The difference between a consumer and an owner is probably fairly intuitive, but let’s use one example just to compare them. If you purchase stock in a company, you’re an owner. If you purchase that company’s products, you’re a consumer. Naturally, everyone is both a consumer and an owner. However, when it comes to building wealth, the emphasis needs to be on ownership. Put simply, ownership involves building wealth by accumulating assets and consumerism generally involves diminishing wealth since you’re spending your assets to obtain a product or service.
An owner typically has a long-term perspective. They prefer to invest their raises, bonuses and windfall gains rather than spend them on some short-term luxury. When they spend money, they do it strategically. Take a new car for example. An owner and a consumer might both purchase a very nice vehicle. However, the consumer does this to have the latest, hottest thing with the thought of getting the next trendy model fairly soon. The owner selects their car based on its ability to last a number of years, be economical to operate and have reasonably good resale value. If the car example is still a little fuzzy, think about iPhones. Are you driven to get the newest model each year? You’re being a consumer and Apple appreciates it. If you plan to keep your phone for a number of years, you’re being an owner and you’re driving the Apple marketing folks crazy!
Here’s an easy way to see whether you’re putting enough emphasis on ownership. Just think about your net worth. Of course net worth fluctuates due to changes in asset value (like the ups and downs of the stock market). But, if we ignore those kinds of changes for the moment, you can see that an owner’s net worth increases over time and a consumer’s decreases. This simple exercise can help you see how you’re doing. So, when you’re about to make a financial decision, you can think about your net worth to judge whether you’re acting like an owner (increasing wealth) or a consumer (decreasing wealth). Maybe you’re simply dying to purchase something that you really can’t afford at the moment. If you put it on your card, you are decreasing your next worth by the purchase price and by the (very high) interest you’ll be paying the credit card company.
As you can see, being conscious of whether you’re acting like an owner or a consumer can have a big impact on building wealth. If you would like to further discuss this topic, or any other financial matter, we can set up a no-charge, no-obligation initial meeting. Please visit our website or give us a call at 970.419.8212 to set up an in-person or virtual meeting.
This article is for informational purposes only. This website does not provide tax or investment advice, nor is it an offer or solicitation of any kind to buy or sell any investment products. Please consult your tax or investment advisor for specific advice.