A family member of mine was looking at houses and I started thinking about Charlie Munger when he said it is important to keep a lot of the “silly needs” out of your life. (This particular family member is doing a great job managing his budget, but in general, it made me wonder about society as a whole.)
[mainbodyad]Had I not wanted to own my own firm, I would have been perfectly happy living in a nice place like this Toll Brothers townhouse outside of New York, staying debt-free, wearing cashmere sweaters, taking my kids to piano and soccer practice, and managing a portfolio at an institution such as an insurance company.
That is, instead of buying a huge house, I’d rather live comfortably and use all of my extra earnings to acquire shares of stock or real estate. Or, I’d rather have an $18,000 handmade armoire that will appreciate in value each year. The desire to build a bigger house than you can afford, spend large sums heating or cooling it, cleaning it, and insuring it, and then spending half your day working somewhere else just never made any sense to me. I see it all the time. Why? If your funds are limited, wouldn’t you rather live inside a smaller diamond than a larger rhinestone?
What am I missing? Getting up every day and working to buy assets that bring more money into my personal treasury excites me. I wouldn’t want to be spending my labor paying all of my earnings to the bank in the form of interest expense. Is it signaling theory, again? I think I underestimate how powerful it is.
Reader Comments (2)
Comments are presented chronologically, with replies indented beneath the comments to which they respond.
Andrew
July 4, 2013
Yes, it is signaling theory! Seems to come in all shapes and sizes. Looking at those giant useless oversized wheels on the 15-20 year old worthless cars.
Donna Bayley Lovett
August 31, 2017
We moved from a small house (1100 sq ft) to a 4400 sq ft. home. It is huge, and why did we move? Because it was important to us, and what we always wanted. A window seat in the bedroom, our own Jacuzzi tub in our bathroom (before we used to go stay in a Hotel for a weekend get-a-way just for the tub), a huge atrium kitchen window, and an island in the kitchen that we can all sit at. When you grow up always wanting these things, then yes, you pay more for what you WANT. I don't spend money on expensive cars, but I'm willing to pay more for a house that has features I've always wanted, complete with a yard that I can do gardening. I would never, EVER live in an apartment or condo, because I wouldn't be able to go outside and relax, or mow the lawn. So in answer to your question, people will do what they can in order to fulfill their dreams. We wouldn't have bought the house though if we couldn't afford it, that would have been silly. We had been told we are crazy for having so much space, but I happen to love it. We also rent out our basement suite, because we don't use that third floor anyhow....and perhaps one day we'll let family use it (my son, nieces or nephews) when they get married so they can live with reduced rent in order to save for their own house. I grew up always wanting expensive things, and I've always saved until I could afford them. The bigger house was always a dream for me, even as a little girl I'd dream about the house I wanted. I'd love a mansion one day - some of the houses I've seen down in the USA are breathtaking. So, one person's dreams might be a high end car, expensive jewelry, outdoor "toys", but mine was always a big house, with a curved staircase. And now I have it. Ahhhh.