When you have a friend who doesn’t know the difference between company stock and chicken stock, beware when he proudly announces he’s just bought something as an investment. Chances are, that’s his way of justifying his purchase of a $5,000 suit or new rims for his car.
One of the biggest excuses Singaporeans come up with to justify spending too much money on stuff they can’t afford is that it’s an investment that will somehow “pay off” somewhere down the road.
Bought an Audi when you can only afford a Kia? Well, you’ll make a good impression on clients and that will somehow make you richer so, tadah! Investment!
Spent $700 on a pair of Ferragamo shoes when Charles and Keith sells near-identical ones for 1/10th the price? Well, you know what they say about the importance of dressing well at work.
And of course that $3,000 handbag you bought wasn’t a waste of money! Because in a few decades’ time, when your retirement savings run out, you’ll be able to sell it for an even higher price on the market since it’ll be vintage!
Think that sounds dumb? Here are three instances where you might think a purchase is an investment, but it’s really not.
Frivolous things you need an excuse to buy
Spending money on your education or to upgrade your skills can pay off somewhere down the road if you choose wisely.
But we often try to justify completely frivolous purchases by playing the investment card.
See, the thing is, if the item is something that you thought of buying before you realised that hey, it could be an investment, the likelihood is that the investment excuse is just a smokescreen to justify your purchase of something that you have no reason to buy other than the fact that, well you want it.
When you’re truly investing in yourself, such as when you enrol in a part-time degree course while working a tough job, or you rent a car from Uber so you can ferry your real estate clients around while still being able to recoup the cost of driving, you’ll know it as you’ll be weighing in your mind the pros and cons, and evaluating whether the return on investment is high enough to make the cost worthwhile.
That feels a lot different from trying to convince yourself you can pass that Chanel handbag on to your grandchildren.
Items that look useful in the short-run, but turn out to be expensive in the long-run
There are many items that, when they’re on the sales rack or the salesman is enthusiastically demonstrating how to use them, sound like a good idea.
I mean, why wouldn’t you want to buy that Japanese bread maker? Sliced bread isn’t good enough for you, and baking your own bread at home sounds so hipster.
Except that after you buy the machine, you end up making bread a grand total of 3 times in 10 years. You regret buying the one with a zillion functions because you have no idea how to use most of them. To add insult to injury, you don’t even save the few dollars a month you thought you would on bread, since you’ve realised buying Gardenia is just more convenient.
Then there are items that end up costing a bomb to maintain. That blouse you thought you’d be able to take to you from the boardroom to the club might indeed be versatile, but the problem is that you never get to wear it, since it has to be dry-cleaned and nobody’s got time for that.
Expensive items that actually don’t last any longer than cheaper alternatives
People love trotting out the quality argument as a reason for being willing to pay more for something. And no, I’m not saying that I wouldn’t pick the $40 Havaianas flip flops over the $8 knock-offs myself.
But this is an argument that isn’t always correct. Because some items are expensive not because they last longer than their cheaper equivalents, but for other reasons such as style or, well, just because they’re trendy.
For instance, when you’re buying electronics like computer speakers, it isn’t always the case that the more expensive the item is, the better the quality and specs.
Some brands like, say, LaCie, are expensive partly because of their design, but don’t be surprised if those speakers can’t survive a bit of manhandling and end up malfunctioning earlier than much cheaper Panasonic ones.
While it’s true that for a great many items, buying the absolute cheapest option means you get crap quality, that doesn’t mean you need to go overboard and upgrade to the point of no return.
What’s the last thing you spent on that you think counts as a legitimate investment? Tell us in the comments!