This article was originally published in March 2020.
Many of us are guilty of equating status, success and ultimately happiness, with material possessions. Even if, like me, you make a conscious effort to avoid such associations, most of us tend to go through life accumulating a lot more stuff than we need.
Take clothes. I have no interest in clothing or shopping. And yet my wardrobe is full of clothes I’ve barely worn. The suits and shirts alone probably cost me £2,000. Throw in the casual items that have hardly seen the light of day, and I’m probably looking at £3,000 of wasted expenditure. And I’m not a frivolous spender.
The opportunity cost of that £3,000 is enormous. I’d like to think (perhaps mistakenly!) I could earn about a 10% annualised return on that £3,000. Compound that over 30 years and what do you have? A whopping £52,000.
So the effective cost of my wasted spending – on clothing alone – is north of £50,000. And that’s just based on my current wardrobe, ignoring clothes I’ve bought in the past and discarded.
Once we consider all the other ways we waste money, like on daily Starbucks coffees, ‘stuff’ for the house, toys for children that go un-played with, funky gadgets (leaf blowers, bread makers etc), that wasted spending figure probably rises to at least £50,000. Which compounded over 30 years at 10% is £870,000!
This is ignoring the really big items of spending, like buying bigger houses than we need, the second car, the holiday home and so on; which would take that figure well into the millions, possibly even the tens of millions.