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How to Tell an Expense from an Investment.

In business, it is essential to know the difference between an expense and an investment.
It is important to know that you are using your money wisely.

 

 
Many opportunities are presented as investments, especially those that say “Make an Investment in Yourself, You’re Worth it”. Assess these opportunities carefully. Is the weight loss product or skin cream that you will need to buy continually? Then that is an expense. Alternatively, is this an exercise program that you can use at any stage of your life? Then that is an investment.

 

 
Expenses are tempting because they usually mean instant gratification. They make you feel good now. Maybe it is a new car or a Caribbean cruise. Expense! Do you absolutely need that gorgeous pair of shoes? Expense! Must your home office have the latest fashion, most stylish office furniture? Expense! Expenses give immediate benefit, whether that benefit is for pleasure or productivity.

 

 
Investments often require more evaluation before the decision is made. The money is spent now, but the payoff is later, maybe much later. Evaluate an investment to make sure that it will pay off bigger than you are investing now. Perhaps it is investing in a high-end camera for your start up photography business. While this may be more expensive in the beginning, it will mean being able to buy specialized lenses later on, taking better quality photos immediately and not having to upgrade as soon. Investment!

 

 
Each spending decision in your business should be evaluated to determine if it is an expense or an investment.

 

To quote Robert T. Kiyosaki, Rich Dad Poor Dad, “Poor people spend money on liabilities; Rich people spend money on assets”.

 

Spend your business and personal money wisely. Invest in assets, rather than have liabilities as expenses.

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