| by Glenn J. Downing, MBA, CFP® |
Collections vs. Experiences
This is another topic that arises from my financial planning practice. It is my generation’s habit to make collections of prized or valued items. To this day I have my book collection and my music collection. These give me great pleasure. I enjoy picking up a volume I’ve read and thumbing through it looking for a particular passage. Or choosing a CD to play on my ancient Bose.
Today’s generation is, I believe, more focused on experiences. Rather than collecting things, they value using their cash to gain experiences – whether travel, or simply a great night out with friends. And of course, all generalizations are faulty, including this one.
Buy or lease?
Case in point: to buy a Corolla, I might need to make a payment of $X. But for that same payment, maybe I can lease an Audi. Hmm. Much better experience. But at the end of the Corolla payment period I own the car for whatever its value. The liability is paid off, and the asset remains. But the lease? I paid for the use of the car, expecting no residual value. I paid for the experience of driving a luxury auto.
I can’t say one viewpoint is superior to the other. My books give me great pleasure – but I know they’ll eventually end up in a landfill. They mean pretty much nothing to anyone but me.
Generational understanding
Here’s how my generation understands things: If I have $10 cash or $10 tied up in a book, my balance sheet still shows that same $10 asset. I have not decreased my net worth by transferring that $10 from one asset account, cash, to another asset account, collected books. But if instead I spend that $10 on an experience, I have no corresponding financial asset – my net worth has decreased.
But experiences can be wonderful! and indeed, beyond price. In our early married life Mrs. Downing and I traveled to Europe several times. It was an inflationary period like now, with a very strong dollar, and long before the Euro. The dollar was extraordinarily strong relative to the European currencies, so it was super cheap to travel. Way cheaper than a trip to CA would have been. So we took advantage, and treasure those experiences to this day.
Then there’s the phrase, You have nothing to show for it. True enough; nothing to show, but great experiences.
As I reflect on this generational difference, I guess that, as in most things, there’s a balance to be achieved. Acquire some physical assets that will give you pleasure (paintings, sculpture, etc.) and may increase in value. At the same time best not to neglect the wonderful experiences that are ours to be had in life.
Intangible Assets
Let’s keep thinking about assets. What is your greatest asset? It may be an intangible – your education, your experiences, and your ability to earn a living. No matter what happens to you in life, these are yours. No one can ever take them away from you.
Things can be lost but experiences are forever
One of the most influential and fascinating biographies I ever read was Life and Death in Shanghai, by Nien Cheng. She was a banker for a western bank, a woman of wealth, and parenthetically, a Christian. The communists imprisoned her for years, with no trial, until finally releasing her with no explanation. Her sort of conclusion to her life’s story: Every day I thank God for another day of experience and enlightenment.
Well said. Things can be taken away and lost, but our experiences are with us forever, and we are the ones who choose our responses to the world.
