Last week a member of my club and I were discussing the advantages of newest TV/Monitor technologies and the many differences between brand names and mainly display capabilities between LCD, Plasma and LED developments. All in all a very healthy and enlightening discussion; you can nowadays go to any big chain store and find the three type of technologies side by side, compare them and come up with the best value (i.e. price/features), personal likes, and business fits.
At one point during the chat, she said something like “we just invested in a nice 50 inch plasma ...”. I did not pay much attention to the sentence. However, later that day I kept thinking about the 'invested' word used in such a conversation. It was somehow awkward to hear it, perhaps because she changed the word from bought to invested in at the last second; and mostly because such scenario was not in any way, er… truth.
So, how do we differentiate between expenses and investments? I've read countless books and articles and still am confused about what really represents and investment and what is simply money that needs to be spent in order to continue our business/life. I would say everything we put resources in so that we will complete a package or product to be delivered to another entity is in fact an investment. However, cars? Computers? TVs? Yes, we need them to do our work, some more than the others, but all of those items only depreciate through time; there is no way for me to say “I invested in this car…” because it will NEVER appreciate. It will never return more money than I paid for it. It becomes in fact, a tool, an asset, an active.
So, where do we draw the line? Very gray area indeed. However, what I’m doing now before spending any money –or time- on anything is think about whether such item is an expense or an investment.
Back to watching my expensive TV now.