Life is full of indulgences.

    Everyone knows this. The cornucopia available to successful people is mind boggling.

    The hard part is choosing.

    So try this conceptual tool for major indulgence decisions. I call it the Indulgence Calculator. It is based on a simple idea. While some of our consumption is just that, consumption, some of our pleasures may show up on our personal balance sheet as though we had never spent the money. They may actually “pay for themselves.”

    When I was in my mid-twenties I owned a sailboat. Then I had an epiphany: Why not own pleasures that appreciate rather than depreciate?

    It’s a question more people need to ask.

    I sold the boat and bought a Cape Cod summer house. Twenty-five years later I sold the house and recouped every dime ever spent. The appreciation far exceeded the expenses. I’ve repeated the experience in Santa Fe.

    How do you do the indulgence calculation?

    Simple. Take all the ownership expenses as a percentage of the purchase price. Add or subtract the annual appreciation or depreciation as a percentage of the purchase price. What remains is a virtual index of your indulgence. If a house costs about 5 percent  of its value to own and operate each year, exclusive of financing, and it appreciates at 5 percent a year, its net indulgence cost is zero.

    Note that this doesn’t count your “experience dividend.”

    Viewed this way, houses are wealth builders and boats are true conspicuous consumption. They cost a lot to operate (try 10 to 20 percent) . And they depreciate. Their indulgence cost may hit 25 or 30 percent.

    Things that are purchased new--- like cars--- don’t fare well in this calculus. The vast majority are wasting assets with lots of expenses. So they may set you back 25 percent of cost a year.  Compare a luxury car to a run of the mill car, however, and many luxury cars are relatively inexpensive indulgences. A Lexus ES300, for instance, scores at 23 percent a year while a Ford Focus scores at 38.4 percent a year.

    Again, we’re not counting the experience dividend.

    Things that are old, like furnishings, jewelry, and fine art, can be pleasures that pay for themselves. They have virtually no expenses but still deliver an experience dividend. The Chinese Art Deco rugs I’ve owned for years have at least kept up with inflation. Sold at auction, they would return my original purchasing power.

    How far can you go with this?

    Too far. Just because cars are expensive doesn’t mean you shouldn’t own one. On the other hand, if all of your pleasures score high, you might reconsider your habits.

    Any caveats?

    Yes. One of the reasons houses look so good is that it doesn’t cost much to sell one. Most things have major selling costs.

    Buy an antique from a consignment shop and you’ll only get 50 cents on the dollar the next day. Buy it from a dealer and you’ll get as little as 25 cents.  Either way, unless the item appreciates faster than inflation and is kept for a long time, it will take years to reduce its indulgence cost.

    Shop well!