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Debt-Free Living

What Can Discontentment Really Cost You?

If you don’t know Chris Hogan, you need to. Chris is a national best-selling author, amazing speaker, retirement expert and all-around great guy. Plus, he’s my friend!

 Today, I’m so excited to have him guest post on my blog and talk to you guys about the power of opportunity cost. After reading, make sure you check out his website and follow him on Twitter.

I once owned an SUV worth $1 million. No, really, I did.

I was in my 20s. Young and, well, stupid. I was showing off my success, and my status symbol of choice was a Ford Expedition. Like others my age, I was caught up in keeping up with the Joneses, so I signed on the dotted line, got the bank to loan me the money, and began to make payments. That one decision cost me $1 million. I know, no Ford should cost that much money. But it did—and here’s why.

I made $600 car payments every month for five years to own that hunk of metal. If I had invested that money in my 20s instead of driving it around, I’d have over $1 million at age 65.

That’s a classic example of opportunity cost.

Working Definition of Opportunity Cost

Opportunity cost is a fancy financial term that basically means this: If you spend money on this, then you can’t spend it on that. If you spend $10 on a book, you can’t spend that same $10 on lunch. Money spent on clothes can’t go toward your grocery bill. Every choice has consequences. You always give up something. Resources like time and money are limited. The problem is that most people don’t think through what a choice may cost, both in money and in time lost.

Take my example of buying an SUV. Not only did I lose out on the money I could have earned by investing, but I also lost time—five years of saving up for retirement. And when it comes to investing, time is your best friend (or your worst enemy).

Why We Don’t Think About Opportunity Cost

Let’s face it. Most of the time, we don’t stop to think about the opportunity cost of a purchase. We just open our wallets and fork over our money—or a credit card. We don’t stop to consider the impact of our spending. But why is that?

  1. We live in an instant society. Who wants to save money until you have enough to buy something? Just whip out that credit card and take your purchase home today! You’ll also take home the interest. And every time you pay interest, you’re robbing your retirement savings.
  2. We buy on emotion. Fear, anxiety, jealousy, anger, sadness—those are not-so-fun emotions. To feel better, we spend money. Here’s the problem, though: When you spend money carelessly, you’re adding another emotion—guilt.
  3. We get sucked into social pressure. If somebody else has a new boat, then we need a new boat. Keeping up with the Joneses meets FOMO—fear of missing out. We picture others having fun and we want that too. We forget that the Joneses are up to their eyeballs in debt.
  4. We get duped by marketing. For example, store owners might place a $200 jacket right next to a $75 jacket. That’s so we think we’re getting a bargain at $75, without ever thinking of what we are giving up by buying the cheaper jacket. That $75 left alone in an investment for 40 years adds up to almost $3,400. That may not seem like much, until we think about how many times we give in to those “bargains.”

The Biggest Reason We Don’t Count the Cost

I’m going to be honest with you now, so hang on. The biggest reason most of us don’t take the time to look at the opportunity cost is simple: We don’t want to. We don’t want to be responsible and accountable for our actions. If we look at the downside of our purchase, we might not get what we want—when we want it.

Time to Get Focused!

Opportunity cost can be summed up pretty easily: You can’t have your cake and eat it too. You can’t spend like you want now and expect to enjoy the retirement of your dreams later. It’s time to get focused on the future. If you haven’t already discovered your Retire Inspired Quotient, that’s the place to start. That way you know how much money you’ll need to enjoy the retirement you want.

If you take action now, you’ll get to enjoy an amazing retirement later. If you don’t, you’ll learn firsthand the cost of that missed opportunity.

Chris is on a mission to educate, encourage, and empower people to do more in retirement, leadership, business, and life. Check out his website to learn more!

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  • Mallory

    Loved this. Reminds me not to emotional buy even when I have the money.

  • Please please please get this truth into the hands our children AS SOON AS POSSIBLE! I never had a money education. I had a education that if I spent all I was given, I would not have anymore to spend until I was given more. Money comes from hard work. Not from handouts. I love Financial Peace Jr and Smart Money Smart Kids and am instilling all the values and concepts in the lives of my two children. More children need to be aware though. More families need to know. Love Love Love the succinctness of this post. IT’s like all the Ramsey courses wrapped in one post. Brilliantly written!

  • I love this! This is such a powerful truth. My dad always taught my sister and I financial responsibility but there are some lesson we just have to learn ourselves. I too bought a brand new car and am ALMOST done paying it off. While I don’t regret the decision because it was my first “adult” purchase and I have learned SO much from it, I DO wish I had thought about the long term consequences of having the payment I have. Lesson learned! Thank you for this truth today! I’ll be sharing it for others to read 🙂 Blessings to you.

    http://www.littlelightonahill.com

  • Kevin Kemler

    I can’t help but read this in Chris Hogan’s voice! Lol

  • Laurie Linda Cody

    I am big on the ‘being responsible’ segment of my adult life. I once gave in to the inducement to buy a new car. It was October, 2001 and the Financial Towers lay in smoldering ruins in NYC as I spoke to a car agency here in Central Florida. I could get a new 2002 Tahoe, 2002 using my old 1995 Tahoe as a trade in worth about a quarter of the cost of the new car and then finance the payments at 0%. Also new custom leather seats ’cause I didn’t want scratchy velour in hot Central Florida. The car is regularly maintained, garaged and has 202,000 miles on it. The total costs for BIG repairs in the 14 years I’ve owned the car has run me approximately $3,000 and my service mechanic says it is still in great shape. So … I’ve said all that to say that I plan on keeping this vehicle until it runs into the ground. The possibility is that it will outlive me and, if so, I just may be buried in it. Saving money on a coffin. Now isn’t that good stewardship ??

  • Ben Tatro

    I might be wrong, but the picture is a Ford Explorer…..not an Expedition. Great article though.

  • Robert Luna

    Or the stock market could crash and steal all your money and you would not even have the ford!
    trust me it already happened!

  • Patty N Eddie Perida

    I have a similar story. Except that I listened to Dave Ramsey and bought an SUV that looks just like the picture. Paid cash, under $5000. Sure, it’s 12 years old but I’m debt free in Vegas, baby. eddiep

  • Jagjwg G

    Some people always said enjoy you life because we don’t know when we die,,,, so a lot of people always spend they money to buy things they like it because they want enjoy they life before they die. My questions is,,,, what the Bible said about how people can enjoy they life,,,,is that with buy all the kind stuff we want??? Thank you