5 Steps to Prevent Costly Mistakes

We often use, “investment,” to rationalize a purchase that really isn’t an investment. Use these 5 questions to help determine if you are making the same mistake.

1. Are you spending any amount of time, energy, or money?

The answer to this question should always be, “yes.” We are always using time, almost always using energy, and money makes the world go around. In fact, we generally use all three at the same time.

2. How much time, energy, or money are you using?

Without knowing this, it is impossible to determine if we are spending our resources wisely. You could spend time driving to visit family in order to save money on plane tickets. Or maybe you are spending more time sleeping in order to have more energy tomorrow.

3. As a result of your actions, do you gain more time, energy, or money than you would have had before?

Let’s talk about cars. Upgrading to a newer model isn’t usually an investment:

“I’m going to spend a month (time), negotiate a deal (energy), and pay as little as possible for a new car (money). In return, I plan to still change the oil (energy), sit in the same traffic jams (time), and pay more interest on my car loan (money).”

When a car is an investment:

“I’m going to spend a month (time), negotiate a deal (energy), and pay for a used car with cash (money). In return, I don’t have to take the bus anymore (time), I can get more sleep (energy), and I have no car debt (money).”

4. What was the return on your investment?

Have no fear, there’s no math here. Just fill in the blanks below, and check out question 5:

“I spent         (so much time)       and      (this much money)      in order to save      (this much time)      and      (this much money)     .”

5. Was it a good investment or a costly mistake?

If you can’t finish the sentence from question 4, you didn’t make an investment and it was likely a costly mistake. But if you can finish the sentence from question 4, try saying it out loud to a friend or family member. How you feel saying this out loud–whether proud or embarrassed–will determine if you made a great investment.