Investment or Expense?

Every time I hear someone say they are going to invest in a car I cringe. While I know it is just their way of justifying the purchase the fact is cars are expenses. They depreciate in value and cost money to own and operate.

Does this mean you shouldn't buy a vehicle? No, because unless you are fortunate enough to live in an urban area with great public transportation, you do need a vehicle to get to work and run all the myriad chores necessary to daily life. If, however, you recognize a vehicle as something that is going to cost money you can approach the purchase differently.

Once you recognize a car as a justifiable expense, not an investment, you can determine just how much of your hard-earned money you really want to spend on it. The less money you spend on a vehicle the more money you have available for investments that will increase in value.

Keep in mind an expense is anything that costs you money with no chance of a return.

An investment is anything that has a strong possibility of providing more income. Notice I do not say an investment will increase in value. Something important you need to learn is there are no absolutes in this life. Having said this there are some investments that are more likely to increase in value than others. though. A simple one, readily available to almost everyone is a passbook savings account. It doesn't pay much interest and usually doesn't keep up with inflation, but it does provide a storage spot for your money until you have enough to step up to a money market account.

When you have sufficient funds in a readily available passbook account, and I recommend keeping two or three months net income here, you can use the overage to put into a money market account. When the money market account has sufficient funds which you can then invest some of the money in mutual funds or stocks and bonds. These are far safer than you might think just looking at the day-to-day fluctuations of the market. Over time money invested here will grow, but you have to be prepared to wait five or more years to be certain of this.

All of this sounds like wimpy advice, but it is something anyone can put into practice whether they are a dishwasher, waitress or engineer and be fairly certain of having their money grow instead of waft away into nothing.