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One of the most famous quotes in history is, “There is no such thing as a free lunch.” Actually, the real quote is “There is no such thing as free lunch”. The proverb refers to the idea that it is impossible for a person not to get anything. Every option you make is a next best option you can choose but not. That forward opportunity is known as opportunity cost. That is, the price you paid for doing whatever you have done was the opportunity you can no longer enjoy.
Whether you are successful in life or not depends almost entirely on how well you manage your own, personal opportunity costs. What if Julia Child did not start cooking at the age of 37? What if Sam Walton did not start Wal-Mart Stores at the age of 44? What if Warren Buffett listened to his father, Howard Graham and his master Benjamin Graham, and did not go to work in the investment industry? The opportunity cost of each of those decisions was startled, in retrospect, in retrospect. This is the nature of life.
As the CEO of your time on Earth, you have to decide how to manage your own opportunity costs. Do you go to art school or become a doctor? Do you invest in high-tech startups that your friends are putting together or staging on their own?
The opportunity cost is around you. Do you go to the gym or eat a cookie? Apply for that job in the industry that you love or stick to the area in which you are comfortable? But this is especially present in your finances. This can not be taken care of by anyone because the average person does not know the power of compound interest and can have an impact on small decisions where you finally end on the journey of your wealth. A single $ 4 coffee from Starbucks is $ 470 in 10% for 50 years. $ 9 in the future money is actually $ 1,057.
The more you know, the more you can defend against the opportunity cost mistakes
Knowledge is power only. The more you know about a given area, such as investing in stocks, investing in bonds or investing in real estate, the more options you have. The more options you have, the better you can earn a good return on your money. This means that a more comfortable lifestyle for your family, less financial stress, and the freedom to pursue things that you always want to see without the price tag.
Doing Nothing has its own opportunity costs
The biggest warning for new investors, especially young investors is that doing nothing, it is an option, itself. This means that this is the opportunity cost. When you have no chance of investing, you lack the money deficit in front of you. Let’s look at some examples and scenarios.
John is 18 years old. She gets a job in school and she opens Roth IRA. He saves $ 5,000 per year in it and keeps doing it till the age of 70. It is completely average, investes in low-cost index funds, the average of dollar cost, again invests its dividend, and earns only what is the previous century or two-ten% pre-tax and inflation Is in the market for. As a result, he ends up with more than $ 7,000,000 in wealth.
Adam is also 18 years old. She gets a job in the school, but nothing remains. He waits till the age of 30, at which point, he opens a series of retirement accounts and saves $ 5,000 a year. He is only $ 60,000 in total contribution behind John, and he still has 40 years before he turns 70, so he says that it is not very bad. When he reaches retirement, he only has $ 2,200,000. That reduced by $ 60,000 to $ 4,800,000 in the valley.
In fact, starting with 30, Adam would have to save $ 16,000 a year because John also saved only $ 5,000 per year to get a break even with John. The opportunity to blow your income as a young adult was huge consequence later in life. That’s right if Adam thought through those options and decided what he wanted. Most people do not. that is the problem. This is the reason why we want you to suffer from opportunity cost so that you can live your best life.
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