What’s the ROI?
You own a lot of useless junk.
I still do, and accumulated it because whenever I went shopping, I almost never asked what real value any item actually had. I didn’t view these things as assets or investments, and I was wrong. Every dollar you spend should work for you in some way otherwise you will end up getting burned in the end. My advice to you is to start asking yourself “What’s the Return on Investment (ROI)?”
I used to be an impulse buyer with almost everything. It was extreme. I would buy random accessories for things that I owned but would never use. Or I would be extremely lazy and purchase fast food instead of going home to cook. You probably do the same thing. Or maybe you know the people who on the first of the year buy a gym membership or a Fitbit thinking they will actually wear it every day and that after the purchase, they are able to get more fit because of this extra thing will somehow enable it.
For me, a large part of it was that I had never had my own income before. I was limited growing up to asking for things from my parents. I always wanted more and was almost never satisfied. I thought the extra things would enable me to do more. Like maybe if I buy a guitar I will learn to play it (Hint: I never did).
Eventually, I began to realize the absurdity of all of it. I would buy things that would be used once and put to the side. Or I would buy things that could be easily replaced with cheaper options. I scale back what I purchase now, and one large reason is because I’ve begun ask myself before I make a purchase: “What’s the ROI?”
I work now to ensure that the things I purchase always yield more for me than what I initially put forward. To clarify, I am not treating this question as strictly as an investor would. It’s not like I expect a 3% annual return on a toaster oven, but I do expect it to be at least utilized, regularly, in a way that adds value to my existence.
For example, I love eating out, but eating out every night produces two large problems that lower the ROI:
- It’s expensive.
- Decreasing utility over time.
Since it’s expensive, it is creating a physical cost on me that limits other ways I could spend my money. Then because of the amount of enjoyment I derive over time lowers itself, the dollar to utility ratio gets worse and worse. So how do I make eating out profitable?
The answer is I do it only when I can gain an added measurable ROI. The most common one is social capital. If I am going out to eat, I am going to do it with an individual or maybe a group of people. Rather than just gaining the raw value of food, I am now gaining the most valuable resource which is connections with other people.
Other things have great opportunity for a ROI, but only if you actually know how to use and execute them. I had no business buying a guitar before I knew how to play. I had a multitude of other alternatives from signing up for lessons to borrowing a guitar from a friend. For those people who sign up for a gym membership without ever working out that is a terrible ROI. Invest in smaller, more manageable things first before you spend all your money on something you don’t understand. If you can’t force yourself to do push-ups and sit-ups for a month straight before you sign up for a gym membership, then you have no business in signing up for a gym membership.
So the next time you want to purchase something, ask yourself how are you going to gain value from this, and what’s the ROI?
Originally published at Cody A. Chipman.
