Your urge to acquire such assets continues while you continue to spend; excessive spending should be tempered
Your urge to acquire such assets continues while you continue to spend; excessive spending should be tempered
“Passion Assets” refers to investments in collectibles such as art, paintings and antiques. One problem some people face is overspending on passion assets. In this article, we will discuss what leads to overspending on these assets and how to moderate it.
asset tolerance
Collecting assets with passion is a rewarding experience. But as time goes by and you amass a large collection, it’s likely that you’ll develop a tolerance for passion assets. That means you won’t have the same level of pleasure even if you collect as many assets as you did last year. That means you have to spend more to get the same rewarding experience. Why?
Neuroscience can explain this behavior. Your brain releases a neurotransmitter called dopamine when you have pleasurable experiences.
When you’re constantly spending money on passion, your brain’s reward center becomes overstimulated. This means your brain is initially overwhelmed and releases high levels of dopamine. Eventually, the brain controls this problem by decreasing dopamine production or reducing dopamine receptors.
This leads to another problem: buying passion assets will now trigger a weaker response from your brain’s reward center. But your urge to acquire passion assets persists. So you buy more to get the same level of experience as before.
How do you “know” you’re overspending? For one, you may pay more than you would normally to buy an asset.
For example, you may outbid at an auction, or you may have a compulsive urge to purchase an otherwise inferior asset. Second, your spouse, siblings, or parents might start to think you have an addiction! So how should you moderate this overspending behavior?
Coherent outputs
It is highly unlikely that your immediate family would have developed tolerance for the same passions as you. So, an optimal strategy would be to consult with your spouse, parents, or siblings before spending on such assets. Admittedly, this may not always be easy as your urge to spend money on a passion can be impulsive.
The second way to moderate excessive spending is to devote yourself to other leisure activities that can be rewarding. You probably spend money on passion often when you’re bored or not engaging in an activity profitably.
Suppose you find gardening reasonably rewarding. If you then devote more of your free time to gardening than analyzing what passion goods to buy next, you could mitigate overspending. You should also maintain a separate bank account to purchase passion assets. You can fund this bank account with a predetermined amount each month, thus limiting the amount you can spend on such assets.
After all, you could continually replace your passion assets. Just as you buy stocks with proceeds from the sale of another investment, you could buy a Passion Asset with proceeds from the sale of one or more assets from your existing collection.
True, parting with passionate assets can be painful as they are hands-on assets.
Often, such pain causes us to ask for more money to sell an asset we own—a tendency that behavioral psychologists call the endowment effect. But the endowment effect usually wears off the longer you hold an asset.
Conclusion
You can determine the amount that you want to spend on your passion assets as a percentage of your total investments, or you can set an absolute amount in consultation with your spouse, siblings or parents.
Note that your excessive spending could simply be a result of the pandemic. It is a fact that many with limited scope for leisure pursuits have focused on buying passion assets. As we adjust to this virus and the world returns to pre-pandemic activities, your brain’s reward center may revert to normal spending habits. If you continue to suffer from excessive spending, you need to moderate the problem.
(The author offers training programs for individuals to manage their personal investments.)
