Everything has a cost. I have alluded to this point previously but wanted to discuss it more specifically. We all make decisions that have costs associated with them. In general, I think there are many decisions we make that aren’t necessarily right or wrong; we should just be deliberate about them.

For example, a sense of financial security may be very important to me, and the stock market seems scary. I can make the decision to only “invest” my money in bank CDs. I’m trading the higher rate of return I could get from the stock market for the sense of security I feel with the bank. Long term there could easily be the difference of hundreds of thousands of dollars in lost interest by making that decision. It’s important that I’m honest and acknowledge that I’m foregoing great potential returns and a more comfortable retirement for a greater sense of security now.

Personally, this cost equation tends to be an element of most decisions I make. Take something as mundane as going out to lunch. It isn’t just an experience in which I eat and hope I have enough money at the end of the month to cover the meal but a recognition that I have a certain amount of money budgeted that I can spend on lunch. If I don’t spend it on lunch, I could spend it on something else. Neither choice is right or wrong; it’s just a conscious decision, assuming I wasn’t given the money by my dying Aunt Tilda, who asked me to donate it all to the beleaguered League of Penniless Penny Pinchers.

In general, I think we are often willing to trade a certain sense of security, pride, fun, or comfort now for less of it in the future. This can be security in the form of “I need to pay $25,000 for this new car so my family can be ’safe’;” or pride in the form of “If I buy this fancy techno gadget, I’ll be the envy of all three of my friends;” or fun in the form of “I will buy this boat when I am 22, even though it means it pushes back reaching my investment goals by 3 years;” or comfort in the form of “I won’t spend any money, because it’s wrong and I want to keep it all so that I can make sure I have enough.”

That last point is an extreme type of saver that is so focused on hoarding money that they lose the opportunity to enjoy the things that money can buy. That loss comes at a cost—everything has its cost. It seems best if we can find a balance—not fall too far on the hoarding side or the shopping spree side—and make conscious decisions about what “costs” we are incurring.

There’s my two bits on the matter. Do you see other costs or ways to consider them?

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