Forward StoryGoals – Forward Story

The Power of Opportunity Cost & Why You Should Use It

Mark L. Casey — Wed, 14 Feb 2024 20:38:55 +0000

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:

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.
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.
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?”

What Retirement Means

Mark L. Casey — Tue, 21 Sep 2021 16:56:47 +0000

Photo by Alexandra Luniel on Unsplash

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?

It’s Time for a New Story

Mark L. Casey — Mon, 26 Jul 2021 15:46:04 +0000

Photo by Max Saeling on Unsplash

The most powerful thing about a story is that it can make you believe. When you write a story about your future, you are committing to paper a vision for what you want to accomplish. A goal is an example of a story. The way I write my Forward Story is to create a comprehensive view in different timeframes of what I plan to accomplish. This includes many goals, objectives, etc.

I revise my story annually. At least that is my desired approach. I do not do this perfectly. For the last few years my wife and I have been working toward the completion of one of the major chapters in our life. This chapter has been primarily financial – overcoming many years of bad financial habits and decisions and getting back on course. Since this has been a dominant theme in our lives, the story has not changed that much.

Within the last year we have achieved what for a long time appeared to be unlikely. It was not easy, but we have now reached a new stage. Even though we are smack in the middle of the year, I realize that I need to revise my Forward Story now. I do not need to wait until the end of the year.

I will go back to the process I lay out in my book and begin doing a revision that will help me get my new bearings in this new reality.

Next post about the re-write

Where are you in your story? If you are ready for a re-write, there is no time like the present.

Godin – Paint a Picture [Quote]

Mark L. Casey — Sat, 01 Dec 2018 16:06:05 +0000

The secret of leadership is simple: Do what you believe in. Paint a picture of the future. Go there. People will follow.

― Seth Godin, Tribes: We Need You to Lead Us

Emily Brontë Died at Thirty

Mark L. Casey — Tue, 04 Apr 2017 15:14:59 +0000

How Old Are You?

My wife and I recently watched the movie To Walk Invisible about the Brontë sisters. These amazing sisters created some of the most enduring works of English literature.

The eldest sister Charlotte wrote Jane Eyre (Penguin Classics). The youngest sister Anne wrote Agnes Grey (Penguin Classics). The middle sister Emily wrote Wuthering Heights (Penguin Classics).

Their decision to write and publish under male pseudonyms is an amazing story of strategy and perseverance. Charlotte was “Currer Bell,” Anne was “Acton Bell,” and Emily was “Ellis Bell.”

As with all writers in their day, their work was conducted often by candlelight and always by hand with ink and quill on paper. I am writing this post in an online editor with cut and paste, auto-spell check, and the ability to publish to the world with one click of the “publish” button. It is hard to even envision the painstaking effort they expended to bring these works to readers.

There are many aspects to their story that I find amazing, but perhaps the thing that strikes me most is the fact that Emily Brontë lived only 30 years. In fact, her youngest sister Anne lived only 29 years. Charlotte lived only to the age of 38.

I do not measure myself against women who were among the most gifted writers in the English language, but I do draw two lessons from their lives:

Youth should be no barrier. If anyone told them they were too young, the Brontës did not listen. Some of us seem to be waiting until some magic future date when we are of sufficient age to do something important. Go ahead and do it now. Will you get better at it as you get older? Probably. Maybe. Maybe not. In the case of the Brontës, there was no getting older. Life is uncertain and short. That leads to the second lesson…
What are you waiting for? Go ahead and get started doing something you really want to do and need to do. Don’t wait for later and older. Do it now. Get it started. Do not let resistance paralyze you. If you plan to do creative work (writing, music, art, entrepreneurship), get a copy of The War of Art: Break Through the Blocks and Win Your Inner Creative Battles and let it motivate you. The main thing is to act. Now.

I have to confess that while we have had copies of both Jane Eyre and Wuthering Heights in our library for years, I have read neither. I am going to correct that soon. I think that as I read them knowing just how young these authors were when they wrote them, it will really reinforce the two lessons above.

Hopefully it will motivate me to act.

How old are you at present? If older than 30, take encouragement from what these young women did at a younger age than you. If you are younger than 30, follow the Bronte’s lead. Make it happen.

Too Many Irons in the Fire?

Mark L. Casey — Fri, 23 Sep 2016 16:05:46 +0000

Ideas are portable and easily shared. In a recent conversation with my friend, Coach Deborah Newkirk, I repeated the familiar refrain: “I’ve got too many irons in the fire.” This idiomatic expression comes from the days when blacksmiths had literal iron bars in literal fires. We now use it to mean “I am really busy.” Deborah shared something that her friend Dr. Jerry George said to her (see how portable ideas are?). Since I did not hear it directly from him, I will offer this as a paraphrase. I am not even sure of the context in which he said it to her, but here it is:

When you have a lot of irons in the fire, don’t be afraid to add more irons. Accept the blessing. – Dr. Jerry George

That resonates with me. Even though I do have a lot on my plate, I need to adjust my attitude a bit and remain open to new opportunities and blessings that come my way. The “too many irons” mindset can become an excuse for not doing something that matters. It may also prevent me from accepting a tremendous new opportunity.

The new approach I plan to adopt is to not be afraid of all of the irons I have heating, but rather to attend well to them while being open to even more irons. Now, not every iron is as important as the others at any given point in time. I may need to focus on some more than others at this moment, but they are all a blessing.

Having a lot of irons in the fire is a very good thing.

If you don’t believe me, just ask someone with nothing to do.

My Responsibility with Regard to My Potential

Mark L. Casey — Thu, 05 May 2016 13:05:53 +0000

And Yours with Regard to Yours

We have all seen it before. A naturally gifted athlete with tons of potential refuses to work to develop that potential, and he or she ends up wasting it. We had a guy like that on our team.

It is sad.

I find it easy to get judgmental about that guy and about others who waste their potential.

Yet, it occurs to me that I also have specific and unique talents, abilities, and background that create my potential. The real question is whether I am putting in the work to realize my potential? Am I living up to my potential or am I instead wasting it?

That is a challenging question to answer with total honesty.

I have come to believe that it is my ethical responsibility to live up to my potential and to achieve my ambitions. To do anything less is to waste what I have been given. To me, that would be unethical.

My family, my community, and my world are counting on me to contribute what I can and to be the best version of me possible. They deserve nothing less.

So how do I achieve my potential?

Dan Fogelberg’s lyrics in “Run for the Roses” resonate with me:

It’s breeding
And it’s training
And it’s something unknown
That drives you and carries you home

While he is talking about race horses, I find application there for us. There is nothing we can do about our “breeding,” but the training and the “something unknown” is where we can reach our potential.

So, what is your potential? What is your responsibility with regard to it? What are you doing today to achieve it?

I’m Having Trouble Seeing My Goals Through All This Clutter

Mark L. Casey — Thu, 25 Jun 2015 18:50:35 +0000

I have always been a goal-driven guy. To me it is exciting to set a goal and then work to achieve it. I have never regretted setting and accomplishing a goal. Looking backward I have sometimes regretted that there were goals I did not set, and therefore never achieved. For the most part, though, I have had no shortage of goals. I still do not.

My goals are usually well structured to include all of the necessary ingredients to conform to the SMART acronym:

Specific

Measurable

Actionable

Realistic

Time-bound

Sometimes, though, I allow the busy-ness of life to obscure my goals. The urgent often distracts me from my goals. At moments like this (in fact, this is now a moment like that) I try to simplify.

What is really important?
Why am I spending so much energy and time on the urgent instead of the important?
How can I clear the clutter, re-focus on the goal, and then zero in on the short-term objectives and next actions to make the goal possible?
What is the worst thing that will happen if I ignore the urgent?

These are not just questions I am asking myself. I invite you to share what works for you as well. I want to know how you deal with this. Please use the comments on this post to share your experience with me and our readers.

Like you, I have important goals to accomplish and only a limited amount of time to achieve them. It’s time to get with the program.

Soon I will be posting the next article in the series “How I Lost 50 Pounds.” Don’t miss a post in that series. Subscribe to the Forward Story newsletter to be notified when new articles are posted. In addition, you will receive my free eBook 15 Questions to Change Your Life.

How I Lost 50 Pounds (Part Three)

Mark L. Casey — Tue, 09 Jun 2015 15:05:18 +0000

The Role of the Large Intestine

Colon

In Part Two of this series we examined the structure of the small intestine and how nutrients are absorbed from the food slurry that moves through. The muscular process that keeps the slurry moving through the length of the small intestine is called the Migrating Motor Complex (MMC). This same process continues to move the slurry out of the small intestine and into the large intestine. Before we move on to what happens to the absorbed nutrients, we need to do a brief overview of the large intestine. The large intestine is also known as the colon. It is “large” in that it is larger in diameter than the small intestine. It is much shorter, though, as the colon is a little less than 5 feet in length. Under normal circumstances the process in the colon from entry to exit takes between fifteen and twenty hours.

Creative Commons Deed CC0

There are two primary functions of the colon that I want to mention.

Microbiome digestion. Your gut is populated by organisms that are not actually part of you in the way that your organs and cells are part of you. These are actually separate organisms that are the “good bacteria” that help with certain nutrients that could not be broken down higher in the tube. The reality of this colony still surprises and amazes me. When you see advertising for probiotics, it is this colony of bacteria in your gut that they are claiming their product will help you build and nourish. The common terms used for this colony of good bacteria are gut microbiome or gut flora. Certain foods we eat can help nourish and build the microbiome. This includes cultured foods like yogurt, drinks like kombucha and kefir, and fermented foods like sauerkraut. This microbiome breaks down certain nutrients and allows for the production of vitamin K and other vitamins. So, how many of these good bugs live in your colon? Believe it or not, they number in the trillions with a “t.” It is important to note that while most of the good bacteria is found in the colon, there are also beneficial bacteria that live in the small intestine. Many health issues occur when the good bacteria in the gut do not thrive and when bad bacteria do thrive. Here is an outstanding article on bacteria and the small intestine. I hope to write a separate article later with more detail on the microbiome of the nutrition tube.
Removal of liquids and formation of solid waste. While we did not mention it earlier, water has been absorbed already throughout the small intestine. Now as the process continues, the remaining water is absorbed into the body and solid waste is left in the colon to ultimately be eliminated from the body. The removed water ultimately ends up passing through the kidneys, into the bladder, and out as liquid waste.

There are obviously serious disorders and diseases of each component of the nutrition tube that require the expertise of medical professionals to diagnose and treat. The explanation I have provided in this series is my understanding of how a non-diseased gastrointestinal tract should work. Some of the disorders of the digestive system can be treated with a nutritional approach, but some require more aggressive intervention.

Conclusion

With that much too brief treatment of the colon, we have finished tracking the slurry through the complete nutrition tube from top to bottom. In the next article we will go back to the small intestine where we said that most of the nutrients from the slurry make it through the inner walls and are absorbed into the blood stream. Ponder the thought that these nutrients escape the nutrition tube and enter into your blood. Now they become part of you.

My next questions are:

What happens to these nutrients when they enter the blood stream?
How does the body make use of them, and how does that decision you made several hours earlier to eat 1,000 calories of doughnuts or broccoli impact the body’s chemistry and how those nutrients are used?

As with every question we have asked so far, these are actually very complicated questions. We will explore them in Part Four.

Don’t miss a post in this series. Subscribe to our newsletter to be notified when new articles are posted. In addition, you will receive my free eBook 15 Questions to Change Your Life.

Tweets of the Week: Recipes, Health, & Wisdom

Mark L. Casey — Sat, 30 May 2015 10:00:05 +0000

Week of May 24, 2015

Saturday is a good day to recap the activity from our Twitter feed from the past week. Not sure what Twitter is all about? That’s OK. Neither are we (or at least it remains somewhat mysterious to us). There is no denying, however, that there is some very valuable information shared on Twitter. That is what this weekly feature is all about. Click the links below to check out the good stuff. Here are my Top Tweets from this past week, great for retweeting (whatever that is). If you missed these, follow Forward Story on Twitter.

Here are a couple of recipes from Maria Emmerich, a master of gluten-free and low carb cooking:

Low Carb Pancake http://buff.ly/1Aq7DWf

Fudgsicles http://buff.ly/1IVmf0L

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Some great information related to health:

A Hedge against Drought: Why Healthy Soil is ‘Water in the Bank’ https://shar.es/1rFlGK

I know it’s counter-intuitive: Why People Who Sleep Longer Achieve More http://mhyatt.us/1wSPmLK

When Daily Life Is Exercise, Everywhere Is the Gym http://www.cavemandoctor.com/2015/05/19/when-daily-life-is-exercise-everywhere-is-the-gym/

“Food should not contain ingredients, it should be an ingredient.” http://bit.ly/1Ap712w

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A little wisdom from two great sources:

New Podcast Episode: The Secret Power of Smiling http://mhyatt.us/1HL5lQY

How to Run a Debt-Free Business Without Running Out of Cash [VIDEO] http://bit.ly/1AhZZgg

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Great flood safety tips:

5 ways you can be ready when a flood hits: http://abt.cm/1PNgR5m

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Seth Godin is always thought-provoking:

Seth’s Blog: The do over – http://bit.ly/1IXiOrS

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Here is a wonderful article from Susan Adcox that speaks to grandparents helping their grandchildren cope with cancer:

When a family member is diagnosed with cancer, grandparents can help grandchildren cope: http://ow.ly/NwFc2

Forward StoryGoals – Forward Story

The Power of Opportunity Cost & Why You Should Use It

Smart Phone

It’s a New Car!

Conclusion

What Retirement Means

What is your approach to retirement?

It’s Time for a New Story

Where are you in your story? If you are ready for a re-write, there is no time like the present.

Godin – Paint a Picture [Quote]

Emily Brontë Died at Thirty

How old are you at present? If older than 30, take encouragement from what these young women did at a younger age than you. If you are younger than 30, follow the Bronte’s lead. Make it happen.

Too Many Irons in the Fire?

When you have a lot of irons in the fire, don’t be afraid to add more irons. Accept the blessing. – Dr. Jerry George

My Responsibility with Regard to My Potential

I’m Having Trouble Seeing My Goals Through All This Clutter

Specific

Measurable

Actionable

Realistic

Time-bound

What is really important?

Why am I spending so much energy and time on the urgent instead of the important?

How can I clear the clutter, re-focus on the goal, and then zero in on the short-term objectives and next actions to make the goal possible?

What is the worst thing that will happen if I ignore the urgent?

Soon I will be posting the next article in the series “How I Lost 50 Pounds.” Don’t miss a post in that series. Subscribe to the Forward Story newsletter to be notified when new articles are posted. In addition, you will receive my free eBook 15 Questions to Change Your Life.

How I Lost 50 Pounds (Part Three)

Colon

Conclusion

Don’t miss a post in this series. Subscribe to our newsletter to be notified when new articles are posted. In addition, you will receive my free eBook 15 Questions to Change Your Life.

Tweets of the Week: Recipes, Health, & Wisdom

Here are a couple of recipes from Maria Emmerich, a master of gluten-free and low carb cooking:

Some great information related to health:

A little wisdom from two great sources:

Great flood safety tips:

Seth Godin is always thought-provoking:

Here is a wonderful article from Susan Adcox that speaks to grandparents helping their grandchildren cope with cancer: