Money at 30: Investing in Yourself vs. Wasting Money
We’re now just over one month into 2018 and that likely means one thing: your New Year’s Resolution has long gone out the window. Hopefully that’s not actually the case but this annual exercise in turning a new leaf is an important reminder of just how fickle we can be. At the same time it also raises questions about the idea of investing in yourself.
I’m actually a big proppant in the idea of investing in yourself and making efforts to better your life. Unfortunately it can also be easy to let yourself splurge on unnecessary expenses under the guise of such betterment. With that premise, let’s take an honest look at ensuring your investments aren’t just a waste of money.
Start small and seek alternatives
Whether you’re pursuing a new venture or working towards a goal, there seems to be a misguided perception that spending more will help accelerate your rise. In reality this is rarely the case. While you may be tempted to jump straight to the top of the line when shopping for tools, often times there are plenty of more affordable options you can start with instead.
Admittedly I’ve done this both the right way and the wrong way. When I was living in Los Angeles and kinda-sorta-not-really pursuing a career in writing for film and television, I convinced myself that owning the industry standard Final Draft software was imperative — as if the file format my script was in was standing between me and staff position on a hit show. Of course I bought it anyway and, well, it hasn’t done me a lot of good. On the other hand, when my wife and I decided we wanted to start making YouTube videos, we opted to buy a reasonably priced used camera instead of dropping thousands on a DSLR rig. Since then we’ve started to grow into our equipment and supplement it when we see a need instead of loading up on gear we don’t need.
There may come a time when you do need to make a major purchase in order to reach the next level in whatever it is you’re pursuing. However be realistic about when that day comes and don’t let yourself be swayed by fancy bells and whistles that just aren’t practical yet.
Once you make your investment, the key to making it pay off is to actually use it. This means not just utilizing it when the urge strikes but being consistent and making progress.
In addition to your big, main goal, set a series of smaller goals that will help you get there. Returning to my personal example, I’ve made it a point to ensure that I’m releasing at least one video a week in order to not only grow an audience but also because, with each video I produce, I learn something new about the process and how I can improve. Because of this consistency, while I still have a huge way to go, I’ve found plenty of small successes that have more than justified the investments I’ve made.
Know when to call it quits
Despite your best efforts, the truth is that your aspirations may end in failure — and that’s ok! Heck, even wise investing still means risk and the possibility of taking a loss.
If it’s clearly the end of the road, you can help yourself by avoiding the sunk cost fallacy. This commonly-cited fallacy suggests that we as humans do or keep certain things because of the money and time we’ve already invested in them. In this case your pursuit of success and desire to not have “wasted” the cash you spent could actually lead you to keep blowing both time and money. In fact this behavior could be compared to a gambler on a losing streak, sending themselves deeper into the hole as they try to turn it all around.
To be clear, hustle, drive, and determination in the face of adversity are great qualities and hard work does pay off. At the same time, be honest with yourself about how hard you’ve really been working and whether it’s worth continuing. For example, going back to my would-be screenwriting career, had I let the sunk cost fallacy convince me that I need to stay in Los Angeles and pursue a dream I was really only half-heartedly (at best) working towards, my wife and I would have been jeopardizing our financial futures — not worth it!
Setting goals, having dreams, and investing in yourself are all things I wholeheartedly believe in. Sadly there’s a difference between actual passion and fleeting interests. As a result some so-called investments can really just be a setback to your finances. Luckily you can avoid these pitfalls by starting small, being consistent with the efforts, and (in some cases) knowing when enough’s enough. Good luck!