Stephan asked a question in the comments section a couple of weeks ago. I made a note to myself to respond and neglected to do so.
My apologies, Stephan, and thank you for reminding me.
Here’s Stephan’s question:
Hi Byron,
I have read the old money book recently and really appreciate it. I especially liked the rule of the car purchase, 10 % of the you annual income. Do you have a similar idea or rule for a luxury watch? 🙂
I would like to have a stainless steel Rolex Datejust 36 mm, silver dial. I have looked at it for several years. The problem is I am “only” 35 years old and have saved and invested part of my salary for about 7 years (since I started work after university). Of course I know that it’s stupid thing to purchase an expensive watch like that when you’re not financial independent. (25 % financial independent at the moment).
Should I wait or may it be justified to buy one or two luxury items like this during your way to financial independence?
Many thanks in advance!
Regards
Stefan
I think this is a great question…and an eternal dilemma: at what point in time or at what financial level do we splurge and enjoy ourselves? This question reflects the dual purpose of money: to provide a means of survival for us on a daily, weekly, and monthly basis, as well as to acquire luxuries (material possessions or experiences) which we can enjoy, alone or with family and friends. Charity, of course, is in the mix, too.
To address Stephan’s question, I would say this: everyone’s financial situation is personal and unique to them, and I’d never say it’s ‘stupid’ to want a luxury item. It simply comes down to knowing the wisest moment to purchase it.
When referencing the term ‘25% financially independent’, you may want to ask yourself a few questions:
First: can I go 12 months without income and survive on my savings and investments without liquidating assets or going into debt? If you’ve got 1 year of living expenses in the bank, you’re on the road to financial independence. If you’ve got 100 grand in the bank (cash) and other assets, I wouldn’t see a problem in spending 5 grand on a pre-owned Rolex, (a 5% rule, I guess) but read on before you go shopping…
Second question: if I purchase this Rolex (uh, cash please, no credit card debt), is the expenditure going to impact any other opportunities that may be on the horizon, such as starting a business, purchasing real estate, or obtaining additional education or specialized training in my field?
If you dish out for the Rolex and then miss out on an investment or advancement opportunity, you may regret it. So think about that. If you’ve got the ‘opportunity money’ set aside, then you could be okay. (Do you have or expect children? Is their education paid for?)
Third: does a stainless steel Rolex fit into my current lifestyle? Or would it stand out as a single, possibly inappropriate luxury? Would it alienate my friends? Or would they be happy for me? If you’re socializing with other college educated, upwardly mobile young professionals, then it’s probably not an issue. Also, you’ll want to make sure that the rest of your image is in order: you’re taking care of your teeth, skin, hair, and body so these are all very presentable…before you buy a luxury watch.
Finally, ask yourself why you want a luxury wristwatch. I ask this because I’ve known probably a half dozen guys who have worked hard, saved and invested, performed and prospered. They’ve then purchased a gold Rolex (invariably), worn it for a week, and then put it back in the box and into a sock drawer. The reasons–lifestyle issues, impact on relationships, or simply the disappointment that the Rolex didn’t deliver SOMETHING that they thought it would–all contribute to this disappointing (not to mention expensive) journey.
If you simply enjoy the idea of owning a Rolex, and you’d enjoy wearing one if you were alone on a desert island with no one else around, then great. That’s the way to identify a luxury that has meaning to you. Trying to impress others is a tricky business. Better to have a long, honest conversation with yourself before buying something you don’t really want…or if you don’t know why you want it.
Of course, I’d love to hear from the tribe, and from you, Stephan. I’ve thrown out some general questions that could form a guideline for all future luxury purchases. I hope it’s helpful.
Thanks.
- BGT
I purchased my first Rolex in my early 30’s. I also have a second Rolex and a Patek Philippe. I mostly wear my Nike Apple Watch/cellular. There is a Hermes edition which is very nice as well. I find it is more practical to wear my Apple Watch. FYI Apple Watches outsold the entire Swiss Watch industry in 2019 by 10 million units.
Good evening Stephan,
This is an interesting topic – especially that I have had a lifetime fascination with watches. Byron has covered some important aspects regarding the purchase of such an item. If I may I’d like to share the following personal experience(s) with watches which might help you decide.
The first Rolex I owned was a so-called Submariner ‘Red’. It was stolen but had I still owned it it would have been very useful in terms of resale value. I have seen them sold for between 20 and 30K$. Like anything it depends on the model, condition, vintage, provenance etc. This might come in handy down the line with childrens education, for example. My second Rolex was a DateJust. Simply put, nothing special and no special resale value. However, just after I’d bought it I was at work one day and a colleague looked at my wrist and said ‘Mmmm…. I see you have a Rolex’. It was one of the last times I ever wore it. I felt uncomfortable as it had attracted a form of attention I do not seek. It lay in a drawer until I sold it some years later and bought an Omega Speedmaster with a leather strap. Twenty five years of use and no one has ever commented. [ I think it’s what most members of the tribe might prefer.]
Keep this in mind too: these are mechanical watches and if you are as lucky as I was with my Speedmaster you’ll get ten years out of it before it requires a service. Currently a service with a recognized agent costs €5-600 providing there are no serious defects. In ten years time you’ll be 45 and might have other pressing needs. The Rolex might be consigned to a drawer because of those pressing needs.
There is also the matter of insurance. Once something like this is ‘itemized’ on a policy the monthly premium goes (up).
Respectfully may I say, if you’re struggling to decide look critically at the comments made in response to your questions and perhaps invest the money until you’re more comfortable. There is no better enjoyment than treating yourself to something and knowing there is no buyers remorse, or guilt that you’ve short-changed someone or something. That way you’ll enjoy it for what it is.
By the way, Rolex isn’t the only fish in the sea – in spite of what their marketing department might want everyone to think. No one ‘has to have’ a Rolex.
Regards,
David.
Thank you Byron, very nice of you to write this text. Really appreciate it! 🙂
I think your answer gave me something to think about. If I am really honest to myself, I really appreciate and love a well made italian made to measure blazer or suit, or a good pair of Crockett & Jones shoes (with no labels and people around you don’t know the price), more than a Rolex watch. I don’t like watches in the same way I like clothes when I am thinking about it. But I suppose it has become a thing to me that “you should have”. I have a cheap (200 EUR) steel watch at the moment…
I don’t even know if I would wear my Rolex when I’m visiting my parents and some of my friends, who probably would think I had lost it to spend that much on a luxury watch. Perhaps, I think the Rolex watch would be to show others and myself that I have made it….I could actually buy a new Rolex datejust and still be below the 5 % rule of my index funds, but if I am really honest I think I’m more of a Seiko guy that goes under the radar. 🙂
Byron, I like your caution that you might wear the Rolex for a week and then put in the box. There are a lot of great watches in the world. I would suggest buying something fun and very affordable to see whether wearing a mechanical watch fits in with your lifestyle. A great starter watch is Swatch Sistem51. I’m wearing mine right now. It’s fully mechanical and winds with the motion of your arm. It’s made by robots and a great conversation starter. Or, perhaps, buy a vintage mechanical watch from the 1950’s. I’m Canadian so I like Birks watches because of their connection with Canadian history. Because of their age, you have to wind them frequently to keep them on time. After a year or two caring for one of these very affordable watches see if you still want to upgrade to a Rolex, and by that time your ability to afford one will be improved simply by the, ahem, passage of time. Also, your friends will know you are a “watch person” and will be less likely to feel uncomfortable if you are wearing an expensive watch knowing that it’s an aspect of who you are to have a precision watch.
If you would wear it and enjoy it then by all means buy it. I agree with Byron, make sure you can justify it if other needs/issues come along. I have a dear friend who buys 18k gold Breitlings. He enjoys them and rotates them out each week, he has six. I have a gold Rolex I inherited. I never wear it, my Cartier tank is the only watch I wear. Watches are a very personal thing. It should give you joy, if it can do that then go ahead.
It seems to me that in a time of ubiquitous cell phones, almost nobody actually needs a watch. Watches therefore are now almost entirely decorative items. However, if you want a nice watch, get something tasteful and understated. Avoid gaudy or flashy. I also think there is something to be said for very inexpensive watches which, these days, keep time just as accurately and reliably as expensive watches.
It’s worth remembering that, from a financial point of view, most watches are not a good investment. It’s unlikely that you will be able to sell a watch for more than you paid for it. Nevertheless, the watch industry has done a very effective job of marketing their products. No one is completely immune from the effects of advertising.
Skip the Rolex, they only require maintenance down the road. Get a Timex on a ribbon band and you’re solid.
Well now, if I wear a watch at all today, I wear a battery powered moon dial thing from Target. It makes me feel like a hippie. It tells me when it is best to plant things. I still do that although on a small scale,
However, I must admit not needing to impress anyone these days. So I impress myself with how practical and down-to-Earth I am.
Thank you for these wise words. You distilled the issue in this one sentence:
“If you simply enjoy the idea of owning a Rolex, and you’d enjoy wearing one if you were alone on a desert island with no one else around, then great.”
This is the only test needed.
Thank You
I come for the articles/blog posts, and I stay for the comments. As always, Byron, this was an excellent discussion prompt!
Dear Stephan,
The simplicity of no watch at all is also not a bad option. However if you do want a beautiful timepiece which represents value, don’t rule out a vintage one. I bought a 1950’s IWC which is a lovely understated watch as opposed to what they are making today. It’s been very reliable and I probably don’t strictly service it as often as I should, but every few years it goes in for a little TLC, which is not too expense and so far it’s given me 15 years of trouble free service.
Regards
James
Dear Byron,
I’m passionate about watches. I’m fascinated not just by the ownership but also by everything that relates to it. I’m curious, right now, of how old money perceive watches which lead me to buy and read 2 of your books: “The Old Money Book” and “Old Money Style”.
But I would like to ask for your comments on the 3 most iconic and sought after watches of our time, namely:
1) Audemars Piguet Royal Oak stainless steel
2) Patek Philippe Nautilus stainless steel
3) Richard Mille tonneau-shaped case, titanium/carbon ceramic
I’m not looking to buy any of these incredibly expensive pieces but just curious about how OMGs view the mania/hype surrounding these 3 icons. Here are my 2 questions:
1) Would an OMG wear these watches?
2) What do OMGs think about the people who wear these watches?
I particularly asked about the non-gold versions of the watches because as you said,
“Thin gold watch on leather strap. Maybe a stainless steel Rolex. Stop.” So I already know how the gold versions of these watches are perceived.
I hope you could accommodate my questions. Other OMGs are welcome to chime in as well. Thank you very much.
Regards,
Bernard
Hello Bernard, thank you for the questions. A few OMGs I know are passionate collectors of timepieces. That said, everyone’s cautious about going out on a limb in terms of wearing them. Patek Philippe is almost always a tasteful choice. The Richard Mille looked to be a little much to me. The Royal Oak is a good watch, well made. It often comes down to a very practical, day to day lifestyle choice: when am I going to wear this watch and how am I coming across when I do? Does it make sense? We never want to show all we have. And as much as we can impress someone with our wristwatch, we can just as often put someone off with them.
I will say this, however…I know a guy who wears a gold Rolex, most often with short sleeve polo shirts and jeans. Everybody can see it. But he’s so nice and so genuine that most of the people he knows don’t care about the watch. ‘That’s who he is.’ said one person, then shrugged. ‘He’s out there, but in a good way.’ So know that a wristwatch is going to communicate a lot, but in the end, OMGs will see through such things and assess each on their own merits. Hope that helps. – BGT
Thank you sir for taking the time to answer my questions. This is going to influence greatly my watch collecting journey. I’ll read this every time I’ll make a watch purchase. I’ll keep this in mind whenever I assess a watch.
The idea of Richard Mille in its inception was a very “horological connoisseur” category as you have described in one of your articles. It’s an expensive watch that veers away from gold and showing-off. In place of that are features that only the wearer would appreciate: lightness, precision, and durability. It was supposed to be a millionaire’s secret but people start showing it off on social media. The design from then on leaned towards showing off and the watches became larger than the original.
This is probably why OMGs prefer Rolex stainless steel. Daytona, Explorer, and Submariner are all masters of classic proportions. I now understand that Old Money is a taste for beauty unadulterated by the intent to flaunt.
This has helped me massively. I can’t thank you enough for your expert insight. – Bernard
I will stick with my 1960 Timex Marlin, nice and understated, once a day a “feel” time by winding it. On the weekend I have another Timex that I have a ribbon band on. If I inherited a Rolex, I would wear it but I would certainly not buy a new one.
I’m not an “OMG” but but have steadily adopted the lifestyle as I progressed from my my working class childhood through college and law school. My social circle consists of 2nd generation immigrants and working class kids in the professional classes, and exactly two folks that I consider OMG’s. Both the “OMG” guys have trust funds, and one stands to inherit a very considerable amount of commercial real estate. Here is what I can tell you about Rolex watches (or any fancy watch). Neither of the OMG guys would be caught dead wearing one. Both live in modest homes, drive modest cars, and Rolex watches would not fit with the image. The new money friends? Apple watches and Teslas.
I work as an attorney for an insurance company. You know who purchases Rolex watches? Poor and working class people that want to make fraudulent theft claims under their homeowner’s policies. In the last 3 years, I’ve conducted no less than 5 examinations under oath of people from those demographics claiming they have had Rolex watches stolen. The stories are….interesting.
For the record, I wear a Fossil watch my wife bought me when we were in college. It takes a battery, is 20 years old, and keeps perfect time.
Thank you for the insight, Karl. It’s always fascinating to hear a unique perspective. – BGT
@Karl makes a good point. The true OMGs that I know wear whatever watch they want with no intent to impress anyone.
“No. flashiness. ever.” “The only jewelry typically worn is a wedding ring and perhaps a subtle timepiece—never a flashy watch.”
The newer Rolex models seem increasingly like bling, designed to be conspicuous. If you are wearing a Rolex Submariner, you might as well be signaling to the world that you have a $10,000 bill strapped around your wrist.