How to Make the Right Self-Investment Choices

by Darwin on June 7, 2017

One of the best ways to live a fulfilling, productive, and satisfied life is to invest in yourself. Self-investment is one of the best investments you can make, since the returns are both immediate and long term — and when you make the right investments, can be among the most profitable decisions you will ever make. Whether you’re aiming for personal or professional growth, your quality of life can be significantly impacted by how you choose to invest your time and money in yourself.

Effective self-investment isn’t only about devoting resources toward activities that will eventually help your financial bottom line. There’s no doubt, for example, that enrolling in one of the MBA programs online will help you land a better job and increase your salary. Other opportunities may not have such clear-cut benefits, and you need to evaluate them the same way that you might look at any other investment opportunity to determine whether it’s an effective use of your resources.

If you are looking at ideas for self-improvement and growth, ask yourself some of these important questions before you jump in with both feet to ensure that you’re focusing on the right priorities and making decisions that will pay excellent dividends.

Is This Investment Viable?

Successful investors ask a few key questions about every opportunity to determine whether it’s even a viable option for their portfolio. While there are others, at the minimum, they consider the following:

  1. Is this investment in a market with growth potential?
  2. Is the timing right?
  3. What is the competition to this investment — both now and in the future?
  4. How is this investment differentiated from others? What is the value proposition of the company, and what is their strategy for growth?

You can apply a similar approach to your options for self-investment. How will this investment help you to grow as a person? What will be the benefits to your career, your relationships, or your spirit? Consider the timing: Ask yourself if the time is right now for you to go back to school, for instance, or if you might be better suited to wait until you have more experience or have paid down some debt. How will this investment make you competitive in your career, or at the very least, improve your life in a tangible way? Spend the time to look at the potential self-investment objectively, as an investor might look at a new business opportunity or stock, to determine its viability in the long term.

What Is the Opportunity Cost?

When looking at any investment decision, it’s important to consider the opportunity cost. This isn’t necessarily the actual monetary cost of the opportunity (although that is also an important issue) but the potential cost associated with taking one course of action over another. For example, it’s unlikely that you can successfully manage a full-time job, a master’s program, a side hustle, and a family. You want to earn a degree, but to do so, you’ll like have to put your side gig on hiatus, at least for a short time. What will the cost of that be?

Keep in mind that opportunity cost isn’t always monetary. Choosing to spend your time on self-improvement activities means taking time away that you could spend on other activities, and you need to determine how much time you’re willing to spend on self-investment, and what sacrifices you’re willing to make to reach your goals.

What Is the Risk — And What’s the Payoff?

Arguably, there is no risk in self-investment. No matter how you choose to invest in yourself, if you gain knowledge, self-awareness, or simple enjoyment from the pursuit, then it’s worth the time and energy put in. That being said, when you bring money into the picture, you may be taking risks for which the payoffs are limited or non-existent. For example, you may decide to hire a coach to help you determine your goals and hold you accountable for specific actions to reach those goals. You are taking a risk that the person you hire is the right fit, and that he or she will provide guidance and insight that you wouldn’t find on your own. When making self-investment decisions, then, you need to weigh the risk (an overpriced, ineffective coach, for instance) against the reward (a partner who earns their fee and helps you achieve success).

Again, it could be argued that no self-investment is a bad investment, as long as you feel happy and fulfilled with your choice. However, you’re likely to get much more from the experience if you make smart choices that will benefit your life in the long term, and avoid making decisions on a whim.

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