Opportunity Costs and Die With Zero

I was somewhere between Washington DC and Seattle when the concept of opportunity costs smacked me in the face (versus the more subtle way it typically appears in my life on a daily basis – sneaking into my decision-making on a just-barely-conscious level). I was sitting in an aisle seat of a Boeing jet, headed to the Financial Planning Association’s national conference to convene and learn with my fellow CFPs, and I was devouring Die with Zero by Bill Perkins.

There are so many insightful nuggets in this book. The message Perkins shares as he urges readers to recognize the trade-offs between money, time, and health aligns so much with my perspective as a financial planner. Financial planning is all about using your resources to get the maximum potential enjoyment out of life. With good planning, you could achieve financial independence and retire early, or live early. And so often we exchange our time and health for money. And we make decisions on a daily basis about those trade-offs.

Perkins shares the story of his 45th birthday when he rented a beachfront hotel on St. Barts and hosted a truly epic party for his family and friends. When else would he gather together the people he loves in such a way? His 50th birthday? His funeral? The story is wild and extravagant, but it’s these kinds of stories that shake me and remind me to open my eyes to the opportunities costs around me.
So, what are opportunity costs? An economist would describe them as “the value of the next-best alternative when a decision is made.” Or maybe they’d define an opportunity cost as “the value of the next best opportunity.” So what were some of the opportunity costs Perkins paid for his 45th birthday celebration? Definitely the earnings he could’ve made on the money spent if he’d kept it in an investment instead. And a thousand other things like paying for a dozen solo vacations, or buying a vacation home on St. Barts. And if he didn’t host his epic party – what would his opportunity costs be then? The biggest one that jumps out to me isn’t quantifiable. It’s the cost of never making the memory of a gathering with loved ones while in good health.
I’m in no position to throw a party like Perkins. But, with the white noise of the airplane engines in the background and nowhere to go for several hours, my mind started to wander and turn over the opportunity costs in my life. What if I paid the $35 to check my bag and carry less around in the terminal? What did I plan to do with the money I saved by not upgrading to Business Class? As I zoomed out further, beyond the present moment on this flight, I asked – Have I been intentionally using my money, time, and health to reduce opportunity costs as much as possible? Have I been on auto-pilot like the crew on the flight deck?
And so I ask… have you?