Exploring The Difference Between an Investment and an Expense SHP Financial

In theory, the definitions of an investment or an expense are quite clear-cut. An expense, or cost, is simply the dispensing of time, money, or resources. An investment, while an expenditure, comes with the expectation of a return.[1][2] While the two ultimately have the same goal –to acquire a good or service—their intentions and outcomes differ. So, let’s discuss the main differences between an expense and an investment and why sometimes, the reasoning to back up each cost can make a difference.

Defining Each Concept

For starters, the period of usefulness of the asset acquired differs between an expense and an investment. The item, service, or experience obtained could be considered an investment if it is durable and promotes continual benefit for some time.[3] An expense, however, is when any potential gain is immediately received and finished shortly—its useful life is typically less than one year.[4]

What Does This Mean for You?

So, what are some examples of an expense vs. an investment? As we know, technically speaking, an expense is money that you spend on a simple exchange that doesn’t provide financial returns. People often spend their money on expenses. They pay rent and buy clothes, decor, and groceries – things used for personal, non-financial, non-speculative reasons. But expenses need to be differentiated from other kinds of monetary transactions if you want to grow your wealth. That’s where investments can help!

There are many ways to invest, like buying stocks, bonds, or even paying for tuition and enrolling in college. By owning these items, or earning a degree, you are basically ensuring that you will have access to more financial freedom in the future.

However, there is a gray area to this distinction as well. Some investments aren’t as obvious. For example, we tend to view materialistic items as expenses rather than investments. But, if you purchase something like a vintage car, you could potentially sell it for a higher price down the line, thus turning this into an investment.  Similarly, college tuition is considered an investment. However, there is no monetary gain directly associated with it. There is an indirect monetary value, given a degree often sets one up for a prosperous career, but there are both monetary and non-monetary values to completing college.


Balancing expenses and investments are a vital part of maintaining financial and personal well-being. Whether you are an entrepreneur launching your business or considering helping pay for your family’s college expenses, knowing the difference between expenses and investments is one of the best ways to increase your financial literacy. Overall, implementing a financial plan that accounts for both investments and expenses will ensure your money works for you, helping you enjoy your life and gain financial freedom. If you’d like to discuss your financial plan further, Click HERE to sign up for a complimentary meeting with us at SHP Financial.


The content presented is for informational purposes only and is not intended as offering financial, tax, or legal advice, and should not be considered a solicitation for the purchase or sale of any security. Some of the informational content presented was prepared and provided by tMedia, LLC, while other content presented may be from outside sources believed to be providing accurate information. Regardless of source no representations or warranties as to the completeness or accuracy of any information presented is implied. tMedia, LLC is not affiliated with the Advisor, Advisor’s RIA, Broker-Dealer, or any state or SEC registered investment advisory firm. Before making any decisions you should consult a tax or legal professional to discuss your personal situation.Investment Advisory Services are offered through SHP Wealth Management LLC., an SEC registered investment advisor. Insurance sales are offered through SHP Financial, LLC. These are separate entities, Matthew Chapman Peck, CFP®, CIMA®, Derek Louis Gregoire, and Keith Winslow Ellis Jr. are independent licensed insurance agents, and Owners/Partners of an insurance agency, SHP Financial, LLC.. In addition, other supervised persons of SHP Wealth Management, LLC. are independent licensed insurance agents of SHP Financial, LLC. No statements made shall constitute tax, legal or accounting advice. You should consult your own legal or tax professional before investing. Both SHP Wealth Management, LLC. and SHP Financial, LLC. will offer clients advice and/or products from each entity. No client is under any obligation to purchase any insurance product.
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