Hello Everyone,
I’m not sure if you’ve ever heard of the two following words together: opportunity cost. I’ve only become familiar with it over the last couple of years. If not, no fret. It’s what the topic of discussion is all about today.
With each choice we make to spend money, we’re defining our own opportunity cost to travel the world, purchase a home, buy a car, invest for retirement, someday purchase a home, etc. Think of it like this, if I make “X” choice today, how will it affect my opportunity for “X” in the future?
What about living for now you say? That’s definitely ok…it’s actually wonderful to enjoy the moment. I wholeheartedly agree. But I also agree with preparing for the future and making decisions with the thought of how they’ll affect my purchasing power tomorrow.
You can’t get back money that’s spent, I’ve had to learn that the hard way. Ninety three thousand dollars? Where did it all go? Some of it accounted for; the other portion…well. I probably should have cashed my paychecks, gotten in my car, rolled down the windows and thrown it out. Sounds funny, but that’s just the way I feel sometimes. At least that way I’d know where it all went.
I’m just kidding, but you can see where I’m going with this. We all are guilty of enjoying today’s pleasures not thinking of how it’ll affect tomorrow’s desires. Eckhart Tolle calls it living unconsciously…just going through motions with no thought.
For instance, I watched a couple on Property Virgins (an HGTV Network show) look for a home as first time home buyers. They seemed to be very smart and intelligent, but they had one major issue….NO DOWNPAYMENT. Why no down payment? The bulk of it went towards eating out at least 5-7 times a week with friends. If I remember correctly, they were spending over $10-20,000 per year just eating out.
So now, their payment has to be higher because of past decisions with spending. It’s cost them the opportunity to have a much better deal when purchasing their home. I can’t remember the outcome of the show, but needless to say a lesson has been learned.
Of course, swallowing dollars is definitely not the only culprit that can keep our future opportunities out of reach. For each one of us, our goals, opportunities and costs are different. But whatever your costs are, remember this:.
One secret of success in life is for a man to be ready for his opportunity when it comes. ~Benjamin Disraeli
In the end, it’s your life and I’ll leave you to live it. But if for some reason there is an opportunity you miss due to misguided past choices, don’t beat yourself up. We’ve all fallen victim. You’ll just know to make better decisions in the future and next time, you’ll be ready when opportunity arises.
So what do you think? I love hearing your feedback, so please leave a comment below with questions or your own thoughts about opportunity cost and what it means to you. Don’t forget to share this post with your Facebook and Twitter friends by clicking on the icons below. They’ll love you for it! Thank you for sharing your time with me today!
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Fortune Image by Elle
{ 6 comments… read them below or add one }
Opportunity Costs is one of the first concepts that I learned in studying economics. I think it’s a great idea to evaluate most decisions by measuring the value of your next best option (which is the textbook definition). If we did this consistently, we would avoid many of the foolish decisions that we make.
Oh, and I know how you feel about measuring your debt and wondering what it was spent on.
Thanks Khaleef. Glad to know that I’m not rocking in this boat by myself! I know there are more out there though…
“If I remember correctly, they were spending over $10-20,000 per year just eating out.”
holy sh*t… thats alot of steak!!!! WOOOOWWW *Flavor Flav voice*
“But if for some reason there is an opportunity you miss due to misguided past choices, don’t beat yourself up. We’ve all fallen victim. You’ll just know to make better decisions in the future and next time, you’ll be ready when opportunity arises.”
this part is akin to quitting smoking for me. The urge for instant gratification is so strong, but I’m fighting it. And beating yourself up is tempting too b/c its like an instant gratification for making changes. You have to be doing better if you lecture yourself, right? But its easy to not take action after doing so…
Hmmm…talk about living large!!! I don’t know where we get the feeling that we have to have “it” NOW! Maybe it’s time that we start recognizing the symptoms of the “gotta have it” I ’tis and learn to control them by becoming more present and consciously aware. Dare I suggest even spiritual. I think most of the problems we have are deep rooted habits that have gotten out of control. Surely not the final answer, but just kinda thinking out loud.
I currently save 30% of my income, have no debt but a mortgage. I find it easier to take off 30% of my income and live off the rest. I hate budgeting and tracking every penny
I guess this fits the scenario of “different strokes for different folks”. You have found a great system that works for you. Me? I have to have categories so that I make sure I don’t overspend in a particular area which helps me to be ready for those unexpected opportunities.
Thanks so much for the comment!