Your desire to acquire such assets remains as you keep spending on them; Excessive spending should be moderated
Your desire to acquire such assets remains as you keep spending on them; Excessive spending should be moderated
‘Passion wealth’ refers to investment in collectibles such as art, paintings and antiques. The problem that some people face is the excessive spending on passion assets. In this article, we will discuss what triggers excessive spending on these assets and how to control it.
asset tolerance
Collecting passion assets is a rewarding experience. But as time goes on and you have a larger collection, chances are you develop a tolerance for the wealth of passion. That is, you stop enjoying the same level of happiness even if you get the same amount of wealth as you have accumulated in the last year. This means you have to spend more to get the same rewarding experience. Why?
Neuroscience can explain this behavior. When you have a pleasant experience, your brain releases a neurotransmitter called dopamine.
When you constantly spend on passion assets, the reward center of your brain is overstimulated. This means that your brain initially becomes overwhelmed and releases high levels of dopamine. Ultimately, the brain controls the issue by reducing dopamine production or by reducing dopamine receptors.
This translates to another problem: Buying passion assets now will trigger a debilitating response from the reward center of your brain. But your urge to acquire the wealth of passion continues. Therefore, you buy more to get the same level of experience as before.
How do you know you are overspending? For one, you may end up paying more than usual to buy a property.
For example, you may be bidding high in an auction, or you may be forced to buy a substandard property in some other way. For another, your spouse, sibling, or parent may start to believe that you have an addiction! So, how should you control this extra spending behavior?
relevant expenses
It is very unlikely that your immediate family will have developed a tolerance for the same passion asset that you have. Therefore, an optimal strategy would be to consult with your spouse, parents or siblings before spending on such assets. Agreed, this may not always be easy, given that your urge to spend on passion assets can be impulsive.
Another way to control excessive spending is to engage in other leisure activities that can be beneficial. When you are bored or not gainfully engaged in an activity you are likely to spend often on a wealth of passion.
Let’s say you find gardening to be something beneficial. Then, instead of allocating much of your leisure time to gardening to analyze which passion properties to buy next, can control excessive spending. You should also maintain a separate bank account for purchasing the passion asset. You can fund this bank account with a predetermined amount every month, thus limiting the amount you can spend on such properties.
Lastly, you can turn your obsessive assets into something on an ongoing basis. Just as you buy shares with the proceeds from selling any other investment, you can buy a passion asset with the proceeds from selling one or more assets from your current collection.
True, parting with the possessions of passion can be painful, as they are properties of touch and feel.
Often, this kind of pain drives us to sell our assets to demand more money – a bias that behavioral psychologists call the endowment effect. But the endowment effect usually takes longer for you to hold the property.
conclusion
You can determine how much you want to spend on passion property as a percentage of your total investment or after arriving at an absolute amount in consultation with your spouse, sibling or parent.
Note that your excessive spending may simply be the result of a pandemic. It is a fact that with the limited scope of leisure activity, many people have turned their attention towards buying passion property. Perhaps, as we adjust to this virus and as the world loosens up on pre-pandemic activities, your brain’s reward center may revert to regular spending habits. If you are suffering from excessive spending, then you should moderate this issue.
(The author provides training programs for individuals to manage their personal investments)