Opportunity Costs

The loss of potential gain from other alternatives when one alternative is chosen.”

Earlier this week Rachel and I were sitting in the sun on the back deck after work. The weather had taken a dip towards the cool so we were not in the pool. It’s not uncommon during our end-of-day unwind that we listen to a portion of a podcast or I read to her something that I’ve read earlier in the day (over an adult beverage of course). I read to her fairly often; parts of some article or book that I find insightful or interesting. It can be a good conversation starter. We typically unpack what we listen to or read, and try to see how it fits into our lives, if at all. Many times we find that the information can have a much broader impact than perhaps was originally intended.

This particular afternoon I was reading a small portion of The Simple Path to Wealth by JL Collins. I’ll admit to not being very smart about money. I wasn’t raised with any sort of money-awareness. I mean, working hard and paying the bills was the right thing to do, but that’s about as far as it went. No one I knew ever talked (or knew anything about) the stock market. I never heard the terms 401K or return on investment (ROI). Debt was fine as long as you could make the payments. There was not a great sense of driving yourself towards higher goals or being a life learner; I was discouraged from pursuing my dream of being an attorney because they were all “educated idiots.” Mediocrity was perfectly acceptable. My upbringing in that area is probably not unlike some others who are now coming into middle age.

I’ve left most of that behind now; except the part about not (still) knowing much about money and investing. Rachel and I are learning fast, and as we move towards becoming debt free, we want to make smart decisions. We want to be well-informed about all things financial. Once we reach our debt free goal, we should have a very sizeable amount to invest monthly and we want to make sure we’re doing it right. So, after I read an article from an author that I respect that listed Simple Path as one of his foundational readings, I ordered it from Amazon and downloaded it to my phone (so I could read it in the hot tub of course).

I didn’t get very far into the book when I came upon this idea of opportunity costs. I thought I knew what it meant (I didn’t), and the whole concept rocked (is rocking) my world (in more areas than just financial). I’m still fleshing it out.

In chapter 4 of the book (this is what I was reading to Rachel), the author talks about buying a car. Once that car is purchased, the money is spent, and there is an opportunity cost to no longer having that money available to work for me. Financially speaking, opportunity cost is what I give up (lose) when I choose to tie up my resources (money) in one thing (car) over another thing (an investment). The car money (a study in depreciation) won’t be “working” for me in the future. If I had invested the money, it would “work” for me by creating earnings at (maybe) 8-10%, and that money would then make more money, and so on and so on. So in the end the car costs me alot more than the actual price because I both pay interest to the car loan and I don’t earn investment interest. Run that out for 20 years and there’s a huge disparity. I suppose if I had used the car to be the getaway driver for bank robbers, the money might in some way still be “working” for me (if you knew how slow I drove, this would be hilarious and a non-option).

It’s this idea of opportunity cost that really set my head spinning. It’s about alternatives and the way the choices we make run out into the future; both the alternatives we say yes to and the ones that we say no to.

We could have chosen to purchase a bigger Baby House in Mesa. We had that option. But then the extra money that we spent on the higher payments could not be used towards getting out of debt. The money that I chose to spend in obtaining my first Masters degree might have been better invested to create returns. We could have chosen to spend 30K updating the kitchen (the architect had the plans all drawn up), but we chose instead to spend 10k and focus on the real needs. We could have chosen to purchase a newer and more expensive motorcycle, but then we could not have used the extra money towards debt (and I wouldn’t look nearly as cool).

I could have chosen to purchase the Super Duper Double Barrel Master Blaster Wasp Annihilator Spray for the back yard wasps, but there are much less expensive (and less deadly) options and, again, that money can be better used (and the neighbors won’t start dis-inviting me to the barbecues).

The idea of opportunity cost is that options we select create the potential for loss of gain, and it’s a really good idea to consider the options before choosing the path. Is there a better way?

It might sound like I’m advocating for never spending, or spending less, or eating rice and beans until financial independence is achieved (although I kinda like rice and beans). That’s not it at all. Rachel and I have really beautiful things. Truthfully, we could have not bought the Baby House (alternative 1) and used that money to get out of debt even faster (alternative 2). We then could have invested more and sooner (alternative 3), and that money would go on making more money essentially for the rest of our lives. So in the end the opportunity cost of the Baby House will be more than the purchase price, probably alot more. Even with that, we would make that choice again in a New York minute. That opportunity cost is worth every cent and pays every year non-monetarily: helping us escape some of the Idaho winter. It brightens us, gives us hope, and has opened a whole new world of potential.

Not all things are about money. Life is not just a monetary excursion or just about amassing bags of money. Looking back in regret at life can be frustrating, and quite honestly, largely a waste of present life. It only has value if a lesson can be learned and used to make the future better. A lesson can be a very powerful tool. Move on. Do better.

Also, sometimes things just don’t “feel” right. And sometimes things do just feel right. The 30K kitchen didn’t feel right. All of the fifth wheels and monster trucks to pull them so far just have not felt right. Despite the dream, it might be a path we choose not to go down. If we had bought the fifth wheel or truck or more expensive kitchen update, we would not have been able to afford the Baby House. And although I’m also not advocating for sitting cross-legged on the floor and making decisions based on Zen, there is a “gut” that’s valid and should be listened to.

Additionally, Rachel and I are noticing that our age is becoming a significant factor in our consideration of options. As we move into this thing called mid life, we’re understanding that we probably have less time to fix a mistake (even though I’m going to live to be 106). By default, it’s making us more cautious.

What I’m really trying to focus on is understanding that our choices, both financial and non-financial, can earn “interest,” and are both manifested and magnified in life. They create results that last for a lifetime. Like the picture at the top of the post, choosing one path means we can’t choose the other. And down that path will be more alternative paths to choose. We probably can’t ever get back to the other path, and even if we do, we’re changed people.

Every decision creates potential. There are benefits and detriments, advantages and disadvantages. Choosing one means that we negate the other. There is a cost to our decisions, and sometimes the cost is worth it and sometimes not. But it’s always a good idea to work that out and know the cost as best we can.

Opportunity costs are cool to think about. I want to apply the paradigm as we move forward, especially now that middle age is upon us and we’re preparing for our non-working future. While that still might be some years off, I’m finding that even in the daily decisions it can be beneficial. Food choices, activity choices, thought choices, word choices; am I at least trying in some small way to be better than I was yesterday, to factor out the effect of my decisions into the future, to choose better paths? In the long run it could really make a difference.

Why is it so hard to get rid of stuff?

Our Weekend Stuff Pile

This middle age journey I’m on is forcing me to deal with some new realities. One of them is that at some point Rachel and I are probably going to sell The Big House and move to The Baby House. We’re working towards becoming debt free, and we know that this current house is bigger (and costs more to upkeep) than we need.

There are still alot of options and the move might not take place for years, but we know at some point we’ll trade ~2,000 sq. ft of living space, 2-car garage, and 10×12 backyard shed for 640 sq. ft. of living space, no garage, no shed, and very limited storage. It will probably be the next big step in our lives.

One of the natural laws of science (and life) is that only so much stuff will fit into a given space (my daughter packing her suitcase notwithstanding). If we want to avoid being featured on one of those A&E TV shows like Buried Alive or Hoarders, it stands to reason that we’re going to need to get rid of stuff. Downsize. Minimize. Reduce excess possessions. De-materialize. Streamline. Un-stuff.

We spent part of this weekend un-stuffing. We did pretty well, but there were a few moments when the realization sunk in that we were choosing to release things from our lives that we once deemed important. Some of it was bitter-sweet; yes we are moving on, and yes there are good memories represented in that stuff. But the truth is, it can be a tough thing to get rid of stuff.

How do we get so much stuff? It seems like it just sneaks up. Stuff is sneaky. Sneaky stuff. We’re living our everyday life, doing our everyday things, and then it’s like a stuff-avalanche. Stuff is everywhere because it can hide in plain site. We have boxes of stuff, and closets of more stuff, and attics of even more stuff, and sheds of even way more stuff. We never see it until it jumps us. We open a closet to get a coat and get stuff-jumped for no reason. There’s a kitchen smudge so we look under the sink for the Smudge-Off and stuff has taken it hostage. Stuff sneaks into our car at night and hides until we give someone a ride. Then it’s a mobile stuff party. Some people who have too much stuff sell their stuff on Saturday mornings to other people who have too much stuff. It just goes back and forth like that. Some people give up or run out of space to hide stuff. Then it’s called clutter and they’re called hoarders.

And stuff can morph. Like a shape-shifter. Or the pods in Invasion of the Body Snatchers or Gremlins. It starts out as something cool and Must Have and then ends up in a box or closet or under the bed as stuff.

There are smart people who know alot about having stuff. Authors have built their entire profession on writing about stuff. There are professional Stuff Managers for hire that will deal with your stuff for you. Apparently U.S. homes have more stuff per house than any society in global history. It’s called Hyper-consumerism. The average home has 300,000 items in it (no way. I started counting). That’s a wicked-lot of stuff. Some people need more space to store stuff and they pay for it. The U.S. has roughly 50,000 storage facilities (5 times more than Starbucks) and there’s 7 1/2 sq. ft. of stuff storage space for every man, woman and child.

I confess: I hate stuff. It’s one of my hot buttons. It makes me insane. I once had a job that required me to go to people’s homes; maybe a thousand a year. Some had so much stuff there was nowhere to sit. I would fantasize about taking a push broom or firehose to the whole place while laughing maniacally and when I was done they would gather round and clap and cheer and thank me for saving them. Stuff makes me grumpy.

I was in the Coast Guard for 20+ years; much of it lived on a ship. There’s not much space for stuff on ships. Maybe that’s where my anti-stuff persuasion comes from. Most of the time stuff is very hard to describe (What’s in that box? I don’t know, just stuff. What kind of stuff. Just stuff stuff).

We save stuff over the years. Most of it is useless, but we save it anyway, because it’s perfectly good. We use words like perfectly good or might come in handy someday to describe things we’ll never use again but feel the overwhelming need to keep. We also use just in case and then describe a ridiculous situation that has never happened and never will (we’ll save it just in case we win the lottery and move to Mexico and can’t find a 2006 iphone case). 13 unused spiral notebooks (just in case we need to write a letter), 31 elastic banded pens that all work (might come in handy for writing all those letters), 7 nail clippers (just in case the other 6 break), every book we’ve ever read (throwing away a book is a sin), old eyeglasses (just in case my eyes ever go back to my prescription 7 years ago), various cables (just in case we need to hook something up); all perfectly good stuff that might come in handy just in case.

Pictures are the worst. The worst. We have boxes and boxes of pictures that we don’t look at until we’re deciding to get rid of them, which we never do (I threw away pictures this time. Rachel is pretty sure I now have it in me to be an ax murderer).

We have to Go Through stuff before we get rid of stuff. That’s the rule. It’s just about the only time in life that we ever Go Through anything, which automatically defines it as stuff. We have to be in the right frame of mind to Go Through stuff. Some people Go Through stuff but that’s as far as they get and it makes them feel like they’ve done enough for today.

Sometimes getting rid of stuff feels like we’re being disrespectful. Or wasteful. Or careless. Or cold. It’s our stuff and it belongs to us. We might not want to display our stuff, or use it, or ever really even see it, but we want to know it’s there. Where it’s safe. Under our control. Getting rid of it is so final. Stuff represents our past and reminds us of our mortality. Maybe that’s part of the reason we have so much stuff. Marie Kondo advises that we hold each item in our hand and thank it for the enjoyment it brought us before getting rid of it. Some people might need to thank a whole dumpster.

Stuff can cause big fights if both people aren’t on the same stuff-page. Some people are stuff keepers. Some are stuff get-rid-of-ers. Some people over-identify with their stuff; it becomes who they are. I tend to be a little reckless on the stuff reduction front and am definitely a get-rid-of-er. It makes me feel good (I hear the Rocky theme in my head). I’ve gotten rid of stuff that I shouldn’t have. I know I shouldn’t have because I got caught (stupid trash man).

I learned a lesson once from my grandfather about stuff. He explained that life is like a garden. We need to tend our Life Garden, and on a regular basis purposely pull out everything that’s not helping us get what we want. Weeds, bugs, last year’s old crop, too many of one thing, harvesting: at some point we need to remove instead of add. This removing process is natural and healthy, and makes us better and more purposed people. The tendency is to want to keep growing and growing, adding and adding, but that’s not how life works (and would make for a really messy and unfruitful garden). Stuff is like that. We add and add and if we don’t regularly remove, it’s going to get really messy and hard to grow.

I mentioned in an earlier post that we’re learning that right and hard can be friends, and just because a thing is hard does not mean it’s not right. Overall, it felt good to downsize and get rid of stuff. We still have a good amount of stuff to Go Through, but so far we’ve emptied the attic, 2 big closets, and most of the garage shelves. Some we donated and some we threw away. We’re doing a little bit each month. There were a few bumps but it’s fun to be taking tangible steps in moving towards our dream.

We Pushed Pause

Rachel and I are learning all sorts of new things on our mid-life debt free journey. Sometimes the learning is fun and sometimes not so much. Like with all new adventures, there are things that are expected and things that aren’t (hence the term “adventure”). Even the best planned adventures are going to create surprises. 

We knew we’d need to be more aware of our finances. That was good; we wanted to be more aware. Although we are not subscribers to the “every single dollar must be accounted for” school of thought, we compared our income to outflow and set a goal that was seriously challenging: be debt free minus the mortgage by September 2020. We then broke that goal down according to the time we had to work with. We are having fun, working hard, conserving, stretching, and feeling the reward getting closer month by month. It’s happening!  

Recently, though, during our Saturday morning front-porch and coffee (FP&C) finance meeting, we had to make some changes. We both felt it coming but our competitive natures made it tough to admit. We didn’t really know if we wanted to make a change or even talk about making a change. The path looked a bit more precarious (and narrow) than was comfortable.

We were doing our best at hashing out our timelines, pay dates, asset arrangement, and monthly goals. I wish I could say we weren’t both getting a bit stressed (but we were). In order to stay on short term track, we were going to be cutting things really close.

Rachel has the opportunity to take a couple of unplanned trips in June. Her Gran in Oregon is turning 94 and she wants to be at the party. Additionally, our daughter works with an amazing company that allows her to bring a +1 to the June corporate retreat (this one is in California) for a very reduced cost, and our son in law can’t make it.

Additionally, although we sold our boat, I still want to do some fishing from the kayak this spring and getting caught without a license is a pretty stiff fine. We’re also missing the Baby House (badly), and want to make a trip down in July to relax and drop off the Baby Car.

During our FP&C talk I went to get the mail that had just been delivered. It was a pretty hefty stack of envelopes.

Lord.

What are the chances that 3 of our 4 vehicles all needed to be registered in June? I mean, c’mon, seriously right now? (You’d think the red “6” sticker on all the license plates might have tipped me off (you’d be wrong). 

Suddenly I felt like I was getting chased around the ring by Butterbean.

We both sighed. 

And sipped quietly. 

For a long time.    

Storm clouds were gathering.

Birds stopped singing. 

It was hard to breathe.    

I mentioned before that we don’t subscribe to eating only beans and rice until we’re debt free. We had decided when we started our debt free adventure that we were still going to do some things that mattered to us, despite the cost, like date night and keeping the house and yard nice. 

We also had some non-negotiables:

We were not going to adjust our giving

Everything is prepaid or we don’t go or do

The minimum checking account balance stays

We don’t touch savings  

Perhaps I had not done a completely comprehensive job of factoring in every possible cost. I own that. Maybe we started without fully estimating the year. That’s me too. Maybe we set the goals a little more aggressively than we should have.

After a little more reflection, I just grabbed the goal remote: Pause.

There (big breath. Silence). Ok. So.

Let’s take a break; a one month temporary pause from the full-speed-ahead goal pursuit. Just like watching a Netflix movie: let’s push pause and get a snack. We can use the cash that we would have applied to our debt-free pursuit towards making sure the trips are prepaid, our non-negotiables hold, and we enjoy a short-term respite and the fruits of our hard work (Baby House!). We can create a plan for the late summer months to redirect additional funds to get back on track (shouldn’t be too hard; we don’t have any more cars or grandmothers).

As soon the words were out, the birds returned to singing, the sun came back out, the air freshened, and the coffee magically reheated itself. We talked about it a bit more from different angles and decided it was a good move. We’ve been running pretty hard for 6 months and have made unbelievable progress, but sometimes in life you just need a little re-leveling; a return to homeostasis.

I’ve been pondering the events for about week. There was a time when I would have pushed to stay on track; damn the torpedoes, take the pain, get plumb mad-dog mean (how have you not seen that movie?), feel the burn, and all that. Perhaps a life of military service helps create that; meet the objective at any cost.

But at what risk?

The risk of breaking something that might be irrefixable (Rachelism). The risk of crashing the epic quest. The risk of losing the jazz, the fun, the pursuit, and the Trust. The risk of becoming the guy who wrecks all the intoxicated fun by using his tape measure during the block party cornhole game.

And that risk for what gain? One month? 30 days? We already have a plan to regain the time. The right to brag about the hard times we endured? Like anyone cares. What about 2 years from now when Gran has passed and Rachel could have gone to the party?

That’s the stuff nightmares (and life-long regrets) are made of.

No (sorry Clint). None of that is why we chose to get debt-free. This adventure into the good shouldn’t feel like penance. It should build a sense of expectancy, anticipation, and optimism, which it has. It should make life more enjoyable, not less. Self-denial needs to happen, but even that is more like trading short term pleasures for long term (life-long) benefits.

Bending the rules is adventure. Breaking something is regret.

I have to be honest though. I am a little afraid that if we let up we won’t get back to it. But after examination, that fear is unfounded and irrational, and must be addressed as such. Fear is one of those “yeah but what if” things that can run you ragged, become larger than it should be, and create stagnation in middle age. Sometimes us middle-agers might need to do some things just to stay comfortable with change. It’s ok to move forward and be afraid at the same time.

I’m glad we pushed pause. The drive down through the desert to Mesa is pretty. We’ll ride along and listen to podcasts and argue over Dr. Laura’s advice. We’ll stay at the Hoover Damn Lodge where Rachel plays blackjack with a virtual dealer. I’ve picked out some secluded spots where I bet the big bass are hiding. It’s not every day that you get to eat birthday cake with your 94 year old Gran, or sneak away to a cool Cali hotel with your daughter.

All of it: memories waiting to be made.

I’m glad I didn’t break anything. Those movie snacks are the best.

Be Careful What You Take in

As I move onto my latter 50’s (ok, geeze, 58 in September), I continue to marvel at my phone (little things that aren’t so little, huh?). My Google Pixel is a 5″x3″ portal to the planet: libraries, pictures, people, weather, news, work, stocks, directions, answers, movies, games, and adventures (Oh, yeah, it makes calls too). I’m pretty sure my kids, born into a world of ubiquitous technology, don’t get it.

The morning was like most: drag out around 6, coffee-shuffle to the hot tub, song birds, gorgeous Idaho sunrise, ducks in flight, and the phone held carefully (it’s gone in twice but still keeps working). I planned to catch up on some of the blogs that I follow like The Retirement Manifesto and ESI Money. They’re really good. 

After the blogs, I checked the Facebook to see if I had earned any Likes on some barefoot lawn pics I posted the day before. Nope. But I did notice a post in my feed from a group that focused on remembering the 70’s. In the fun post pic the Osmond brothers were dancing with Cher. The bait worked (like you could resist sequined bell bottoms and yes I was being task avoidant about work).

One of the posts on the site was someone starting a Who Remembers These thread. Despite the misspellings and bad punctuation (seems to be the hallmarks of my generation), I became a 1970’s kid again: HR PufnStuf (that witch still freaks me out), Popeil’s Pocket Fisherman (Bob landed a lunker!), Dark Shadows (that music still freaks me out), electric can openers, a Rupp minibike, clothing styles from the period (man could I rock that white denim suit), and even a music video (Living Next Door to Alice. If you Google it, that’s on you). I suddenly remembered why my kids laugh at me. 

I was having fun and laughing out loud (in the hot tub. Sorry neighbors). A bit further down the page someone asked what advice would you give to the 13-year-old-you if you could go back in time. Fun idea! I was expecting things like buying Apple and Microsoft stock, being careful about teen drinking, keeping dad’s ’73 Charger, listening to parents more, and keeping the puka shell necklace (what? I was a stud in that!).

But that’s not what I read. That’s not what I read at all. 

It would have been impossible (and psychologically damaging) to review all of the 1,273 responses, but I read quite a few until I realized I had stopped laughing and was getting depressed.

While there were some light and insightful answers like wishing they’d kissed the girl or been nice to the fat kid or been less shy or focused on education or told mom they loved her more, those types of responses were actually pretty scarce.

Most of the replies were angry, cynical, and dark:

Run from the bitch and never look back.
Never get married, ever.
Men are jerks.
Never trust a woman, she’ll take everything you have. And your kids.
Teachers were wrong, there is no good life waiting.

He was the worst mistake of my life and ruined it.
I would change everything.  Life is hard and there is no rainbow.

It went on and on. 

I stopped reading. I felt a little sick. Some fun person had asked a fun question. It should have been fun. I had wanted it to be fun. Maybe I could even find a cool quote and capture it for my day. What I thought would be an insightful look at the past with my peers turned into a reading of bitterness. 

I made the mistake (slow learner here) of tracing some of the more spitting comments back to the headwaters. Wow, these were some angry people. Angry at just about anything you could think of: politics, climate, animals, genders, tourists, culture, the past, the future, and the unknown enigmatic “they” for causing all of the disappointment, underachievement, unfairness, and mistreatment.

I finally closed it. Even work was more fun that this. I sank down in the warm water and reoriented myself. That was dumb of me. Dumb to keep reading and dumb to take it in. No Generation Groovy, teaching the world to sing in perfect harmony, Doobies (no, the singing group. Really?) or peace signs. I de-hot tubbed and headed in to do my chores. Morning chores make me feel better; like I’ve done something good.

The Facebook post reminded me of something(s): I need to get better at staying away from pessimistic, cynical people. I need to get better at surrounding myself with bright, optimistic, energetic, witty, purposed people (hello Mesa!). I need to be more vigilant about what I let inside. I become what I take in.

I’m becoming more aware (and less tolerant) of people that trade fun and energetic conversation for a trip down Awfulness Avenue. The people that can more quickly list the wrongs than the rights and are better at feasting at the table of doom than offering hopeful solutions or recommendations. The people that complain about the free lunches at the free conference and the ones that know we must be in the end times because it’s never been this bad (Ummm…what?) and the ones that just. can’t. shut up. about politics and the ones that for whatever reason just can’t be happy (and yes I know that was one giant run-on sentence).

Those people leave me wanting a scrubby shower and a drink (not necessarily in the order. Or maybe both at the same time).

Sure life is challenging and there are some awful things that happen. There are real dangers and bad people and bad places. That’s just the truth of life on the planet; it always has been and it’s always going to be.

Sure there are things we could have done better. We’ve all looked back and sucked our teeth (probably could have handled that a little differently) over things we should have (or not have) done. They’re on our timeline forever. We can’t un-ring a bell. We Imperfects bang around and crash in to people and make messes.

But we can choose to focus forward, learn a lesson, look up, hope for good, apologize, forgive, and be better. We can re-think, re-frame, reconsider, and grant the benefit of the doubt. We can seek higher ground and a better outcome. We can let it go. Stop looking back. Move into the sun. We can. We should. We owe that to ourselves. Maybe it’s not easy, but it’s better for us.

We have tremendous and crazy access to the world, but it’s not without risk, as I’m learning. Technology can bring good to our lives if we choose it. There is so much positive content, good music, fun games, and quality social media that can enhance life. Technology can also bring us incessant sensationalized news, the push to be globally aware every second, endless polarizing social and political issues; it’s easier than ever to perseverate on the negative or become a back in my day-er (I gave Rachel the ok to hit me with the kayak paddle if I ever say that). It’s all in how we use it, or in how we allow it to use us.

Not everything written needs to be read; not everything spoken needs to be heard. Solomon advised that it’s most important to guard our hearts (and eyes and ears), because it’s where our life comes from (he seems like a pretty smart dude). I need to be more vigilant about protecting my optimism; it’s where my energy comes from. It’s too easy as we age to become cynical, or fearful, or grumpy (or to get whacked with a kayak paddle). I’m much better than I used to be at being optimistic and it’s good to keep reminding myself how awesome life is.

After this morning, I’m going to be more careful about what I take in on social media, and faster to hit the x. Social media and technology is a knife that cuts both ways and should be handled as such. I’m going to be better at directing negative thoughts and conversations towards the positive.

Life is sweet. I love and am loved. My job is way cool. I have good family. We have big dreams. I can pedal really fast for an hour on the spin bike. I read good blogs that have pictures of people with big smiles. My life is richer than any pharaoh or king or Caesar that ever lived (even without the puka shell necklace). People are good and they’re doing good things. Life is good, and more good is coming.

Thanks for reading. If you comment, it damn well better be cheery.