The best place to invest your money is in yourself. The rate of return from investing in your own knowledge and skills will be much higher than anything youll see from stocks, real estate, or other investments.

In some cases you can even measure the rate of return. Say you buy a book. Even add in the cost of your average hourly rate multiplied by the time it took you to read it. Many books will be lousy. But every once in a while, youll get one good idea that gives you a huge rate of return. Like 10x the cost in a matter of months. This is especially true with business and personal productivity books. But often it isnt a breakthrough idea but rather the continuous exposure to the same ideas presented in different ways that produces a steady return over time. And the results go way beyond monetary. If investing in your own knowledge finally gives you the idea you need to quit smoking, you can measure the lifetime financial savings in the cost of cigarettes, but what is the increased level of health worth to you? What is the idea that allows you to meet and connect with your future spouse worth? What is shedding 50 pounds of fat and knowing you can keep it off the rest of your life worth? What is building a career that totally fulfills you worth?

A trick I learned from Brian Tracy is to invest 3% of your income on your own personal development. I dont know why he specifically uses 3%, but that seems about right to me. So if you earn $5000 per month, youd invest just $150 per month on your own personal development. You could buy about 10 paperback business or self-help books; those are typically $12-16 each (but thats a lot to read in a month). Or you could order about 3 six-cassette or six-CD audio programs; those are usually around $50-60 each, often $20-30 if you buy them used. Or that $150 could go toward the cost of a seminar or conference. Most one-day personal development seminars Im familiar with are around $100, with 3-day or longer ones typically in the $200-600 range (although they can go much higher, well over $10,000). I find it best to mix and match different types of learning. For example, last month I bought an audio program, a few books, and went to a 3-day seminar.

You dont have to spend that exact percentage every month. Its fine to underspend one month and overspend another. But aim for about 3% for the year on average. If that amount makes you uncomfortable, start with 1% the first month and build up gradually. Or just start with a fixed amount like $20 until you get the hang of it.

You can use this budget to invest in improving yourself any way you like. So that includes not just knowledge, but also equipment and services anything that helps you grow and improve. For example, I used this budget to put together a home gym with a weight station, an exercise bike, and lots of free weights. If youre feeling stressed, you could use the money to get a professional massage (in my area those are usually $40-100 for an hour). My wife likes spending half a day at the Luxor Spa now and then. If you feel it would be a growth experience for you, go for it. Take sky-diving lessons. Tour a museum. Join a club or association. Buy software to learn to type faster. Take flute lessons. Take tennis lessons. Get a PDA.

This is a pretty easy habit to develop too. Just write on your calendar on the 1st of each month: Invest 3% in myself. Then when that date comes up, figure out how much money you made the previous month, and then decide how youll spend it. If you can, spend it right away easy when you order online. Remember that this is an investment; the money you spend here will be repaid in the long run based on how you invest it.

If you run your own business, you can decide whether you want to invest a percentage of your gross or your net income. I use the gross, which obviously gives me a higher budget. Use whatever figure you feel most comfortable with.

Even though Im shopping-challenged, this is the kind of shopping I enjoy. You can give me a $10,000 shopping spree at the local mall, and I wont be able to find anything I want. But when it comes to investing in knowledge and skills, suddenly I have no trouble coming up with a wish list. Its fun to think, OK, I have $X to spend on my own personal growth. How shall I do it? Lets buy 30 shares of better health, 10 shares of financial prosperity, 5 shares of communication skills, and 20 shares of relationship building.

Happy spending! :)