It is probably difficult to overstate the importance of financial prudence and personal responsibility. We were well advised regarding the importance and practicality of not paying more than absolutely necessary in the book “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy”, by Thomas J. Stanley and William D. Danko.
However, there are times when some attention should be paid to the overall experience, even if there is some cost penalty. For example, should you be extremely price conscious when purchasing a long life, daily use item such as s new television set. Most consumers will watch a new TV almost daily for many years, suggesting that a better long term experience may trump saving a few dollars at the point of purchase.
On the other hand, it may make sense to consider a late model used car, as an alternative to a new car with a high depreciation rate over the first few years. Improving manufacturing quality and a flood of two and three year off lease vehicles could make a gently used car a reasonable alternative at a significant saving.
Buying things (cars, TVs, etc.) is one part of the equation. Spending on advice may be another. While it is difficult to create a one-size-fits-all template, it may be helpful, when considering how much to pay for advice, to assess the stakes involved. For example, if you are a young person, getting started on a career, a modest amount invested through your employer’s 401k program, or monthly contributions to a passive equity fund, may be just right, at only a nominal cost. However, as your investable assets increase, perhaps climbing toward the $500,000 level, a personalized, professional approach could be money well spent, perhaps through improved performance, guidance regarding attractive strategies and reassurance during periods of market turbulence.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA®