In the realm of financial planning and education, designer clothing is seldom recognized as the asset it truly is. A Chanel purse is not merely a stylish addition to your wardrobe; it is a valuable asset that can enhance your financial portfolio. In this post, we delve into how taking inventory of your designer wardrobe offers more than just aesthetic gratification. From financial planning and insurance purposes to estate management, uncover how your closet can be an untapped reservoir of wealth.
The Financial Potential of Designer Clothing
Debate abounds over what personal property should be included in a net worth calculation. Personal property encompasses items such as clothing, jewelry, electronics, vehicles, and furniture. Many argue that depreciating property, which most personal property is, should not be included in your net worth. However, I beg to differ. If an item can be sold effortlessly within a week, it is a liquid asset that should be factored into your net worth. In times of financial distress, your wardrobe could serve as a swift source of cash.
What Should Be Counted?
It is crucial to note that only high-value items should be included. If you were to pass away tomorrow and your loved ones were to sort through your closet, what would they sell and what would be donated to Goodwill? Only account for the items that would be worth selling. The most effective way to do this is to meticulously document your designer clothing.
How to Document Your Designer Clothing
I utilize the $4.99 app Stylebook to photograph each of my clothing items and document their value along with additional details like color and brand. This is also beneficial for insurance purposes. Should your clothes be damaged or stolen, you would have a record of what you owned.
How to Value Your Items
As I acquire the majority of my designer items pre-owned, much of the depreciation has already occurred. I check what comparable items are currently fetching in the market and document their value accordingly. Alternatively, one might record the original purchase price for insurance purposes and then adjust that figure for net worth calculations. On platforms like Poshmark, the average markdown ranges between 20% and 70% off the original retail price, contingent upon the item and its condition. If your wardrobe was originally $10,000 and you liquidated everything at a 70% discount, you would realize $3,000. Employ this conservative estimate when determining your net worth.
The Benefits of Taking Inventory
Taking inventory of your closet is paramount for multiple reasons. Not only does it allow you to keep track of your belongings, but it also provides an accurate estimate of how much your wardrobe is worth. This can be particularly advantageous for insurance purposes, should anything happen to your collection. Furthermore, having a detailed inventory can assist in estate planning, ensuring that your assets are accurately accounted for. Lastly, an organized closet can help you make informed decisions about future purchases, preventing unnecessary spending on items you already own.
In conclusion, your designer wardrobe is more than just a collection of stylish pieces; it is a potential treasure trove that can contribute to your net worth. By recognizing and documenting your items, you can leverage them for financial planning, insurance, and estate management. So the next time you gaze upon your closet, see beyond the fashion and acknowledge the value it holds!