Do You Really Have to Spend Money to Make Money?

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Since the advent of the first minted coin, “experts” have advised that you have to spend money in order to make it. But, do you really? Is there any truth to this cliche –– or is it just that, a worn-out idea devoid of any substantive meaning? Today we’ll focus on this question and provide an answer for ambitious professionals on a budget:

Expenses Don’t Contribute to Wealth 

First, let’s tackle the obvious aspect of the topic at large. Expenses don’t increase an individual’s financial standing. That’s simple enough to understand. After all, if you pay $5 for a sandwich, you’re $5 worse off than you were before. In the same vein, paying static expenses like rent, bills, gasoline, (etc.) won’t help you make money, but they could help you avoid further financial trouble. Simply paying off your credit card debt on time, for instance, will prevent you from incurring penalty charges or late fees. So in that sense, spending money can help you save money. But can it help you make it?

Investments vs Expenses

An investment –– as opposed to an expense –– is an outlay of capital done with the intention of seeing a return on the initial amount. So if you were to purchase a stock for $5, you’d expect to receive more than $5 when you eventually decide to sell it. (This is just one of the many ways in which a five-dollar stock differs from a five-dollar sandwich.) Of course, not all investments are sound ones. Many people unfortunately don’t monitor their investments closely, and some fall for illegal or duplicitous pyramid schemes. Common sense is crucial to successful investing, but there’s also a level of nuance to the skill that many overlook. Bottom line: never invest more than you can afford to lose!

How to Make Better Investments

The best possible investments you can make are in yourself. That might sound mawkish at first blush, but it’s the truth. Investments like going back to school to learn about suspension culture flasks, or paying your way into a conference in order to build relationships with leaders in your industry will help you advance in your career and your life. The best uses of your money are purchases that continue to deliver value over a long period of time. And while everyone has to set money aside to handle day-to-day expenses, making a few savvy investments now can lead to massive returns –– both fiscally and otherwise. In conclusion, yes, the old axiom does still have some merit: you have to spend money (wisely) to make money.