A recent post by our friends at the Motley Fool refers to story told by America’s most famous investor, Warren Buffett, where he explains that if someone had invested just $40 in Coca-Cola stock when it went public in 1919, it would now be worth more than $5 million. The Fool Team updated the math and concluded that factoring in recent performance and events, the 2014 total value of that $40 investment would be nearly $11 million! The Fool piece then poses the question: “Would you rather have an Xbox One, or almost $11 million?”
Data Points’ research consistently shows that people that strike the right balance between spending and saving are happier and financially healthier than those who miss the mark (to either side of the save/spend continuum). So, the message here is NOT that successful wealth accumulators NEVER buy pulp consumption items like an XBox. Instead, those with high Wealth Potential™ scores, those with a high likelihood for building wealth over time, seem to be able to strike the right balance between spending-for-consumption-today purposes and saving/investing for the future. Potential consumptive purchases are often weighed against the prospective future value of the amount of money invested over time, thereby allowing the successful wealth accumulator to ask the question: would I rather have this Xbox or $11 million at a distant point in the future?
Assessing consumptive purchases through this lens can have a positive impact on wealth accumulation potential. Those who build wealth over time tend to believe that “a dollar saved is a dollar invested.” And once invested, it can grow.