Let's talk about money

[Salomons Cat]

...and by that, I don't mean Roman coins, for once. Not directly, at least. Collecting ancient coins can be an expensive hobby.

I've read a few times that collectors have had periods when they got into financial trouble because they spent too much money. I'm glad that some more experienced collectors have mentioned that financial troubles due to coin collecting can occur. I think it would be good to discuss this occasionally.

Two days ago, I was watching an online auction. There was a great coin that I really wanted, but apparently, others wanted it as well. The price went higher than I had hoped. I calculated how much money I had spent recently on coins and pondered whether it was reasonable to spend a bit more than I had planned. Suddenly, I was shocked because I realized that I had no clear decision scheme, and I was deciding on a case-by-case basis whether I would buy a certain coin or not.

The next thing I did was read some articles about the question of how much a hobby should cost. I found something called the "50/30/20 rule," which seems quite popular. Let me summarize it quickly:

The 50/30/20 Budget Method is a simple guideline that can help you plan your budget effectively. Under this method, you allocate your monthly after-tax income into three categories: 50% to "needs," 30% to "wants," and 20% to your financial goals.

"Needs" include food, mortgage or rent, electricity, insurance, and car or public transport expenses.

"Wants" encompass ancient coins, other hobbies, and holidays.

"Financial goals" refer to savings. Although, during times of high inflation, you might prefer to invest in shares or other assets rather than storing money in your bank account.

I'm aware that this rule has some limitations. Someone who has just started their career will have a different relationship with their money than someone who has worked hard for decades and is now retired. So, most people would probably adjust these guidelines according to their needs. Nevertheless, I believe that most collectors do have, or should have, some principles that they apply when deciding how much they want to spend.

By the way, I concluded that I could afford the coin that I mentioned above and I bought it. But it felt only good after having cleared my head about these financial aspects.

So, my question is: Do you have any rules when it comes to buying coins, or do you decide for each individual one if you can afford it or not?

The following video is just for the case that you want to know what Scrooge McDuck thinks about money and budgeting:

 

Edited October 5, 2023 by Salomons Cat

[Hrefn]

I have neither rule nor budget.  My purchases are capricious, and my collection lacks a formal, overall plan.  Expenditure is governed by a highly unscientific mental calculation weighing the desirability of the coin, family finances, and other demands on cash.   This keeps my acquisitive nature in check, and recently has limited me to about twenty specimens per year.   For this year I am already up to twenty-two, and there are 3 months to go.  

Can the 50/30/20 budget survive marriage, children, and the attendant expenses?   I could imagine following it as a single person, but not as head of a household.  For one thing, once married, your money is not yours anymore, it’s household money.  And your spouse may (almost certainly does) have different priorities.  This is not a bad thing, but few wives are enthusiastic about their husbands’ stamp, coin, or gun collections.  There are exceptions, but such women are scarce.  

My other thought on the 50/30/20 budget is this.  It lumps collecting in with “wants” instead of “savings.”   We have elsewhere discussed the track record of rare coins as investments, which is not great.  But as an awkward type of savings account, a collection combines enjoyment with accumulation of wealth.  You may not recoup every penny you spent when you sell, but the same could be said about shares of stock or real estate.  I would never recommend numismatics as one’s only retirement plan, but buying coins is different from buying airline tickets or meals in a restaurant.  Coins can always be converted back to some amount of cash.  

I also have enjoyed selling less desirable material to buy new specimens.  This has no net effect on the family finances or budget, thus the proceeds from sales can be spent liberally without hesitation.  This Gratian solidus is the latest example of a coin acquired without resorting to the checkbook.

 

[sand]

It's an interesting topic.

I've been collecting ancients and medievals since 2018, and US and world coins since childhood (with a couple of long gaps of time, when I didn't collect any coins, but I still kept my coin collection, or perhaps my mother did). Until 2022, I never had a coin budget, except for a maximum amount that I was willing to spend on a single coin, and a vague bad feeling, that I would get, if I thought I was spending too much money on coins. I had never broken my maximum dollars per coin rule, but that maximum had increased each year. For some reason, spending a large amount of money on a single coin, bothers me a lot more, than spending the same amount of money on a bunch of cheaper coins over a period of time.

However, 1 of my new year resolutions for 2022, was to spend less money on coins and coin books. Therefore, in January 2022, I started keeping careful records, of how much I spent on coins and coin books each month, including auction buyer fee, shipping, taxes, etc. I also decided on a maximum amount, that I would spend on coins and coin books each month. Not coincidentally, my 2022 monthly coin (and coin book) budget was equal to the maximum amount, that I had been willing to spend on a single coin in 2021. In 2022, I came under that budget 7 months out of 12, which I considered pretty good.

For 2023, I decided to spend even less money on coins and coin books. Therefore, I cut my monthly budget in half for 2023. In 2023 so far, I have come under that budget 7 months out of 9, which is not bad.

Thus, in 2022 and 2023, I've become more frugal with my coin buying and coin book buying. Partly, to save money. And partly, because I'm pretty satisfied with my coin collection, and there are fewer coins that I really want anymore, which are within my monthly budget. However, I've still managed to buy 25 coins (13 ancient, 6 medieval, and 6 modern), and 7 coin books in 2023 so far.

For me, my coin (and coin book) monthly budget, is a result of how much I enjoy coin collecting, and how much I think I can spend on coins (and coin books) without regretting it, and how much I want to spend on other things, both now and in the future. I don't like it, when I exceed my monthly coin (and coin book) budget. Therefore, for each coin or coin book that I'm thinking about buying, I consider how interesting the coin or coin book is, and how much I've already spent on coins and coin books that month, and how close to the end of the month it is. The closer it is to the end of the month, the more likely I am, to buy a coin or coin book, because there is less chance that I'll find another interesting coin or coin book, before the end of the month.

Also, if I happen to spend way less than my budget, during a particular month, then I like that. Therefore, that's also a factor.

At this point, I have no regrets. I enjoy my coin collection, and I've learned a lot of history, by collecting coins.

Edited October 5, 2023 by sand

[Prieure de Sion]

5 hours ago, Salomons Cat said:

I've read a few times that collectors have had periods when they got into financial trouble because they spent too much money. I'm glad that some more experienced collectors have mentioned that financial troubles due to coin collecting can occur. I think it would be good to discuss this occasionally.

Of course, i cannot generalise.

But as a buyer of antique coins, I can already report that there are always collectors who are forced to sell part of their collection in order to sell new coins. This is nothing unusual at first.

For myself - privately - I have set a budget for my collection. I will now simply name a fantasy amount! Let's assume I have set myself a limit of 10,000 euros. This is the value my collection is "allowed" to have. If I want to buy more coins, I have to sell other coins from my collection first. So my collection will always be worth around 10,000 euros. For example, I often change my collecting areas. Then I sell my "old" coins again and make room (financially) for the new coins. I think this is also the way many collectors do it. I think only a few people can collect and keep everything financially. The reality is rather that coins from a collection are sold and bought again and again.

But - I think collecting can also be "addictive". I get that too. I have - and this is not even rare - collectors who are forced to sell parts of the collection again and again because they could not resist the attraction of new coins (and perhaps also overstretched themselves financially). I have had collectors who had to sell coins quickly - so that they could pay the bill for the new coins (already bought!). The new bills were already due! You have to be careful then. If you have to sell urgently, you quickly make high losses. 

[Hrefn]

@sand, kudos to you for sticking to a budget.  A budget is mental permission to spend, a pre-authorization in medical billing terms.  (It would be easy to just say authorized, but jargon is so dear to the heart of bureaucrats, whether commercial or governmental.). I am curious;  if you do not spend your budget amount for the month, does it carry over to the following month?  

@Prieure de Sion, your approach to controlling your spending by total cost of the collection is completely different, and has the huge advantage of requiring no additional contribution of cash.  A disadvantage from my perspective is it limits your collecting as an accumulator of wealth.  I suggest you consider removing your three favorite coins annually from your rotating collection, to a permanent collection.   In a decade you would have a nice little bijou collection.  In fifty years, Deo volente, you would have a truly awesome collection.  

Although I have been collecting all my life, I only know one other serious collector in my state.  Thus, the methods, turnover of inventory, budgets, and practices of other collectors is completely unknown to me.  I am somewhat astounded that people buy so recklessly that they are forced to sell from their collection to pay for coin invoices which are already due.  That does sound like addictive behavior.  I also am surprised by your estimation that only a few people buy and keep, and most collectors’ inventory has a high turnover.  I doubt I have sold 10% of the coins I have collected, over the entire period I have collected which is many decades.  This would include times when my funds were very, very limited.  

I am a buy and hold collector.  Is this really so uncommon?

 

 

 

 

[ela126]

5 hours ago, Hrefn said:

Can the 50/30/20 budget survive marriage, children, and the attendant expenses?   I could imagine following it as a single person, but not as head of a household.  For one thing, once married, your money is not yours anymore, it’s household money.  And your spouse may (almost certainly does) have different priorities.  This is not a bad thing, but few wives are enthusiastic about their husbands’ stamp, coin, or gun collections.  There are exceptions, but such women are scarce.  

My other thought on the 50/30/20 budget is this.  It lumps collecting in with “wants” instead of “savings.”   We have elsewhere discussed the track record of rare coins as investments, which is not great.  But as an awkward type of savings account, a collection combines enjoyment with accumulation of wealth.  You may not recoup every penny you spent when you sell, but the same could be said about shares of stock or real estate.  I would never recommend numismatics as one’s only retirement plan, but buying coins is different from buying airline tickets or meals in a restaurant.  Coins can always be converted back to some amount of cash.  

This is a great discussion section as it's something my wife and i have had to balance in the last 4 years as we transitioned for early to mid 30 year old, childless, professionals, with a respectable income. To now late 30's with two children and a spouse with a reduced work volume and income. We've had to significantly adjust our ratio of spending on the "wants" over to the needs, all while my collecting has increased, due to a more home based father requirement to young children.

The balance my wife and i have found in this regard is on a monthly basis, after all the needs are satisfied (with daycare being now the largest expense, by far), and our "financial goals" are paid (401k, Roth IRA, college savings) which are automatically invested weekly, we look at the remaining funds. To not cause any fights, we split that money equally, into our personal bank accounts. (we hold a joint account for all need based expesnses).

This disbursement is an exciting time as both of us spend that money quickly. Me on coins, her on designer purses. We sometimes do overrun the disbursement amount, and at those times, that is debited from the next monthly disbursement, or we sell things (coins/purses) ourselves. Where i take solace in this spending for both of us is as mentioned by @Hrefn, they are liquidable items. Maybe not for the entire purchase value, although value buying is a great deal of the fund, but these can be sold, if needed.

2 hours ago, Prieure de Sion said:

But - I think collecting can also be "addictive". I get that too. I have - and this is not even rare - collectors who are forced to sell parts of the collection again and again because they could not resist the attraction of new coins (and perhaps also overstretched themselves financially). I have had collectors who had to sell coins quickly - so that they could pay the bill for the new coins (already bought!). The new bills were already due! You have to be careful then. If you have to sell urgently, you quickly make high losses. 

The need to sell hopefully will never arise. Each of us have different financial situations, but as @Prieure de Sion has highlighted, being in a position where one must sell coins quickly to pay new coin invoices, or worse, a mortgage payment, is a situation i feel a collector may need to step back from. As with any addiction, proximity to the addictive item is the primary sustaining and execerabting factor. Stepping back cold turkey is required for a period of reset and reflection. Once the daily stimuli of auctions and other members new purchases is removed, i think the collector can realign their spending and priorities. 

 

3 hours ago, sand said:

For some reason, spending a large amount of money on a single coin, bothers me a lot more, than spending the same amount of money on a bunch of cheaper coins over a period of time.

Absolutely agree here, which is why i collect Byzantine bronze these days. While there certainly is a high end market for coins, there is a steeply reduced potential customer base available. Holding a 5,000 dollar coin, while beautiful, would be concerning as to what the net loss might be on it's sale.

3 hours ago, sand said:

And partly, because I'm pretty satisfied with my coin collection, and there are fewer coins that I really want anymore, which are within my monthly budget.

This is an important part too, as one matures the collection, there is less of a rush to buy. Patience can take over the purchasing process rather than the desire to amass a horde.

[John Conduitt]

It really depends on your circumstances. 50% for needs wouldn’t be right for most people but if your level is 80%, then you cannot risk getting into debt. If your needs are 20%, you can deal with debt quickly. So someone at 80% has even less to play with while rich people can spend what they like.

I have found that increasingly my target coins are expensive and don’t come up often, so I need to decide how often they will appear and how urgently I need to buy one when I see one. This could require borrowing that month and cutting spending the next. I stop buying a lot of coins just by working out that another will come along in a few months, so no need to buy now unless it’s an amazing example or extremely rare.
 

[Prieure de Sion]

19 minutes ago, Hrefn said:

I am a buy and hold collector.  Is this really so uncommon?

Not really - I think.

As everywhere in life, there is not only black or white. 

Many things come into play. One's own budget and financial possibilities. Above all, the collecting area. It is easier - just as an example - to collect and hold a large collection of Gordianus III. Simply because with relatively little money you could complete a large part of the collection (gold and medals excluded). To build up (and hold) a very large complete collection of the 12 Caesars, of Nero or other rare valuable coins is far more difficult (financially) for most people. 

But you can also see from the very large supply of coins at dealers and auction houses that a lot is being sold at the moment. And as written - that's how I experience it too. Many collectors are selling coins again and again to make room for new coins. 

As I said, I think that's perfectly legitimate. Sometimes the preferences of the collecting field change. Sometimes you might have coins that you just haven't taken to heart - sometimes you just want to exchange certain coins for new ones. 

I stick to the value of my collection. That's simply because I don't want to spend more than x euros on it. I am already an older person and will not have my collection forever. It's also not a financial investment for me - so I don't want to let the value of my collection get too big. And - my money is also finite. I have two other expensive hobbies that need to be financed. My horse is eating the hair off my head and my vintage English cat is also making me poor. All of this needs to be financed. So I have to set myself budget limits here. 

Why do you think I became a trader? I'm not going to get rich from it. But hey - I have new coins in my hand every week and I enjoy them. As a dealer I get so many coins that I would never have got privately. The fact that I pass these coins on again doesn't bother me 😄 

 

But what I find frightening - when someone comes to me and has to sell their coins. Not because he needs the money for other urgent private things - but because otherwise he can't pay the next bill from the auction house because he has already bought the next coins. I then find that critical and makes me think. 

 

Edited October 5, 2023 by Prieure de Sion

[ela126]

14 minutes ago, Hrefn said:

I am a buy and hold collector.  Is this really so uncommon?

I think this is most certainly the norm. While i think there is replacement or upgrades of lower end items occuring for everyone, the best pieces are most often kept, even if just to serve as a "check box" in ones mind. Personally I've switched from collecting American, dabbled in mideval, to now Byzantine, but i could not imagine liquidating the collection i was once proud of and learned so much from. Those pieces and collection are a reflection of our priorities at that point in time and can be remembered as such

[Roman Collector]

26 minutes ago, ela126 said:

I think this is most certainly the norm. While i think there is replacement or upgrades of lower end items occuring for everyone, the best pieces are most often kept, even if just to serve as a "check box" in ones mind. Personally I've switched from collecting American, dabbled in mideval, to now Byzantine, but i could not imagine liquidating the collection i was once proud of and learned so much from. Those pieces and collection are a reflection of our priorities at that point in time and can be remembered as such

I'm that way, too. I only deaquisition coins when I upgrade, giving away or selling the replaced specimens.

[Hrefn]

@Prieure de Sion, horses, boats, and large old houses are very effective money vacuums.  

Our financial priorities change as we grow older.   I was much quicker to spend hundreds of dollars on a coin when I was single, young, and not even thinking about saving for retirement, than I am today.  I was hesitant about appearing to offer you unsolicited advice, but I thought my idea of reserving a few coins a year was an interesting thought experiment, and I hope you understood it in that sense.  For a seasoned collector, it doesn’t make sense, but I do think it good advice for a neophyte.  I hope you do not think me overly presumptuous.  

I think your evolution into a trader is very interesting.  The disadvantage of selling for a collector is that he or she is on the downside of the buy-sell spread.  Whether sold at auction or through an intermediary dealer, the money the new buyer pays for the coin is not the money the seller receives.  The only way to overcome this is to become a dealer/trader one’s self.  I believe many dealers started out in this fashion.  

[ominus1]

[Prieure de Sion]

29 minutes ago, Hrefn said:

I hope you do not think me overly presumptuous.  

No! All good! We have a great and very interesting discussion after all. And it's nice to "fertilise" each other with interesting points of view. All is well!

[Sol_Invictus]

Thanks for starting this discussion @Salomons Cat! I always find it very interesting to read about the different approaches that people have. For myself, I set a strict annual budget. I find using an annual budget gives a little more flexibility for occasionally buying expensive coins that would be well over my monthly budget. In practice I usually end up with more money saved up in my budget at the end of the year for a bigger purchase.

[Tejas]

Most hobbies cost money and it is possible to overspend on coins. However, most of the time this is a liquidity problem and not a solvency problem. For example, if your hobby is skiing and you spent thousands and thousands of dollars on expensive skiing trips, this is consumption. You may have had a lot of fun, but the money you spend cannot be recouped and if worse came to worse you create a liquidity and solvency problem.

Coin collecting is different. It contains an element of investing. If you find you overspent on coins, you still have the asset, i.e. the coins, which you can sell (even if this incurs a loss). Hence, overspending on coins can really only result in a liquidity problem, but not in a solvency problem. 

As with all assets, liquidity is crucial. If you bought fakes you may lose your money. If you collect  coins from a niche area, perhaps in poor condition, you may not be able to sell them easily or only at a great loss. In contrast, if you collect highly desirable coins in excellent condition, the coins will likely be sellable at relatively lower costs or even at a profit. 

In short, I don't budget for coins. I buy what I like and feel that I can afford, based on rudimentary mental accounting. 

[Tejas]

2 hours ago, Prieure de Sion said:

....My horse is eating the hair off my head and my vintage English cat is also making me poor. ....

 

Yes, those vintage English cats can cost an arm and a leg. Have you tried a dog? 😀

[Deinomenid]

1 hour ago, Hrefn said:

Our financial priorities change as we grow older.   I was much quicker to spend hundreds of dollars on a coin when I was single, young, and not even thinking about saving for retirement, than I am today

Not  to be the personification of the duck in the cartoon, but I'd really urge the  younger members on the forum to  do the opposite, as I guess you  too think now . I'd never take  taxis when in  my 20s as the cost of the ride wasn't $5 or whatever,  but  ten times that at any decent rate of return over 20 years. Walk or bus. As in $5 spent  when you are  20 is really  worth  WAY  more than that if invested until - say- 50.  $5 over 40 years at 10% is more than $2k.  I know  Buffett urges the same and it works -  he's a rather more  successful high priest of the art than  me,  but  it's  so true. Doesn't mean  you have to  be a miser or  miss  your  youth,  just be aware of the best ratio - that ratio of spend to save  should  be hugely flexible  over time and the incredible power of compounding  drummed into the heads of those at the start of the process. 

Of course this assumes we live  in countries where wealth creation is encouraged, where we are lucky enough to  also  have a surplus to invest and  not have success  mostly confiscated by taxes  or inflation or worse. Hopefully most of us  do live in such places even if  we are subject to the miseries of fiat currency.

[Heliodromus]

10 hours ago, Salomons Cat said:

Do you have any rules when it comes to buying coins, or do you decide for each individual one if you can afford it or not?

I don't have a coin budget as such, but obviously am aware of what I can and can't afford. I don't think a strict monthly budget makes sense since the time to buy is when the coin is available. It evens out over time. I'm pretty disciplined about bidding - always do price research beforehand, and always snipe were possible. When bidding live in an auction with no fixed end time, I'll drop out at my predetermined limit. I try to play the long game!

While this is a hobby, I do hope/expect to recoup much of what I spent when I eventually sell, and therefore try to mostly buy coins at a price/quality where that seems a reasonable goal. As an LRB collector I also necessarily have many low end coins that are unlikely to ever appreciate much... but I'm a collector/hobbyist not an investor, so I don't mind paying my "golf club dues".

[kirispupis]

This is an interesting topic.

I don't have a coin budget per se, but I try to be reasonable with my purchases. Granted, my recent pickups have been more on the unreasonable side because there were several coins that I knew I'd likely never have another chance at again unless I paid up. I don't regret those acquisitions.

Rather than budget, one thing I do follow is targeted acquisitions. More specifically, I don't buy coins (usually) just because the meet my fancy. I have a specific focus and a list of coins I'm after. Yes, if a coin is inexpensive and is an interesting type from a person or city I already have, I'll add it. The pricier coins, though, must be on the list.

The theory behind this was to limit my budget that way. Once I had the easy coins, the rarer coins wouldn't pop up so often. That idea may have worked had I not chosen to pursue 4th-3rd century Hellenistic cities. While I do purchase fewer coins now, pretty much every target is rare and I have to fight for them. Therefore, my expenditures have increased.

Below is an example of a coin I didn't really need to pick up, but I'm happy I did. Although I have other representatives from Athens, this one was minted roughly during Alexander the Great's reign and is in good condition despite the reverse being off center.

Attica, Athens
circa 340-322 BCE
Æ 14 mm, 2,19 g
Obv: Head of Athena r., wearing Attic helmet.
Rev: OE. Double-bodied owl stg. on Eleusis ring; in each upper corner, olive spray
Sv. 22.37; Kroll 43c

 

[Prieure de Sion]

3 hours ago, Tejas said:

Yes, those vintage English cats can cost an arm and a leg. Have you tried a dog? 😀

Unfortunately I don't know any English Vintage dogs - what are they like? 😄 
 

Are there any other classic car enthusiasts on the forum? Maybe we should start a thread...

[Ryro]

My system is pretty straight forward; if I see a coin that is so expensive that I fear purchasing it would cause the wrath of my lovely, little wifey to do me bodily harm, I don't buy it.

Seriously though. I do not like these % budgeting methods, especially for those of us with families. We live month to month. If I spent 20% of my income each month on coins, my kids college savings is gone. Same with my own retirement savings. You need to save a minimum of 15% each month in your 401K! And we cannot tell a unforeseeable doctor's bill, "Sorry, but you aren't part of my % system." Add to that the unevenness of inflation, high cost of milk, bread, chicken etc. it would not be very smart to live by such a system. Even if it is something that I have mapped out using YoY finances and careful calculations, I just aint trusting it. 

The month ends and there is excess. That is MAD (My Addictions Diminished) money. 

Here is an extreme rarity that cost me 10 MAD bucks:

Philip V

(184 - 179 BC). Æ Chalkous Quarter Unit (12,7 mm, 1.80g). Delphi mint. R/ Macedonian shield, omphalos decorated. R/ B-A /Φ Crested Macedonian helmet right.
HGC 3.1, 1086 Mamroth, Bronzemünzen 18. Touratsoglou, Macedonia 13 (Philip V). Good VF and extremely rare. Purchased from Aphrodite Aug 2023

 

[DonnaML]

2 hours ago, Prieure de Sion said:

Unfortunately I don't know any English Vintage dogs - what are they like? 😄 
 

Are there any other classic car enthusiasts on the forum? Maybe we should start a thread...

They make English cars with the steering wheel on the left?

[Hrefn]

6 minutes ago, DonnaML said:

They make English cars with the steering wheel on the left?

German. (Dealer, not car.)

https://home.mobile.de/SCHWEICKERT-PFORZHEIM#ses

Edited October 5, 2023 by Hrefn

[Prieure de Sion]

50 minutes ago, DonnaML said:

They make English cars with the steering wheel on the left?

I drive only a English car on German roads - left hand drive.

A long time ago I also had an English MG-F as a right-hand drive car. I couldn't get along with it at all on German roads. It drove me crazy that I sold the car again.

Sorry for the OT.

[Sulla80]

20 hours ago, Salomons Cat said:

There was a great coin that I really wanted, but apparently, others wanted it as well.

@Salomons Cat, a thoughtful post and thread.  Although they certainly retain some value, I treat coins like any other form of "entertainment" whether that is a movie ticket, sporting event, concert ticket or an airline ticket with hotel.  I can get quite a few hours of entertainment from one coin.  I do not have a defined budget other than "reasonable as entertainment".  Your 50/30/20 Budget offers a sound framework (especially with the assumption that "wants are broader than coins" - apologies to all for this potential heretical thought.  @Ryro's approach "avoid bodily harm" makes sense whether the risk of harm is from one's spouse, lack of food & shelter, or a determined debt collector.

The missing element to this thread: a photo of the coin of interest that you mention 🙂

Edited October 6, 2023 by Sulla80