How much money do you spend per month on living the good life? I’m talking about the money you spend on the latest gadgets, cars and home accessories and not the money you spend on eating out, cigarettes, chocolate and house keepers (although these do, technically, count as luxuries and definitely enhance good living). The difference between the gadgets, home accessories and cars and eating out, cigarettes and chocolate is that the former have hidden costs while the latter are transient.
For instance, you buy a brand spanking new iPad 2 to go with your iPad 1, Kindle and Galaxy Tablet and then you have to add it to your assets listed in your insurance policy. If you don’t then you’re in trouble if it’s stolen or breaks and needs to be replaced. If you make a habit of buying expensive gadgets then they start to add up and your premiums will reflect this.
What if you don’t like your white electric stove and decide to get a big green and red gas model? The trouble is that the only gas supplier is in Joburg and you’re in Cape Town, so you have to order them specially. You’ve just added to your insurance costs and cooking costs.
What if you’ve just got a raise? It’s not spectacular but you can just about afford the new Mercedes SLK you’ve had your eye on. So you have the whole insurance thing to go through, higher car payments and you discover that the sexy SLK is a very thirsty car and the R1000 that used to get you enough petrol to last the month now only covers the first two weeks.
Or, you remodel your bedroom and the new lighting configuration means that not only can your house be seen from space but your electricity bill has doubled.
How much thought do you really give to the long-term consequences of your spending?
Clint Harker, of Pinion Insurance Brokers, was cited in an article on business.iafrica.com. He said that many people find their finances in a sorry state of affairs simply because they aren’t able to cope with the associated expenses of maintaining their treasured luxury items. Often, the hidden costs only come to light a few years after the purchase, like when the warranty expires on your car and you suddenly have to pay for your SLK’s services or your lovely stove starts to rust in the Cape air and you need to have it treated annually.
The bottom line, according to Harker, is that even if you can afford the immediate cost of a luxury item, if you can’t afford the regular upkeep and associated costs then it is best not to get them at all.
Sandy writes on behalf of Direct Axis, a financial services provider that specialises in personal loans, home and car insurance and burial plans.