Sell Your Options Dearly: WASTING ASSETS

Eddie Braverman's picture
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Andy note: "Best of Eddie" - while Eddie is on vacation we're throwing up some of his classic posts from the past. This one from June 2010 is part of the very popular "Sell Your Options" 5-part series. More to come later this week & next. If there's an old post from Eddie you'd like to see up again shoot me a message.

"The things you own end up owning you. It's only after you've lost everything that you're free to do anything." - Tyler Durden

Sorry for the delay in this final post, guys. Yesterday was my oldest kid's end-of-year play, so a large part of my day was spent watching the boy that will carry on my family name dance around and sing Hitler Youth-style indoctrination songs about man-made global warming (don't even get me started).

Anyway, we've made it to the final installment of Sell Your Options Dearly, and this one might be the most important of all. Wasting assets hold the greatest temptation for us. But before I get into that, let's define "wasting asset" so you know what I'm talking about. When I say wasting asset, I'm not referring to the DXD calls I had expire worthless on me yesterday - AGAIN (damned overvalued market).

The wasting assets I'm referring to are better known by their street names: BLING. STUFF. CRAP. Basically, shit you don't need but might enjoy acquiring. The problem with most of it, though, is that the joy of acquisition diminishes rapidly after you acquire it.

That doesn't mean you should forgo toys altogether. Without blowing money on senseless shit every once in a while, you'd have a pretty boring life and it would be hard to get out of bed in the morning. We need the things that motivate us, and those things are often depreciating (or wasting) assets. The key is to not go overboard.

Is a $10,000 Rolex going to keep better time than a digital Timex? I use this example because one of my proteges found this out the hard way. This was a kid who went from making no money to making really pretty good money. So the first decent check he gets, he goes out and blows $7,000 on a watch.

And he loves it.

For about two weeks.

Then he calls me and sheepishly admits what he did. I ran him over a little bit because he should have known better, but you guys know what I did with my first decent check, so I don't give it to him too badly. But then he tells me he's over the watch. It just doesn't do anything for him anymore. He can't wear it to work because he's still a pretty junior guy and it looks ridiculous, and he'd just as soon sell it if he could get his money back.

Wasting assets go hand-in-hand with debt, and the two together can ruin you. So it's important to ask yourself what it is that turns you on about something. Is owning it going to make you happy? Or would just experiencing it satisfy your desire?

It's a lot cheaper to rent a Ferrari than it is to buy one. If you live in the city, when are you going to get to drive it anyway? I know there are a lot of avid car guys out there, and if that's what really revs your engine (no pun intended) then go for it. But if you want a slick car just because everyone else has one, you'll be a lot happier renting. Like these guys:

Visit msnbc.com for breaking news, world news, and news about the economy

The same can be said about just about anything. So I guess this is a pitch for a minimalist lifestyle. Do you really want to own all that shit, or do you just want to experience it?

I've owned 8 sailboats in my life, and I loved all of them. With the exception of one of them, I sold all of them at a profit or break even (based on purchase price - not factoring in monthly expenses). You could say I'm passionate about sailing. But these days, I'm more than happy to charter. (full disclosure: if I do go back to the States at some point, I'll buy another boat because it's a great way to spend time with the kids).

I just want to touch briefly on home ownership and real estate in general. I've also owned 8 residential properties in my life, 3 of which were my principal residence (the rest were investments). Real estate has worked out well for me, generally speaking. But you make your money on it when you buy it, not when you sell it, and a huge percentage of Americans are just now waking up to that fact.

Don't believe the reasons you've been given about why it's a good idea to buy a home as soon as you can. Real estate doesn't always appreciate in value (thank you sub-prime crisis). And the carrying charges can be brutal. Maintenance is always more than you expect, municipalities are scrambling for tax revenues, and the tax break you get for mortgage interest is little more than a working class myth.

When I met my wife, she owned her own house and her mortgage payment was $483 a month. You read that right. You're not going to rent a place for that, so buying makes sense in that case. But in almost every other case, renting is going to be your better option. Unless you can buy for significantly less than you can rent, renting is the way to go. If you do buy, pay the mortgage off as quickly as possible.

Hopefully Patrick will chime in on this post, because he's just gone through a major phase of life simplification in preparation for some long term travel. It would be interesting to hear his thoughts on selling your crap to make yourself more mobile.

Having a bunch of stuff just ties you down. If you're not getting the enjoyment out of it anymore, get rid of it. I'm reminded of something Robert DeNiro's character said in the movie "Heat":

"Never have anything in your life that you can't walk out on in 30 seconds if you spot the heat around the corner."

While I'm not suggesting such a spartan existense, there is some wisdom there. Don't let yourself get tied down by crap. Enjoy the things you have and give some thought to whether you really want to own the next big thing or just experience it.

Hope you've enjoyed it, guys. Thanks for hanging in there with me, and have a great weekend.

Comments (32)

Jun 19, 2010

edmundo, this series was great writing, thanks for taking the time to share your experiences/opinions/advice regarding life issues.

Jun 19, 2010
Edmundo Braverman:

Don't believe the reasons you've been given about why it's a good idea to buy a home as soon as you can. Real estate doesn't always appreciate in value (thank you sub-prime crisis). And the carrying charges can be brutal. Maintenance is always more than you expect, municipalities are scrambling for tax revenues, and the tax break you get for mortgage interest is little more than a working class myth.

Do any of you guys just think it's a better idea to rent for life?

Jun 19, 2010
econ:
Edmundo Braverman:

Don't believe the reasons you've been given about why it's a good idea to buy a home as soon as you can. Real estate doesn't always appreciate in value (thank you sub-prime crisis). And the carrying charges can be brutal. Maintenance is always more than you expect, municipalities are scrambling for tax revenues, and the tax break you get for mortgage interest is little more than a working class myth.

Do any of you guys just think it's a better idea to rent for life?

If you're going to get married, raise a family, and stay in the same location for a long time, then you definitely should purchase a home. But if you're single and flexible on location, then there shouldn't be a rush to buy. Buying restricts your opportunites for movement and can be a pain in the ass financially in the short term. The the OP is just alluding to the fact that there is too much social pressure to purchase a home, although the real estate bust has alleviated that to a certain extent.

You gotta understand the intended audience is guys from 18-28, a lot of whom work in or aspire to work NYC. Droppiing 600K on that townhome in Jersey is not neccasarily a good move when you can rent for $1800 a month.

Jun 19, 2010

i would argue that if your not planning on getting married and having kids, and you make good money and have no debt (key word is debt not leverage, and by leverage i mean borrowing $$ to make $$). then buying depreciating assets like real estate, cars, watches, clothes, etc is essentially the point of making money in the first place. i completely understand being liquid and not having all your money tied up into personal crap and investments and how its important to have money in the bank. but at the same time whats the point of having money if you cant buy shit?

the way i see it is; if your in your 20s and just getting your career started things may be skittish; you may be moving for better possibilities, you plan on going to business school, etc. so at that point it makes sense to save, invest, and limit spending on depreciating assets that may hold you down and limit your options.

but if your in your late 30s/40s and youve made a sizeable amount of $$ and want to buy crap, whats the downside?

why do we all want to make money? to buy crap, thats the point. does having a 500k patek on my wrist make me immortal, no. but the concept of having a 500k patek on my wrist when thats how much some peoples homes cost, and some peoples whole entire net worth. so i suppose just being able to have allot of nicer, more expensive shiny things than the other person is the point of life, atleast mine

this quote; "the things you own end up owning you" only applies to middle class assholes who are living in over mortgaged suburban homes and competing with the joneses by buy newer base model bmws with car loans

Jun 19, 2010
MSH:

why do we all want to make money? to buy crap, thats the point. does having a 500k patek on my wrist make me immortal, no. but the concept of having a 500k patek on my wrist when thats how much some peoples homes cost, and some peoples whole entire net worth. so i suppose just being able to have allot of nicer, more expensive shiny things than the other person is the point of life, atleast mine

this quote; "the things you own end up owning you" only applies to middle class assholes who are living in over mortgaged suburban homes and competing with the joneses by buy newer base model bmws with car loans

The other danger of spending too much money on pointless crap: becoming an incredible douche.

Jun 19, 2010
MSH:

i would argue that if your not planning on getting married and having kids, and you make good money and have no debt (key word is debt not leverage, and by leverage i mean borrowing $$ to make $$). then buying depreciating assets like real estate, cars, watches, clothes, etc is essentially the point of making money in the first place. i completely understand being liquid and not having all your money tied up into personal crap and investments and how its important to have money in the bank. but at the same time whats the point of having money if you cant buy shit?

the way i see it is; if your in your 20s and just getting your career started things may be skittish; you may be moving for better possibilities, you plan on going to business school, etc. so at that point it makes sense to save, invest, and limit spending on depreciating assets that may hold you down and limit your options.

but if your in your late 30s/40s and youve made a sizeable amount of $$ and want to buy crap, whats the downside?

why do we all want to make money? to buy crap, thats the point. does having a 500k patek on my wrist make me immortal, no. but the concept of having a 500k patek on my wrist when thats how much some peoples homes cost, and some peoples whole entire net worth. so i suppose just being able to have allot of nicer, more expensive shiny things than the other person is the point of life, atleast mine

this quote; "the things you own end up owning you" only applies to middle class assholes who are living in over mortgaged suburban homes and competing with the joneses by buy newer base model bmws with car loans

This is retarded. Some of us would like to make money to:
a.) Travel and engage in life-enriching experiences
b.) Have enough of a financial cushion to not have to worry too much about money, and to minimize the roll of income in choosing our profession
c.) Buy things related to our hobbies/interests/things we're passionate about (i.e. a sweet set of golf clubs)

I'm not disparaging people who want to buy a Rolex (especially since I've always liked good clothes myself) but I think a-c will lead to a far more fulfilling life than focus.ing on buying random crap

Jun 19, 2010

this video is on the money with spending and buying depreciating assets

http://video.google.com/videoplay?docid=-619200265...

Jun 19, 2010
MSH:

this video is on the money with spending and buying depreciating assets

http://video.google.com/videoplay?docid=-619200265...

Here's the 3-minute version of that video:

Jun 19, 2010

The series were so great Eddie. really appreciate your contrbution.

Jun 19, 2010

You don't make money to buy useless shit. You make money because it gives you freedom and safety.

Jun 19, 2010

These were great articles Ed. I rarely read the cover pages, but I read all of your articles this time around.

I would love to see more of this stuff. Reading genuine wisdom from real experiences is far more enjoyable/useful than some of the other stuff posted.

Jun 19, 2010

Let's also not forget about wasting money on $10,000.00 tables and $1200.00 dinners in the city just to impress some dumb blonde

Jun 19, 2010

Agree completely.

Right after I left banking 2 years ago, I used some of my savings to buy a lot of crap, get awesome furniture for my house, and throw a big party with some friends.

Some of that was fun and I had a pretty ridiculous setup when all was said and done.

One year later, and I was moving out of the country to prepare for long-term travel and was in the midst of selling all the crap I had accumulated.

You could argue that I have an unusual story since most people don't leave banking to start an online business - but plenty of people do move around a lot, transfer offices, move to different cities, etc.

It's a huge pain to get rid of - or even store - everything you've amassed over the years, especially when you barely even use most of it.

I now keep a bare minimum of stuff and intend to keep it that way for as long as possible. I'll move back to the US at some point, but even when that happens I'm going to be as much of a minimalist as possible.

Given that this is a finance message board, all of us want to make a lot of money - and you need to indulge on stuff occasionally just to preserve your sanity.

So take some of your bonus and buy what you want... just don't go overboard and make your life about buying things.

As one of the posters above said, you make money because it gives you freedom and safety. You quickly forget about most things you buy, no matter how great they seem at first.

If you do want to spend money when you get paid, I would strongly recommend spending it on experiences rather than things.

You'll always remember studying abroad, volunteering, getting in adventures, etc. and you can even turn around and spin those to your advantage for interviews, b-school applications, and such - try doing that with the new Ferrari you just bought.

    • 1
Jun 19, 2010

edmundo, that video was great haha

Jun 19, 2010

Sorry Edmundo, I think Clooney / Ryan Bingham kind of summarized it best.

http://www.youtube.com/watch?v=nA9Q_hEDne8

"I just want to be a monkey of average intelligence who wears a suit. I'll go to business school!"

Jun 19, 2010

Nice post, Edmundo. i even copy and paste your best words into my FB..... talk about one step closer to become a monk.

Oil & Gas monkey

Jun 19, 2010

awesome! thanks Ed!!

after all the hard work, the most important things in life are going to be experiences, adventures, stories, family etc. not much a watch can compete with.

Jun 19, 2010

The worse mixup of selling your options dearly: Getting in DEBT to buy DEPRECIATING assets.
I know of one guy who did this (not closely acquainted, but I stayed with his daughter's brother). He had a shitty truck job and he bought furniture, quite a big TV, nice heater, new laptop, and I don't know about his car. The problem was some (or all) of it was obviously bought with debt because he'd be bitching about his repayments to to my friend's mum.
Verdict: fricking idiot. I assume he's rarely home to use them, and every one of those items depreciates quite quickly (I think).

Jun 19, 2010
Anonymous Rep:

The worse mixup of selling your options dearly: Getting in DEBT to buy DEPRECIATING assets.
I know of one guy who did this (not closely acquainted, but I stayed with his daughter's brother). He had a shitty truck job and he bought furniture, quite a big TV, nice heater, new laptop, and I don't know about his car. The problem was some (or all) of it was obviously bought with debt because he'd be bitching about his repayments to to my friend's mum.
Verdict: fricking idiot. I assume he's rarely home to use them, and every one of those items depreciates quite quickly (I think).

Huh? Minus the tv, the things you mentioned are neccesary in today's world. Who goes without furniture, heat, and a computer? I don't think it's a big deal to buy those things, and all of the above items are usually offered at 0% financing. Plus, a trucker's salary should be more than adequate for that.. Don't they make 70-90K?

Jul 20, 2010
Bottles and <span class=keyword_link><a href=//www.wallstreetoasis.com/finance-dictionary/what-is... rel=nofollow>DCF</a></span> Models:
Anonymous Rep:

The worse mixup of selling your options dearly: Getting in DEBT to buy DEPRECIATING assets.
I know of one guy who did this (not closely acquainted, but I stayed with his daughter's brother). He had a shitty truck job and he bought furniture, quite a big TV, nice heater, new laptop, and I don't know about his car. The problem was some (or all) of it was obviously bought with debt because he'd be bitching about his repayments to to my friend's mum.
Verdict: fricking idiot. I assume he's rarely home to use them, and every one of those items depreciates quite quickly (I think).

Huh? Minus the tv, the things you mentioned are neccesary in today's world. Who goes without furniture, heat, and a computer? I don't think it's a big deal to buy those things, and all of the above items are usually offered at 0% financing. Plus, a trucker's salary should be more than adequate for that.. Don't they make 70-90K?

Sorry, I should have been more specific. The furniture was a dual set of reclining chairs with either leather or some wannbe material similar to leather. The heater I agree with, and the laptop: I think it's a necessity (one of my biggest). I don't think he needed it though. I'm pretty sure he sold it sold it. My point is that he bought toys that he could not afford - he could of bought cheaper versions if he had to. He had trouble paying rent and food expenses (he was living on the same property as my ex-buddy, and they were poor and on the benefit).
I don't know if he was paying interest, all I know is that apparently he was bitching about payments he was having trouble with. And I'm not in America (I dream of a greencard). I don't know what truckers make here. I know that in America they make bigger bucks.

Jun 19, 2010

A great series of rather life changing posts. I enjoyed reading every single one of them and even joined so I could send you my appreciation. Defiantly had many things I either half assed(ly) thought about or didn't want to think about. Thanks again edmundo!

Jun 20, 2010

Great post. Great read and interesting topic to think about.

  • Only time will tell....
Jun 20, 2010

^ Ok, that makes sense. I know people like that. They may buy necessities but then they have to get the most expensive brand, or get something they don't need because other people who actually need it have it (i.e. Blackberry).

Jul 20, 2010

Yeah. It wasn't that they were the most expensive brands or even current models, it's that he wasn't wise with his spending. He could of been wiser with his spending. If he bought them with his own cash, that would be one thing. But one should think very carefully before deciding to become a debtor to purchase such items.
For the record: I don't know which items were owned, and which he was making payments for. All I know is he had a number of assets of some value, and that apparently he was having financial problems paying rent and making payments for whatever he had purchased on finance.
I would purchase a laptop with debt if I needed a better model, but I wouldn't purchase recliners, a heater, and a tv unless I know I could pay.

Jun 20, 2010

"Never have anything in your life that you can't walk out on in 30 seconds if you spot the heat around the corner."

Could someone explain what this means? The heat part.

Jun 20, 2010

^^^ He was a thief referring to the cops.

Jun 20, 2010

Ah yea. Makes sense.

Jun 20, 2010
Edmundo Braverman:

Hopefully Patrick will chime in on this post, because he's just gone through a major phase of life simplification in preparation for some long term travel. It would be interesting to hear his thoughts on selling your crap to make yourself more mobile.

Well, I'd say the phase is still in process...I've sold most of my furniture, my TV, computer/s and I'm in the process of donating most of my clothes.

Over the past 8 years, I've lived in 7 different apartments, so to say I am sick of moving my shit is an understatement. Selling 99% of my stuff and simplifying my life in the process is a much welcome change for me. I really think this change is more about shifting my focus from chasing "status" and "possessions" to chasing rich life experiences (first through travel)...not that I really ever cared much about status and not to say that I don't appreciate a nice apartment with all the amenities...my focus and priorities have just changed. I am sure once I decide to settle somewhere in a few years I will start accumulating some nice material things again, but hopefully I will keep it light and keep some of the freedom I plan on enjoying over the foreseeable future. Maybe I'll have to visit these latest threads by Eddy as a reminder of what not to do.

I'm moving back to Boston as a "home base" in a few weeks before traveling to Russia with my family in July and then I'm off to Buenos Aires for some long-term travel (as Edmundo mentioned) starting in September. Everyone always asks me how long I'm moving down to BA for and my answer is always "3-6 months" but the truth is I don't really know. I could be there for 2 years. Right now, after 6 years on Wall Street and 2 years in business school I don't think I need a definitive life plan. Before I have to take care of someone other than myself, I think seeing more of the world is probably as good a plan as any....

-Patrick

Jun 24, 2010

Taken to the extreme, the most baller example of the minimalist philosophy is Nicolas Berggruen... allegedly his sole possessions in life are a G5 and a fine art collection.

"Having given up most of his material possessions (other than an art collection and personal jet), Berggruen does neither own a home nor a car and prefers to live out of hotels and restaurants. He said:

"...for me, possessing things is not that interesting. Living in a grand environment to show myself and others that I have wealth has zero appeal. Whatever I own is temporary, since we're only here for a short period of time. It's what we do and produce, it's our actions, that will last forever. That's real value." (Wikipedia)

Jul 3, 2012
LiquidityEvent:

Taken to the extreme, the most baller example of the minimalist philosophy is Nicolas Berggruen... allegedly his sole possessions in life are a G5 and a fine art collection.

"Having given up most of his material possessions (other than an art collection and personal jet), Berggruen does neither own a home nor a car and prefers to live out of hotels and restaurants. He said:

"...for me, possessing things is not that interesting. Living in a grand environment to show myself and others that I have wealth has zero appeal. Whatever I own is temporary, since we're only here for a short period of time. It's what we do and produce, it's our actions, that will last forever. That's real value." (Wikipedia)

He must not have married or have kids.

Jul 4, 2012
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Jul 3, 2012
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