Home Finance Crypto news Kitces & Carl Ep 128: Noticing What You Spend Money On That’s Actually An Investment

Kitces & Carl Ep 128: Noticing What You Spend Money On That’s Actually An Investment

Kitces & Carl Ep 128: Noticing What You Spend Money On That’s Actually An Investment


Throughout history, there has been an age-old question of the difference between an investment and an expense.  Society often views expenses as a permanent fixture in life, suggesting that there is no path away from their burden. But what if there was an alternative path?  What if there was a way to shift our financial mindset about expenses from one of endless sunk costs to one of intentional investment? And what if we could apply this perspective not just to how we spend our money, but also to how we use our talents and spend our time as well?

In our 128th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore how to allay the expense-centric mentality that many people apply to their finances, and consider the process of shifting into an investment-centric focus that encourages individuals to grant themselves the permission to free up time for business growth, spending time with family, and other important (and enjoyable!) activities. Identifying these investment opportunities in how we spend our time and resources can even help to enhance our performance and growth, both professionally and personally.

While spending is an ongoing and inevitable part of life, viewing it as a drain on resources rather than an investment for the future is a common trap. The ultimate goal is to realize that our allocated time and money can potentially produce meaningful benefits instead of viewing them simply as spent resources. And while the challenge in changing that mentality will be a unique process for everyone, there are many common strategies available. For example, investing time and money into scheduling multiple weekly sessions at an expensive (but highly effective) physical therapist can help alleviate chronic pain, devoting years of our life to obtain a college education can open up lucrative career opportunities, traveling in business class for international speaking engagements allows for a more comfortable and convenient flight (so that you’re more energized and ready to offer a dynamic presentation upon arrival!), or simply committing to a monthly lunch date can maintain close ties with long-term friends.

One approach to help us validate the potential investments we make with our everyday spending is to consider how any potential profit to be gained from the investment stacks up against the pain of granting ourselves permission to commit to the cost of the investment. For example, a new business owner might struggle with the decision of hiring staff to cook, clean, or maintain a household to save themselves the time of doing the work themselves. And while doing so might feel like an indulgent and unnecessary expense, the potential profit to be gained from the additional time afforded by the household support can be used to significantly grow the business. Alternatively, giving oneself permission to work fewer hours by hiring support staff to help with routine tasks at work can be justified by the greater ‘profit’ of creating more quality time with family. Realizing the importance of the ‘profit’ to be made from our investments can often help us realize when it’s obvious that we can’t afford not to make them!

Ultimately, the challenge isn’t so much about making the investment itself; instead, it’s more about being able to identify the benefits that will result from the investment, and recognizing when the payoff will be worth the resources at stake. And by making the right investments into the things that result in outcomes that matters most to us, we can become confident in allocating our resources more intentionally – whether they involve time, energy, money, or a combination of all 3 elements – changing our view of expenses and instead filling our surroundings with meaningful opportunities for the future!

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