Should You Buy A Nice Watch?

Investing, saving, stocks, ETFs, bonds, cash, 401ks, IRAs, Roth or Traditional, annuities…

All are things Financial Advisors love to talk about.

What about nice watches?

You don’t hear Financial Planners talk about things like a Rolex, or Omega, or Patek, or other expensive items too often.

We will.

Let’s talk about how a nice watch (or other expensive items) can fit into your financial plan.

First, why you shouldn’t.

A nice watch (or other potential collectibles) is a luxury item. Luxury items should be near the bottom of the list priority-wise when it comes to spending money.

Before talking luxury items, almost (if not all) of your non-mortgage debt should be paid off. Those items are liabilities and represent risk to you if something where to happen like you lose your job.

You should also be putting in a more than sufficient amount into your retirement (20-25% as a rule of thumb, less if you’re an extremely high earner and you can be okay).

You need to have a nice emergency fund of cash, ideally at least 6 months worth of expenses, sitting in your bank just in case you have an emergency.

I would also prioritize other goals first, like saving for a house, or wedding, or any other big expense you know you have coming up.

If you have done those things and have a solid financial base to work from, then the conversation gets more nuanced. If you have not done all of those things, then stop and come back once you have achieved those basic goals.

Another reason why you might not is that luxury goods can go down in value. Like cars, most people don’t want used items. So when you take something off of the shelf/lot, you know it is generally going to take an immediate hit value-wise.

Depreciating assets are not a way to build wealth.

If you do not make smart purchases, then you could spend big money for something that goes out of favor in a relatively short window.

Also, spending money on a luxury good might mean that you have to sacrifice elsewhere. I am not a big fan of buying objects over memories. Is it worth giving up a nice experiences like a vacation and all of the memories that come with it for whatever you are thinking of purchasing?

Is there something else more practical that you need?

Is your car getting old and you should be thinking about the next purchase there? Kid going to need braces?

There are many factors to consider before purchasing a luxury good, like a nice watch. I want to make sure those bases are covered before thinking about diving in to making that purchase.

But now that have, here’s…

Why you should!

How much are you earning in your bank account today?

I am getting next to nothing, if anything at all, for the cash I have in the bank. That’s okay for my emergency fund. The emergency fund is insurance, so it costs you money (opportunity cost).

But what about the extra money you just have in the bank because you don’t have anything better to do with it, or that isn’t earmarked for anything in particular?

If you do your research and buy a nice timepiece, a good used and sometimes even new one will hold their value.

If you wanted or needed to you could sell it for about what you paid for it.

Let’s just go with a scenario in which it held it’s value. You get to wear a nice beautiful timepiece, and all of the benefits that go with it like the confidence it provides, how well it shows in a professional setting, it can be used to get cash/bartered in an extreme situation if you need help.

You get all of the benefits of the watch, and it costs you nothing in the long run.

Your bank account doesn’t do that.

I purchased a nice used Omega a year and a half with some extra cash after my wife urged me to. Entry level nice watch, pre-owned so it had already taken it’s big value hit. In the year and a half since I bought it, the value has actually gone up by 50%!

Now, a lot of unusual market forces are driving that, just as they have many stocks, crypto currencies, NFTs, etc. While the watch is not a speculative asset like a lot of those things, and will hold most of it’s value, that kind of rise in value isn’t normal or to be expected. It is a nice perk though for sure!

The market for watches is crazy right now with prices at record highs without nearly enough to satisfy the demand, so I would anticipate that values hold for a while. That is just a guess though, do your own due diligence on that please.

As mentioned above, there are settings where it can be advantageous. If you are in certain professions, then a nice watch can help to demonstrate your financial success, which generally follows high performance in your field. It will probably never be the reason you close a deal, but it certainly won’t hurt.

If you are in an emergency situation, it can be used to help get you out. For instance, if you are traveling and get in jam that requires money, then the watch could be sold or traded for help to get you out of the situation. You won’t get full value for it, but it could help you not be in harm’s way. It’s a tradeoff, but a watch is a good universal enough to potentially save you in the right instance.

If you don’t necessarily have a nice family heirloom, a nice watch could be the start of that tradition. I hope to leave nice watches for my kids and future grandkids. I enjoy watches, and if they don’t love them there is value in them. There is an emotional component that can be a real factor in making the decision. That is okay.

So should you buy a nice watch?

It is different for everyone, and you can come up with any reason to justify a purpose. But if you are following a solid plan, and have the extra money aside from your emergency fund, then it is something you could consider.

I write about watches because I know and love watches more than other things, but if you have another type of luxury good you can reasonably substitute, that retains value well, then all of the methodology can apply to you too.

Just make sure it doesn’t come at the expense of any needs or at the expense of creating memories with loved ones, and you will be fine.

Want help deciding if you’re ready to buy that watch?

All written content on this site is for information purposes only. Opinions expressed herein are solely those of Snowcap Financial, unless otherwise specifically cited.   Material presented is believed to be from reliable sources and no representations are made by our firm as to other parties’ informational accuracy or completeness.  All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

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