Opportunity Costs

Sometimes you will hear an investor refer to “Opportunity costs.”

Actually, what they are referring to is the cost of lost opportunity.

The motivation behind this concept is to be sure to measure the potential long-term returns on today’s money against spending it on something today.

For example, before adding another subscription to your television streaming service (it’s only 5.99 a month!!! How could you go wrong!? ) be sure you’ve factored in the opportunity costs.

That 5.99 a month (let’s round it up to 6.00) is actually costing you 72.00 a year. And that 72.00 compounded at 10% (the average stock market return) would be worth 1152.00 in 28 years or 96.00 a month. (And this is not factoring in year 2, 3, 4, etc.)

Now you may consider the loss of 1080.00 a good trade-off for the entertainment you are going to receive from your 5.99 a month subscription, but at least think like an investor and do the math.

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Hang with me just a moment more…

“Opportunity costs” is not just about money. It’s really a life principle. There are opportunity costs for everything you do.

The way you spend your time…

The friends you choose…

The books you read…

The places you go…

The hobbies you indulge in…

The food you eat…

The way you spend your evenings…

The ONE THING for today: Spenders spend their life with little thought of tomorrow. Savers put off living for a rainy day. Investors calculate the opportunity costs and live their life in such a way that they get the greatest return. In the end, which method do you think will give the greatest satisfaction and do the greatest good?

Photo by Pixabay on Pexels.com

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