CAUTION: Once you use it, you lose it.

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I’m a pretty big proponent of freedom, financial as well as social and governmental freedom.  I believe that as long as you don’t violate someone else’s rights, you’re welcome to be stupid.  This sounds simple, but unfortunately, it’s not how our society works anymore.  You can tell by reading labels on just about everything “CAUTION: Hot Coffee” on your hot coffee, “do not use to dry pets” on your microwave, or “DO NOT allow children to play on or in the dryer”.  Freedom comes with responsibility, you’re free to do stupid things, but unfortunately in this country you’re also free to blame someone else for your stupidity.  These warnings came to be because someone did something stupid and tried to blame it on someone else.

Our litigious society isn’t going to change anytime soon, if ever.  But, just like putting a label on things is a way for companies to not have to pay for your stupidity, I think we need a warning on our money.  “CAUTION: Once you use it, you lose it”.   We could put it right below the “In God We Trust” since that gets so much publicity.  Like good marketing, we can slowly influence people’s behaviors.

Many people haven’t figured out this simple fundamental law of money.  Once you use it, you lose it!  It’s gone! You can’t buy something else with it.  This is true whether it’s cash in your wallet, bitcoins on a computer, or available balance on your credit card.  Once you use it, you lose the ability to invest it and allow it to work for you.  It is such an important concept in economics that it has it’s own term: Opportunity Cost.

op·por·tu·ni·ty cost
noun
  1. the loss of potential gain from other alternatives when one alternative is chosen.

 

If you can grasp this concept and realize it’s implications, you’ll learn discover you know another word you’ll tell yourself more often: “no”.  When you decide to order that second beer while out with friends, when you decided to stop for some fast food when you’re 15 minutes from your house instead of just going home to find something, when you buy that new car, when you go out to lunch at work instead of bringing something from home… every time you choose to spend money, there’s a long term opportunity costs you’re accepting whether you realize it or not.

No bunnies were harmed before, during or after the taking of this picture.

No bunnies were harmed before, during or after the taking of this picture.

I’m not saying to never do any of those things or to never spend money, but you should understand what you’re giving up.  For instance, I have a dog, she eats about $65/month worth of food.  I’m not sure exactly how much I’ve spent on vet bills for her, I know it’s hundreds, but I’ll ignore that for now. With the $65/month in food, I’ve had her for 7 years and assuming she’ll be around until she’s 15, that’s $11,700, in food.  There’s an opportunity cost to even my Hairy Houdini, I could instead be invested that money instead of buying her love. I could have put $65/month away for 15 years  instead and earned 8%+ annually during that time and into my retirement.  By the time I’m 65, it would be about $130k.  So, she’s expensive, I understand this and even understood this when I got her. But, I will continue to choose to keep her around.  She’s man’s best friend and it’s bonus that she has enough self control to not attack bunnies that are 5 feet in front of her.

Do you understand the choices you’ve made and continue to make by spending your money the way you do and hoarding those items around your house that you haven’t used in years?

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