Remember This When Investing in Yourself

Investing in yourself can be incredibly powerful. Especially when you first start your personal finance journey.

The easy example is spending money on a university education. Sure, the world is filled with waitresses who have a university degree, but for the most part, the decision works out well.

Say someone spends $30,000 to get a degree, including interest. This degree increases their income by $20,000 per year. That’s a fabulous return on investment you can’t get anywhere else. Even after factoring in opportunity costs.

I continue to think reading books is one of the best ways for anyone to pass the time. An investment of just a few hours into a book can yield terrific results -- especially if the book is free from the public library.

But there’s just one problem with investing in yourself. If you buy a stock or a rental property, it’s easy to measure a return on that investment. It’s much harder to do so when spending that money on your own personal growth.

Our own psychology has something to do with that. If somebody spends $1,000 on a course, they’re likely to feel good afterwards. The euphoria of taking action trumps everything else. Nobody wants to admit they spent money foolishly. So they call the course a success even if it did nothing.

At its worst, this phenomenon leads to somebody who spends thousands per year on self-improvement while making very little actual progress.

Nobody should be discouraged from investing in themselves. We just have to remember to logically measure the results after. That’s hard to do when the person doing the judging is also the one shelling out the money to begin with.