Buying Quality Furniture Can Save You Money In the Long Run

From my calculations, if you took the $1750 (the full retail price of the expensive chair minus the full retail price of the Target chair), plopped it into an index fund, and bought a new Target chair (price adjusted for inflation) every five years,  you would have $22,678  of extra inflation-adjusted dollars in hand after 50 years.

This ignores minimum investments for mutual funds, commission fees, and capital gains taxes. Index fund assumed to compound at 7% after inflation, and the Target chair assumed to scale 3.5% with inflation annually.

Here is the spreadsheet I used.

https://docs.google.com/spreadsheet/ccc?key=0AuFk9oZ4K42gdHdfVnRjaVlsOTg3UEo2YzVXWVAzWmc

Probably contains some minor errors (I think this is 49 years, not 50), but I think it makes my point. Let me know if I made any grievous mistakes.

If you are comparing the financial value of buying a chair relative to the opportunity cost putting the money to work in a higher returning asset class, your analysis makes sense (unless, of course, you happen to find some furniture maker that turns into the next great collector item and is being sold at Christie's in 50 years; there are some Stickley pieces that go for $100,000 to $200,000+ at auction).  

However:

1. I would never pay full retail price.  I would use $1,170 as a starting base, not the $1,750 retail.

2. A business owner could, theoretically, buy certain products for his or her company and get a tax-deduction lowering the cost even further.  Imagine that the nicer chair were bought by a dentist for his office and he were in the 35% bracket.  Suddenly, the $1,750 retail chair wouldn't be $1,170, it would be $761.  That is only 43¢ on the dollar.  Just like buying a stock cheap can improve your returns, the same holds true for furniture.  (Some believe the tax code is unfairly tilted toward business owners in this way, but I have no problem with it because they also get double-taxed on self-employment income on the first $106,800+ or so each year.)

3. The math comparing chair-to-chair purchases would still be close enough to favor the higher quality chair because the utility I'd gain from having a piece of furniture that had been with me through my entire life, that could be passed on to my kids, and that saved me the inconvenience of at least ten different trips to department stores to replace constantly-breaking-and-wearing-out less-expensive chairs has more value to me than $22,678 in future wealth because I already have enough future wealth that it won't provide me any additional utility.  

This is why I'm crazy about the personal opportunity cost approach. It isn't a precise science, but when you picture your future life, knowing which you'd rather is a useful exercise. It tends to weed out a lot of mistakes, especially if you are rational enough to be willing to live with the consequences of your decisions.

Josh, it's been three-and-a-half years since we had this discussion. Back then, I wasn't satisfied with your answer because the notion that $22,678 (inflation-adjusted) has no utility to you makes very little sense: you and Aaron (and a great deal of your readers, including me) intend to pass on our accumulated wealth, either for our heirs, spouse, or for causes that we believe in. Therefore, the small utility you give up today grows into vast utility for someone or something you love in the future. Furthermore, the idea of bequeathing your furniture to your children is a nice thought, but how is that better than passing $22,678 to your children, and they can use $1,950 (inflation-adjusted) of that to buy a brand new set of furniture of the exact same style from the exact same company, if they wish (ignoring the tiny chance that the furniture might become high-priced antiques)? The conclusion I came to was that there's something intangible today that's worth $22,678 to you in future money. It took me 3.5 years of musing, but I think I've finally figured out what that intangible factor is: lifestyle inflation. Or "decimal creep" as you called it in some of your earlier writings.

Over the last 3.5 years, I've had lifestyle inflation in a number of areas: I can no longer go back to cheap, generic-brand honey that's very likely adulterated with 49% inverted sugar syrup - it kills the experience for me. I can no longer go back to "classic fit" (box-cut) shirts because I cringe when I look in the mirror. I can no longer go back to poorly-designed electronics after a number of terrible experiences (including the phone that I used to butt-dial 911 and my dad in China repeatedly - you should've seen my phone bill). My guess is that you've had lifestyle inflation in a number of areas, including furniture, to the point where sitting at a cheap MDF desk makes you want to (╯°□°)╯︵ ┻━┻ while sitting at a 19th century solid mahogany desk makes you want to caress the wood while hissing "my preciousssss.". I highly doubt you popped out of the womb with a lust for gold-rimmed china, Goodyear-welted shoes, and full-canvas super 150 S suits - the preference for nice things likely came from exposure as you experienced them and learned more about the intricacies of the world.

Today, I'm still using the crappy MDF desk that my dad bought when he first immigrated here to the U.S. It's rickety, pockmarked, stained, and would probably collapse if I kicked it really hard or tried something really adventurous on it. But it's still good at its fundamental purpose (which is to keep my crap off the floor), and I really know nothing about furniture so I don't mind at all. I keep thinking that the $100 I could spend to replace it is X shares of Y stock, or the really nice desk I could get is XX shares of Y stock, just like the analysis I made three years ago. If I were to study furniture and become a furniture connoisseur like you, that's likely to change. Hopefully I won't suffer lifestyle inflation in this realm, because I do get alarmed when I realize that my overhead has significantly and irreversibly increased...and a taste for fine furniture is expensive no matter which way you look at it.

TL;DR: Lifestyle inflation raises the bar for happiness and contentment, and it's very difficult to put a price tag on happiness and contentment.

Gilvus thanks for posting the follow up. It is interesting to see how your position has evolved. Most people would not be big enough to post such a follow up.

Today, I'm still using the crappy MDF desk that my dad bought when he first immigrated here to the U.S.

Sounds like this desk was good enough for your dad to leave for you! 🙂

I am happily on the receiving end of a quality sofa.  I paid about $700 for it 2 years ago.   My boyfriend had received it from his parents who in turn had received it from a wealthy client of theirs when she passed (they are CPAs). 

The couch was a few years old and by the time I and the boyfriend started dating it looked like the typical bachelor pad sofa it was.

I couldn't abide the now hideous floral print upholstery but I also couldn't afford the $1600 in labor quoted for a re-do (without the cost of fabric).

So we trotted up to the garment district in LA and I purchased about 20 yards of royal blue silk for $7 a yard.  Yes, $7.  I love living this close to a hub of the fashion industry.  Long story short, I learned how to upholster our sofa by doing it, with lots of help from the internet.  I re-made the down cushions, re-tied the 8-way knotted springs and mastered (at least for the duration of the project) attaching the fabric around curves and straight edges while keeping it taut .  The best part was getting in there and seeing the original craftsmanship and adding my own touches with the small repairs I did.

Now this nice sofa that someone bought for themselves years ago has found its way into my home.  The silk will fade, get ripped or eventually just wear out.  Hopefully there will  be another person who takes it in and enjoys fixing it up again to their own tastes --the couch will certainly be solid enough to go another round.

You certainly won’t be able to pass it on to future generations.  It probably won’t even be held together in another 20 years, let alone a century!

Oh yeah?  Prove it.  

This sounds like a ridiculous justification for buying overpriced things.  As "Gilvus" notes, there's a huge opportunity cost to spending 5 times as much on a chair.  Sorry.

And all the hub-bub about passing furniture down for generations?  Yeah, I'm sure your kids are just dying to get your old junk.  There's not a single piece of furniture I'd take from my parent's place, and it's not because it's low quality.

Financially, I'm a wild libertarian. I don't think justification is necessary because, morally, I think someone who earned money honestly should be able to do whatever they want with it. But I don't follow your logic about future generations becaus if the kids didn't want the furniture, they could sell it. That happens all of the time, in every area of life. I watched Carl Bark's family auction off his easel, the one where he created countless legendary Walt Disney paintings, because they didn't want it. Investors and collectors did.

Plus, you have to remember "expensive" is a relative term. Purchases should be measured by how much time it takes for the buyer to re-earn the cash necessary to pay for the item. To a guy making $500,000 per year, a $2,000 chair is exactly the same purchase burden as a $200 chair is to a guy making $50,000.

The whole time I'm writing this comment, all I can think is "Pedo Bear is commenting on my site."

That Pedo Bear comment almost knocked me out of my chair. Completely unexpected, and I'm still laughing.

I should also point out that most of the price, a large percentage of it, is due to paying American workers good wages. The identical item could be bought for half if it were made in China. I don't consider it wasted money. I think of it as a "vote" for domestic industries.

tatsuke,

I don't think you're approaching Josh's post in the right way. He's not trying to suggest to you that you should buy $2,000 chairs (and I'm guessing from the tone and content of your comment, you absolutely wouldn't), but rather, he's sharing with us his thought process of how he makes his decisions, and that's the most valuable part of his many posts. Whenever Joshua talks about some of his purchases on the blogs, many people respond as if Joshua is suggesting that "they" should make the same purchasing decisions, which couldn't be further from the truth. Do I personally think buying expensive furniture is absurd? Yes. I like to buy old beaten down "comfortable" furniture for $50 so I don't have to worry about treating it a certain way. But Joshua doesn't write these posts to seek our blessings and endorsements to effectively say, "Yes, I'd spend my money the same way", but rather, to explain to us why he did it, and that's what is important. Plus, if Joshua were to look at my expenditures for the past twelve months, he could easily find things in there that would be ridiculous to him--for instance, I'm going to see Bruce Springsteen live 5 times in the next two months, and that will most likely cost me over $1,000 (and the lifelong opportunity costs could be in the hundreds of thousands). Joshua may not think that's a wise allocation of capital, you may not think it's a wise allocation of capital, and no one else reading this blog may think it's wise--but if I take a clear-eyed view of the opportunity costs of these decisions and still decide that it's worth it, then I'm doing myself a service by living according to my own judgments of personal satisfaction, rather than the value systems of others, and I think that attitude is the first step towards living a satisfying life. 

"Joshua may not think that's a wise allocation of capital, you may not think it's a wise allocation of capital, and no one else reading this blog may think it's wise--but if I take a clear-eyed view of the opportunity costs of these decisions and still decide that it's worth it, then I'm doing myself a service by living according to my own judgments of personal satisfaction, rather than the value systems of others, and I think that attitude is the first step towards living a satisfying life."

- Brilliantly, brilliantly put!  That is exactly the point!

That is so cool!  Well done!  (And +1 for the Playstation controller right next to it - a household after my own heart.)

Buying quality in anything can save you money! 

This is a much more advanced version of the theory I use for clothes and shoes. I am the only woman I know who doesn't have dozens and dozens of shoes. I buy quality, classic styles (no, not orthopedic hausfrau clogs), wear them for 4-5 years until they are worn out, and then shop again. Family and friends were appalled by a recent purchase price (the sale price!) for new leather boots this winter... but comparatively, spending half that each year on a new pair is far more expensive, and I wore the 2006 pair until just 2 months ago.
But as you point out in the comments, it really is a matter of personal taste. People are free to spend their money as they wish. I agree wholeheartedly, and at the end of the day the sum of your choices is your responsibility. For someone who enjoys having multitudes of boots and pumps, I suppose the quantity over quality method makes sense. The opportunity cost to make yourself happy? That is up to you. I tend to agree with you about quality furniture and legacy pieces, but many people are happy to redecorate every 2-3 years, and probably spend the same amount in the long run (while keeping craigslist and, ultimately, landfills, in business). 

Thanks for the thoughts!

Yes it
really worth to buy a branded one like Henredon furniture for long run.
Thanks for sharing.

Can anyone recommend what shoes to buy that will last years? I was raised by parents who have impressed upon me an aversion to spending more money on anything that needed, the result being that I will buy shoes that are heavily discounted and cheap, that will break down quickly. I would like to spend money for shoes that can last 5 years and that will be cheaper to have resoled rather than discarded. Thanks for your help.

There is a company called Allen Edmonds that has one of the lowest "per wear" costs according to the research of Dr. Thomas J. Stanley. When the shoes fall apart, you can send them back in for very cheap and have them completely rebuilt at varying price points. A pair bought today should still be wearable, with a few rebuilds, 70 years from now. I think Stanley showed they ended up costing a couple of pennies per day and that the high initial upfront cost was more than made up for in long-term quality and durability.

Thank you, I am going to be looking there for shoes and hopefully bringing my cousin with me, who knows more about shoes than I do. I imagine that I will be hesitant to purchase shoes as the most expensive pair I currently own are my running shoes ($95). That said, if I can stomach the cost, I think it will be worth it, especially as I saw that Allen Edmonds insists on the vast majority of their shoes be made in the US.

Joshua, where did you get the research by Dr. Stanley? I have read "The Millionaire Next Door" and his followup book and would like to see more of his future writings and advice for following these tips? Thank you!

I read all of his books, went through the footnotes, found the references he made, tracked those down, and even still occasionally try to keep up with his blog, where he will post new information from his work from time to time. I think he's made a very wonderful contribution to academia in understanding the mechanisms by which capital is concentrated in the hands of a minority of people.

He actually wrote a brief post about the topic we are discussing, quality shoes and lifecycle cost, providing page references to his work.

It is always best to buy quality furniture because I look at it as an investment..There are so many furniture shops that are household name here in South Africa, but their products are not of quality ...my mom has been buying her furniture at House of Class and we have had it for many years....So when I buy my own house one day I will make sure I buy. http://www.hofc.co.za/