Writing assignment: 250 words. “Why shouldn’t I borrow to buy something that depreciates?”
I believe you shouldn’t buy something that depreciates with debt. Not only that, but I think that you should try to avoid debt altogether. The definition of “debt” is “an obligation to pay money or an owed amount.” This debt is often a loan of money; there is usually a deal made that the money will be paid back, usually with added interest and fees, over a specified period of time.
So why shouldn’t you borrow to buy something that depreciates? Here is an example of something that depreciates: imagine you buy a brand new car. You buy this with a loan, and as soon as you drive it off the lot, it immediately depreciates. That car may be new now, but in a year or even a few months, it will have lost about a third of its value. Year by year, a newer and better car will be rolling out, and the owner will be left with debt and disappointment. By the time you want to sell it, whether it be a month or five years, you will still be paying off your loan, and you will get less money for the car.
Here is something I bet you haven’t thought about weddings. This is a great example of why you shouldn’t buy something that depreciates with debt. The first big one is a wedding dress. A wedding dress loses about 50% of its retail value the moment it’s worn. The dresses often go out of style quickly and with fast moving bridal fashion trends not much holds value.
An entire wedding budget shows an example of immediate depreciation. A wedding is an event rather than an asset purchase. This means nearly 100% of the capital spent cannot be recovered. Look at the catering, alcohol, venue rentals, flowers, and the band. All that comprises up to 75% of a typical wedding budget. These are all depreciating services with a market value of little to no resale value the morning after the wedding.
Everything about a wedding depreciates; the menus, personalized welcome signs, and custom invitations hold zero resale value. They are often difficult to resell because they cannot be reused by another couple. Centerpieces, table runners, and lighting elements can sometimes be sold on peer to peer marketplaces. However, they typically only sell for 20% to 30% of their original cost due to too many similar items being resold. A wedding is a terrible thing to go into debt for; save your money and avoid making these long term payments.
You should never buy depreciating items with debt. You will only be stuck with something that has lost value ever since you bought it, and you will be unable to sell it for what you paid for it. We must think ahead with our money, save, and only buy what we can afford.
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