Expense or Investment

Same cost, same dollar amount, but how someone views a particular expenditure can make all the difference when you're selling it. Whether you're talking to a company about spending on a particular project, or talking to a spouse about buying a shirt, dress, or a particular item for the home, determining if it an expense or an investment will make the difference as to whether the check will be signed and approved.

Let's start from the beginning. An expense is a sacrifice. Once an expense is paid, the money is gone forever. There is nothing coming back. The purchase of a suit for a special event could be an example of an expense. It makes the wearer happy, but wouln't return any real value other than the happiness of the wearer. On the other hand, an investment is spent in the hopes of getting a return - i.e., a Return on the Investment [ROI]. The purchase of a business suit could pay for itself by improving the wearer's appearance, helping them look more professional, and helping him or her close more deals.

For the most part, people don't mind investing if they are fairly confident they will see a return. In today's market they are more cautious and less willing to take risks, but they are still willing to make an investment where they are not so willing to incur an expense.

So, how you describe a specific cost, and how it is presented to the person writing the check is as important, if not more so, than the actual cost itself. How you present yourself is a huge factor in that mix. Are you trustworthy? Are you someone who is responsible enough to manage the money and provide a return on the investment? Or are you someone who's just going to take the money and throw a huge party? Either way, it all comes back to what kind of a return the person writing the checks expect.

$700 billion in bailout? I originally thought of it as an investment in America's future. Something that would help the homeowners stablize their finances and the banks support them. Until I started hearing about $2 million going to an arrow company in the Pacific Northwest, or how the banks were really just hording the money and not using it to open up more loans. Now, it's just an expense. Why? Because the people managing the money are either uneducated in basic finance, idiots or dishonest. Or possible, a mix of all three.

So the next time you're asking for money, either from a partner, spouse or business associate, think ahead in terms of what can be delivered and what ROI you can carry through on. The results will brand you forever....

If that's not clear enough, just think of how the original investments given to B. Madoff quickly turned into a hugh expense. Also think about what kind of new investors he'll be able to attract on his next time around....