Liza Lee

Quick Guide: What About That Luxury Item?

As I walk along the plethora of luxury goods stores in the city, I occasionally see queues to enter these stores. I must admit that I am not a fan of luxury handbags, shoes, etc. One day, I was curious about their prices, so I went in to browse and to check on prices. As an example for my analysis, I decided to repeat this each year.

So, here it is…

In 2019, the item’s value was $28K and it increases by 7.3% on average each year.

Table 1	Item's value	Add 7.30%
2019	$ 28,000.00	$ 2,044.00
2020	$ 30,044.00	$ 2,193.21
2021	$ 32,237.21	$ 2,353.32
2022	$ 34,590.53	$ 2,525.11
2023	$ 37,115.64	$ 2,709.44
2024	$ 39,825.08	$ 2,907.23
2025	$ 42,732.31

Inflation is roughly 5% on average each year.

Table 2	Inflation	Add 5.00%
2019	$ 28,000.00	$ 1,400.00
2020	$ 29,400.00	$ 1,470.00
2021	$ 30,870.00	$ 1,543.50
2022	$ 32,413.50	$ 1,620.68
2023	$ 34,034.18	$ 1,701.71
2024	$ 35,735.88
2025	Total increase due to inflation	$ 7,735.88

If you do not purchase the item and have the $28K, it can offset your mortgage at roughly 4.5% per annum.

if you purchased the item on a loan with a 4.5% interest rate per annum, the repayment would be approximately $6K each year over 5 years, the total cost would be roughly $31,488.56 by 2024/2025.

Table 3	Payments	Interest	Principal	Balance
2019	$ 0.00	$ 0.00	$ 0.00	$ 28,000.00
2020	$ 6,000.00	$ 1,161.01	$ 4,838.99	$ 23,161.01
2021	$ 6,000.00	$ 938.70	$ 5,061.30	$ 18,099.71
2022	$ 6,000.00	$ 706.19	$ 5,293.81	$ 12,805.90
2023	$ 6,000.00	$ 462.99	$ 5,537.01	$ 7,268.89
2024	$ 6,000.00	$ 208.62	$ 5,791.38	$ 1,477.51
2025	$ 1,488.56	$ 11.05	$ 1,477.51	$ 0.00
Total	$ 31,488.56	$ 3,488.56	$ 28,000.00	$ 0.00

Conclusion:

In 2024, if the item is an investment/unworn and has a resale value, it can possibly be sold at the same price or slightly less due to various factors.

Table 4	Amount
From Table 1 - Shop sells at	$ 39,825.08
From Table 3 - Total spent	-$ 31,488.56
Profit	$ 8,336.52

From Table 1 - In 2019, item was purchased at	$ 28,000.00
From Table 3 - Total spent	-$ 31,488.56
Spent on interest	-$ 3,488.56

If the item was purchased as an investment outright without any loan in 2019, and assuming the item can be sold at the same price as the store’s in 2024 then, the value of $28K will be $ 39,825.08 (table 1). This is an approximate profit of $11K and $4K greater than the inflation value of $ 35,735.88 (table 2).

If the item was purchased as an investment with a loan, and assuming the item can be sold at the same price as the store’s in 2024 then, there is a potential for breakeven with inflation. i.e., Inflation value is $35,735.88 (table 2) in 2024 vs 2024 proceeds from sale at $36,336.52 ($28K plus profit of 8,336.52 from table 4).

If the item was not purchased, with the funds offsetting a mortgage, then $3,488.56 (table 4) can be saved on the loan interest payments.

So, which options would you choose?

Purchasing this item can be achieved through proper financial planning that ties in with your budget including a forecast across all financial scope. Please refer to ‘Bring Me Wealth Please’ <https://www.austinmacauley.com/book/bring-me-wealth-please> for detailed knowledge and step-by-step instructions.

Disclaimer:

Thank you for your interest. Please keep in mind that both books ‘Bring Me Wealth Please’ and ‘Bring Me Success Please’ including their contents and blogs are copyrighted material. Please read the policy below:

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This guide is of a general nature. It has been prepared without taking into account your particular investment objectives, circumstances, financial situation or needs. Before acting on the information, you should consider your own investment objectives, circumstances, financial situation and needs. This guide is not intended to be, and should not be construed in any way as, investment, legal or financial advice.

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