Ever notice how two people can buy the exact same thing and tell wildly different stories about it?

One person says, “It’s an investment.”

Another says, “It keeps draining cash.”

That gap is about mindset and understanding what truly builds your balance sheet versus what quietly eats it.

As someone who spent years modeling cash flows as a financial analyst, I can tell you the simplest test is this: Does the thing put money in your pocket after costs, or does it take money out?

If it takes money out, it’s a liability; no matter how shiny, sentimental, or socially approved it is.

Let’s walk through six common purchases many people label as “investments” that, in practice, often behave like liabilities:

1) The bigger primary home

“Real estate always goes up.”

I hear that a lot, but growth doesn’t pay your mortgage this month.

A bigger primary home usually behaves like a liability because it demands constant cash: Mortgage interest, property tax, insurance, HOA fees, maintenance, landscaping, furniture, and upgrades you didn’t even know existed until you saw your neighbor’s.

None of that produces income, it’s lifestyle.

Could the value rise over 10 years? Sure, but appreciation is uncertain and illiquid.

Meanwhile, your monthly outflow is very certain.

When I was building household models as an analyst, the line that moved people backward fastest was housing costs that scaled faster than income.

Psychology plays a role here: We equate square footage with success.

We tell ourselves, “It’s an investment,” to soothe the discomfort of a big payment.

That’s post-purchase rationalization, not math.

A better approach:

Buy the home you’ll love and comfortably afford, not the maximum the bank approves.
Channel the difference into assets that pay you: Index funds, cash-flowing rentals run like a business, or a diversified portfolio that compounds quietly.
If you really want real estate exposure without landlord headaches, consider REITs. They’re liquid and actually aim to generate income.

The wealthy tend to treat their primary home as a consumption choice.

They enjoy it, but they don’t pretend it’s a cash-producing machine.

2) The brand-new car

I love a smooth trail run and a scenic drive to a ridge line.

I do not love watching money melt the second a new car leaves the lot.

A new car is almost pure depreciation plus ongoing costs: Insurance, registration, maintenance, tires, interest (if you financed), and the “I deserve it” add-ons.

Unless you’re using the car to generate revenue in a tax-efficient business, it’s a tool.

“Investment piece” is often just a status story we tell to feel better.

The middle class often carries 60 to 84 months of payments, then rolls negative equity into the next upgrade.

The wealthy either:

Buy reliable used and keep for a while;
Own new but pay cash because they value convenience, not because they expect profit, or;
Use a business vehicle with a clear, audited plan for productivity and tax rules that make sense.

Try this:

Decide your transportation budget as a percent of net income, not as a monthly payment the dealership offers.
Buy value, not new-ness. Two-to-three-year-old models often hit the sweet spot.
Invest the difference. Cars get older. Investments get older and pay you for it.

Ask yourself: Is this vehicle helping me earn more or simply helping me look like I earn more?

3) The prestigious degree without an ROI

Education is powerful, but the story “education is always an investment” breaks down when the cost dwarfs the payoff.

If you’re funding a degree with high-interest debt and no clear path to materially higher earnings, you don’t own an asset.

You own a payment schedule.

The rich are ruthless about ROI.

They ask: What’s the likely salary delta in three to five years? What’s the placement rate from this specific program? Where are alumni working? What’s the true, all-in cost, including living expenses and opportunity cost?

When I left corporate finance to write full time, I sketched a simple rule I still share with friends: Don’t exceed projected first-year salary with total debt for the degree.

If you must, have a very clear, evidence-based reason.

Explore alternatives first: Employer-sponsored programs, targeted certificates, apprenticeships, or a stack of skill-specific courses that move the income needle faster.

A quick checklist:

Will this credential raise my income or reduce my time to promotion within 12 to 24 months of graduating?
Are there lower-cost pathways to the same outcomes?
Can I test the field with a smaller bet before committing to the big one?

Learning is always an asset; expensive tuition without a payoff is not.

4) The vacation home or timeshare

I once ran numbers for a couple considering a lake house.

On paper it looked dreamy, in cash terms it leaked: Mortgage, taxes, insurance, HOA, repairs, utilities year-round, travel, vacancy, and management headaches.

Their reality check is that they used it six weekends a year!

Vacation homes feel like investments because they seem to “hold value” and come with sunsets but, unless you operate the property as a disciplined short-term rental with professional management and realistic occupancy assumptions, it’s usually a liability that rents you.

Even timeshares sold as “equity in vacations” tend to lock you into fees and fixed windows.

If you’ve ever tried to resell one, you know; if you adore a place, by all means, spend time there.

Just be honest about the role.

Renting gives you flexibility, zero maintenance, and variety.

If your heart is set on ownership, treat it like a business from day one:

Pro forma revenue with conservative nightly rates and occupancy.
All-in cost modeling, including platform fees, cleaning, capex reserves, and your time.
A clear exit plan if local regulations change or demand shifts.

Ask yourself: Do I want a second mortgage, or do I want the freedom to visit any coastline I feel like next year?

5) The luxury “investment” watch, bag, or gadget

“Investment piece,” I hear it most around luxury watches, handbags, limited sneakers, and the latest phone or home tech.

Yes, a tiny slice of luxury collectibles appreciate, most don’t.

Add sales tax, storage, upkeep, authentication risk, and liquidity uncertainty, and you have a fashionable liability.

Tech is even more obvious.

A top-of-the-line phone or TV every year is a subscription to depreciation.

The benefit is joy or convenience, which is fine, but own the truth so you can budget accordingly.

Here’s a simple policy I use:

If it won’t generate income or verifiable resale demand beyond costs, label it “joy spend,” not “investment.”
Set a joy budget. Enjoy it guilt-free within the fence.
For rare pieces with evidence of resale markets, treat them like a hobby portfolio and cap the allocation. Track realized gains, not imagined ones.

It’s amazing how clear your priorities become when you stop calling wants “investments.”

You may still choose the splurge. You’ll just do it eyes open.

6) The “value-adding” home renovation

“I’m adding a chef’s kitchen. It’ll pay for itself.”

Maybe. Often, no.

Plenty of renovations increase livability while decreasing your liquidity.

Kitchen and bath overhauls, custom built-ins, exotic landscaping, and high-end finishes rarely return 100 cents on the dollar after labor, permits, delays, and your own time.

Meanwhile, they raise insurance and maintenance.

When I volunteer at the farmers’ market, I chat with folks saving for remodels.

My first question is always, “Is this to sell at a higher price soon, or to love your space for the next 7 to 10 years?”

Those are different projects.

If you’re staying, optimize for joy and efficiency; if you’re selling, focus on projects with higher average recoup: Basic repairs, curb appeal, paint, energy-efficient upgrades that actually lower bills, and modest kitchen refreshes rather than full tear-outs.

Better rules:

If you can’t quantify the resale lift using local comps, count the project as a lifestyle spend.
Use a 10 to 20 percent contingency. Renovations have a talent for surprises.
Ask the cash-flow question: Will this reduce ongoing costs? A heat-pump water heater, better insulation, or solar (with numbers that pencil) often beats marble everything.

“Because I want it” is a valid reason. Just don’t expect it to pay you back.

A closing thought

I’m vegan and spend a lot of weekends around farmers who know, in their bones, the difference between planting and harvesting.

You plant with intention, you water and wait, and you don’t call a bouquet an orchard.

Money works the same way.

If it’s planting seeds that will feed you later, it’s an asset; if it’s beautiful, enjoyable, and fleeting, it’s a liability or a joy.

Both have a place, and calling them by their right names is where freedom begins.

So, what in your life have you been labeling an investment that’s actually asking for a monthly allowance?

What quiet, unsexy asset could you fund instead?

Your future self will thank you for choosing the harvest over the bouquet.

 

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