Calculate depreciation for all your items

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henders
Posts: 99
Joined: Fri Dec 30, 2011 11:58 pm

Calculate depreciation for all your items

Postby henders » Fri Mar 03, 2017 1:13 am

Calculate depreciation for all your items - is one of those things recommended in the book. Does anyone do it? I'm thinking of doing it in Excel.

I think it will be too much of a hassle to list every single item. So I intend to include items that cost over $100 each.

It will be an effort to get all the information in there, but once it's there it should be pretty easy to maintain?

Please share your experience - why you do it, how you do it and what value you get out of it.

Thanks.

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ebast
Posts: 91
Joined: Sat Mar 23, 2013 10:42 pm

Re: Calculate depreciation for all your items

Postby ebast » Fri Mar 03, 2017 2:59 am

A year ago I performed an inventory and calculated quarterly straight-line depreciation for all clothing and have been maintaining it since then. So much fun I even extended it retroactively to cover the past couple years! I've since been expanding this to tools and some capital goods when I'm bored.

I like excel, and in fact just spent the evening on a non-excel spreadsheet of some complexity, but in this case I used a ledger-style graph-paper notebook and a pencil. (I enjoy designing non-excelling solutions to things obviously better solved with a spreadsheet as I find the constraints on granularity, computational complexity, and editing force you to think through and prioritize the essential elements of the problem. Also it'll continue to work when this whole "computing" fad washes over.) I can tell you from that experience it gets a little messy though. A spreadsheet would be nice.

Whatever, but point being to answer your question: maintenance is a breeze. purchases are infrequent enough it's no chore, and I'm even updating the depreciation quarterly by hand, which takes a few minutes/quarter, and even that's hardly onerous.

Expected & Unexpected benefits:

  • You make more economically-informed decisions. I better avoid decisions based around sticker shock and am willing to spend more for durable, frequently-used, maintainable items, as well as items with resale value, which should save money long-term. E.g. Expensive boots costing $300 dollars work out to cost way less than cheap running shoes that wear out fast and resist repair, and don't even mention fancy shoes you wear three times a year.
  • You model your spending better: Depreciation expense is a better indication of typical spending than jumpy cash flow figures (no more of these jerky $300 expenses, instead a nice smooth $1.25/month). I discovered at this point in my life I now spend less on clothing than on laundering it(!)
  • You have a comprehensive, exhaustive, and cost-weighted inventory. I mean, I could write a minimalist blog, now. (in terms of actual utility to the world, however, I consulted this on a recent move to help in packing). I could also tell you what I spend too much on.
  • It may encourage you to accumulate less. In my case I'm not buying another damn thing till I get rid of one since I ran out of lines (the joys of paper). Additionally, the knowledge that I'd have to go depreciate it makes me think twice.
  • You get a personal history to review at leisure. Some keep journals, others photo streams, but you, you have your depreciation schedule.
  • 'Mint'? 'Envelope method'??? Pssh! Please. You're depreciating your socks!

IlliniDave
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Joined: Wed Apr 02, 2014 7:46 pm

Re: Calculate depreciation for all your items

Postby IlliniDave » Fri Mar 03, 2017 5:46 am

I don't do it because other than my house and cabin, I don't count the value of anything I own. Once I buy something, I consider the money gone. I just find it simpler that way. All my non-real estate physical possessions together might comprise 1% of my net worth so it's hard to motivate myself to dedicate too much time to them.

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Dragline
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Re: Calculate depreciation for all your items

Postby Dragline » Tue Mar 07, 2017 6:36 am

IlliniDave wrote:I don't do it because other than my house and cabin, I don't count the value of anything I own. Once I buy something, I consider the money gone. I just find it simpler that way. .


Yeah, that's how I look at it too. I still own way too much crap, but now most of it is over 12 years old when I really just stopped accumulating it. You might say I'm largely "fully depreciated."

George the original one
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Joined: Wed Jul 28, 2010 3:28 am
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Re: Calculate depreciation for all your items

Postby George the original one » Tue Mar 07, 2017 1:35 pm

LOL, Dragline... me too!

Another way to put it: whether I have $1k or $5k of accumulated crap is irrelevant when liquid net worth is over $500k. The point of Jacob's depreciation calculation is to show you that accumulating crap is devasting one's goal of increasing net worth in order to retire early.

henders
Posts: 99
Joined: Fri Dec 30, 2011 11:58 pm

Re: Calculate depreciation for all your items

Postby henders » Thu Mar 09, 2017 2:37 pm

Interesting conversation. I guess I'm in the boat of don't-do-it only because like others my possessions at <3% of my net worth. And it's not worth worrying about. The only benefit for me that I can see would be to calculate how much I spend in buying gadgets. Like, if I buy a phone for $1k and used it for 4 years and now I can sell it for $300 so my depreciation is (1k-300)/4 = $175 per year. Should I really spend $175 every year on a phone or any other gadget? Could I use this money on something else? But this calculation doesn't tell the whole story - I could be using the phone for multiple times every day which improves my life etc. In which case the expense might be justified.

In the end I am leaning on not doing it (I don't have to deal with yet another administrative overhead.) as the benefits are so few.


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