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The Reich Report

Reich report: Spending money on the right things

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Last week we talked about how to save for different goals. This week I thought we would cover something that most of us never actually consider, am I saving too much? We have been told all our lives to save money, and we should. We also know that frivolous spending is bad. But clearly all spending is not bad. The key is to spend on the right things. In general, I like to buy things that go up in value and rent things that go down in value. It is important to ask if you are saving too much and not spending enough. Spending money after all can potentially make your life richer.

1. Real Estate. Spending money on a house that you intend to occupy for a longer time period is a great way to build wealth. Yes, prices are grossly over-inflated right now, but they were in 2006 too, and while it took a long time to get back to those levels, we ultimately surpassed them and we will pass these levels at some point in the future too. If you have enough time horizon, buying a home is what I consider a “right thing to buy.” Investment property can also be a good thing to spend money on, but the prices are currently higher than normal. Investment property provides the ability to generate passive income (income you don’t go to work each day to earn). Having multiple sources of income, including passive income is a great way to build personal wealth.

2. College education. If you’re spending money on it, then yes, you are “buying” a college education. I hear a lot of talk about is it worth it at these high prices? What about people with degrees and no jobs? These are anomalies not the norm. It has been proven countless times that those with degrees make more on average than those without them. Yes, college is a good investment. That isn’t to say that alternatives to formal four-year colleges don’t count too. All education is worth it and personally, I think trade schools are likely to be the hottest area for jobs over the next 20+ years.

3. Health and fitness. Is a gym membership an expense? Only if you don’t use it. If you do, it is clearly an investment especially as you age. One of the biggest expenses retirees face is healthcare. Taking care of yourself is a great way to potentially reduce those costs. Healthy or organic foods can go a long way to adding to that healthy lifestyle.

4. Experiences. I love to travel. I mean a really love to travel! Spending money on trips with my family is by far the best use of my money. I love to save, but it really doesn’t help me to save all of my money if I don’t ever get to enjoy it with those that are most important to me. Those experiences are what you remember throughout your life, not the “stuff” you bought and got rid of a few years later.

A few things to skip when it comes to buying things,

1. Cars. This one hurts a little to write, since I’m a huge car lover. While the market for cars is crazy right now, especially for collectible cars, the reality is that they rarely appreciate in value. As a business owner, I typically lease all of my cars as they will likely go down in value and often provide better tax deductions (business only). The same goes for most collectibles in general. Most do not go up in value so only buy them if you love them for yourself and not their future value.

2. Stuff. We all have too much stuff. Some days I literally feel like I am drowning in stuff. 95% of it is probably a waste of money. Unless it’s a requirement for your job, etc., expensive clothes, handbags, etc. are a horrible waste of money. Yes, sometimes they make us feel good, and yes, I have been known to buy them, but it really isn’t a good use of money. You’re much better off saving it and using it on a great experience with your family.

Don’t be afraid to spend some money. You can’t take it with you as they say! Just try to spend it on the right stuff.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.

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