By David Wiesner
Building wealth would be easy if we lived in a perfect world. A world in which we get to keep, spend, and enjoy all the wealth we accumulate over time. Unfortunately, we don’t live in a perfect world. Wealth Eroding Factors, as we refer to them in Leap, can eat away at wealth and savings over time. Examples of this are fees, taxes, inflation, planned obsolescence, technological changes, and many more. What may have been a large amount of wealth years ago can be minimized over time.
Being a lifelong drummer, I can relate wealth eroding factors to music. While it’s obviously an activity I love and enjoy doing, there is a cost associate with. Much like many of the financial decisions we make throughout our lifetime. To put this in perspective, I will give a brief example of this with regards to my own personal experiences.
In 2017, I had taken a few years off between bands to concentrate on my family and work, as well as my other passion which is coaching youth football. When I wanted to get back into playing the drums, I researched various drums and purchased a new set of Tama drums. They were beautiful, black with white smoke effectively painted on them. A bass drum, two floor toms, three mounted toms, and a snare drum. I was in love. Total cost: $800. The next thing to do was purchase cymbals. Cymbals usually cost more than the entire set of drums. I researched cymbals and purchased a set of new cymbals that cost $1,900. Adjusted for inflation, in today’s dollars all of this would cost almost $2,800. What can I say, I like a lot of options!
Last but not least, the cheapest part of drumming, drumsticks. I ordered a “brick” which consists of six sets of sticks. By the time the first gig started, I had two pairs of drums sticks left because the others had cracked during band practice.
The eroding factors on a drummer are material and physical. First, the more you practice and play, the first to go are the sticks. Sticks are replaced the quickest and most often, but thankfully the cheapest. Sticks used to run about $2 a pair. Today they run $11. The second is cymbals and this is a bigger expense. They used to be about $150 for a crash cymbal. Today they run $275. Then we look at drumheads. Most drum sets require 4 new heads at a time. They used to run about $10 a head. Today they are $18 a head.
So, what does all of this mean? How much has my passion for drumming “cost” me over time. Let’s take a look at a simple example using my first new drum set, bought in 1995 for $1,300. Had I taken that money and simply put it in the S&P500 at that time, today it would be worth around $24,000. That doesn’t include any additional purchases or replacements we discussed! As we know in Leap, we never stop paying for lost opportunity costs. If I had that $24,000 today, and earned 6% over life expectancy, that drum set “cost” me $137,000! Let’s just say, it’s one expensive hobby.
However, there are other eroding factors associated with drumming that are harder to quantify. Years of playing hard, in small rooms with music blaring and cymbals crashing with no ear plugs eventually catches up, along with all kinds of other wear and tear on the body. The physical version of planned obsolescence. The older I get, the harder it is to recover and, in some cases, like my hearing loss, it’s never coming back. This can absolutely lead to complications that ultimately will cost me in some way to take care of. Like I said, you have to really love being a drummer.
Leap is very relatable in that it helps one illustrate wealth eroding factors over time, and the lost opportunity costs associated with them. Most don’t realize their full impact until it’s too late. Drumming is similar, with a financial and physical impact. However, you don’t have to be a drummer to experience these wealth eroding factors. Many hobbies we all love can be looked at the same way. Leap may not be able to solve my physical issues, but financially I am in a better position to deal with the possibility of financial eroding factors over time.
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