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Opportunity Cost Is Not Just About Money

November 1, 2011 · 28 comments

in Personal Finance

When life is busy, there just isn’t time for getting everything done I want to.

One thing that I have not taken the time to do lately is clip coupons or really pay attention when grocery shopping.  I have mostly been just stopping at the store on the way home from work each day  and picking up whatever ingredients I need for dinner that night.  No meal planning, no maximizing sales, nothing.

Today, I actually had time to do a full grocery shopping trip.   I made a list since there were many items that needed to be purchased since I have been so neglectful about shopping.   As I shopped, I cringed while I put full-price items in my cart from my list.  To make it worse, many were items that I almost always have a coupon for.  I am sure that doesn’t sound like a big deal to most of you, but psychologically, paying more money than I have to just eats away at me.

It reinforced my opinion that opportunity cost is not just about money…

I Know I Could Make More Money Working Than I Would Save By Cutting Coupons and Planning Meals (Probably)

One reason many people do not clip coupons is because they know that the hourly payoff might not be very high.  Of course, that point may not even matter for those who are salaried workers, but actually in my case, I am an hourly contractor.  I can actually work as many hours as I want, and work at any time of day I choose.

So, I recognize that the time I take to plan meals and save on groceries could be used to generate income.  (That is true of any activity I do though- reading a book, watching a show, going out to eat, etc.  In general, every non-work activity I do has opportunity cost. )  But, in the past I almost never ran out of staple items and bought things only when they were on sale.  After shopping that way year after year, it was very difficult for me to grocery shop in a way that does not maximize my hard earned dollar today.  It was one thing when I had to shop at the last second and didn’t have time to plan.  But today I finally had the opportunity to take my time to shop, but since my pantry was so bare, I just had to buy certain items, regardless of price.

I hated it.

Opportunity Cost Can Be Quantified In Dollars and Sanity

When evaluating the opportunity cost of spending my time ‘saving money’ vs.  spending time making money, I realize it is not comparing apples to apples.  This is because  the making money part of the equation needs to be balanced with the money I save plus my ‘happiness factor’.  Obviously, happiness cannot be quantified, but it is important.  Just like how I plan on paying off my mortgage many years before the loan is due.  I know mortgage rates are ridiculously low, but peace of mind from not having a mortgage also has value.  It isn’t as easy as looking at 2 different investment vehicles and comparing the rate of return on each.  I may be holding myself back somewhat financially by including my happiness factor when making financial decisions.   However, I am willing to trade off some extra money for happiness and contentment, whether that is saving money when I should be or earning a lower rate of return than I could.

Do emotions play into your spending and investing at all?  Or, are you able to look at different options and make a decision based solely on expected performance?





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