How Much Did I Really Earn? Understanding ROI to Track Your Money - CivicNote

When we think of the word “investment” in everyday life, what comes to mind? It might be stocks, real estate, launching a business, or spending money on digital ads. Whatever the choice, we all ask the same core question:

“If I put in this much money, how much will I actually earn?”

The simplest and most powerful tool to answer that question is ROI—Return on Investment. While the name might seem long, the idea is straightforward: it’s a numerical way to compare the profit relative to what you spent.

What is ROI?

ROI goes beyond merely asking, “How much did I make?” It serves as a key metric for comparing different investment options or evaluating efficiency. For example, suppose two individuals each invest 10 million KRW. One in real estate, earning back 13 million after a year; the other in stocks, receiving 11 million. Which investment performed better? ROI gives you the clearest answer.

Basic Formula:

$$\text{ROI} = \left( \frac{\text{Net Profit}}{\text{Investment Cost}} \right) \times 100$$

Examples:

Real Estate:

$$\text{ROI} = \left( \frac{13{,}000{,}000 - 10{,}000{,}000}{10{,}000{,}000} \right) \times 100 = 30\%$$

Stocks:

$$\text{ROI} = \left( \frac{11{,}000{,}000 - 10{,}000{,}000}{10{,}000{,}000} \right) \times 100 = 10\%$$

Why ROI Matters More Than Ever

In today’s world, opportunities to spend money are endless, but few know how to spend it wisely. When you treat tuition, housing, marketing, or even time as investments, ROI becomes a vital tool—not just for companies, but for individuals.

ROI is especially useful for long-term financial planning. In a world overwhelmed with options and information, ROI helps pinpoint the most efficient path forward.

The Simplicity of ROI: From Formula to Practice

If you invest 10 million KRW and make 13 million, the ROI is:

$$\text{ROI} = \left( \frac{3{,}000{,}000}{10{,}000{,}000} \right) \times 100 = 30\%$$

This means you earned 300,000 KRW for every 1 million KRW invested.

Time Factor: Annualized ROI

One catch: ROI doesn’t factor in time. A 30% ROI over one year is very different from the same ROI over three years. That’s where annualized return comes in:

$$\text{ROI} = (1 + r)^t - 1$$

Where $r$ is the annual return rate and $t$ is the investment period in years.

Real-World ROI Comparison

Option	Investment	Total Return	Net Profit	ROI	Annual Rate	Duration
A	-10,000	13,000	3,000	30.0%	9.14%	3 years
B	-12,000	11,000	-1,000	-8.3%	-2.86%	3 years
C	-15,000	17,000	2,000	13.3%	13.3%	1 year

Even though A and C have similar ROI percentages, C is more efficient annually because of its shorter term.

ROI in Marketing, Real Estate, and Startups

• Marketing ROI helps measure how much revenue ads generate versus the cost.

• Real Estate ROI considers rent, maintenance, and acquisition cost to determine long-term yield.

• Startup ROI projects potential gains at exit, accounting for higher risk and longer time horizons.

ROI with Excel

You can use simple Excel formulas for ROI:

=(Revenue - Cost) / Cost

To calculate annualized ROI in multi-year investments, use:

=RATE(nper, pmt, pv, [fv], [type], [guess])

Example: 5 years of 20M KRW inflow, 100M initial investment:

=RATE(5, -20000000, 100000000)

Going Beyond ROI: IRR and NPV

ROI is powerful, but not flawless. It has limits:

• Doesn’t account for risk

• Ignores time dimension

• Misses cash flow timing

Use additional metrics like IRR and NPV for better investment decisions.

$$\text{NPV} = \sum_{t=0}^{T} \frac{B_t - C_t}{(1 + r)^t}$$

Final Thoughts

ROI gives us a starting point. A number that tells part of the story. But interpretation is everything.

“Numbers are honest, but wisdom lies in how we interpret them.”

Use ROI not just to count money, but to guide your next steps—and become a sharper, more strategic investor.