Yet more habits draining your net worth

By | January 11, 2014

These are things I spend money on approximately 1-2 times/year, but if I bumped that number up to 1-2/week, I’d consider the habit a drain.  Frequency matters on all things consumption!

Books far I have tried to flesh out the arguments for and against each spending habit draining your net worth, but in the case of books, I have nothing but glowing things to say about them. Books are one of my primary sources of entertainment and my favorite hobby.

Books can drain your net worth if you let it, but I seldom find it necessary. I pay Civilization before I even pay myself and he buys a lot of books. I mean, every book you can think of. And he lets me borrow them! He even set it up so I can request whatever book I want online and he emails me when I can pick it up, usually only a few days later. It’s a magical place called the library.

I do occasionally purchase books, however. If the library has already lent out all of the copies of the books I want to read in time for my next book club meeting or if I find a book that really resonates with me that I want to keep, I will happily buy it.

Adia and Brigham are voracious readers. Adia loves the library and uses it to fill most of her reading desires, whereas Brigham loves wandering through book stores, picking up shiny new hardcovers and filling his kindle with every novel that seems remotely interesting.

Adia spends $50/year on books while Brigham spends $1000/year on books. Adia takes the difference ($950/year) and invests it in a fund earning her an average of 5%/year. After 40 years, Brigham has an impressive personal library, most of which is stored in boxes in his basement as he ran out of bookshelves long ago.

Brigham spent $40,000 on his reading habit

Adia took that same $40,000, used $2,000 to finance a similar reading habit and turned the rest into more than $120,000.

And just for kicks, I’ll throw in Cyrus who hates to read and invested the whole $1000/year on the 5% fund. He now has almost $127,000, but his life makes me sad.

Movies don’t see much wrong with movies either, but my attention span responds better to television shows. 

The cost of watching a movie depends very much on how you watch it. A 3-D movie in an IMAX theater with snacks and drinks can easily run $50 while renting one from a vending machine in the grocery store will set you back a whole dollar. A movie collection of DVDs (or blue ray or VHS or whatever the latest obsolete technology is) can steal thousands from your net worth and clutter your shelves.

Adia spends $50/year on her movie habit, while Brigham spends $1000/year seeing movies in the theater and purchasing a new DVD every couple of weeks. Adia invests the difference as in the previous example. She cannot declare herself a movie buff after 40 years, but she does have another $120,000 that Brigham does not. Cyrus only watches movies through his cable television subscription and has another $127,000.

Music like music I can sing along to, but I do not possess an ounce of musical aptitude, so the radio (now Internet radio) meets all of my needs. I realize that I am probably in the minority here though. Maybe music is your profession or your passion. Maybe you live for concerts and buying a new artist a week makes you thrive. You will hear no complaint from me if you attend concerts, but spending money on a music collection just seems like a waste of money and space while taunting the technology gods. Remember cassette tapes?

Adia spends $50/year on her music habit, mostly on concerts, while Brigham spends $1000/year enhancing his media collection. He wants his music selection to rival his book and movie selection, so he buys a new vinyl record or CD every couple of weeks. Adia invested the difference ($950/year) in her fund and has another $120,000 to show for it.

Remember, even if you don’t want to cut a habit out of your life completely, moderating the habit and indulging in it smartly can shave years off your working life.

Frequency matters because you’ll never get rich spending your money on depreciating assets!

Say something!