The Uncommon Quality of a Great Investment

The reason I’m writing this post is because I’ve been thinking a lot recently about the best way to use my money over the next year. Over the past three years, I’ve focused heavily on maximizing my savings and keeping my spending low in order to build up a fairly good size nest egg for a 28 year old. Now that I’m preparing to leave my job and take a 6-month mini-retirement at the end of May, I’m shifting my focus from saving to how can I spend and invest my money wisely until 2019 when I likely will rejoin the workforce.

Instead of seeing all of the money I spend during my mini-retirement as a “sunk cost”, I’ve decided to see my $20,000 mini-retirement budget as an investment. An investment in what you may ask?

An investment in my life and my happiness.

 

The Traditional Qualities of an Investment

When considering typical investments, what do you think of?

Maybe a house or other piece of real estate, a stock or other financial instrument, or maybe even a college education. All of these are common investments of money that many people make throughout their lives. Typically, the goal of all of these investments is to provide some level of financial return (aka make more money).

Real estate appreciates in value and may provide you with rental income, stocks increase in value or pay dividends, and even a education provides the return of higher income potential. So traditionally, the main quality of a traditional investment is that you invest some money into an asset, and then hopefully you make money from it in the future.

But this financial return that we seek from our investments comes at what cost?

How much work is this investment of ours going to require, and what is the risk that comes along with it?

Real estate can require a lot of time and maintenance, and sometimes the housing market can barely increase in value or crash periodically. The stock market is highly volatile and not for the faint of heart. And you could spend years in school only to come out without any employment prospects and thousands of dollars in debt.

I’m not trying to dissuade anyone from investing in real estate, stocks or an education. In my opinion, these investments are actually great places to put your money if reviewed carefully. The point I’m going for is that traditional investments are only analyzed in terms of dollar figures, but there is so much more to an investment and how if affects your life that simply a financial return.

 

Money or Quality of Life?

The question that I want to pose is that “What if we thought about investments in a different way?”. Such as the way that I described at the beginning of this post. Building a new framework for how we perceive what is or is not a great use of money.

Instead of just seeing an investment just as a way to bring us more money, what if we decided to qualify an investment as how it increase our quality of life? Getting more money is great, but isn’t what we are truly after is an increase in our quality of life?

We buy homes or real estate either to provide us a great place to live that is our own or as a way to generate some extra income by renting. We invest in stocks to see our money grow over time and provide a nest egg for the future. We get an education in order to become more well-rounded people with higher income potentials.

All of these returns provide an increase in our quality of life.

There is a financial reason for all of these investments, but the overall goal is to increase our quality of life in one way or another. So why can’t we have this same way of thinking when approaching everything we do? Whether it be an investment of time, money or energy.

 

Here are a few examples of common situations which may be worthwhile to view as an investment in quality of life:

• Moving to a more expensive neighborhood that gets your closer to your job. Your monthly expenses might go up, or you’ll get less home for your money, but you can save time/energy everyday from not having to endure as much of a commute, giving you more time for leisure or fun.
• Selling your rental properties and investing the money into index fund investment account. Your yearly income from the rent will be no more, but now your money grows without any effort on your part handling property management, allowing you more time to pursue other interests.
• Taking 6 months off from work to travel the world or learn a new skill. This will cost a decent amount of cash savings, but it will give you incredible experiences that you could never get on a two week vacation and free up mental energy to pursue other passions and maybe consider a career change

 

These are all investments that end of up costing us money, but they return to us other valuables, such as time, energy or experience.

 

Understand What Brings You Happiness

One of the most important reasons that I started this blog was to help people get the most value from their money but also the most value from their lives by using money as a tool. Hopefully what I write about gets you to rethink what you want in life and use your money to help get you where you want to be.

A great investment doesn’t just need to make you money, sometimes it just needs to make your life better. Ask yourself where you could make improvements to your life to enable you to become a happier person, and then throw some money at making those improvements. What I’m referring to isn’t throwing money at a new car or the latest Apple gadget because you’re frustrated with your job, but maybe take up a new hobby or invest in starting a side business.

What do you want your life to look like in 10 years? Get really specific about what you want and how you will spend your days. If you can’t see yourself going to work and sitting in an office everyday then what can you invest in today that will get you off of that path and onto a different one? Can you move to a new place? Go back to school? Figure out how to start your own business?

Many of the decisions we need to make to get our lives to where we want them to be 10 years will probably require us to use our money as a tool to get there. Investing in an education, moving to a new place, quitting a job or any number of life-changing decisions require money to make them happen.

So my ask of you readers is to use a new framework for evaluating investments. Don’t sacrifice quality of life just for a financial return. Money is not the end game here. Happiness and a great life are the end game. Money just happens to be a pretty great tool to help you get there.

Question: How do you qualify a great investment? Is a financial return the most important, or do you consider other features as well?

Leave a comment or send me an email!

NYPFGuy