Business is viewed as exchange of money for goods and services. We view the exchanges in terms of benefits. The financial benefits can be profits, break even or losses. Unfortunately, many business transactions come in the form of learning curves. Those learning curves are usually losses but eventually, the losses of learning how to work the system become profitable. As I look at my losses for the big-ticket items, I do see a profit margin on a later transaction. This lesson has taught me to elongate the time needed to measure financial benefit.
I have had 4 used cars and 2 long term rental cars in my life. The first car actually didn't cost a lot of money since I bought it from my mom and the car didn't need a lot of repair. The second car, a 1994 Volvo was very expensive to maintain but I had no car payments. The losses were minimal compared to the losses of the third car. The third car, a Honda Odyssey was expensive to get and expensive to maintain. I definitely lost money on the third deal. Those losses derailed my car buying experience which led to more losses by renting cars. Now, I am on the 4th used car where I learned my lesson. The purchase was a hybrid to save on gas. I paid extra to reduce the number of car payments, bought an additional warranty and paid a little more to buy certified used. If this car lasts another year, it will not only be a profiitable investment but it will be enough to wipe away the losses from the rental cars and the lemon of the Honda Odyssey. Even with the tough losses, buying cars for business is still a profitable investment when planned accordingly.
Let's take that same logic to homeownership. I bought my first house in Delaware where I learned I am a city girl through and through. I only owned that house for 3 years. That wasn't long enough to cover the costs of buying the house. That house was my learning curve to understand how money is made in real estate. My second house was a HUD home that made 40K in 2.5 years. The third house was a foreclosure that doubled in value with a light home renovation. Even with the tough losses, homeownership is still a VERY profitable investment when planned accordingly.
I need to take a longer timeline so I can change my perspective of student loans. Many people say that "Public schools are free". Public schools are not free as they are paid by tax dollars collected by the city, state and the federal government. My mom likes to say she couldn't have paid for the education I received. As I pay for the education of my children, I am ready to put a dollar amount in the education investment from public school. 12 years at 7,000 per year is $72,000. I would agree with my mom, that some public schools are an excellent financial investment. The education costs me $0.00 and I received $84,000 worth of education. Now let's review the 5+ years of college. The $150,000 loss which includes the college education and the opportunity cost of not working was not worth the return on investment in the short term. Since I was young and a woman in a male dominanted field, my salary was 50% of my co-workers. In order to make the numbers work, I needed to invest EVEN MORE into education.
Luckily, I received a scholarship for the first year of graduate school but borrowed against my future through student loans for the second year and third year. I borrowed 32K which allowed me to work while in school. 20 years later that $32K invesment is now $74K . The investment in graduate school allowed me to demand a higher salary from employers. Over the next 6 years, the MBA degree added an average of 15K per year to my salary. If I would have stayed in the corporate workforce, the degree would have paid for itself. The overall investment in my education - 84K profit from K-12, 150K loss from undergraduate school and (74K investment - 90K in additional salary) 16K profit from graduate school equals a loss of $50K. If I had todays' financial IQ when I accepted the debt trap, I would find other ways to pay for college outside of student loans. Back in the day, there were no apps to easily find scholarships. What I can appreciate is that graduate school taught me how to CONTINUE to learn. Now, that is the financial IQ that I pass down to my family (blood relatives and community members) to make the education that lost $$$, WORTH IT!