Expenses Versus Investments: What’s the Difference?

Merriam-Webster definitions

Expense – something expended to secure a benefit or bring about a result

Investment – the outlay of money usually for income or profit : capital outlay; also : the sum invested or the property purchased

Expenses are basically things we pay for to bring a benefit or result. We have expenses like car notes and groceries to help us move around and eat.

Investments tend to be things that we think about a little more and don’t necessarily need right now. The idea is that we pay something now for the chance of a greater return later.

What someone sees as an expense may be considered an investment to someone else

Believe it or not, one person might consider something an expense that another considers an investment. This all comes down to mindset. I’ll explain further.

Let’s take books, for example. Someone who isn’t interested in learning much might consider buying books “for fun” as a waste of money, an unnecessary expense. However, someone else who is passionate about learning new things or about a certain topic would consider that purchase to be an investment.

The thing is, investments don’t always have to bring monetary return. The return can be intangible as well. Learning more and spending money to educate yourself is an investment in yourself. Something interesting happens when you learn more and become an expert in your craft… the more you learn and improve, the more monetary return you can usually generate.

An example of shifting perspective: my self car wash story

I posted a status a few years ago about how I couldn’t believe people waste money on expensive car washes when they can do it themselves for just a couple of bucks. I’d spend 30 minutes or or so going to a self car wash or washing my car in the driveway. This involved scrubbing the car down, hosing the soap off, then using a chamois to dry it all off. Sometimes it was hot outside, other times it would be cold. But hey, I washed the whole car for maybe $2!

I considered getting car washes as an unnecessary expense at the time.

A few years later, I have perspective and a better understanding of the value of time. Yes, I had heard that time is money, but it really rings true today.

After you’ve had a little taste of generating a decent hourly income that far exceeds the cost to get something done, you don’t mind paying for the convenience. I now look at paying to have my car washed as an investment as it helps free up my own time.

My time is better spent finding a resell deal or closing a sales funnel client instead of hand washing my car for 30 minutes or an hour.

What changed? MINDSET.

The guy who last commented on this post is someone who had the right mindset… a mindset it took me a few more years to develop. His comment was: “what if you make enough money where $25 is viewed like the $2.50?” BOOM. If you’re generating decent money, it’s not worth spending time on a task that you can just offload.

This is similar to hiring virtual assistants or freelancers to do things you’re not good at so you can spend time and resources on those that you are.You see, I was looking at things with a small-minded perspective. I was probably earning $35/hour at my “good” oil & gas job. So comparing to an hour of work, $25 would mean giving up about 70% of what I got paid in an hour.

I’m sharing my previous salary and my small-minded mentality with you because I want to be completely open. I want you to learn what I know now instead having a small-minded mindset another few years.

Look, it’s all about where you are in life. At that time in life, washing my own car to save $25 was kind of a big deal. However, I’d rather just have someone else do it so I can spend my time working on other things or doing things that are more important to me.

Moral of the story: THINK BIGGER

The moral of this story is to think bigger. Some things like drinks at a bar may be a waste of money. Or maybe it could be an investment if you’re taking a client out to talk about a deal. Perspective and mindset play a huge role in whether you consider something to be an expense or an investment with a return of some sort.

The main takeaway is to value your time. Pay for things that are non-value add activities if possible and focus on those things that are. Don’t be afraid to spend money on courses or books that you know will help you get to the next level. Pay for flights and tickets to a conference where you’ll connect with like-minded individuals. Lastly, don’t just think of things as a waste of money. If it’s an experience, enjoy the experience.

Of course, be careful with this mindset. Don’t spend money you don’t have. But don’t be afraid to spend some money to enjoy life. Get a fancy, overpriced dinner with tiny sushi plates. Check out the experience. Learn how the rich operate and how they think. Focus on GROWING wealth, and you won’t have to worry about expenses. There’s a quote I remember hearing that I want to leave you with:

“Revenue solves all problems.” Remember to add value and the revenue will come. Better yet, “Profit solves all problems.” If you have high expenses, high revenue might not be enough.

 

Stay Connected

Chris Bello

Entrepreneur Motivation Podcast on Facebook

Leave a Reply

Your email address will not be published. Required fields are marked *

css.php
Instagram
YouTube
YouTube
LinkedIn
Share
Follow by Email