Many years ago, I tuned into a radio program that would forever change my outlook on spending and saving. "Do you buy things that disappear or reproduce?" the host asked a troubled caller. As I listened, pondering my own financial future, he then offered this advice: "The next time you want to buy something, instead consider buying stock in the company that makes it. Rather than buying a Coke, for example, buy a share of Coke stock."

I didn't think much about money back then, other than knowing that I didn't have much (I was, after all, an elementary school teacher earning $18,000 a year). I was pretty much clueless about stocks, IRAs, and the Fed. But the host explained how most of what we buy depreciates and eventually disappears. (That also means, it then occurred to me, that the time I spent working to make the money that bought those items was essentially wasted; I worked so I could buy what amounted to nothing.)

Contrast that, the radio host continued, with spending money on an asset, which increases in value and can't be consumed. (Well, sure, you could eat a share of stock, but check the carb count first.) You are spending your money on something that eventually can return the favor by paying you money. Do that enough, and you won't need to work since your money will essentially be doing all the work for you.

The sum of thousands of decisions
The crossroads of your financial future is your spending. It determines how much you keep, and how much someone else gets. For many, the flip side of spending is saving -- but saving sounds so boring. It smacks of self-denial, which is why people have trouble doing it. But saving is simply spending money on something that appreciates rather than depreciates -- something that reproduces instead of disappears. This is important before retirement ("I could buy that item, or I could buy the stock") and in retirement ("To buy that item, I'll have to sell stock").

There are many worthwhile uses for money that can't be put in a portfolio. An education, a vacation, a great bed -- they all have their "appreciating" aspects that provide lifelong value. But if you spend the next few weeks observing where you're inclined to spend money, I suspect you'll find yourself shelling out the bucks for goods or services that may not be worth the long-term price you'll pay.

Buy a piece of the company
So let's come up with some hypothetical situations based on real-life companies and their real-life returns. Consider the following consumer-oriented companies and their annualized trailing-five-year and trailing-10-year returns:



Outback (NYSE:OSI)






Electronic Arts (NASDAQ:ERTS)



Coca-Cola (NYSE:KO)




Now let's see what kind of money you'd have if you avoided some of the products offered by these companies and instead bought the stock, using the actual returns:

After five

After 10

Buying $50 of Outback stock each month
instead of eating at the restaurant.



Investing $100 in Nike stock each year
instead of buying a new pair of shoes.



Investing $50 in Electronic Arts
instead of buying a new video game each year.



Investing $15 a month in Coca-Cola
instead of drinking a soft drink every day.



Giving up relatively small purchases (as little as $15 a month) can lead to hundreds and even thousands of dollars down the road. Do you still value the can of Coke you had last month, the Outback steak you ate a year ago, the Nike shoes you bought five years ago? Or would you rather have more money in your IRA?

So spend like mad -- on assets. Maybe you can replace the "buyer's high" you get from making a purchase with an "investor's high" that will keep your net worth growing.

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Rule Your Retirement editor Robert Brokamp doesn't own any of the companies mentioned in this article, though he wishes he had spent $20 on Time Warner stock rather than on the latest Superman movie. Coca-Cola is an Inside Value pick. Electronic Arts is a Stock Advisor selection. The Motley Fool has a solid disclosure policy.