Save Your Money for Great Values

February 16, 2013 โ€” Some purchasing decisions are drastically better than others. You might spend 20 on a ticket to a conference where you meet your next employer and earn 1,000x "return" on your purchase. Or you might spend 20 on a fancy meal and have a nice night out.

Purchasing decisions have little direct downside. You most often get your money's worth.

The problem is the opportunity cost of purchases. That opportunity cost can cost you a fortune.

Since some purchases can change your life, delivering 100x or greater return on your investment, spending your money on things that only give you a 10% return can be a massive mistake, because you'll miss out on those great deals.

It's best to say "no" to a lot of deals. Say "yes" to the types of deals that you know deliver massive return.

[0] For me, this is: books, meeting people, coffee (which I use as "fuel" for creating code which generates a strong return).

[1] I'm not advocating being a penny pincher. I'm advocating being aware of the orders of magnitude difference in return from purchases.

[2] I wonder if someday we'll have credit cards that help you be aware of the order of magnitude variance in expected value of purchases. It seems like one great benefit, would be to charge a higher interest rate on purchases that have low expected value, and a very low interest rate on purchases with high expected value (like books).

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