Flipping The Value Proposition: Spending vs. Investing

By now you should have the CEO approach to your finances ingrained in your brain: Cut Costs, Earn More, Optimize Spending. Every morning when I wake up, I sit up and scream it loudly for 11 minutes. What — that’s not normal?

For “Optimize Spending,” we’ve looked at ways to help you make sure you’re getting the most value for your money.

ut there’s another aspect to Optimize Spending, and that’s what I call flipping the valueperspective. While many people simply try to cut every single expenditure, I always emphasize that in some cases, spending can be investing — if you spend on the right things and really use them. Today, let’s focus on how to take money you’re spending and view it as an investment.

Why Would You Try To Save Money on Books?

Maybe it’s because I’m an author. Maybe it’s because books only cost around $10. But I’ve never understood why people try to save money on books when the point should be to getvalue out of it. I’m not talking about a quick online comparison, but really going through hoops to save $2 on a book.

Instead of saving on books, how about using more of the content from it to make it worth the money? When was the last time you got a measurable benefit from something you read like learning how to earn more money or how to save time? Are you reading those kinds of productivity books that actually teach you something and help you to improve your life? If not, why not?  Here’s a list of books that I recommend.
 


For example, if you spend $12.99 on a book that teaches you how to raise honeybees and sell honey for profit, then your perspective on that book suddenly changes from viewing it as a wasted $12.99 to a minimal investment for the potential return of thousands.

And that’s why I encourage you to re-think the way you consider your spending on books.

Many people pick up a book, read it, brush their hands off, and say, “Great! I read that” and go on their merry way. Let’s take my book for example: It’s highly tactical, so it’s very easy to call up a bank and get $25 refunded, which more than pays for the book.

But other books are not so simple. For example, if you read The Social Animal, how do you create value from it? The answer is: Remember that “value” is not always money…although if you do it right, it can often lead to it. In The Social Animal, for example, you might understand how group dynamics at work are functioning, which will give you more insight into why your co-workers behave the way they do. How can you use that to your advantage at work? Can you take on extra responsibilities from your boss? Finish a project faster? Complete it better than others? Finding “value” from books requires a leap of creativity to apply a book’s principles to your own life.

As much as possible, you should try to tie it to something critically important to you. These are usually health, relationships, money, and career, but there can be others depending on your situation.

The bottom line on books: So instead of penny-pinching, looking for ways to save a few dollars here and there when you buy books, flip the perspective you have of the book’s valueand actually implement the strategies you learn from it.A New Way of Thinking About Spending on Eating Out

Eating out is a big deal for a lot of people — in fact, it’s my #1 discretionary expense. We all could probably cut back on eating out as much as we do. But instead of feeling guilty every time you eat out, try being more strategic about it.

For example, you could spend money on a meal out and turn it into two meals. So, instead of “saving” on eating out, how about cutting that meal in half and eating the rest for lunch or dinner the next day

 Check out the video for some interesting ways that restaurants convince you to overspend and overeat.
Follow the tips, and you can easily cut your eating-out spending by 50%-70%.
But that’s just the cost side. Let’s talk about the value side.
Take someone out to lunch and invest in a relationship. I wrote about this in a guest post I did for Get Rich Slowly called The Best $20 You’ll Ever Spend. In fact, many of my eating-out expenses are hard to categorize since my personal/professional life blend together so much.
However, not everyone is a weirdo like me. Maybe the meal doesn’t qualify as professional development or a business lunch. It can still be an investment. Let’s say you’re catching up with a friend. Is it an investment? This is harder to judge. Sometimes, your friend might hook you up with a job 2 years down the line. In that case, was that $20 worth it? Or was it just the fact that you’re a friend? And isn’t it somewhat distasteful to think of friendships as a transactional? The point here is to decide what’s important to you (hanging out with friends), and if it involves eating out with them socially, figure out how you can get as much value as possible from it. That doesn’t mean you have to get a job or ask them to give you something. In fact, it can mean you try to help them as much as possible.

Flipping your value perspective here means you need to think about the purpose of that meal and realize that the return – a new professional connection or a good friendship – is worth more than the 20 bucks you’re spending on food.Stop Buying and Selling Things So Much, Jackasses!

Instead of finding tricks to “save” on a new cell phone, how about using it longer?

 

With expensive purchases like cell phones, TVs, computers, pretty much anything electronic, if you look at it as something you want to have for years, you should invest in a good purchase — something that will actually last for 4 years like my cell phone, instead of crapping out on you after just a few months. But that means you may have to spend a little more up front — like I did with my phone, iron, and camera.
Think of it this way: if you flip your value perspective on the purchase, you’ll come to understand the money you spend upfront as an investment because it will save you money over the duration of the product. Are you prone to spending $200 on a new phone every year? You have a couple choices: Either get a cheap $50 phone and get a new one each year, or pick an expensive phone and hold it for the long term.

The problem, of course, is that many people who buy $400 phones or $200 jeans don’t treat them as an investment. They turn around and buy the newest model the next year. That’s not an investment — that’s simply spending — and it’s a behavioral issue.

The Key: We’ve talked about spending, but the most important thing is flipping the valueproposition to make it an investment. It’s ok to spend, but what are you GETTING OUT OF IT? Just because you spend money doesn’t mean you’re getting any real value out of it.

For example, you attend a community college class to improve your education. OK, great. What are your goals? Presumably you want to earn more. Before you jump into another class, how are you going to make back the value of that $200 course? Ask for a raise? Try to teach others what you learned? Become a consultant? You should figure this out BEFORE you register for the class, and try them before you .Other people will simply try to get the cheapest thing, thinking they’re “saving money.” Or, worse, they will buy expensive things and churn them all the time. But since you’re a Scrooge member, instead of worrying about the sticker price, you will buy a car for its value, and spend extravagantly on things you choose because they add value to your life.

Flipping your value perspective is a principle you can apply to any area of your spending. It requires picking what’s important and being creative about how you can get value from it. Whether it’s a cellphone, education course, or even eating out, you can start focusing on valueand not simply cost.

You’ll see this right away: Let your friends worry about cost over and over again. They’ll think personal finance is about willpower (which it’s not), while you’ll understand when to focus on cost and when to flip the value proposition to focus on value.