Opportunity Cost of Time

Opportunity cost represents the potential benefits that a business, an investor, or an individual consumer misses out on when choosing one alternative over another.

Opportunity cost usually refers to money. If you buy a television for $1000, you don’t have $1000 to spend on food. We don’t think of the opportunity cost of time very much. I don’t do my lawn. Let’s say I pay the lawn company fifty dollars to mow my lawn. I don’t have the fifty dollars to go to dinner with my wife (If I would have gone someplace cheap). But, if I spend ninety minutes doing my lawn, I won’t have ninety minutes to read a book, talk to my wife, or fish with my son.

When we are young, we mainly think of the opportunity cost of money and don’t worry about time. We might drive fifteen hours rather than spend the money on a flight. We’ll ask a friend to give up three hours of their day to pick us up at the airport rather than taking a shuttle or an Uber. Maybe that’s appropriate when we’re young.

Many people ignore the opportunity cost of time even when they’re my age or older. I ask people in their sixties when they plan to retire. They might say, “six years.” Why? They need the money to retire. Read my post on actuarial tables. We don’t know how much time we have. I recently retired at fifty-five, and patients told me I was so young. They can only say I am young if they know how long I’ll live. If I work five more years and die or become disabled at sixty, then those five years of salary would have cost me fifty hours a week for the rest of my life.

Ryan Holiday quotes Seneca: No person hands out their money to passersby, but to how many do each of us hand out our lives! We’re tight-fisted with property and money, yet think too little of wasting time, the one thing about which we should all be the toughest misers. I can prove it’s true. If you had a million dollars and knew for sure you had ten years left to live. You’re forced to choose between giving up a million dollars or the ten years remaining in your life. Which would you choose?

In his superb book, Die with Zero, Bill Perkins teaches that money’s main or only value is buying experiences. If you give up experiences so you can earn more money, it is self-defeating. Working until you are 70 when you could retire at 62, costs you all the experiences you could have had for eight years. That is always a loss. I am healthy but cannot do many things I could have done only a few years ago. No one at 70 can do what they did at 60. Even if you could, you might not want to at 70. Those experiences are lost forever.

I am not telling you what to do with your time or money. I am telling you not to ignore the opportunity cost of time. Watching TV means you can’t read a book. Doing your lawn means you can’t meet your friend for lunch. Working three more years means you miss out on several vacations with your family forever.

If I have a deathbed, I don’t want to lie on it regretting not spending time with my family or doing something meaningful. I certainly won’t regret not working for a few more years to earn a few more dollars.