So, there is a thread out there about a newbie wanting to buy a Lambo and given that he just started, and had no money at the time, most people consensus is that buying a Lambo would not be a good idea at that time.
So, I was wondering when is a good time to reward yourself with lavish gifts? Of course it depends a lot on where you are financial and your comfort level.
What is your thought process as far as if you can afford a lavish item? Most people I know is all about the monthly payment, "Can I fit it in my monthly Budget?", I've never been like that, I have never had a car note, and now three rentals feel and clear and a nice nest egg.
One side of me says reward myself and buy that lavish liability, the other says buy more assets because it's the smart thing to do. I've been doing the smart things for many years now and feel like I should buy something stupid. lol
After hitting a revenue goal a year ahead of schedule, I'm totally going for the lavish reward in the form of an apartment building.
I view it as a gift that keeps on giving.
Always have small rewards based on certain achievements.
Have a six month goal figure out a good reward put a picture of the reward at your bathroom and office space. Look and step forward towards it every day.
Fighter Pilots use this its called your future picture.
Good luck
Paul
@Bruce L. Obviously it's a personal decision, but I am definitely a firm believer of rewarding yourself (once you've achieved significant milestones). That reward may look different to different people. Some would think nothing of dropping 50/100k, etc on a piece of jewelry or automobile; while others would scoff at the idea of purchasing a large dollar luxury item, and would use that to further invest, ie, buy more properties, invest in stock market, etc.
Life is too short, and if you are in a comfortable financial position to be able to afford that "special" something that you've always wanted then I say, "Go for it." No ones situation is exactly the same, and some people will have more disposable income than others. If someone is single and makes 1 million a year, their comfort level may be higher to purchase a luxury item versus the couple who is married, has 3 kids, a mortgage, multiple cars (one child in college and two on the way), and makes 1 million dollars. Their priorities are likely going to be exceedingly different. Just my .02
Always have small rewards based on certain achievements.
Have a six month goal figure out a good reward put a picture of the reward at your bathroom and office space. Look and step forward towards it every day.
Fighter Pilots use this its called your future picture.
Good luck
Paul
Yes, I have my "Vision Board," I just started creating a couple of years ago. Wish I had done it years sooner...
A couple of investors I know who worked together used to buy each other gifts like cars and such, and as it was a gift it was a tax deduction for the business. Not sure if that would still work, but it used to.
Personally, until my portfolio is cash-flowing at a rate to which I have more money than I need, I will hold off on the luxury items. I think my next fun purchase will be a vacation rental somewhere nice that I can get some benefit from periodically, and also be a cash-flowing asset.
If you want to accumulate wealth you have to emulate the behavior of wealthy people. Wealthy people don't ask "how much down, how much a month?" Rather how much?
In my opinion luxury items should be purchased in relation to your overall wealth, not how much you earn but your actual net worth. For example: purchasing a car worth 40k when you earn 80k a year doesn't seem like a smart thing to do since: 1.You would have made a purchase that cost you half your annual income. 2.You would have too much money wrapped up in something that's going down in value, especially if your net worth is in the red or very low. 3. And if you finance it because you don’t have the cash…. Well, really all that means is that you can’t afford it. I do believe in that you should enjoy some of your money after you have worked so hard to obtain it while always attaching wisdom to the process.
Really at the end of the day you get to decide what your gonna do, when your going to do it and how...
But my advice would be to always use ratios to determine if it's a smart move.
Hope that helps you.
-My name is
Victor Ayala
And Common Sense is my Superpower
@Victor Ayala wrote: Wealthy people don't ask "how much down, how much a month?" Rather how much?
We don't ask how much.... We already know the value of our dollar and the cost benefit of spending it. We've done adequate research prior to the purchase so the how much question is not pertinent to the transaction at hand.
Personally I look for acts of prosperity... and my number one rule is; is the amount I am spending rewarding me enough to want to create more opportunities thus spend more?
Money shouldn't be spent without regard for what it represents. I have often said to people who ask if they should or shouldn't buy this or that, that the answer lies in the moment of the spend... Does it represent an act of prosperity. If not don't buy it... If it does buy 2.
as an example I never tip a waitress or waiter. I tip myself by giving money to my waiter and waitress. Its not a representation of their good deed its a manifestation of my good deeds. Making a waitress happy with a 200 dollar tip is a by product.
When you gift whether to yourself or someone else and understand that the gift is a act of your prosperity you'll gift as much as possible.
Conspicuous consumption can hurt your business especially when it's known that you can't afford it. Poor money management and use of funds, lack of mature judgment, egotistical, irresponsible, impulsive, lack of self esteem, needing attention are all thoughts that may cross the minds of those you work with, like bankers. Are you sure you want to drive up in a Lambo to buy a house? A vehicle shouldn't exceed 10/15% of your liquid assets. Might be appropriate if you pull up to buy a shopping mall, but an F-250 could be appropriate too. :)
I'm not one for "lavish" items, but I try to buy things that will make me happy long-term. Of course if I buy something I need to afford it. If I have to ask if I can afford it, then it needs to go on the "wait" list. My idea of being able to "afford" it generally means that I'm not going to notice that money being gone, and that I'm not going to change my day-to-day lifestyle to accommodate it.
I believe people should spend their money on those things that will make them happy long-term. So the right time to reward yourself is when you know what you want isn't a fleeting wish, isn't done to impress anyone, and adds value to YOUR life. And you can afford it.
This is a question I have pondered quite a bit, as I just recently made my first big ticket splurge. I am 21 and live well below my means despite being fortunate enough to make 6 figure income with my day job. I haven't bought my first rental yet, but will be doing so within the next 6 months. For me the splurge was purchasing a Supercharged Nissan 370Z roadster. Here's how I came to the decision; calculating costs wasn't as simple as it seems in this instance. Basically I looked at the impact the purchase would have on my net-worth over a period of time, as well as the opportunity cost of the money spent on my purchase, as well as the intangible benefits the purchase would bring to me.
Impact on net worth:
For me just asking how much isn't a relevant question for 2 reasons.
1) I will not own the vehicle until it's value reaches $0 so the difference between purchase price and end value is not nearly as important as the rate of depreciation.
2) There are other costs associated with the car not correlated directly with price (ie: insurance, gas, maintenance, parking, loan interest, opportunity cost of money tied up, etc. )
Conclusion: The true impact on my net worth will be the vehicles depreciation while I own it + costs of ownership. I can deduct from this number the minimum I would pay even if I drove a basic car simply for transportation in the most economical way. The difference/ my length of ownership is the amt I will actually pay for the luxury.
Opportunity cost of money tied up:
1) I assume a 10% opportunity cost for money tied up in the transaction and add this to the cost structure alone.
Intangible benefits:
1) Having a luxury I can enjoy on a daily basis, reminds me why I work so hard, and make the sacrifices I do for my career and business. It keeps me motivated.
2) Image: I believe in making my obstacles my benefits. For me age is a huge obstacle because I am younger than anyone else in my position. I use being young, energetic and willing to learn to my benefit. Those that know me, understand my work ethic and disposition aren't reflective of my age however when meeting new business partners they only have my image to base their judgement off. Image wise I am a believer in the Fake it til you make it mentality. When I finally make it to the end zone, I will look as if I have been there before.
3) Unintended benefits: Having no established credit except for a couple low limit cards, a 30k loan helps solidify me as having more substantial credit experience.
4) Education/experience: Since I work in the car business for my day job, I know that I bought the car at a wholesale price, got a ridiculously low APR given my credit (or lack thereof), and that for me though it is a liability it is a relatively liquid one, in which I will always be in a positive equity position. Relating back to impact of the car on net worth, this means my car is "cheaper" than one that is half the price where a dealer and bank made substantial profit. All the more proof that the rich don't ask how much per month, or how much total as neither question is really relevant
***After all the thought I put into the purchase what stings the most is the $2700 sales tax I had to pay Uncle Sam.
I may be young and naive, but that's my take...
There are some great answers on this forum. I especially liked @Chanté Owens
.My thought is that achieving the goal is my main driving force, not a specific item. It is having the ability to tip $10 for a $10 meal if the service was good and not ever notice it in my spending money. It's the ability to buy my wife a present whether it is $200 or $1000 without checking the bank account first.
Perhaps your idea is better if that is what motivates you. I came from a pretty humble background, but I have found that I actually take little joy in items that are lavish for very long. I actually appreciate the really nice battery powered drill set much more than the $500 pocket watch.
Having a good truck that starts every time with no mechanical issues is pretty high living. If I had a $75K to $200K car I would probably drive it less than once a month and worry about it getting hit or stolen constantly.
If I had never had to make a car payment or baby payments for 4 years I might feel differently.