The Chanel sneaker case study
In a recent poll on my @sandrakstewart Instagram stories; 80 percent of my fashion loving following voted “BUY” over “Don’t be ridiculous!” for a pair of Chanel sneakers that cost an average retail price of approximately $1350 AUD!!
At this price these fashionable sneakers are definitely a splurge for most.
Despite being on the lower end of Chanel’s retail pricing (and before their recent price increase of apx 22%) the long term effects of short term purchases can be interesting to investigate!
So let’s run the numbers and the “opportunity cost” of spending vs investing...
Scenario 1 SPEND- the sneaky sneakers 👟
I buy the shoes, I happily part ways with my $1350 and wear a cool pair of kicks and stunt on the gram for a month. I go running 🏃♀️ the shoes inevitably get dirty, worn out - go out of fashion.... I could perhaps even get them professionally treated & repaired for an additional cost at a designer shoe repair store.
Next year comes around and I treat myself to another pair of designer shoes and they cycle continues.
Ten years later I’ll most likely have old shoes and no accumulation of anything of value.. perhaps only my fleeting joy!
Although I’m down - $13,500.....
Scenario 2 SAVE & INVEST (small wins!)
I practice restraint, invest the $1350 into diversified index fund and use my favourite black on black Nike’s.. yeah the shoes were cute but I’m now over it! I repeat this series of good decisions over the next 10 years...
I now have $13,500 in my pocket...
but it doesn’t end there; there is also an....
Opportunity cost!! - over ten years the capital appreciation would have gone up on each stock holding! That’s extra money there, the stock would have paid out aprox -20 dividend pay outs, that’s money there!
If we assume an easy to calculate conservative return of 5 percent per year the extra “free money” I would receive would be $4,329
Making my total $19,179
Now to take this further; if I continued this pattern until retirement over a total of 35 years ($1350 invested per annum) assuming 5% return (lower than average) you would have;
Gained $ 80,779
Just from those; sneaky 👟 sneakers!!