6 Purchases That Don’t Impress the Wealthy (and Don’t Build Wealth Either)
When you see someone flexing their financial success with fancy cars, houses or clothes, it’s hard not to feel a little envious. After all, who doesn’t want to live the high life (and show it off once in a while)?
But there’s a distinction between actually building wealth and pretending you’re rich. Many of those purchases you’re seeing aren’t actually beneficial. If they’re being financed by expensive credit, they could even limit your ability to build true wealth.
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Here are the top purchases that neither impress the wealthy nor build wealth.
1. Expensive Weddings
The average wedding costs $34,200, according to data from The Knot. That’s quite a sum, especially if you’re still early in your career. It’s also not worth going into debt over.
“Not only can overspending on a wedding mean starting off your married life with potential financial stress and relationship friction, but it could actually increase the odds of cutting your net worth in half,” said Matt Miller, certified financial planner (CFP) and founder of Upleft.
It might reduce your net worth by even more than that. According to Fidelity, the median net worth for those under 35 is $39,000. That’s almost your entire life savings for one big (and yes, beautiful) day.
2. Luxury Watches
Splurging on a watch is one thing. Spending tens of thousands of dollars just to look well-off is another.
“Truly wealthy people do not care about what you wear on your wrist and these types of purchases typically do not appreciate like equities or real estate,” said Elias Friedman, CFP, founder and senior wealth advisor at Kadima Wealth.
At best, you might be able to sell your watch for a percentage of what you paid. You’ll get some money back, but not all of it.
3. Expensive Boats
If you love being out on the water, buy a boat. Just don’t buy an expensive one.
Be aware of those extra costs beyond the initial purchase price, too. Boats come with all sorts of fees, like registration fees, upgrades, maintenance costs, fuel and mooring costs. You’ll also have to pay taxes on the purchase, so what you think you’re paying is going to be a lot higher.
The problem is, boats depreciate. You can always sell it, but for a fraction of what you spent.
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4. Luxury Vehicles
Luxury cars look nice and feel amazing to drive, but they don’t build wealth.
“I’ve heard story after story about luxury cars where something humble like a Toyota Land Cruiser garners more respect than, say, a Range Rover,” said Eric Croak, CFP and president at Croak Capital.
A Toyota Land Cruiser starts at $57,880, while a Range Rover starts at $113,300. That’s roughly twice the cost for something that functions just as well and doesn’t impress nearly as much.
“Frankly, investing in things that don’t build wealth and won’t impress rich people tends to have one thing in common,” Croak said. “Rapidly depreciating assets overloaded with branding that says try-hard instead of successful.”
5. Large, Expensive Homes
The median sales price of homes in the U.S. is $403,200. You could get one for less if you live someplace where costs are lower, or if you go for a smaller dwelling.
If you need the space, that’s one thing. But if you’re getting an expensive home just to show off, the cost isn’t worth it.
“There are people who try as much as possible to stretch themselves when it comes to buying property beyond what the bank will approve,” said Cody Schuiteboer, president and CEO at Best Interest Financial. “But this does not surprise any people with money.”
After all, high-net-worth folks often have expensive houses, too. When everyone’s doing the same thing, it’s hard to stand out like that.
The one benefit of buying a more expensive property is that it will usually appreciate. You’ll still need to keep up with the mortgage, insurance, taxes and other fees, though.
6. Designer Clothes
More often than not, designer clothes are status symbols. But they aren’t likely to impress the truly wealthy. They certainly don’t add money to your bank account.
“It’s easy to spend your way into the wealthiest 5% of Americans … but it’s a lot harder to stay there,” said Croak. “Spending on luxury goods burns through wealth. You can’t count that designer bag at $3,000 towards your net worth because it’s going to be worth $0 when you go to sell it next year.”
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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