Opportunity cost is the how you would spend your time or money if you chose your favorite alternative to the choice you are making. For example, I am tempted to add the extra sports package to my Sling TV account, but it costs an additional $11 per month. $11 doesn’t seem like much, but if put into my retirement account instead, $11 per month is $6,000-8,000 in future value. Using the 4% rule, that’s about $300 in future annual income, or about $25 per month in retirement income. So an $11 per month now costs me $25 per month later. That’s a heavy opportunity cost that one might not consider before making a seemingly small financial decision.
Continue reading “A Christmas Carol Is a Lesson in Opportunity Cost”Category: Personal Finance
How Much Energy Do You Save with a Heat Pump?
Quartz published an article today titled “Want to cool your home, save money, and curb climate change? Try a heat pump“, which has some helpful tips about what a heat pump is and why it may be worth considering for your home. About a year after we bought our Central Indiana home, we converted our HVAC system from an all-electric furnace and central air system to a heat pump. Now that I have a few months worth of data, I thought today would be a great day to see what a difference it made.
Continue reading “How Much Energy Do You Save with a Heat Pump?”The Net Worth Budget
You know that you need to budget, save, and pay off debt. Your parents, your teachers, your friend who is a financial advisor, and the morning news show you watch have all told you so. You made a list of bills and expenses and subtracted them from your income, figured out how much you had left, and maybe put some of that into your savings account every month. You’ve been doing that for awhile and don’t seem to be getting anywhere. The savings always gets spent, or somehow the money never makes it into savings in the first place. Something always comes up. The student loan debt seems like it is never going to go away, and saving up to buy a house is never going to happen. It’s time to look at a new approach to budgeting. Continue reading “The Net Worth Budget”
Budget Breakers
I have been wanting to put this lesson together for awhile. I created an annuity spreadsheet to calculate the long-term impact of various spending habits. What would your retirement income look like if you brewed your coffee at home instead of going to Starbucks or drove a sedan instead of an SUV? When you replace small spending habits over a 30 year period and earn investment returns on the savings, the difference can be tens and even hundreds of thousands of dollars. Check it out:
Econ4All 