Is there a rule of thumb on..

[chriswang0130]

Saw this article below earlier this morning, and I am curious “How about watches?” Is there a rule of thumb for you guys of what percentage of your salary should you spend on Rolex or other brand watches in a calendar year?
How do you determine your yearly budget on watches?


“Some experts recommend that car-buyers follow the 36% rule associated with the debt-to-income ratio (DTI). Your DTI represents the percentage of your monthly gross income that’s used to pay off debts. According to the 36% rule, it isn’t wise to spend more than 36% of your income on loan payments, including car payments.”

[TimingIsEverything]

Originally Posted by chriswang0130

Saw this article below earlier this morning, and I am curious “How about watches?” Is there a rule of thumb for you guys of what percentage of your salary should you spend on Rolex or other brand watches in a calendar year?
How do you determine your yearly budget on watches?


“Some experts recommend that car-buyers follow the 36% rule associated with the debt-to-income ratio (DTI). Your DTI represents the percentage of your monthly gross income that’s used to pay off debts. According to the 36% rule, it isn’t wise to spend more than 36% of your income on loan payments, including car payments.”

No. I don't understand the basis or principal behind these metrics.

[zengineer]

well, if you have a watch that runs and aren't swimming in cash the answer is zero.

It can't be quantified in terms of salary percentage or net worth fractions. It's about the extra free cash you have available for frivolous things...luxury items.

[Monty22]

Originally Posted by zengineer

well, if you have a watch that runs and aren't swimming in cash the answer is zero.



It can't be quantified in terms of salary percentage or net worth fractions. It's about the extra free cash you have available for frivolous things...luxury items.

Agreed and not sound financial planning to finance said shiny things that no one really needs. It should be cash and $ that, if lost, has zero impact on your life/lifestyle.


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[77T]

You have the 36% back end ratio wrong - it is all expenses including debt.

28% is the ideal front end DTI.

I don’t know what you mean by the question, though. Income should not come into play.

Discretionary cash that is idle and available is the funding source for luxury items IMHO.


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[Carry The Interest]

I don't view watches as investment vehicles. I do think they store value, but never count on them appreciating. In other words, I think of them as a less-liquid version of cash sitting in a checking account.

I have my own arbitrary way of justifying a collection and it's limits. It doesn't apply to everyone (depending where you are in life, financially and age-wise). I'm in my late 20s, so I place a high importance on investing more today to see the compounding effect over time of my money working alongside me.

I try not to let my watch collection exceed 10% of that amount plus what I have saved/invested in the market.

As an example, if I had one $10,000 watch, I would need $90,000 collectively in savings/put to work/in play in the market (watch collection is 10% of the total). My reasoning for this is money in the market should generate a much better return than money put into watches in the long run (I am not talking about quickly flipping a Daytona for an immediate ~75% return). The 10% thing is totally arbitrary on my part - it's just a percentage I feel comfortable allocating as "dead cash".

Very open to any thoughtful criticisms to my approach. I know I am a nut. I can't stress this last part enough - this isn't about mixing making money with a hobby I love. It's about setting rules so the hobby stays fun and I don't have to worry about making decisions that I may regret later!

[Gecko10]

A meaningless metric.

[Chiboy]

According to Graham and Dodd:

1st Rolex: No more than 6% of annual salary
5th Rolex: No more than 3% of annual salary
10th Rolex: No more than 2% of annual salary
20th Rolex: No more

Extrapolate between numbers.

[ninjin]

Originally Posted by chriswang0130

Saw this article below earlier this morning, and I am curious “How about watches?” Is there a rule of thumb for you guys of what percentage of your salary should you spend on Rolex or other brand watches in a calendar year?
How do you determine your yearly budget on watches?


“Some experts recommend that car-buyers follow the 36% rule associated with the debt-to-income ratio (DTI). Your DTI represents the percentage of your monthly gross income that’s used to pay off debts. According to the 36% rule, it isn’t wise to spend more than 36% of your income on loan payments, including car payments.”

A Rolex is just a watch. Its a retail product. If you want it buy it. If you cant afford it, then dream about it. If you can afford it and you don't like it, then buy something else.

For example, Mr Li Ka Shing (one of HK's wealthiest tycoons) wears daily a Citizen. He said it cost him HK$3000 and keeps perfect time, what else do I need?

He indeed has a very good point. But no doubt, he has a serious collection of very fine and collectable watches locked up at home...

[AF_Rob]

I could understand the desire to put something into a metric. I kind of did the same thing when I purchased my first Rolex. My five digit no date at $6.2K, was a percentage of my annual pay that I was comfortable with. Additionally, I would not go into debt buying it.

The same goes with my car. When it comes to the price, if I can put down half and pay the rest off within a year, I can afford it. If I cannot do both of those things, then I cannot afford it, IMO.


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[AK797]

No rules, each person has a different life and priorities, a single guy with a decent job and no mortgage can spend a large percentage of his income on a watch with no bother, whereas someone married with three kids and a house and all sorts of payments will have to be a lot more circumspect, even if his salary is much higher.

[Tag_asian]

Rule is: get what you like and save up for it.

[chriswang0130]

Thanks guys

Originally Posted by AK797

No rules, each person has a different life and priorities, a single guy with a decent job and no mortgage can spend a large percentage of his income on a watch with no bother, whereas someone married with three kids and a house and all sorts of payments will have to be a lot more circumspect, even if his salary is much higher.

Yea I agree. I understand everyone is in different situations, was just curious if someone has some kind of metric to start a growing collection

[chriswang0130]

Originally Posted by AF_Rob

I could understand the desire to put something into a metric. I kind of did the same thing when I purchased my first Rolex. My five digit no date at $6.2K, was a percentage of my annual pay that I was comfortable with. Additionally, I would not go into debt buying it.

The same goes with my car. When it comes to the price, if I can put down half and pay the rest off within a year, I can afford it. If I cannot do both of those things, then I cannot afford it, IMO.


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Agree. Same for me

[piratfisk]

There are a lot of these threads...

If you have a "fun fund" that you contribute to, spending it shouldn't be an issue. It's the whole point of a "fun fund."

[Fat_ninja]

1 years salary

[911NBK]

Originally Posted by Monty22

Agreed and not sound financial planning to finance said shiny things that no one really needs. It should be cash and $ that, if lost, has zero impact on your life/lifestyle.


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Yup. 100% agree. This shouldn't be done on credit or pact day to day finances.

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[fixinbones]

Originally Posted by TimingIsEverything

No. I don't understand the basis or principal behind these metrics.

Me neither. The same goes for how many months worth of income you should spend on an engagement ring.

[Cryten]

Originally Posted by fixinbones

Me neither. The same goes for how many months worth of income you should spend on an engagement ring.

The months of salary invented by De Beers? The guys who managed to convince the word that diamonds are rare by controlling the market?

Another example of advertising skill. Associate diamonds with love, (diamonds are forever etc.) and then tell us how much of our salary we should spend on them. Pure genius.

[Rashid.bk]

All I know is, if I can afford it then I can buy it. The key is understanding the definition of "afford it".

[HogwldFLTR]

Really what ever your bank account is comfortable with.

[Merkaholic]

Just enough so you can sleep at night.......

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[Ticknaway]

Originally Posted by zengineer

well, if you have a watch that runs and aren't swimming in cash the answer is zero.

It can't be quantified in terms of salary percentage or net worth fractions. It's about the extra free cash you have available for frivolous things...luxury items.

This!

[subtona]

Watches are a pure indulgence.

There is zero necessity to them, it would be unwise to do without any essentials for a watch.

That said if you have the things you need and watches appeal to you more than the other stuff you don’t need, then let it rip and spend it all

[exador]

I wonder if my bank would give me a margin loan to invest in Rolexes?

[Wimbledon]

I've seen a lot of people who make themselves "poor" because they crap away most of their money on luxury items that they can't really afford. Lots of pro athletes and celebrities funnel their money into exotic cars and expensive stuff and end up broke. They have no cash in the bank for a rainy day because they fooled it all away.

[zengineer]

Originally Posted by Chiboy

According to Graham and Dodd:



1st Rolex: No more than 6% of annual salary

5th Rolex: No more than 3% of annual salary

10th Rolex: No more than 2% of annual salary

20th Rolex: No more



Extrapolate between numbers.

Interpolate actually.

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[Chiboy]

Originally Posted by zengineer

Interpolate actually.

[iliketime]

whatever you can afford? people like different things, some people travel, some buy watches.

[RKTINC1]

I like the dead money approach. I would never carry debt while buying a second or third high end watch or luxury item. I think money spent on a Rolex is dead money, Not loosing a tremendous amount but also not significant appreciation in most cases. I am looking for a DD and consider the purchase just another way to diversify my dead money in the bank. It can be turned into cash without serious wait time.