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the cost of opportunity
whenever you feel like spending on something , just follow these steps
wait for 30 days , chances are you would have forgotten about it
see how many hours you have to work for it .. you know your yearly salary , divide it by 2000 and the number that comes up is your hourly rate. Divide the cost of the item that you want to purchase by your hourly rate – that is how many hours you have to work for it. Is it worth it ?
Take the calculator challenge. use the compound interest calculator and see what will be the value of this money after 10 , 20 or 30 years.
there are many compound interest calculators , let’s take this one
- Enter the base amount as the cost of this item ,
- the interest rate as 10 % yearly ( stock market average over 40 years ) ,
- 10 , 20 or 30 as the calculation period ,
- yearly as the compound interval ,
- 0 as the regular monthly deposit
- and then hit the calculate button.
and you will see that the value of the item , if invested , is a lot more .