Tuesday, January 22, 2008

Good Ol' ROI

ROI, or Return On Investment, is a term typically used when talking about money earned on investments such as stocks, bonds, and money market accounts.

But ROI can also mean a return on money invested in a material item that is sold later.

For example, we bought the chair in the picture in 2005. At that time, we had blue furniture in our living room and the chair matched perfectly. It was a very gently used Ethan Allen recliner that the owner didn't like. We picked it up at a garage sale for $50. It was very comfortable and we enjoyed it until we decided to change our living room furniture last summer. We sold it this week on craigslist for $100.

Our return on that investment was 200%. Granted, it's not a steady rate of return over a period of months or years, but it's a huge return in relation to the money we invested.

Instead of a monetary return, ROI can also mean a return on time invested in a project or activity. If I spend time cooking and freezing meals in advance, I'll save as much or more time later when I don't have as much of it to spare. If I take a few minutes each week to track where our money is going, I may be able to recognize and remedy a problematic spending trend, thereby saving us money. We all know that a penny saved is a penny earned.

Not all ROIs can be easily measured; some returns on investment are more intrinsic in nature. In the case of the chair we sold, we not only made money on the investment, but also enjoyed using the chair for a couple of years. Sewing, gardening, making home improvements and cooking can all save money, but they're also seen as an enjoyable hobbies by the people who do them.

Before deciding that an investment or a frugal activity is not worth the time or money, take a closer look at the ROI it could yield, both monetarily and intrinsically. You might be surprised that it's worth your time after all.


Donna said...

I've heard about Craigs list, but don't know how to go about selling anything on it. Any advice?

DadGuy said...

Congrats on the sale.

I've only started looking at things this way the past few years and it is quite different. It's not necessarily just the lowest price, but what value are you paying for? Even if it's "consumed" money it may still be worth it.

I'm not very good at it yet, but I do try to not just go for the cheapest price or pass things up because they aren't "worth it" as much anymore.

Annie Jones said...

Donna: Sure. I'll email you. Might take a day or so though. :)

Dadguy: Only you can decide what your time is worth. I could save a lot of money on food if I'd grow some of it myself. Problem is, I don't enjoy it, I'm not good at it, and I'm not in dire enough straits to force myself to do it. For me, it's just not worth my time. But rinsing out my used Ziploc bags is....LOL!

Lisa said...

that was a good return! I hadnt thought about roi's in the sense of what I'm saving by gardening or cooking. That made me stop and think.

Annie Jones said...

Lisa: I made you stop and think? Yay me! I love that what I right makes people take time to consider something new. Whether or not they agree with it.