Sunday, April 13, 2008

Resolutions and Opportunity Costs

Have had some time to reorganize, rethink and regroup on vacation, and noticed the amount of time and money I put into things that don't always coincide with my long term goals. In the past, I have had a big problem with scrimping and saving and whined incessantly about this, mostly because it brought back painful memories of times when I was extremely poor, in which I had to scrimp and save to get through each month. For example in medical school and undergrad, I on occasion worked up to 30 hours a week in addition to my studies, just to afford rent and living expenses. I would sometimes be so poor that I had to live on bread and tea and potatoes for up to two weeks. I was constantly calculating how much money I had, where the next dollar was coming from and where it was going. I once walked home 12 miles because I did not have bus fare and my bike was broken.

The point is not to have a pity party, but instead to reflect on the fact that something which has such negative connotations (as per my previous post on negativity), can make financial planning unpleasant simply because it has always reminded you of how poor you are. I am now choosing to focus on the positive things that financial planning can do for me, by allowing me to align my expenditures of time and money with my long term goals.

For example, according to my netflix account I have watched 131 movies, which is about 13.1 movies per month, averaging at about 2.48 per movie. If we consider that each movie is approximately 2 hours long, then I have spent about 26 hours per month watching films. Had I used that time and money to workout instead, I would be able to work out more than 5 hours a week, and would be 325 dollars richer.

Take laundry for example. I just washed three loads of laundry which cost $12.50 and took 3 hours to gather, sort, wash, dry, transport, and fold. If I had chosen to drop it off, this would have cost me about $35.00 dollars, which saved me 20 dollars-which could equal a movie night out.

Just based on this analysis, I could think of several other activities and expenditures which could allow considerable flexibility in future goals. I am now resolving to stop drinking 3 cans of redbull on work days, which should save me about 9 dollars a workday, which is about 144 dollars a month.

Together by just washing my own clothes, not drinking redbull, and cancelling netflix, I could save 196.50 a month, which over a year is about 2400 dollars, or about as much as a vacation costs. In addition, this would prevent me from arguing with a significant other about the cost of a vacation, and allow me to spend 5 hours a week working out.

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