Opportunity cost of ownership

[Craig88]

I’ve been assessing my finances lately and realized that although I could “afford” the watch I’ve just bought recently, that cash would probably be better pumped into over paying one of my bonds.

A quick calculation showed that the £10k could have saved me about £25k in interest over the next 10 years.

Of course life is for living and if everything was focused 100% on the most financially sound decision we would never buy watches, other than high demand watches at retail, but at what point do you start questioning if that capital would be better suited elsewhere?

Obviously if you have credit cards you’d want those to be payed off before buying luxury items like watches but most of us will have mortgages for a big percentage of our lives and and it will probably always be an opportunity cost of not overpaying on those.

[brandrea]

I tend to think of money used for purchasing watches, trips etc., strictly as fun money. No guilty feelings in spending every last penny

[beshannon]

Originally Posted by Craig88

A quick calculation showed that the £10k could have saved me about £25k in interest over the next 10 years.

Originally Posted by brandrea

I tend to think of money used for purchasing watches, trips etc., strictly as fun money. No guilty feelings in spending every last penny

Everyone's situation is different and needs to be evaluated as such.

If you do not have the available funds for high end luxury jewelry then it likely could be better used elsewhere.

[m j b]

I think a lot depends on your age, income, future income, family (kids) etc.

I would never have considered buying an expensive watch (or expensive anything) when starting out in my 20s. Priorities were paying off student loans and other debt, buying a house, building up savings.

Then, when the budget permits and you can spend 10K (Pounds, Euros, whatever) without impacting your retirement, standard of living, etc., that's the time to buy a fancy watch.

IMHO. Since you asked.

[brandrea]

Originally Posted by beshannon

Everyone's situation is different and needs to be evaluated as such.

If you do not have the available funds for high end luxury jewelry then it likely could be better used elsewhere.

True enough Brian.

I actually agree with the OP. If you are worried about the financial implications or opportunity cost of buying a luxury product, it probably isn’t wise.

[beshannon]

Originally Posted by brandrea

True enough Brian.

I actually agree with the OP. If you are worried about the financial implications or opportunity cost of buying a luxury product, it probably isn’t wise.

Agreed, however few seem to be willing to do this type of analysis.

[faimag]

I agree with most of the above comments. If I had to think about putting my money on a watch as opposed to using it elsewhere, the wise option would probably be the "elsewhere". But to each their own.

[chloebear]

Financial considerations tend to prevent me from buying non-Rolexes. I know watches are not an investment, but it’s nice to know you can get most of your money back if the shit hit the fan.


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[Zakalwe]

Originally Posted by Craig88

Of course life is for living and if everything was focused 100% on the most financially sound decision we would never buy watches,

This is the relevant statement. I’ve been interested in watches since I was a kid and been able to afford (by my standards) a decent watch collection for years. Despite that my collection has only expanded in the last couple of years.

The reason is that it took me time to recognise the fact that a watch will always be an irrational purchase no matter how much money you have. There will always be something “better” or more worthy to spend your cash on, even if you’re Jeff Bezos.

I don’t subscribe to the notion that you pay off everything before indulging - purely because if I’m lucky I’ve got another 50-odd years on the planet and I don’t want to wait until I’ve only got 10 years left before starting to enjoy myself.

[Harry-57]

It's different for everyone.

I didn't start buying the more aspirational things we now own (such as nice watches), until I was debt free, and I don't buy until I have the money put aside from my net, tax paid income.

It goes in cycles for us. One year (or two) we're saving. Next we're investing. Next we're spending. It all depends on life outlook, goals achieved and of course, income. There's no universally right answer.

[glamorama]

You have a point of course but it all depends on personal situation. If your aim is to be like Warren Buffet that is good thinking. I believe he bought one Day-Date and that is it.

For us normal guys we can justify it to ourselves by saying "you only live once" or "I deserve it" and similar because we want to show one-up on the next guy or genuinely have a special interest in mechanical watches or whatever the reason may be.

I think HNWI are doing a different analysis of asset diversification though. To have a small percentage of their wealth in art, cars, watches and similar tangibles only makes sense financially and maybe tax wise.

[dsouth222]

I'm in my later 20s and my wife and I have also had this same discussion recently. To me, it seems silly to buy such an expensive watch if you still have a mortgage or other debts. We don't have any student loans, car payments, or credit card debt, but we've put an emphasis on paying down our mortgage. By putting together a strict budget, the house will be paid off in 1.5 years. I also understand that you should live a little bit, but I'm willing to sacrifice for a year in order to live interest free.

[Deepseaskateboard]

I think ‘opportunity cost’ and luxury goods are mutually exclusive concepts.

If you have to worry over money, buy something functional if you need it, or can make it work for you. Any watch tells the time.

Luxury goods should be purchased with disposable income, where it is of no concern.
Having said that, buying wisely in this space can lead to decent returns on investment, but that shouldn't be a primary motive, as you say, there are better places to invest.

[Mihislau]

I’m into deferred gratification, but without taking it to the extreme.
My way of thinking is:
1) have no debt (or, at least, no high interest paying debt).
2) start or keep building your snowball by saving and investing every month.
After that, enjoy life. Some will choose experiences (vacations, concerts, etc.), others will choose things (watches, cars, clothes, etc.). I enjoy a bit of both.

In order to decide, I evaluate if the “happiness factor” of doing or having the thing is greater than the “cost of ownership”. For some things I have paid thousands and happy to have done it, for other things I try to avoid even paying a small amount because they are not important to me.

[schoolboy]

Originally Posted by dsouth222

I'm in my later 20s and my wife and I have also had this same discussion recently. To me, it seems silly to buy such an expensive watch if you still have a mortgage or other debts. We don't have any student loans, car payments, or credit card debt, but we've put an emphasis on paying down our mortgage. By putting together a strict budget, the house will be paid off in 1.5 years. I also understand that you should live a little bit, but I'm willing to sacrifice for a year in order to live interest free.

Then you can buy a watch with the money that you are going to save by not paying so much interest!

My fiancé and I are also trying to pay off our house fast, and I personally am trying to not spend too much on things I don’t need.

Right now I’m very happy with what I have and with what I don’t have.

[schoolboy]

Originally Posted by Mihislau

I’m into deferred gratification, but without taking it to the extreme.
My way of thinking is:
1) have no debt (or, at least, no high interest paying debt).
2) start or keep building your snowball by saving and investing every month.
After that, enjoy life. Some will choose experiences (vacations, concerts, etc.), others will choose things (watches, cars, clothes, etc.). I enjoy a bit of both.

In order to decide, I evaluate if the “happiness factor” of doing or having the thing is greater than the “cost of ownership”. For some things I have paid thousands and happy to have done it, for other things I try to avoid even paying a small amount because they are not important to me.

I like this.

[Yobber76]

You're born, you live your life, you accrue debt, you accrue some level of wealth, you pay your bills, and at some point you die. Somewhere in the midst of all that, you do need to do some things for pleasure. Measure your needs and wants, don't be crazy or stupid, work hard and enjoy the ride.

[JayHantz]

Originally Posted by Mihislau

I’m into deferred gratification, but without taking it to the extreme.
My way of thinking is:
1) have no debt (or, at least, no high interest paying debt).
2) start or keep building your snowball by saving and investing every month.
After that, enjoy life. Some will choose experiences (vacations, concerts, etc.), others will choose things (watches, cars, clothes, etc.). I enjoy a bit of both.

In order to decide, I evaluate if the “happiness factor” of doing or having the thing is greater than the “cost of ownership”. For some things I have paid thousands and happy to have done it, for other things I try to avoid even paying a small amount because they are not important to me.

Well said. I think that knowing your limitations and knowing your finances is key. You should never go in debt to an experience or things (a car for a daily I can argue with). They key is being smart, and knowing your own boundaries, which I agree with your deferred gratification. Some things are worth the wait and I am for the virtue of patience. Our society puts so much on owning a thing NOW and getting it NOW, instead of focusing on the hard work and patience to get where you can get it NOW.

[spoon-turbo]

Depends on your other assets. I think it not very wise if your watches cost more than your other assets combined.

[cerendigit]

What's the point of earning money/interest if you never spend it on what you want?

[Tangier11]

There is ALWAYS something "smarter" one could spend money on, but you have to reward yourself in life. Also there are many many things people buy that are not as "smart" as a Rolex

[Pantheon]

buying watches is always a stupid decision among many other things we tend to buy. However that's what makes us human We buy on emotion rather than logic. Some people are more financially responsible while others aren't. People think what I spend on watches are crazy but then they go take expensive vacations, buy expensive clothing, eat out at lots of expensive restaurants, and other things instead. Everyone has a different way to spend irresponsibly.

You can't look at watches as an investment because its like collecting cars. Only the future will tell if a car's value is going to shoot up or go down

[Pw92676]

There is an opportunity cost for everything in life, not just watches.

[envuks]

Yeah, but the real opportunity cost here is that you could have used that 10k to buy a late-model used boat.....

[Watchflair]

Really a matter of priorities and values.
If you want it buy it.
If you would rather pay down a debt that would save a large amount of interest (smart move in the long run) then go for that.

[Miura Mario]

Definetely comes down to what people are willing to spend their money on. Do they live for today or plan for tomorrow. My personal threshold is total collection will never exceed 1-2% of net worth if I want something silly the challenge is to make more money and if I dont I simply dont deserve the item yet. Thats what works for me others may feel different.

[Pantheon]

Originally Posted by Miura Mario

Definetely comes down to what people are willing to spend their money on. Do they live for today or plan for tomorrow. My personal threshold is total collection will never exceed 1-2% of net worth if I want something silly the challenge is to make more money and if I dont I simply dont deserve the item yet. Thats what works for me others may feel different.

Thats actually my mantra. If you don't have enough money, find ways to make more. I don't believing in having to save over a long time for something because that means I can't afford it.

[Chewbacca]

Typically this is covered in grade 9 if you ever did the small bag of M&Ms today, or a whole box next year exercise.

[DoubleJG]

For me. I’ve always been debt free (minus a mortgage). Was maxing retirement in my mid 20’s and bought my first real estate at 29, a condo. At that point I became interested in luxury goods. Didn’t make my first nice watch purchase until I was 32 and had flipped the condo for a single family home. At that point I felt I had enough security and disposable income that I could justify the purchase...


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[Blansky]

There has to be serious money and there has to be fun money.

My brother in law was a stingy money grubber who never bought luxuries and was always saving for retirement.

He died of stomach cancer in his early 50s.

We have to enjoy life, have a few mad moments and a few nice things and also be serious about finances.

Not many here realize this but you can buy just one Rolex and not all the models available.