When we get the urge to buy something, we can come up with all sorts of spending excuses. Telling yourself a purchase is an “investment” is a common justification for frivolous spending.
Of course, there are legitimate investments — purchases made for the sole purpose of earning a return on your money. But calling certain purchases an “investment” can be a pretty big stretch, as Sam of Financial Samurai points out. He cites an example of two friends. One justified spending nearly $3000 on a purse, and the other $2000 on a suit, by saying they were investments in their appearance for job interviews.
While looking fancy could very well nab you a job, an Armani suit and a Louis Vuitton purse are not designed to earn a return; they’re designed as fashion pieces. A degree, on the other hand, is more likely to be designed to be a career investment — although even that has limits:
There is tremendous brand value going to an elite private University. Society has convinced us that we should pay whatever it costs to go to a university like Princeton… Investing in education is fantastic up to a point. Once you go beyond that point, you’ll be laden with debt.
It may sound a bit harsh, and there’s nothing wrong with the occasional splurge. But, as Sam explains, justifying our spending too often usually leads to financial trouble.
Be Careful Justifying Your Spending As An Investment [Financial Samurai]