This is a guest post from Mrs. Micah, who maintains the blog Mrs. Micah: Finance and Life, in which the author is starting to deal responsibly with her $100,000+ debt.
Every purchase you make is an investment.
Too often we think of our purchases as consumables. Some are, like food, but even those should be adding to your quality of life. Food, for instance, is an investment in your health and gives you energy for doing better stuff.
We may not think of it that way, but it’s like buying stock. Not that the purchase increases in value, but that it proves valuable to us over a long period of time or it loses all its value because we don’t use it and don’t (or can’t) resell it.
If you see your consumption as an investment, then it takes on a purpose–the purpose of improving your current and future situation for as long as possible. That allows you to ask whether you could have gotten more value by consuming something different that would have lasted longer, been more practical, more helpful, etc.
One good investment I made recently was a winter coat. My old one, bought cheap at a thrift-store (well-used), lasted me for 4 years. Now, it’s beat-up from some hard Pennsylvania winters and some rough treatment. It wasn’t in great condition to start with, but just fine for college.
I spent $83 on the new coat but don’t regret a penny. On the way to work, I no longer feel frozen (my old coat was not workplace appropriate anymore, so I was braving the cold with a light suitcoat) nor do I get wet in the rain (umbrella helps too). In fact, I feel comfortable as I slog up the hill. Plus it looks appropriate at work and good on me.
The style is pretty classic (and I’m not very fashion conscious anyway), the material seems good, and I’ll take care of it, so I expect it to last for years.
A smaller but excellent investment was an oversize latte mug Mr. Micah bought. He uses it every morning to make his oatmeal and every night for his tea. It cost about $10 (more than I’d normally spend on a mug) but he’s had it for years and uses it so much that it was a great choice.
As investments go, it’d be like buying stock at $10 and having its value shoot up to $100 and hold. Great ROI!
On the other hand, my friend Katie likes to buy electronic gadgets but doesn’t end up using them, making her purchases a very bad investment. For example, she spent a couple hundred dollars on a PlayStation 2, thinking it’d be a lot of fun in the evenings. The PS2 never made it out of the packaging. Instead, it remained in her closet until recently, several years later, when her now-husband discovered it and was thrilled.
In the end, he got some value out of it. But if she and her husband had bought it now (even unused) they could have had it for half the price or less.
It was as though she bought stock for $250 and it immediately dropped to $0 (not counting resale value, since she didn’t think about that). Then it rose to about $100 and now it’s worth something to her again because she can use it with her husband. Not a total loss, but not a good choice either.
She had an unused digital camera (for which I offered her $20) but she ended up giving it to her dad for nothing. Again, over a hundred dollars spent with practically no return.
Fortunately, Katie learned from this. She’s decided not to buy an iPod yet (or if she does, to buy a refurbished one for less) because she might use it for a week and then put it in a drawer. Now that she’s identified which purchases she shouldn’t make, she’ll have much more money to either save or put towards things she’ll actually use.
What you’re consuming (buying) isn’t simply being used up. It’s an investment. Your job is to make sure that it’s a good one!
Read more from Mrs. Micah on her blog, Mrs. Micah: Finance and Life.
Published or updated November 19, 2007.