While there seems to be a great deal of fanfare on the personal finance blogosphere these days about cutting costs to the bone and stacking coupons, I find that certain big picture ideas are sometimes lost. I’m all for saving money, and maximizing savings, but at a certain point the idea of opportunity cost has to enter the equation.
If you have never heard term opportunity cost before, the basic idea is that anytime you choose to pursue one option, you are sacrificing another. For example, every time you choose to spend an hour working overtime or clipping coupons you are sacrificing an hour of leisure time in exchange for that financial benefit. While that is often just fine with many people, I think that many more of us simply do it because it is the normal thing to do and pursuing wealth for material benefit is what we consistently told is right and proper time after time.
“Live Every Day Like…” Well… Just LIVE It!
As we jockey for promotions at work, or lust after that extra 500 square feet of house we can often lose track of the fact that there are plenty of ways and opportunities to make money, but there is only one true commodity that we cannot gain more of – time. While this sounds simplistic, it is true. I don’t really like the clichéd saying of, “Live every day like it is your last,” because it is ridiculous, but the principle is a worthy one. For example, if I literally took the phrase to heart I would spend every day going for a walk with my loved ones at a beach somewhere, in between reading books and maybe playing the odd game of basketball and occasionally asking old friends to come see me. While this sounds great in theory, I am not prepared to live in a world where everyone did this and the whole of civilization basically fell apart.
The principle of not spending huge amounts of your life doing something you hate however is a good one. The idea of getting people to examine what is truly important in their lives and then allocating their most valuable commodity – time, to them is not clichéd at all in my opinion.
I like to do a lot of different things in life, and I currently make a lot of decisions that revolve around sacrificing now for gains later (aka deferred and/or delayed gratification). The opportunity cost of pursuing a master’s degree is not only the money it costs, but also the time spent in class, doing assignments, and commuting. All things being equal, I would rather be having a beer with old friends, or going for a walk with loved ones somewhere, but ultimately my sacrifices as a young person are designed to get me the freedom to pursue that lifestyle sooner rather than later. Also, I enjoy challenging myself and learning new things, so while there is obviously an opportunity cost to attending classes, there are also benefits. The point is that I consciously weighed the costs and benefits before making the decision.
To Each Their Own
Working hard is not the wrong way to live, living a minimalist lifestyle and choosing not to work for extended stretches is not the wrong way to live (unless you take my money to do so). Either of these options can be the right one for you if you have weighed out the costs and benefits of it to you and your family. All I’m saying is to take a moment to re-evaluate every once in a while and decide if the goals you are pursuing are truly worth it.
So as you slave over a stack of coupons, or put in that extra weekend of overtime at a job you don’t like very much (hate is kind of overused right?) make sure and take into consideration the fact that it all costs time, and consequently it is a pretty large sacrifice indeed.