My new way of thinking about money and investment

I have always been hesitant to spend money, especially large amounts of money (and for me a large amount is anything over $500). Well, maybe that isn’t true because I am fine with spending money to go on a holiday or a laptop, but other things not so much. And honestly, I can’t see any rhyme or reason why this is the case. Maybe writing it down will help.

Let me give you a real example, in 2014 I was playing field hockey and my hockey boots were 5 years old and falling apart. I needed to use strapping tape to keep them together. Yet, despite this I refused to buy new boots because they were too much money (thinking $200+). Now, I had the money because I had been working but didn’t want to spend it. Then one game I was playing in my old boots and they fell apart so I switched to my running trainers. Pro tip – please wear hockey boots on a hockey field because trainers have no grip. I found this out as I went for a tackle, slipped and felt immense pain in my hip. Thinking I had just over stretched my hip flexor I continued on and eventually, when the pain hadn’t gone away, got some physio. Low and behold the physio didn’t help so ended up going to a sports Doctor. One MRI later I found out I had a hip impingement that would require months of physio and cortisone injections to overcome. Needleless, to say, the cost of the physio, the sports Dr, MRI, and injections were far more than the cost of the new shoes. Now, you would think that any sensible person would learn their lesson and buy new shoes when needed. Well, 7 years later my hockey boots are yet again falling apart and I am yet again refusing to buy a new pair, even though I have the money and am currently getting physio for the old injury. Yet I won’t budge. Bizarre right?

I honestly have no idea why my brain thinks in this way because I like to think I am a fairly rational person and long term thinker. I’ll happily pay an extra $200 for the faster computer with more RAM and I’ll spend more money to buy a more durable product over a cheap plastic one. But there are some areas, like these hockey boots where my rational brain goes out the window and illogic takes control.

I was recently scrolling through Instagram and saw a quote which spoke to me:

“don’t think about the cost of the action, think about the cost of the inaction”

I think this is an excellent way to look at spending and investment. Take my hockey boots, the cost of the action is $200 AUD but the cost of the inaction could be up to $2000 AUD in medical fees. I took a similar approach earlier this year when I was studying for the GAMSAT (the exam you need to ace to get into medical school) and was debating if I should pay money for tutoring. Initially I was anti-tutoring believing I could teach myself the content off YouTube and Khan Academy. But I eventually caved and got tutoring because the cost of inaction would result in a poor mark and needing to resit the exam and given the exam costs $500 to sit (yes, it is crazy) the cost of the inaction is quite high. Furthermore, the major cost of inaction would be never securing a position to study medicine because my marks are too low, which, in my eyes, was unacceptable.

I am going through a similar process now, I am diving into the world of eCommerce and have been contemplating joining a mentorship program. Again, the cost of the mentorship program is high and I’m not sure if it is worth it (luckily I found a program that I believe is very good as there are so many out there that are scams). When looking at the cost as a one time payment my answer is no. But when considering what the cost of the inaction – failing to set up a business – then the cost of the program becomes irrelevant because it prevents inaction. I have accepted that in business a mentor is vital and anyone good is going to charge money (after all money is just an exchange of value) so I gritted my teeth and signed up to the program. I’ve taken action, and am excited to see where this takes me.

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