Aging assets losing value by the day are money holes, but knowingly or in ignorance people keep them, sometimes at a cost to personal finance and wellbeing.
The Nigerian condition compels citizens to buy used vehicles, electronics and other household appliances and assets. Yet, the truth is that these are serviced at a cost sometimes higher than brand new ones.
A disused car
Every depreciating asset poses the risk of turning the owner into an unwilling slave, especially when emotion or class is attached.
Disregard whatever impression observers may form about that asset. Get rid of it before it hurts your finances.
Learn from the experiences of others
Consider the story of a man who retired in 1988 as a driver in a multinational conglomerate. His boss rewarded his service with an ageing car that had been parked in the parking lot for a long time.
The retiree spent part of his benefits to fix the Peugeot 504 GL. He used the car for some years then turned it into a taxi when it began to erode his little savings fast.
But frequent downtime of the depreciating car hardly allowed him to make savings. Yet he kept it because he was too attached to it as a fond reminder of his kind boss. Against useful advice, he preferred seeing the car rust away to selling it.
A colleague has a BMW car he refers to amusingly as a jalopy. When he realised how costly it was to fuel the car alone, he summoned the courage to withdraw it from the road.
He has since adjusted to the reality of venturing out without a car that had been a status symbol for many owners.
After I stopped driving my ageing Toyota 4Runner, I have saved up money for more valuable assets and property.
Everyone has depreciating assets which may not even be vehicles or home appliances. The financial reality in all cases is that you can gladly do without.
Purchase what you need rather than what you want, and be aware upfront what depreciation rates assets can have.
Here are some assets you can do without when you consider how fast they depreciate.
Luxury cars
For the middle class, there is little chance of avoiding a car purchase for ever. But keep in mind that it is a depreciating asset. To get the most out of your purchase, focus on what you really need, not what suits your ego or gives you status symbol.
A used car in good condition has already seen much of the initial depreciation priced out. The corollary is someone who wants to have the benefit of gold’s stability and buys jewelry instead. You cannot have it both ways.
Boats
There is a reason why boat owners often lament that the two happiest days of their lives are the day they bought their first boat and the day they sold that same piece of property.
The dream of boat ownership is quickly absorbed in the reality of the expense of maintenance. Boat rental may seem an expensive alternative, but it is usually far less expensive than owning one.
Your own boat is a depreciating asset you can harldly afford.
Recreational vehicles
Just like cars and boats, recreational vehicles lose a large percentage of retail value the minute you depart from the dealer’s parking lot. And they continue to lose value as they age.
Few people use recreational vehicles as much as they expect to when they plunk down the purchase price. Add the costs of gas and space rental many people have to pay when they are not in use and ownership does not make much sense.
Electronic gadgets
They not only depreciate, they do it quickly. Owning the latest and, purportedly the greatest, in computers or electronic gadgets may be popular, but it also is the least cost-effective option. The latest models always come with a premium price.
Last year’s model is usually just as effective for most people. And last year’s models will be heavily discounted as soon as new ones appear on the horizon.
