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Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm. The information presented is for educational purposes only and intended for a broad audience. The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.

Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner.

Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.

  • Writer's pictureLogan Doup

What is Opportunity Cost?

Opportunity cost is the benefit of what an individual misses out on when they spend their funds on a particular item vs another item or investing it.  Several excellent examples include Term Life Insurance versus Whole Life Insurance. That article will highlight some examples of how Opportunity Costs may seem small today but add up to a significant number in future years.

 

The Latte Factor, car purchases, and now, new to everyone’s spending options… Streaming services are all examples of things we can spend money on, and then we lose the opportunity to use that money toward our goals. 

 

The Latte Factor

This is a concept created by author and financial expert David Bach.  In his quest to help people with their finances, his goal was to help them start by making small changes to their budget, which, over time, impact their net worth. In principle, the Latte Factor is instead of spending $5 a day on coffee from a coffee shop, which we all know sometimes leads to an added pastry because… “I deserve it,” take the money you would have spent and start putting that towards your retirement. Your $5 a day turns into $150 a month, equating to spending approximately $1,800 a year for coffee… not including any pastry or tips! 

If you start at 0 and put $150 a month into an investment earning 7% from age 25-65, that would be almost $400,000. We like to say, “Save a little until you can save a lot,” and this proves that to be true. Save $5 a day, and it will make a difference!  

 

Buy what car?

In a more extreme situation, we can look at Dave Ramsey’s go-to example with Car payments. At the time of this article, the average car loan payment in America for used cars is $528 a month.  Again, in a simple compound interest calculator, over the course of a person’s working career from 25 years old to 65 years old, if a person would have invested that $528 a month, they would have approximately $1,393,985 using the recommended 7% rate of return.  Now, let’s use the market average over the last 30 years of 9.6%, which would have led to approximately $2,981,787!!!  Again… This is the average car payment for a USED car! As Dave says… “I HOPE YOU LIKE THE CAR!!!” 

 

Streaming Services

In the new technology age, there are a lot of easy and convenient ways for Americans to make poor financial decisions.  We are a society incredibly proud we “CUT CABLE” only to now have five different streaming services! We’re just replacing one expensive way to watch television for another.  According to a Forbes survey, 86% of Americans have more than one streaming service, with the average person spending approximately $39 a month for their services.  This adds up to $124,879 across a person’s working lifetime. 

 

Overall, we can go on and on with different examples of how we spend money and how we could make it work “better” for us.  We eventually get to the extreme, where Dave talks about making fun of those who collect lint and only come out of their caves on coupon Tuesday.  However, the important lesson is that we should change our way of thinking!  If you are someone who is struggling to achieve your financial goals including paying off debt and starting to save for retirement, consider trying some of these small changes and you might be surprised by the impact they can make!

 

Our financial coach discusses opportunity costs during many of her meetings, and a lot comes down to creating new habits. If you would like to talk to our financial coach about learning habits to make lifestyle changes, or if you have questions or concerns about saving for retirement, reach out to one of our financial advisors today!

Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm. The information presented is for educational purposes only and intended for a broad audience. The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.

Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner.

Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.

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