I've talked with a couple of people lately about the worth of their personal property, particularly items that are considered "valuable." It's not a conversation that I enjoy, because my opinion is pretty unpopular.
Whether we're talking about rugs, or jewelry, or Beanie Babies, it seems to be popular to believe that these items have some sort of tangible value because of their source, or their original purchase price, or their appraised value, or the amount of money for which they are insured. In fact, however, an item is only worth as much as someone else is willing to pay, and that amount is often far less than the number listed by a book, or a dealer, or an appraiser.
Let's use jewelry as an example. Heck, let's use my engagement ring. I'm on engagement ring number two, due to a heartbreaking loss many years ago. We had the ring made by a jeweler friend, and he charged us about $1800 for the stones, gold and labor. For insurance purposes, we promptly had it appraised, and I was shocked to hear that the appraised value of the ring was about $3300. It seems that is about right, for I found nearly the exact same ring at a local jeweler recently $3221. So, since that is how much it would cost me to replace the ring, then that is how much insurance I would need. (We self-insure our jewelry, but that is a story for another post.)
However, I'm not going to put $3,300 of value down on my net worth statement, because there is approximately 0% chance that I could find an individual willing to pay me $3,300 for the ring. Both my sister and best friend have tried to sell engagement rings, and guess what? There's not a huge market for them. I think the best offers that they were able to get were about half of their alleged "value," and it took time to find someone willing to pay that much. A quick peruse of online selling pages seems to verify that half is about what people are asking for jewelry; I have no idea if any jewelry is actually selling at these prices.
Regardless of whether it I could sell it for $3,300, or $1,600, or $800, that doesn't change how much my engagement ring means to me. It makes me happy, and I enjoy owning and wearing it. For me, that is its true value.
The same conversation can be had for many objects: their real value is the use and enjoyment that you derive from owning or using them.
Why is this important? For a couple of reasons. First, unless you are a professional collector, I don't recommend that you purchase things as investments. It is tricky to make money from collectibles, jewelry, and household items. Second, don't count on those objects as part of your financial plan, particularly not as emergency funds. If you have an emergency, and you need to get cash fast, you're not going to be able to maximize the selling price. It just doesn't work that way.
If you have, or hope to get, beautiful things, please measure their value by the enjoyment they bring to your life, not the amount of money you hypothesize that they are worth.
