I’ve been in the world of finance, investing, and wealth creation for since 1999 and I’ve seen a LOT of financial strategies and theories. However, what is most mind blowing to me isn’t what financial planners are saying… its what they are NOT saying!
Honestly, in most cases I don’t think that financial advisory types are misleading clients on purpose, its just they are so ignorant about how wealth creations really works that they leave out the most important concept of all… What am I talking about? Its called opportunity cost.
So what is opportunity cost anyway? You make have heard the term, but if you don’t know what it means, it could be costing you BIG TIME!
Simply put, opportunity cost starts with the idea that if you use your resources (in this case your “Dollars”) for opportunity A, you can no longer use them somewhere else (opportunity B). This acknowledges that you “missed out” on whatever opportunity B had to offer because your money had already being allocated. So there is a “cost” associated in whatever you might have done.
So why does this matter to you?
Because if you don’t consider the opportunity cost of how you grow and invest your money, you are likely costing yourself without even knowing it.
Let me give you some easy examples that I see all of the time…
Let’s say you are contributing money into a retirement plan but you also have balances on high(er) interest credit cards. All you see is that are are investing money (which sounds pretty sexy and savvy). What you are NOT seeing is how much you are “missing out on” by having to pay interest to your credit card company.
To go even deeper, let’s say you are earning 6% in your retirement plan but your credit card is at a 16% interest rate. In this case your opportunity cost is 10% (it is actually much higher if you account for fees & taxes) because they are “missing out” on saving the interest they could have “never paid”.
[The difference between the earnings of 6% and the loss of 16% = 10%]
The reason this is so incredibly damaging is that not acknowledging the opportunity cost would let you think you were earning 6% on your money when you are actually LOSING 10% on your money. In other words you are being completely deceived that you are doing the “right” thing when you are actually losing boat loads of money.
But that’s not the end of your losses… it gets worse!
Once you have missed out on the money you could have saved/made, you no longer have that money to reinvest for more gains. This means that every dollar you “missed” is more than a dollar, it is the amount that dollar could have earned if reinvested and grown throughout the rest of your lifetime…
The tragic part of all of this is that you DON’T EVEN KNOW ITS HAPPENING!
While you blissfully continue down the road of thinking you are a ‘savvy investor’ you are actually losing DOUBLE DIGITS on your money – year after year. It’s no wonder it seems so tough to get ahead.
So why don’t most advisors tell you about this?
Honestly, most of them don’t even know this concept exists, so they can’t share it with you. Beyond that, most of them won’t tell you because once you realize the REAL cost of tying up your money until retirement, you’ll probably never buy one of their products again.
This is a concept that you’ll never hear from Suzy Orman or Dave Ramsay – so what else is traditional financial planning not telling you? Find out by scheduling a time to talk with one of our wealth strategists and learning how wealth is REALLY created…
LIKE WHAT YOUR READING? THEN YOU’LL LOVE OUR VIDEOS. YOU CAN WATCH AND SUBSCRIBE HERE>>>
Nice blog thanks for postingg