What is an investment?
It’s something you put money into, that is likely to return more money to you.
It’s a vehicle of in which your money can grow.
Buying a stock. Buying a house to rent out. Buying a suit to wear to an interview. Buying a course to upgrade your skills. These are all investments.
I see too often these days people using investment to mean PURCHASE. Such as “I decided to invest in the face cream,” Or “I finally invested in this fur coat,” or “I invested in my education,” when said education was a degree in art history.
Dudes. Dudes. No No No No No.
Unless that face cream is going to make you pretty enough to land a rich husband, or that fur coat is going to double in value in a decade, or that degree in art history is going to land you a job, none of these are investments.
They are simply purchases. Perhaps they are wise purchases..maybe that face cream really IS better than Olay and maybe that fur coat WILL keep you warmer and you learnt SO MUCH in art history class.
Still purchases.
Investments must return something to you, and that something must be cold hard cash, baby.
Marketers love to use the word investment because they know consumers are more comfortable with the idea of investing rather than spending. Investing allows consumers to justify spending. But you gotta tune it out! Don’t lie to yourself! If you want to spend money there is NOTHING WRONG WITH THAT.
I spend money all the time. A lot of time, on a bunch of stuff that makes me zero money. But it makes me happier, at least momentarily and that’s worth something too. Maybe it’s an investment in my personal happiness, but let’s not pretend that it’s an investment in my net worth.
Here’s a handy graph you can use to figure out if your investment is in fact a purchase:
There are 3 comments
Ha! My favorite is my shopper friends who are “saving so much money”….on their new shoes, or purse, or trips to the Bahamas. I congratulate their efforts to shop at a discount but don’t spin your impulse purchases as “savings.” It’s not. It’s spending. I do like that you acknowledge the happiness factor in purchasing though. I feel too many people fall into the “no spend” trap when setting off to manage their money. Depriving yourself rarely works because binge trots along right behind deprivation. Just waiting for that one bad day. Great article and hilarious infographic!
Yes! It’s such a joke! If you’re going to spend, just spend but don’t PRETEND you’re saving! Thanks for your feedback 🙂
[…] For more of my work attempting to increase precision in the language we use around money, checkout “Why it’s not an investment, it’s just an expensive pair of shoes” […]