• Craig

    Agree, I always try to watch the games at my apt so I don’t have to spend money at the bars and restaurants. Even if I eat or drink its less money.

  • Richard

    Thanks to James Schaefer for the insightful comments, with kind attribution to the Journal’s Jonathan Clements and to Jim’s own brother, about the intriguing and powerful concept of “opportunity cost”. James’ letter appeared in Letters on October 23.

    When we spend money on things we don’t need, not only do we lose that money, but we permanently deprive ourselves of what that money, better applied, could have yielded. $1 million (and maybe much, much more) is not lost by your carelessly misplacing it. It is lost $50 and $100 at a time. When you buy $10 glasses of beer, $15 glasses of wine, $50 lunches, $100 dinners, $125 ties and $500 shoes, you lose out on the future value those funds, if invested even in a poorly performing market, would have produced. Over a lifetime, the poorly performing markets will fade into nothingness and the long term results take effect. Indeed, the financial crises of the hour will one day be but a memory. The shock of realizing what you could have had will floor you and last a lifetime.

    $1,000 per month invested at 8% for 35 years amounts to almost $2.3 million. Adjusting for 3% inflation, you would still have over $800,000 in today’s dollars. Take a look at your annual expenditures on things you don’t need and you’ll find the $1,000 (and maybe a lot more) a month.

    Ignorance of the concept of opportunity cost can mean, after 35 years of well paid employment, having a negligible net worth at 60 and parking cars under the direction of a high school kid at 70. You can be young in this country and be without money but it’s really tough being old and in that shape and much worse to realize it needn’t have turned out that way. James’ brother advised saving “until it hurts.” What did he know that you don’t?

    Richard E. Savoy
    Boston Private Bank & Trust Company
    Boston, MA 02109
    617-912-4333

  • George

    Great topic Erik,

    I think the main problem here is not the matter of balancing the money we spend but how to control the urge to have fun and enjoy life as much as possible with out becoming penny pincher’s. Yes we can all save all of our money by not buying designer cloth or only drinking during happy hour and then investing our money. But then who’s to say tomorrow is promised for anyone. This is what I struggle with. I want to go out and have fun as much as possible. There have been times that I’m embarrassed to say I spent over $300 dollars a night picking up tabs. I know I shouldn’t have done it but looking back I had a “great” time. I’m not a “baller” I’m a hard working individual and don’t really make that much money but I guess I want the best of both worlds and I’m having a hard time finding the middle ground. Suggestions?

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