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Our family just bought a new refridgerator. Nothing fancy. Just a box to keep things cold. We hope that it lasts as long as the one that it replaced. The day after it was delivered I glanced at the package of papers that came with it. One featured big print suggesting that we should "Protect Your Investment With an Extended Warrantee".

Don't know whether it was that I was a financial planner before starting The Dollar Stretcher.com or that I use written words to communicate everyday, but the use of the word 'investment' really bugged me.

Back in my financial planner days I was trained to know that an 'investment' is something that returns more than you put into it. For instance, when you invest in a stock you expect that it will go up in value and you'll be able to sell it for more than you paid for it. Or a bond or CD. You invest a certain number of dollars with the expectation that you'll get your money back and earn interest either paid during the investment or at the end. But, you'll end up with more money than when you started.

Just to make sure that my memory wasn't going bad, I checked a professional source. nvestopedia defines investment as: "An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price."

Back in the 80's we first started seeing 'investment' used a little more creatively. Parents were told to invest in their children's education by sending them to college. The argument was that whatever was spent sending them to college would be more than repaid in higher earnings during their lifetime. And, for awhile, that was true. But recent years has brought ever increasing costs for college and some degrees with questionable marketability. Add to that the student loans that now total more than all the credit card debt (approximately $850 billion!). The result is that college might not be the 'investment' that was claimed. In fact, I did a post about that awhile back. In fact, some are calling recent college graduates "the lost generation" in part because of the debt and economy they're facing. For many young people college crossed the link from 'investment' to something that's consumed today.

As time went on our friends in Washington and the statehouses took it even further. They've attempted to redefine much of government's spending as an 'investment'. In fact (yes, I know that I'm a tightwad) it almost appears to me that they've confused the terms "spending" and "investment".

Now marketers for things like appliances are getting into the act! Let's think clearly about this. A refridgerator is NOT an investment! It's an expense. A necessary expense no doubt, but still an expense. That box will never be worth more than what I paid for it. And, unless I open a restraurant (highly unlikely), it will never earn me any money.

What's the point? Consumers need to see through the words used to sell them. We all like investments. Investments are a good thing. They're what we put in retirement accounts so that we'll have money after we retire. Investments represent money we've saved for a rainy day. So when we hear the word investment we tend to think favorably about it.

But, we shouldn't let politicians or marketers or anyone else fool us. If something does not increase in value or pay income to us it is not an investment. No matter what they tell us. It may be a worthwhile expense (our fridge was). But if I believe that it's an investment I'd be a bigger fool than the guy who wrote the headline on the extended warrantee sales flyer. And, that's not a title I plan on accepting this month!


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About Gary

For more than 25 years, Gary Foreman has worked to manage money effectively. Prior to starting The Dollar Stretcher, he was a financial planner and purchasing manager. While helping clients manage their hard earned money as a financial planner, he applied commonsense, time-tested techniques during the turbulent 1980’s. The experience convinced him that you didn’t need to hit the lottery to accumulate significant wealth. Following that, Gary had an opportunity to learn more about how to get the best value for a dollar spent in the corporate world. As the Purchasing Manager for a computer manufacturer, he was responsible for supervising over $10 million in annual purchases. Gary began The Dollar Stretcher website <www.TheDollarStretcher.com> and newsletters in April 1996. Over 300,000 readers benefit from the time and money saving ideas presented in The Dollar Stretcher newsletters each week. His mission is to help people "Live Better for Less". He also provides private label newsletters for companies wishing to provide money saving information for their clients and/or prospects. Gary lives in Florida along with his wife of thirty years and their two children. Much of his time is spent working with the men's ministry of his church. One of their ongoing projects is the "Holy Smoke BBQ" which sells bbq on Friday nights with the profits going to support local foster kids and orphans. When he has a free moment you’ll find him restoring a Checker station wagon nicknamed “Two Ton” or cruising in a '65 Impala SS Convertible with doo-wops playing in the background.

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Gary is a former financial planner and purchasing manager who edits The Dollar Stretcher website <www.stretcher.com> and newsletters. You can follow Gary on Twitter.com/gary_foreman
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