Category Archives: Realms of Life

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The Power of Opportunity Cost & Why You Should Use It

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Writing this article has been on my task list for over three months. I chose to do many other things instead of writing it. I will come back to this at the end…

What on earth is opportunity cost?

Opportunity cost can be defined as:

The value of what you have to give up in order to get what you want.

Another way to say this is that opportunity cost represents the benefits you give up in choosing one option over another option.

It can be difficult to identify opportunity costs when the benefits of the alternative choices aren’t easily measurable. Fortunately, some alternative choices are easily measurable. Let me give you a couple of examples.

Smart Phone

I first encountered the concept of opportunity cost in economics. It is rather easy to see when you put it in terms of money. If I spend $1,000 today on a new smart phone, that is $1,000 that I cannot invest in a stock mutual fund (for example). Doing a quick financial calculation, if I take that $1,000 and invest it in a mutual fund earning a 6% annual return compounding monthly, in 20 years the value will be $3,326. So the opportunity cost of purchasing the new smart phone today is $3,326 in 20 years. Of course, there is value in me having that smart phone today, so I may still choose it. I will just be better informed about the actual opportunity cost of that choice.

It’s a New Car!

One more financial example.

As a young person, I felt it necessary to always drive a nice, new car. I never had the money set aside to be able to pay cash for a nice, new car, so I financed it (aka I went into debt). This means I had a fat monthly payment to make to the lender that funded the loan on the car. The financing was typically four years. I had to make 48 monthly payments before the car was really mine. This reminds me of the old saying “I owe, I owe, so off to work I go.”

As vehicles became more and more expensive, car dealers began working with their finance arms to offer increasingly long loan payoff terms. This was to keep the monthly payments “low.” That meant that to buy a new SUV, I might be making that monthly payment for six years or even seven years.

Let’s not get too crazy with this example. I am going to use the four year loan length. Let’s say I buy an SUV for $40,000. I finance all of the price at 6% interest for four years. My monthly payment is then a whopping $939 per month! On top of that, I still have to insure it, register it, maintain it with oil and tires, repair it when it breaks down, and keep it gassed up. That is quite a commitment.

The problem with a vehicle is that it is a depreciating asset. It goes down in value with each passing day. Eventually, it will be worth nothing. How do I know this? Most of the vehicles I have purchased are now rotting in a junkyard somewhere or have been crushed into large cubes. The same can be said of the smart phone. It will eventually be worth nothing.

Thinking in terms of opportunity cost, what would that $939 per month car payment be worth if invested in a mutual fund with a 6% return compounding monthly? In four years it would be worth $50,819.

When I was buying cars this way,  there was a related problem I faced. After about four years I was ready for a new car. After all, the new car smell had long since vanished. The paint had a scratch or two. So I repeated the process. I bought into the idea that “I will always have a car payment.“

So let’s go with that logic and assume that I will continue making that $939 car payment every month for 20 years. When we do that math, at the end of 20 years I will own a fourth “new” vehicle that is worth a lot less than when I bought it. That is what a depreciating asset is after all.

If instead of purchasing vehicles this way over the 20 years I instead invested that $939 per month into a stock mutual fund with a 6% annual return, my value in 20 years would be $434,000. Guess what? I could then remove $40,000 cash from my mutual fund and pay cash for a brand new vehicle.

“Wow!” you say. “Why doesn’t everyone do it  this way?”

For several powerful reasons:

  1. To actually do it this way you have to delay gratification and possibly drive (G A S P) an old car you pay cash for. Definitely no new car smell there.
  2. To do this you have to be able to withstand the constant marketing and advertising of some of the smartest people on earth whose job it is to get you to “need” that new car smell. Think white Lexus, huge red bow on top, and snow lightly falling on you and your golden retriever.
  3. Finally, you have to overcome the peer pressure that might come from those who could look down their noses at you for driving something they view as beneath your station in life. What would the neighbors say?

Once I really learned the lesson about opportunity cost with regard to cars, I became a little obnoxious about it. In an effort to  help my kids learn the lesson, I would sometimes look at a parking lot full of expensive cars and say something like: “Look at all those beautiful depreciating assets.” They were not that amused.

One reason few of us do the opportuntiy cost calculations above is that there is indeed value in doing or enjoying something today. Driving in that new car smell, getting the latest smart phone, or having that daily cup of joe brings a certain amount of pleasure.

The concept of opportunity cost is not limited to financial matters. The reason I am a guitar plunker with a very limited skillset is because 10 years ago I prioritized other things above playing guitar. Those things may have been more important, but I still chose them over guitar. I wonder how many things we could all learn and accomplish if we didn’t binge-watch streaming entertainment? It takes a certain amount of vision to see beyond the present moment and to see what this moment could lead to if I chose a different opportunity.

In chapter 11 of my book Forward Story I write about vision: “Your mind has an amazing ability to visualize a future that has not yet occurred.Some of the greatest inventors and entrepreneurs that have ever lived had the ability to visualize their invention and how others would use it. They could see how it would make peoples’ lives better before it ever became a product. That is vision.”

You and I likewise have the ability to develop the vision to see the opportunity cost in anything we buy or in any way we spend our time and talents. We must nurture that kind of vision.

Conclusion

Back to the point I began with. Writing this post has been on my list for over three months. The reason it was not written before now is that I took the opportunity to do other things with my time. The reason it is being written now is because I chose it over all of the other things I could have done with this time. Such are the decisions we make.

My encouragement to myself and to you is to be more intentional about the opportunities we take. Pay attention to opportunity cost. Ask “Is this the best and highest use of my time, money, and talents? Ask “What am I giving up or postponing by choosing this option?”

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Rescuing Rhett

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On Monday, April 4, 2022 an era ended for our family. Our beloved corgi Rhett passed away peacefully at home in his sleep in his favorite sleeping spot. That he had such a peaceful passing was a great mercy to us. He removed the trauma that we dreaded.

It is the end of an era because he was the final packmate of the trio that included our other beloved corgis Fiona and Toby. Those two were our originals that we adopted when our children were still young and at home. Rhett joined their already well-established pecking order and found a way to fit right in. For the next many years our house was a flurry of furry activity. It was equally noisy and enchanting.

Rhett’s life began at a breeder operation about an hour from us that was dubious, to be kind. To not be kind, it was a puppy mill. Our daughter was at college and wanted a dog to keep her company. She loved our other corgis, so I began looking for corgis in our area. I found this breeder online. We drove there to meet Rhett for the first time. He had been born in October, so he was only a few weeks old when we met him in November 2009.

We waited in the office while Rhett was brought in to us. He was so tiny and so precious. It was love at first sight. Honestly, how can you not fall in love at first sight with all puppies? I requested to see the mother and father (or dam and sire, if you prefer breeder talk). The woman was very reluctant to let me see them. I insisted. She took me back through a maze of dilapidated buildings to a ramshackle shed where this poor mother dog was living in what appeared to me to be squalid conditions. It made me sad. It also made me angry.

I have titled this article “Rescuing Rhett” because once I saw the conditions in which he was born, I intended to rescue him as soon as possible to give him the life he deserved. I was able to do just that on December 10, 2009. I drove down there with a new crate and brought him back to our house. After Rhett was safely in our lives, I also filed a complaint with the authorities about the abysmal conditions at that facility. I never got closure on that, but in my mind I hope that is reason there is no longer any online presence for that breeder.

Off Rhett went to college with Kellen in January 2010 as a very young pup. It was in Lubbock, Texas that he provided love to a college student far from home. There he learned to chase frisbees, go on walks, and keep watch over the apartment as his Mom was at school. Later our son also joined our daughter at college in Lubbock, and he spent a lot of time with Rhett as well.

Every pet has unique characteristics. Rhett had many. One of his most endearing was that when he was picked up and held, he would put his chin on your shoulder facing backward. To us it seemed like a hug, so we would ask him, “Hugs?” Then he would dutifully allow us to pick him and up and hold him in that embrace. He was especially willing to give hugs to Kellen and Matt.

I have lost some of the exact chronology, but once Kellen finished college she and Rhett moved home and lived in an apartment. Then, through an apartment change that allowed no pets, it made sense for Rhett to come live with us and join the existing pack of two with Toby and Fiona. After a short adjustment time, the three of them had the pecking order worked out. Fiona was the Alpha and in charge, but she allowed Rhett to wrestle with her and chew on her a little. There was a limit to that, however, and she would let him know when he had crossed the line.

At various points both Kellen and Matt lived with us and our pack for short times while they were getting started in their careers, so all of us got to enjoy the corgi pack. We have special memories of all three dogs interacting together. Corgis are such entertaining little beings.

In August 2015 Fiona was the first of our pack to cross the Rainbow Bridge. Toby and Rhett became closer and inseparable.

One story from that timeframe. In July 2016 some friends visited us from out of state and stayed at our house. One of the children in that family left her bedroom door open with a suitcase on the floor. Toby, who was always food-crazy, found a package of sugar-free gum. He recruited Rhett to help him devour the package. When we discovered this situation, we realized that the gum was sweetened with Xylitol – very toxic to dogs. Given that it was a weekend, we had to take them both to the emergency veterinarian. When all was said and done, the final tally was $3,646. That was a very expensive pack of gum! From that point forward our vet clinic referred to Toby and Rhett as “The Xylitol Twins.”

We lost Toby in April 2018. He had been our first corgi. As with Fiona, it was very painful to let him go. Our house was much quieter with only little Rhett left. He was never a loud dog, except for four triggers which would set him off. We are certain that he learned his hatred of all three from Fiona. If you wanted Rhett to bark and make a racket, just put a new trash bag in the garbage bin, run a vacuum cleaner across the floor, set up the ironing board, or fire up the hair dryer. I am sure Fiona was proud of her understudy as he faithfully maintained her legacy.

In April 2019 Rhett was diagnosed with Progressive Retinal Atrophy (PRA), a genetic condition allowed to occur because of the unethical breeder, who did not do needed testing before breeding the sire and dam. Our veterinary ophthalmologist explained that every puppy born to that mother and father will have developed PRA. It leads to blindness, and there is no cure.

So, the last few years of his life Rhett was in near-total blindness. It was amazing to see him use his senses of smell, hearing, and touch to compensate for his loss of vision. We had a dog door onto the back patio and into the back yard. Even with his deteriorating sight, he would easily go out and spend hours on the patio enjoying the great outdoors. He had every square inch of that house mapped.

Then in July 2021, we moved into a new house. The back yard is steep enough to require stairs. Stairs are one obstacle Rhett could not master. It was too dangerous. So there was no dog door for him at the new place. Even so, after a couple of challenging weeks, he adjusted beautifully to the new house. The covered back patio was a place he really enjoyed hanging out. We installed a gate so he could not wander onto the stairs. He really enjoyed spending time on that patio and feeling the breeze. He loved being with us and was our constant companion. He was an important part of our human pack.

A couple of additional observations about Rhett. He hated riding in the car. By the time we got him to the vet, he was incredibly stressed and shaking. Like I said, dogs all have their own little idiosyncrasies. Also, when our young grandson would visit us and eat in his high chair, much of what was intended for his mouth ended up on the floor. This was fine with Rhett, who hung out underneath and kept the area clean.

As I already mentioned, even though Rhett was a quiet dog, he was not silent. Our house is now much quieter. There is no more clicking of nails on the floor. There is no more shaking of his collar tag. There is no more sprinting for doors that are opened. Of course, we think of him anytime we vacuum, dry hair, or put in a new trash bag. It is quiet. There is also no longer a faithful companion waiting by the front door or the garage entry door for our return. 

I must thank my Dad for helping take care of Rhett each time we were out of town. My Dad is a definite “dog person.” He had a special place in his heart for Rhett. I know he misses him, too. I also want to thank him for being there for me as we laid Rhett to rest under his and Mom’s Memorial Oak. It is a perfect place where Rhett joins their beloved dog Prissy and Charley the cat, as well as my sister’s cats Buddy and Sasha. Margot and I are grateful.

As with Fiona and Toby, I once again want to thank Dr. Todd Rabon at VCA Premiere Animal Hospital for his compassionate care for Rhett.

At the end of this era, what did Rhett mean to us? He brightened our lives with companionship and happiness. He was important not only to Margot and me, but also to Kellen and Matt. As with Fiona, Toby, and all of the special cats we have had, we stand in admiration – no, we stand in awe – of God’s creative work.

I miss you, Rhett. I love you, buddy. Thank you for sharing our lives with us.

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What Retirement Means

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Recently I wrote that it is time for me to re-write my Forward Story. That is because my wife and I recently achieved a major goal that we had been working on for well over a decade. With that accompished, it would be foolish to just meander without a new focus.

As I always do when I re-write my story, I start with the most distant timeframe I can envision. For me that is retirement.

The concept of retirement is a bit challenging. What does it mean to retire? We have all either known people or have heard stories of people that retired after a long employment and within a short time were either bored out of their minds or had actually passed away. Some people view retirement as a time to do nothing but relax and play.

Have you thought of what retirement means to you? I am fortunate to have many family members and friends that have already retired. By observing them I have a clear understanding of what retirement means to me. To me, retirement is simply that state of no longer needing to work for earned income. It is when passive income and/or retirement income supplies my needed standard of living. Let’s break this down:

  • Earned Income. Pretty self-explanatory, this is the most common form of income. I trade my time and talent for money. This could be hourly wages, salary, salary and commission, or contract. The biggest component of this that impacts my life is time.
  • Passive Income. This is income I receive from my investments. This can include equity appreciation through markets increasing, interest income, dividend income, etc. I get rewarded for putting my capital at risk. Very safe investments yield lower rates of return. Riskier investments typically have to pay higher rates to induce me into putting my money into them. Regardless of the actual investment vehicle and its returns, I get passive income from it. Instead of me working for my money, my money works for me.
  • Retirement Income. Increasingly rare, the company pension plan is an example of retirement income. Another example in the USA is Social Security.
  • Needed Standard of Living. Now we get a bit more complicated. I had to go and throw in the word “needed.” If I live in a tent on a friend’s property, my needed standard of living is very low relative to what it would be if I live in a four story house with a a gigantic mortgage. Of course, I get to determine my standard of living and whether I live in a tent, a four story house, or anything else. It is important to think through all of the implications of my needed standard of living vs my desired standard of living. I always need far less than I desire. You get to wrestle with all of that just like I do. As it pertains to retirement, the higher your standard of living, the more passive income you will need. This will likely delay your retirement.

Now that I have defined things, the main benefit for me once I retire will be more freedom over my time and talent. Without needing to use them for earned income, I now get to decide what is worthy of both.

Conclusion

Given this understanding of retirement, I have to calculate what that magic number is that combines both passive income and retirement income in such a way as to meet my needed standard of living. There is a lot of financial calculations and math involved in that. Nerds like me love this stuff. With all of the usual disclaimers about not knowing the future, we can then project a potential timeline for retirement.

Then I get to the more exciting part of writing the new story – envisioning the ways in which I will invest my time and talent in that new retired state. There may be some golf, tennis, and skiing in that for me, but that will be on the fringes. The retired people I know that are in their 80s and 90s are usually very active people that continue to serve and help their family, their friends, and their world. My plan will involve all of that.

What is your approach to retirement?

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Vinyl & Nostalgia

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Nostalgia.

What is it?

Dictionary.com says it is

a wistful desire to return in thought or in fact to a former time in one’s life, to one’s home or homeland, or to one’s family and friends; a sentimental yearning for the happiness of a former place or time”

Nostalgia can be unhelpful, even dangerous. For example, it is not good if all you ever do is wish for the past and use that to avoid the responsibility of the present and future. That type of nostalgia is not what I have in mind.

Nostalgia can be a good thing when it reminds you of some happy or important aspect of your story. Benjamin Franklin said “Dost thou love life? Then do not squander time, for that is the stuff life is made of.” When we look back on the way things were at some earlier stage of life, we are looking back on our time and how we spent it. Hopefully we did not squander it. This type of nostalgia is a type of remembering. It can be a way of remembering important values and practices.

Most of us get nostalgic when looking at old photos or watching old family movies, but it can happen at a moment’s notice in other ways as well. One of the pleasant surprises that I have experienced over the last few years is the revelation that one of my favorite musical artists is actually the niece of one of my former high school teammates. I get some degree of satisfaction knowing that I was a fan of her music before I knew who her uncle was. The fact that her uncle is David just makes it all the more enjoyable to me.

The artist is Grammy award-winning singer-songwriter Sarah Jarosz.

A couple of years ago we attended her concert in Austin. We got to meet her and tell her of my connection with David. For some reason that night I bought her latest album in vinyl instead of CD. I cannot explain why I did that because we had not had our old turntable set up and working for over twenty-five years.

More recently it was our pleasure to meet Sarah’s parents, Gary and Mary, as well. They are lovely people enjoying their daughter’s immense talent along with the rest of us.

This past weekend I dusted off the old stereo equipment, bought some new speakers and speaker wire, and connected the turntable. The first vinyl I played? You guess it – Undercurrent, Sarah’s LP (that stands for “Long Play” for you whippersnappers) that we bought that night.

This vinyl recording is new so it is missing the signature pops and crackles of an old dusty record, but it still takes me back to the day when this was how music was enjoyed. It reminded me of Darrell Starnes and the parties at his house. It reminded me of Guy Anderson and his love for music. It reminded me of strobe lights, black lights, the robot, and the friends I grew up with at a place and time that had a lot of good things about it. It was not perfect. That is one of the dangers of nostalgia – it often conveniently glosses over and idealizes a previous era.

So it wasn’t perfect, but it was pretty good. Music was a big part of it, as it is for every generation from Big Band to Hip Hop. My friends and I were all adept at playing vinyl records, both 33 and 1/3s and 45s (look it up). My parents before me even played 78s. We all knew how to operate the equipment and where to buy the new albums.

There is something wonderful about the fact that my return to vinyl was inspired by a young artist who was not yet even born the last time my turntable was in operation. I am glad I did not toss our large vinyl collection. I am eager to break out the old stuff. To my friends from school I want to challenge you to find your old turntable and set it up. Bring out Black Sabbath, Kiss, Aerosmith (no, the old Aerosmith), Four Tops, the Eagles, and that other stuff that had your parents convinced you would never amount to anything.

Whether vinyl means anything to you or not, I want to encourage you to reflect on those good moments and people in your life and to enjoy the good things you have experienced. Perhaps consider if that simpler time has some values that you can import into your family in the present and future. If not, just smile at the good memories.

For your enjoyment here is Sarah’s “House of Mercy” video from the LP Undercurrent:

A question for you vinyl-era folks: What is the first LP you will play when you get that turntable set up?

I want to close with a disclaimer. For many people the past is not a happy repository of wonderful things to recall. For many the past is a painful reminder of tragedy, regret, and even evil. Because of this fact, I urge caution (and in many cases professional help) for delving into those types of hurts from the past.

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One Day You Will Be a Face on a Wall

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Recently a friend from church told me that he had arrived at a great insight. He realized that one day he will just be a face on a wall of his descendants.

We all have faces on our walls or in our photo albums of people that we knew and loved that are no longer with us. Perhaps your children know who they are, but do your grandchildren? Will your great-grandchildren and beyond?

It is surely true of us that we will also one day be a face on a wall. This prompted my friend to write a document (you can call it a book if you like) where he reflected on his life. He wrote his memories about his grandparents, parents, and his own life experiences. In his words, “It is no masterpiece.” I beg to differ. I think to his descendants who will one day tie his words to his face on the wall it will indeed be a masterpiece.

What about you? First of all, what kind of story are you writing and living that embraces the reality of your own mortality? That is what Forward Story is really all about. Then, what can you do to ensure that those who follow in your footsteps know something about you and the kind of life you lived? What can you do to give them more than just your face in a frame on a wall?

Thanks to Forest for sharing this perspective.

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Keeping Up Appearances

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Keeping Up Appearances logo

My wife and I are fond of British entertainment. One of the older shows we used to watch is called Keeping Up Appearances. The main character is Hyacinth Bucket. Now, to you her surname may appear to be properly pronounced like a pail in which you carry water. Oh no…. Her name, she insists, is pronounced Bouquet, as in an arrangement of flowers. You see, a bouquet is much more elegant than a bucket. Hyacinth tries really hard to distance herself from her low-class family and to convince the upper crust of society that she is one of them. She wants to belong.

The comedic angle is that she is not, in fact, one of them. There is great fun in watching her try to keep up the appearance that she is something that she is not.

On December 1 of each year I begin the process of revising my Forward Story. As I argue in my book, my vision for the future changes with the years and with my own ambitions and values. It would be ineffective to stick with a Forward Story from a decade ago. I need a new, fresh, and relevant story for what comes next. With this annual ritual, I always look back at where I have been and wonder how things might have been different. I try not to wallow in regret. The past is gone, and there is nothing to be done with it other than learn from it.

In retrospect I can see that in some ways I fell prey to the modern Western myth that materialism brings happiness. There have been cars, lots of cars – mostly new and financed. There has been a lot of skiing, tennis, and general fun. Nothing wrong with that, but the idea that it is my right and that somehow I am owed these things regardless of my budget causes problems. There have been homes bought and then left behind for something bigger and better, with a much larger mortgage. Some of what drove that was a desire to keep up with (or exceed?) those people I knew and spent time with. There was some sort of personal dignity issue tied to our stuff. We were in some ways keeping up an appearance. What no one could see was all of the debt behind the scenes propping up the appearance.

We finally came to our senses around 10 years ago and got out of the appearances game. As a result we have a lot fewer of the trappings of success and a lot more actual substance. I give a lot of credit to Dave Ramsey for giving us the kick in the backside that we needed to realize where all that keeping up of appearances had gotten us.

As I was listening recently to a young couple on the Dave Ramsey show explaining how they got completely out of debt, one of them said she had learned how to be content. I think that is also a big key for us. It is a challenge to be content when you live in a materialistic society where some of the smartest and best educated people in that society get paid a lot of money to make you want the products they are selling. That old car just doesn’t look as good as that brand new luxury car on TV with the big red bow on top.

As we finish off another year and get ready for a new one, ask yourself if you are keeping up any appearances. I have found that it is expensive and burdensome. There is a lot of peace in setting all that aside in favor of contentment.

Let me know if you would like any help in getting started with your own personal Forward Story. I would love to hear from you.