Are Your Opportunity Costs Hurting Your ROL?
Whether it involves choosing the scenic route over heading straight home, pizza over sushi, or staying in versus visiting family—every decision comes with opportunity costs we often overlook. Opportunity costs don’t just affect your finances; they shape your Return on Life (ROL)—the way you experience and enjoy what truly matters.
When planning for major life transitions, weighing the costs and ensuring that your choices align with your values and goals is essential. Ask yourself: What am I gaining? What might I be giving up? How do these choices align with my values and long-term goals?
Whether you’re adjusting to an empty nest, navigating divorce or widowhood, or considering retirement, understanding opportunity costs can help you flourish through life’s transitions.
To better understand how opportunity costs can shape your decisions and your ROL, let’s explore three common scenarios many people face at some point.
1. Changing Jobs Versus Staying Put
Comfort and predictability can feel very valuable, especially in our careers. But unless you already have your dream job, the opportunity cost of staying at the same job can creep up on you. As scary as change can be, a new job could create important opportunities and change your career trajectory. It could also help you earn new opportunities to improve your and your family’s life.
While the risks of leaving a long-held job are real, the rewards of stepping into a role that aligns more closely with your passions and goals can far outweigh them. You will want to balance the potential rewards against the possible risks, including losing some seniority or finding the actual day-to-day experience at the new workplace isn’t as shiny as it looked when you were taking a tour. You’ll also be leaving behind years of institutional knowledge and personal and professional relationships.
2. Saving Versus Investing
While saving is important, over-relying on cash savings might mean missing out on growth opportunities that investing offers. However, investing comes with risks, like market fluctuations or poorly chosen investments. A balanced and diversified approach can help mitigate these risks while growing your wealth over time.
On the other hand, investing risks are real, especially for do-it-yourself investors. Even in a professionally designed portfolio, investments will go up and down over time. Make a bad investment, invest too heavily in one security, or make a panic move during a downturn, and your losses could be permanent.
And if your total financial portfolio isn’t balanced and diversified, an opportunity cost could be associated with allocating too much of your investment accounts to cash. If your car breaks down or your roof needs repairs, relying too heavily on investments can create delays and tax consequences. Plus, tapping retirement accounts too soon could trigger penalties and extra taxes.
3. Retiring Versus Working Longer
From a financial perspective, the best time to retire is… Never! If your main concern is building up your assets to hit a number, then there will always be a higher number to hit if you work, earn, save, and invest just one more year.
And then another. And then another.
But the opportunity cost of delaying your transition into retirement might be far greater than the cushion you’re adding to your nest egg. Think of all those family vacations you’re delaying, all that leisurely golf and tennis with your spouse you’re missing, all the learning and growth that comes from organizing your days around the people and activities you love the most.
Every year you delay retirement might mean fewer opportunities to make cherished memories with loved ones, explore new passions, or simply enjoy the freedom you’ve worked so hard to achieve.
Closing Thoughts
Every major life decision involves weighing what you gain and what you give up. Recognizing these opportunity costs allows you to make choices that align with your values and priorities.
Our Life Planning tools help you align your financial decisions with your values, ensuring your resources support not just your goals but also your passions and priorities. By identifying what matters most, we can guide you through major decisions—whether it’s taking a new job, choosing when to retire, or focusing on your health and relationships.
Every new beginning is an opportunity to flourish. Let’s work together to create a personalized plan for 2025 that helps you navigate opportunity costs and design a life you love. Schedule a call today to take the first step toward your most fulfilling year yet.
This Week’s Favorite Reads
This week’s favorite reads include articles discussing the folly of following market forecasts, the importance of advanced care directives, things to leave out of your will, the likelihood that you could serve as a caregiver, and changing how you think about getting old.
Here are the links to this week’s articles, as well as a brief description of each and why you should check it out:
1. How You Can See Through Wall Street’s Ritual of Wrong.
Every year, analysts make market forecasts, which often prove wildly off-target. While seemingly informative, these forecasts primarily serve as sales tools to spark client conversations and generate trades. Anchoring, a psychological bias, makes these predictions influential, unconsciously shaping investors’ expectations. Experts like Rubin Miller advocate separating assets into “forecastable” (e.g., cash and short-term bonds) and “unforecastable” (e.g., stocks, real estate, bitcoin) to counter this bias. Instead of relying on speculative predictions, investors should focus on long-term financial goals and asset fundamentals. As the year begins, prioritize a strategic approach centered on long-term planning over chasing unreliable short-term forecasts.
2. The Most Important Conversation to Have Before You Die.
An important part of estate planning that many leave out relates to having an advanced care directive. While we often don’t like talking about it, we all must face death eventually. The first experience could come when acting as a caregiver. Inevitably, it will happen to us as well. Having a conversation about what type of medical care you want to receive at your life’s end can serve as a gift to family members. It can make decisions a little easier on your loved ones as it will help them know they are doing the right thing. Your advanced care directives include your living will and a healthcare power of attorney. They do not need to be completed by a doctor or an attorney. They do need to be signed by yourself and at least one witness. Some states require the forms to be notarized as well.
3. 10 Things You Should Leave Out of Your Will, According to Experts.
When drafting a will, it’s crucial to exclude certain items to ensure clarity and legal effectiveness. Assets with designated beneficiaries, such as retirement accounts and life insurance policies, should not be included, as beneficiary designations override will instructions. Property held in joint tenancy automatically transfers to the surviving owner and doesn’t require inclusion. You want to avoid specifying funeral instructions in the will. What happens if it doesn’t get reviewed until after the funeral? Communicating these wishes beforehand is preferable. Placing conditions on gifts, like requiring a beneficiary to marry, can lead to legal complications and are best avoided. Leaving fixed monetary gifts can unintentionally deplete the estate, so consider percentage-based allocations. Personal property with sentimental value should be detailed in a separate memorandum referenced in the will. Finally, avoid including digital assets and account passwords; manage these through a digital estate plan.
4. Are Caregiving Duties In Your Future? Magic 8 Ball Says: “Signs Point To Yes”.
Many of us will have parental caregiving duties in the future. According to data cited in this article, about 53 million U.S. adults are caregivers for someone over 18 or a special needs child. This compares to 43.5 million such adults in 2015. Many of these caregivers are moms. On average, they are 49 years old and provide 20 hours of unpaid weekly care. In addition to their caregiving duties, they work outside the home. Given this data, you should consider discussing caregiving with your parents before they need it. While 90% of people recognize the importance of such conversations, very few have them. If you haven’t discussed caregiving with your parents yet, consider talking to them today.
5. Want to Live a Long and Fulfilling Life? Change How You Think About Getting Old.
According to research by Yale’s Becca Levy and others, a positive attitude toward aging can significantly impact health and longevity. Negative stereotypes about aging can increase stress, lead to worse physical and mental health outcomes, and discourage healthy behaviors. Conversely, positive beliefs about aging encourage investment in one’s future through exercise and healthy eating habits. Studies show that people with positive age-related attitudes live longer and maintain better brain health. Overcoming ageism begins with challenging internalized stereotypes and fostering intergenerational connections. Engaging with older adults, broadening vocabulary to include positive descriptors, and identifying role models like Jane Goodall can help reshape perceptions. Embracing aging with purpose, curiosity, and humor ensures a fulfilling and healthier life.
Our practice continues to benefit from referrals from our clients and friends. Thank you for your trust and confidence.
If you would like to speak with us about financial topics, including facing new beginnings, managing your investments, creating your life plan, or saving for retirement, please complete our contact form or schedule a call or a virtual meeting via Zoom. We will be in touch.
Follow us:
Please note. We post information about articles that can help you make better money-related decisions on LinkedIn and Facebook.
For firm disclosures, see here: https://apprisewealth.com/disclosures/
Phil Weiss founded Apprise Wealth Management. He started his financial services career in 1987 working as a tax professional for Deloitte & Touche. For the past 25+ years, he has worked extensively in the areas of financial planning and investment management. Phil is both a CFA charterholder and a CPA.
Located just north of Baltimore, Apprise works with clients face-to-face locally and can also work virtually regardless of location.
