6 Expenses That Can Benefit Your Finances Over Time

When it comes to building long-term wealth, expenses are generally something that stands in your way. But in some cases, certain costs can actually benefit your finances over time. This can be a fine line to walk, as even “good” expenses can run away from you if you don’t budget properly.

But by thinking of certain costs as investments rather than as simple drains on your cash flow, you might set yourself up for a better financial future. Here are six expenses that do more good than harm.  

Insurance can seem like a bit of an enigma if you’re trying to decide whether it’s a productive expense or not. After all, in the best case scenario, you pay hundreds or even thousands of dollars in insurance premiums every year and never get any financial reward from it. But in addition to the peace of mind that insurance can offer, it also provides an essential financial benefit, which is the prevention from catastrophic loss.

Your home, for example, is likely the biggest financial investment you’ll ever make. With the cost of the average home in America rapidly approaching $400,000, even a modest home is likely worth hundreds of thousands of dollars. If you don’t have fire insurance on your home, for example, and it burns to the ground, you not only have no place to live but are also out tens or even hundreds of thousands of dollars. But by paying a monthly fire insurance premium, you can sleep at night knowing that this type of tragedy, while unpleasant to experience, won’t ruin you financially.

Bear in mind that not all insurance is the same, and not all insurance is necessary. But a good financial advisor should steer you in the direction of just what you need and away from what you don’t.

There’s a direct correlation in America between level of education and salary. While the value of a college degree is a hot topic these days, thanks to the immense amount of student debt, the statistics don’t lie.

According to the most recent data from the U.S. Bureau of Labor Statistics, in 2022, workers with a bachelor’s degree earned a median of $1,432 per week, 68% more than the average high school graduate’s earnings of $853. That’s a significant difference.

While there are lots of variables in that data, the distinction is clear, at least on average. This is why investing in yourself by getting better educated can be a very worthwhile expense, whether you’re getting a baccalaureate degree or simply learning a new trade at a vocational school.

The old expression “it’s not what you know, it’s who you know” carries more weight in some industries than others, but still, it’s hard to get away from the basic truth of the statement. No one succeeds without at least a little help along the way, so getting to know influential people who can make a difference and be a solid investment. Paying to attend networking conferences or even buying a cup of coffee for a potential mentor can be relatively small expenses that can pay big dividends along the way. 

Being frugal and being cheap are two completely different things, and one can end up costing you much more in the long run than the other. While you shouldn’t blow your budget buying the most expensive tools, clothes or home furnishings that you can, you should generally avoid the cheapest-quality items and instead stick to higher-quality goods.

Lesser-made goods require a smaller initial outlay, but they generally require repair or replacement much more rapidly than top-quality items. If a cheaper purchase is half the cost but only lasts a few months, for example, the more expensive item that lasts for 10 years will be considerably cheaper over its lifetime.

Strategize your spending to find the right balance of quality and cost when you buy any type of consumer good.

While the general rule in investing is to reduce your expenses as much as possible, there are some important exceptions. If your idea of how to get rich through investments means day trading or putting all your money into cryptocurrency, it’s highly likely you’re doing more harm than good.

If you need guidance, a good investment manager can be worth his or her weight in gold. Not only can good investment managers steer you away from self-destructive behavior, they can create comprehensive, long-term financial plans that incorporate not just your investments but your entire financial picture. The right manager in the right scenario can save and/or earn you far more than you pay them in fees.

Your home mortgage may be your single biggest monthly expense, but it’s not simply sucking money out of your pocket. A home mortgage is an investment, as you’re paying down your loan debt and putting equity into your home with every single payment.

This is the type of “forced savings” that can build real wealth for Americans. In fact, according to the National Association of Realtors, homeownership is the largest source of wealth among families, amounting to a whopping 10 times the median value of financial assets they hold.

In addition to building equity, a home mortgage payment offers various tax breaks as well, further helping your finances.