Nicolas Cole loves luxury watches and sports cars but argues that buying them before you have a year of cash saved is a mistake. He recommends keeping any splurge under 5% of net worth. Even owning a Rolex or Ferrari feels foolish if the financial stress cripples your business decisions.
I am a sucker for watches. I love high end sports cars. I want to stay at five star hotels and fly first class or even private. I get it. And I don't think there's anything wrong with wanting or enjoying any of these things. And side note, anyone who says these types of luxury purchases aren't worth it has never driven a Ferrari 488. Okay, that car is a work of art. However, it is a huge mistake to start loading up on high end belongings and balling out on five star experiences when you haven't even bought the most valuable asset of all, which is your own freedom. Before you do any of these things, you should have at least a year of Runway just sitting in cash and any big splurge you make should be less than 5% of your total net worth at any given time. Ideally closer to 1 to 3%. Because I promise you, there is no worse feeling in life than having a few cool luxury items, a Rolex, a nice car, but you feel like you can't make the decisions you want to make or take the risks that you want to take in your business because you're constantly stressed out about money. Then all those luxury purchases just make you feel stupid.
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