There’s an old financial adage that lays out the groundwork for long-term prosperity by asking the subject to take every dollar he spends eating out and, instead, invest it. (If you skipped your morning Starbucks and put that money into a total market index fund, in thirty years you would have fifty-bajillion dollars!)
It’s a valid point to make about financial prudence, but often it’s met with arguments regarding quality of life versus monetary saturation. And the counterpoint about enjoying the money one earns in a reasonable and responsible fashion as to find a sense of daily fulfillment holds a certain validity as well. But it would be foolish to overlook the underlying theme of that analogy. That is, if you want to get to where you wish to go, you’ll be required to make sacrifices.
Opportunity cost is the most basic of economic principles and one we face every day, likely without even realizing it. Financial implications aside, every decision we make carries either an implicit or explicit opportunity cost. Just as we can never spend the same money on two items, we can never be in two places at once, allocate the same resource to two different causes or use the same moment in time for two conflicting purposes.
It’s the recognition and management of these costs that wind us down the path to eventual success or failure.
For most people, perhaps other than frivolous spending, the largest opportunity costs come in the form of poor time management. We often indulge in over consumption, lack of production or, perhaps worst of all, long periods of dormancy.
But while it’s certainly logical to assert that forgoing some of life’s miniature luxuries can add up to a substantial sum given a long enough time horizon, it’s a heck of a lot more fulfilling to cut the cost of opportunity in other areas of your life and give yourself the freedom to enjoy a big simmering cup of fake Italian sugary goodness on the reg.
So before you commit to swearing off overpriced caffeine water, take stock of your day-to-day. Ask yourself how the bulk of your time is really spent. Imagine what you’d be capable of if you swore off your favorite TV show instead, and used that time to learn a new skill or start a side business.
Imagine if you only watched two football games a week instead of four or five. What is the opportunity cost of tracking your fantasy team so closely? What’s the payout for the league champion? How quickly could you earn that amount if you weren’t spending your day watching garbage time touchdowns?
It adds up. And the end result is thousands and thousands of opportunities lost that could have been used to build whatever life you envision.
How many opportunities have you missed? How many more are you willing to give up?