Items Make You Poorer


Many people believe that the epitimisation of being rich involves owning a lot of "things"; these assets tend to be cars, boats, bikes, horses, jewellery, electronics

Outside the moral argument that being rich involves having a significant number of people who love you and who you love, a lot of assets do not make you rich.

Quite the reverse.

You may be able to afford a lot of assets, but their associated monetary value over time, does not make you rich. 



Other than investments (pension, shares, paintings), the goods consumed (and mentioned above) tend to be depreciating assets. A depreciating asset is an item which looses value over a period of time. In the accounting world certain asset classes have specific depreciation schedules. Company cars tend to be depreciated over 5 years, and computers over 3 years. This means that a company car purchased for £14,000 in 2017 will, per the financial statements, be worth, and have a resale value of £0 in 2022. 

While the above example is a company car, a personal car (unless it's an antique) dramatically looses its resale value over a couple of years.

Coupled with this, the cost to maintain a depreciating asset tends to be quite high. Taking the car example again, MOT's, services, repairs and maintenance, insurance, road tax, petrol, all add up. 

You are spending money on an item that provides little to no return in value, and costs a lot to fund.

Filling your life with "things" causes your wealth to decrease over time. This is a sentiment echoed by some of the wealthiest individual investors; Warren Buffet, the critically acclaimed and supremely successful investor, leads a frugal and conservative lifestyle, despite his amassed wealth. 



I'm not saying that owning these things is bad; to a sailing fanatic, a boat is an aspiration to own, and the associated appreciation in enjoyment and fun far outweighs the depreciation of cost.

I'm also not advocating joining the minimalism movement that seems to have taken hold in the UK. Clearing our cupboards, drawers and wardrobes, and thus owning less, does provide an immense sense of calm. Selling the items on Gumtree or gifting them to charities shops leaves you financially and spiritually richer. What doesn't provide an immense sense of calm is realising you've thrown out essential kitchenware or reducing your wardrobe to the point where you have limited clothes choice. 

Coupled with this, the concept of minimalism appears to have been "hijacked" by consumerism. Replacing my 10 different coloured H&M t-shirts with 4 over-priced cashmere sweaters is not providing me with the care free life the minimalism ethos is meant to offer; I'd spend more time worrying about the cost of the sweater, spilling any food down myself (classic), or even the fact they need hand washed over  machine washed.


Your Means

I'm neither advocating consumerism, nor advocating minimalism.

What I am advocating is that we should not assign such importance and value to "things", particularly the aspiration that owning these makes you rich, or seem rich. By doing that, individuals are encouraged to live and spend outside of their means in a bid to keep up with society. 

In the UK, consumer credit now stands at 10.8% (The Money Advice Trust). This is the highest its been since October 2005. Individuals are spending money on items they cannot afford, which in turn have no resale value, and cost money to maintain. 

These items are making people poorer. 

As mentioned in blog #10 , interest on debt is money you are giving away with no return.  

Rising inflation (currently 2.9% in the UK: the highest in the G7) coupled with stagnant wages and increasing interest rates means you are giving even more money away, borrowing money, for items that are priced even higher than they were previously.

This scenario does not sound like the epitomisation of rich. 

Photo from the beautiful

Wee Scot Finance