95: How NOT To Buy Depreciating Assets + Giveaway Winners
Dec 16, 2024
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The hosts explore the five critical mistakes people make when buying depreciating assets, like over-borrowing and inadequate research. They share inspiring success stories from listeners who transformed their finances and emphasize the importance of avoiding negative equity. Listeners gain insights into responsible spending and the benefits of diversifying investments, including art. Fun anecdotes complement practical advice, ensuring a wealth of knowledge for anyone looking to secure their financial future.
A key mistake when buying depreciating assets is overextending one's budget, which compromises future savings and investment capabilities.
High-interest debt can severely hamper financial growth, making it crucial to avoid financing depreciating items without careful consideration.
Thorough research and strategic planning are essential to avoid impulsive purchases, enhancing financial health and ensuring better financial decisions.
Deep dives
Impactful Success Stories from Listeners
Listeners share inspiring financial turnarounds as a result of the podcast's guidance. Shane's journey from addiction and financial instability to saving thousands and launching a business exemplifies a dramatic life change facilitated by the show's insights. Lonnie successfully funded his daughter's college education through strategically managed investments, avoiding student debt altogether. Eric helped his girlfriend overcome financial anxiety by implementing budgeting strategies learned from the podcast, showcasing the show's influence on both personal and relational financial literacy.
Understanding Depreciating Assets
The discussion highlights the commonality of purchasing depreciating assets, defining them as items that lose value over time, such as cars and appliances. It emphasizes that while these purchases are a part of life, they should be made intelligently to avoid negative financial consequences. Understanding the balance between enjoying life and maintaining financial health is crucial, as excessive spending on depreciating assets can hinder wealth-building efforts. The hosts stress the importance of ensuring sufficient funds remain for investment rather than using income solely for non-appreciating purchases.
Avoiding Financial Overstretch
A major mistake in purchasing depreciating assets is not fully grasping what one can truly afford, often leading to financial strain. Buyers frequently stretch their budgets beyond comfort, affecting their ability to save or invest. The conversation stresses the importance of maintaining a 15-20% savings margin after accounting for all expenses, advocating for investments over unnecessary consumer debt. It warns against financing depreciating items that diminish one's ability to contribute to future wealth accumulation.
Debt Management and Low-Interest Opportunities
Another pitfall is taking on excessive high-interest debt, which can be particularly damaging in the current economic climate. The hosts advise against financing depreciating assets, especially when interest rates are significantly high, as this can drastically affect long-term financial growth. Leveraging low-interest rates is seen as beneficial; however, too much cash down on a loan can also be counterproductive. The importance of evaluating the holistic cost of ownership, even in seemingly low-interest scenarios, is highly emphasized to avoid accumulating burdensome debt.
The Importance of Research and Due Diligence
Listeners are urged to conduct thorough research before making significant purchases, as impulsive buying can lead to costly mistakes. The hosts recount a personal anecdote highlighting how strategic shopping led to saving substantial amounts on a boat purchase. They advocate for taking time to compare prices, seek better deals, and ensure purchases align with both needs and financial health. Additionally, the practice of using a 'cooling-off' period before finalizing such purchases is recommended to solidify decision-making processes.
In this week's episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz discuss the five biggest mistakes they believe people make when buying depreciating assets...
They simply can't afford it. They borrow too much or the interest rate is too high. They pay it off early. They didn't do their research. Or they roll negative equity into it again and again.
❓ Ask us questions for our Q&A episodes – @richhabitspodcast on Instagram
📬 Inquire about working together – christian@witz.vc
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Disclosures: Masterworks affiliated issuers have now conducted more than 420 offerings of securities, representing over $1.02 billion in Art Investments, as of June 30, 2024.
See important Masterworks disclosures: https://masterworks.com/cd
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