In the pursuit of riches, I decided to take on a significant amount of extra work this past holiday season. It was a great time, with people wanting to be with their families and me being able to charge a premium due to the lack of people wanting to work.
I was pretty excited in the lead-up to the work, finding ways to slot in more work into the hours I had yet to allocate and maximising how much I was going to earn. However looking back, I realise that I was perhaps…overzealous with my time allocation.
Most days I was working 05:30 to 20:00.
I’m not bragging as I’m more than aware many people work harder than this, but what I’m going to highlight today are the actual costs involved in maximising your financial gain.
Opportunity costs, and opportunities cost
Something that I’ve been recently been fascinated with is economics.
Economics taught me all about something called “opportunity costs.” This refers to the value of the thing you don’t use your limited resources (time, money, willpower, etc.) on.
For example, you have 10 hours and £100 to invest; you could either spend that time baking 50 apple pies, or 100 loaves of bread. You can sell the pies for £5 each or the bread for £2 each. The opportunity cost of baking bread instead of pies is £50 (£250-£200), but the opportunity cost of baking pies instead of bread is £0, so you choose to bake the pies.
Looking at the opportunity cost of something is a great way of seeing if it’s worth doing A or B. However, opportunity costs are not just financial. They can be emotional, physical, and even spiritual.
Those looking to be successful often fall into the trap of only looking at the financial opportunity costs.
Moneymaking sacrifices that don’t add up
99 per cent of self-made millionaires and those who have reached financial freedom will tell you that sacrifices need to be made in order to reach their position. Although I’m not yet a multi-millionaire or financially free I find their logic sound.
However, during the time I was working 05:30 to 20:00 I had to sacrifice the following things due to a lack of energy, willpower, and time:
- Cooking my own meals
- Educating myself
- Going to the gym
- Spending time with friends/girlfriend
These three things are vital to your continuing success and wealth. Cooking your own food saves you a ton of cash, not only from not eating out but also in terms of health and brain power. Similarly, I was so tired each day I couldn’t properly process the audio-books I was listening to, nor could I find time to read.
Being unable to go to the gym and exercise was also a huge sacrifice. Exercise is fantastic at reducing stress and stimulating the brain, not to mention the other health benefits. I was so frazzled from working so hard that I found myself drinking more (which adds up), and watching more TV.
The sacrifices that help you make money
Going down this journey, I’ve already made a number of sacrifices in the pursuit of financial gain. Unlike the previous sacrifices the opportunity costs of giving these up were comparatively minor, as overall they’ve saved me money, given me more time, improved my relationships, and overall happiness:
- Drinking in the week
- Eating at restaurants more than once a week
- Playing more than four hours of video games a week
- The comfort of riding the bus
- Leaving household chores to my girlfriend
Enjoying a balanced life has dramatically improved my life overall, and as a side-effect actually increased my financial situation.
Let’s take regular exercise as an example; the benefits of which have reached much further than I initially expected.
Due to the dopamine and serotonin released after exercise, I’ve been able to save more money as I’m far less inclined to look for “quick fixes” to make me happy/reduce stress. These “quick fixes” include:
- A cheeky beer at the end of the day
- Foods high in saturated fat and salt
- Spontaneous purchases of things I don’t need
Often we spend money to battle self-inflicted issues caused by; working too many hours, from losing focus on what’s important, or not spending time on ourselves.
Time is the most important resource
99 per cent of self-made millionaires and those who have reached financial freedom will also tell you this; invest in yourself.
Time is the one resource we can’t (currently) buy. My mistake on taking on all that extra work was that I forgot how important it is to invest in myself.
If you don’t have time to invest in your education, health, or wellbeing, you’ll plateau. You’ll reach a point that is impossible to move beyond until you take some time to better yourself.
The number one guarantee to making more money than the next guy is knowing more than him. If you focus all your attention on increasing the amount of work you do, you’ll get great at doing that one thing, but you’ll find progressing much more difficult.
Without spending time looking at how to increase your standard of well-being, you’ll forever be stuck running in circles.
The only reason you’ve decided to go on the journey to success/financial freedom is to be happier, right? How are you going to achieve that goal if you don’t know what happiness means to you?
Finally, you need to time to improve and maintain your health. There’s no point in being wealthy if you’ve ruined your body to get there.
Also, investing in your health is a great way to increase your mental ability, as well as your ability to focus, and increases your energy levels. These factors all affect your ability to increase your wealth.
The best things in life are aren’t free
Every decision you make has a cost, that’s just the nature of existence. We are often blind to the costs of making money, as we’re so focused on the number on the paycheck. If you take away one thing from this article it’s this: Even making money will cost you something.
If you want more than one takeaway, here’s a round-up:
- Opportunity cost: When making a decision about a time-consuming activity, look at everything you’ll be giving up
- Make worthwhile sacrifices: The best sacrifices to make are ones that exchange time for happiness, health, and education, for the smallest amount of cash
- Finances are just one piece of the puzzle: Living a balanced life is far more lucrative overall than using all your resources on one aspect.
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Great article!