Or: How to Stop Accidentally Lighting Your Money on Fire

Picture this: You’ve got two friends. One is like that reliable buddy who gets better with age—always there for you, constantly improving, maybe even helping you move apartments without complaining. The other? Well, they peaked in high school and have been steadily declining ever since, borrowing money and never quite living up to their initial promise.

Welcome to the world of appreciating versus depreciating assets, where your money’s best friends and worst enemies duke it out for your financial future.

If you’ve ever wondered why some people seem to effortlessly build wealth while others work just as hard but remain perpetually broke, the answer often lies in this fundamental difference: wealthy people understand that not all purchases are created equal. Some purchases are investments in disguise, while others are just really expensive ways to make your money disappear.

Think of it this way: every time you spend money, you’re essentially casting a vote for your financial future. Are you voting for “Future Me deserves to be wealthy” or “Present Me deserves this shiny thing that will be forgotten by next Tuesday”? The choice is yours, but the consequences compound over time like interest—except sometimes in reverse.

What’s the Deal with Appreciating Assets?

Appreciating assets are the overachievers of the financial world. These are investments that actually have the audacity to become MORE valuable over time. I know, revolutionary concept, right?

Examples of approachable appreciating assets include:

• Real estate (the good kind, not your cousin’s “investment” in cat condos)
• Stocks and index funds (because apparently, betting on human ingenuity tends to pay off)
• Bonds (these debt instruments aren’t as flashy as that new sports car, but boring can be good)
• Certificates of Deposit (you are lending your bank money and as a thank you, they pay interest on that loan)
• Your education and skills (the one asset the IRS can’t tax… yet)

Think of appreciating assets as low maintenance financial houseplants. You water them occasionally (make payments, reinvest dividends), and they keep growing. It’s like magic, but with a little more paperwork.

The beauty of appreciating assets is that they work while you sleep, binge-watch Netflix, or argue with strangers on the internet (not recommended). These wealth builders quietly appreciate in value while you’re busy living your life. But unlike your actual houseplants, they won’t die if you forget about them for a few months.

But here’s the kicker: appreciating assets often require patience, which is apparently a superpower a lot of us lack. We live in an instant-gratification world where waiting three seconds for a webpage to load feels like an eternity, yet building wealth through appreciating assets requires thinking in years and decades. It’s like asking a fruit fly to plan for retirement or asking a teenager to watch paint dry.

The Dark Side: Depreciating Assets

Depreciating assets are the exact opposite. They are the financial equivalent of that expensive gym membership you bought in January and used exactly twice. They lose value faster than your motivation to meal prep on Sunday nights.

Common depreciating assets:

• New cars (the moment you drive off the lot, congratulations! You just participated in the world’s most expensive magic trick)
• Electronics (your 75” flat screen TV loses value faster than you can say “new iPhone release”)
• Boats (remember: the two happiest days of boat ownership are the day you buy it and the day you sell it). Someone once told me all boats come with a hole in the middle: that’s where the money goes.
• The latest fashion trends (yes, you’ll look cool for a while, until the next fad kicks in and then you have to lay out more cash to keep up)

Depreciating assets are like reverse wine—they don’t age well, and they definitely don’t get better in storage.

What makes depreciating assets particularly insidious is that they often disguise themselves as “investments” or “necessities” when they’re really just expensive entertainment. That luxury car isn’t transportation—it’s a very expensive way to feel important during your commute. Those designer clothes aren’t wardrobe staples—they’re wearable ego boosts that lose their power faster than a phone battery at 1%.

The depreciation game is rigged from the start. Manufacturers spend billions figuring out how to make you want the latest model, upgrade, or version. It’s planned obsolescence meets psychological warfare, with your wallet caught in the crossfire. They’ve turned consumption into a hobby, and unfortunately, it’s a hobby that costs money instead of making it.

The really cruel irony? The more you spend on depreciating assets, the less you have available for appreciating ones. It’s like choosing to eat dessert first, except dessert costs $50,000 and ruins your appetite for building wealth. Every dollar that goes toward something losing value is a dollar that can’t compound and grow into your future financial freedom.

Why Smart Money Chooses Team Appreciation

Here’s where the wealth-building magic happens. People who build serious wealth have figured out the cheat code: they load up on appreciating assets and minimize their depreciating ones. It’s not rocket science, but it does require restraint and the ability to think beyond immediate gratification.

The wealth-building formula is embarrassingly simple:

1. Buy things that go up in value
2. Avoid buying things that go down in value
3. Wait (this is the hard part)
4. Repeat until wealthy

When you buy appreciating assets, you’re essentially hiring your money to go out and make more money while you sleep. It’s like having the world’s most reliable employee who never calls in sick, never asks for a raise, and works 24/7 without complaint.

But here’s what really separates the wealth builders from the wealth dreamers: they understand the concept of opportunity cost. Every time they’re tempted to buy something that depreciates, they calculate what that money could become if invested instead. That $40,000 luxury car? In 30 years of compound growth at 7% annually, that’s potentially $304,000. Suddenly, that heated steering wheel doesn’t seem quite so essential.

Many of the wealthy don’t necessarily make more money than everyone else (though some do). They just make their money work harder. While the average person’s money goes to work and immediately retires to a life of leisure (usually involving rapid depreciation), wealthy people’s money goes to work and brings friends—lots of dividend-paying, interest-earning, value-appreciating friends.

This is where compound interest becomes your financial superhero. Einstein allegedly called it the eighth wonder of the world, and while he probably never said that, whoever did wasn’t wrong. When you own appreciating assets, you earn returns on your original investment AND on all the previous returns. It’s like financial the movie Inception. Instead of dreams within dreams, it’s returns within returns, growing exponentially over time.

The Plot Twist: Sometimes You Need Depreciating Assets

Before you swear off everything that loses value, remember that some depreciating assets are actually necessities disguised as financial villains. You need a car to get to work (unless you live in one of those magical cities with functional public transportation). You need a computer if you work in anything invented after 1985. You need clothes unless you’re planning a very different lifestyle change.

The trick is being intentional about these purchases. Buy reliable, not flashy. Think “will this help me make money or save money?” rather than “will this make my neighbors jealous?”

Here’s a revolutionary concept: you can actually buy depreciating assets strategically. Instead of buying new, buy used and let someone else take the depreciation hit. That three-year-old car has already lost most of its value but still has most of its utility. Those slightly outdated electronics still perform 90% of the functions at 50% of the price.

The key is distinguishing between wants and needs, then finding the most cost-effective way to meet your actual needs. You need transportation—you don’t need a vehicle that costs more than most people’s annual salary. You need a computer—you don’t need the latest model that can render 4K video when you primarily use it for email and social media stalking.

Smart buyers also consider the total cost of ownership. That cheap thing might actually be expensive if it breaks constantly, requires expensive maintenance, or becomes obsolete quickly. Sometimes paying more upfront for quality actually saves money over time. It’s the “buy once, cry once” philosophy versus the “buy cheap, buy twice” trap.

Making Smart Choices in a World Full of Shiny Objects

The modern economy is basically a giant casino designed to separate you from your money in the most entertaining ways possible. Every advertisement is essentially screaming, “Hey! Want to trade your future wealth for immediate gratification? We’ve got payment plans!”

Here’s how to stay strong:

• Before any major purchase, ask yourself: “Will this be worth more or less in five years?”
• If it’s a depreciating asset you need, buy used, buy reliable, and buy the minimum that meets your actual needs
• If it’s an appreciating asset, do your research, but don’t wait for the “perfect” time—time in the market beats timing the market

The real challenge isn’t identifying appreciating versus depreciating assets—it’s developing the emotional discipline to act on that knowledge. We’re hardwired for immediate gratification, which is why every store has a checkout lane designed like a gauntlet of impulse purchases. Retailers have studied human psychology and deployed it against our wallets with surgical precision.

Develop your own defense mechanisms:

• Implement a 24-hour rule for non-essential purchases over $100
• Calculate the “opportunity cost” of big purchases (what could this money grow to if invested instead?)
• Ask yourself: “Am I buying this to solve a problem or to feel better about myself?”
• Consider whether you’re trying to buy an identity rather than meet a genuine need

The most dangerous purchases are often the ones that feed our ego or signal status to others. That’s expensive psychology, and it rarely delivers the lasting satisfaction we expect.

The Psychology of Asset Appreciation (And Why Our Brains Fight Us)

Here’s the uncomfortable truth: our brains are basically financial saboteurs. We’re evolutionarily wired to prioritize immediate rewards over future benefits, which made perfect sense when we were hunter-gatherers worried about surviving until next Tuesday. You ate as much as you could when food was available. But in a modern economy where compound interest can make you wealthy over decades, these same instincts can keep you broke.

The appreciation versus depreciation decision happens dozens of times every day, often in small ways that seem insignificant but add up to life-changing amounts over time. That daily $6 coffee (depreciating faster than morning motivation) versus contributing that same money to a retirement account (appreciating like a fine wine, if wine could somehow multiply itself).

The “lifestyle inflation” trap is particularly sneaky. As income increases, the temptation is to upgrade everything—bigger house, fancier car, more expensive hobbies. But wealthy people often do the opposite: they maintain their expenses while increasing their investment in appreciating assets. They drive the same reliable car while their investment portfolio grows. They live in a modest house while building a real estate empire.

The Bottom Line

Building wealth isn’t about living like a monk or never enjoying life. It’s about being strategic with your big decisions and recognizing that every dollar you spend on something that loses value is a dollar that can’t be working to build your future.

Your money is like a army of tiny financial soldiers. You can send them off to fight appreciating battles where they multiply and return with reinforcements, or you can send them on depreciating suicide missions where they valiantly die for your immediate entertainment.

Choose your battles wisely. Your future self will thank you—probably from their paid-off house, while checking their investment portfolio.

The path to wealth isn’t mysterious or complicated: buy things that increase in value, minimize things that decrease in value, and give time and compound interest the opportunity to work their magic. The hard part isn’t understanding the concept—it’s having the discipline to implement it consistently over years and decades.

Remember, every financial decision is a vote for the kind of future you want to have. You can vote for immediate gratification and perpetual financial stress, or you can vote for delayed gratification and eventual financial freedom. The choice is yours, but the consequences compound over time.

The wealthy understand something that the financially struggling don’t: money is a tool, not a scorecard. They use money to buy appreciating assets that generate more money, rather than using money to buy status symbols that generate envy (and monthly payments).

Remember: The goal isn’t to have the most stuff. It’s to have stuff that makes you more money than it costs you. Everything else is just expensive decoration.

Your mission, should you choose to accept it: start treating every purchase as an investment decision. Ask yourself whether you’re buying an asset or a liability. Your future self is counting on you to make the right choice—and they’re willing to pay compound interest for your good judgment.