‘Burn the Money in the Middle of the Floor’: Ramsey to $92K Earner Eyeing a $14,000 Rolex
Dave Ramsey handed a Tennessee caller earning $92K a one-question test before weighing in on his plan to drop $14,000 on a Rolex, and the answer reveals exactly how most people fool themselves about luxury goods and money.
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Sam from Franklin, Tennessee makes $92,000 a year and has a net worth of about $200,000. He has no debt other than his mortgage, and he already invests 15%.
He wants to spend $12,000 to $14,000 on a luxury watch in 2028, paid for with an $80,000 to $90,000 bonus.
Dave Ramsey, host of The Ramsey Show, gave him a one-question test: “If you took $12,000 after you got this check and burned it in the middle of the floor, does your life change?”
Sam can afford the watch. The bigger risk is buying it as an “asset.” Once you think a watch holds its value, it gets easy to justify spending more and to count it toward your net worth. Both ideas fall apart when you go to sell.
A Diamond Confession Backs Up Ramsey’s Verdict
Ramsey didn’t tell Sam no. He said a $50,000 watch would have been an automatic no, and he called $12,000 “a pretty good chunk of your net worth.” His main warning was frank: “Do not fall for the trap that a Rolex is an investment. Some go up in value, but if you pull up 30-year-old Rolexes, they’re really not appreciating. Buy it as consumption, not investment.”
He also admitted something about his own buying. He has bought diamonds for his wife for decades: “I’ve been buying [diamonds] for 30 years. I couldn’t sell them for what I got in them.”
Ramsey is right. At the low end, the watch equals 6% of Sam’s net worth. At the high end, $14,000 takes about 18% of an $80,000 bonus. That’s a real purchase, but it won’t wreck his finances.
The return is where the investment pitch breaks down. Here’s an example. Say a $12,000 watch resells for $20,000 after 20 years. That feels like a solid profit. Spread over that period, though, it works out to about 3% a year. Ramsey summed it up: “When you back out the percentage rate of return, it sucks.”
Now put that same amount into a stock index fund and take 10% a year as an example. After 20 years it grows to about $80,730. That leaves the watch behind by roughly $68,730, and that’s in the case where the watch actually gained value.
Gold Shows How Shaky the “Hard Asset” Story Is
Gold is the common case for luxury goods as investments. It traded near $1,780 an ounce in October 2021 and sat near $4,163 this week. That’s a gain of about 134%.
That same metal is still about 21% below where it stood in February, at roughly $5,279. It fell again this week after hot U.S. inflation data raised expectations of a Fed rate hike. Even with gold up more than double, Ramsey still can’t get his money back on jewelry. The reason is that a retail buyer pays for the brand, the dealer’s markup and the labor on top of the metal, and the resale market pays for very little of that.
Your Mortgage Rate Sets the Watch’s Real Price
Co-host George Kamel asked the right question: “If I had 12 grand right now, would I rather put it toward the mortgage… or have a watch in my drawer?”
Sam’s realistic alternative is his mortgage, so his mortgage rate is the number that matters. Every extra dollar you pay on a mortgage makes that rate with no risk. Here’s an example. At 3%, $12,000 grows to about $21,670 over 20 years.
At 7%, it grows to about $46,440.
So the same watch costs very different amounts depending on the rate. With a low rate locked in, the extra growth you give up is modest. If your mortgage is near 7%, the watch costs you more than double that.
Run These Numbers Before the 2028 Bonus Arrives
- Take the burn test using cash money. Leave out home equity. Divide the watch price by your cash and investments. If losing that money would change your plans, wait.
- Find your mortgage rate on your statement. Multiply the watch price by (1 + rate) raised to the number of years left on your loan. The result is what that money would have saved you.
- Look up real resale prices. Find completed sales of the same model from 20 years ago, compare them with its original retail price, and change the difference to a yearly return. Most of the time it comes out near what Ramsey described.
- Pay cash only after the basics are covered. Keep your 15% retirement contributions and emergency fund in place first. Then list the watch at zero on your net worth statement.
Kamel added that wearing a $50,000 watch would make him “target demo to get mugged.” The bottom line: buy the watch if you can afford to burn the money, and expect it to be worth less than you paid.
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Jake has been been working in financial media for almost 15 years. He focuses on all things personal finance for 24/7 Wall St. with high hopes to educate and entertain. Most recently, Jake spent 12 years working various roles at The Motley Fool. He started copy editing fool.com content, worked on premium and marketing campaigns, and helped launch The Ascent, a personal finance brand.
His work has been featured on platforms like MSN, Yahoo Finance, USA Today, and more. He's written about credit cards, social security, ETFs, savings accounts, and just about anything else you can imagine when thinking about money. Jake love to cook, play golf, and tell people he's never had a cavity. (It's true!)
