We established that everyone has a price. Everyone has a limit of how much self control, resistance, or willpower they have before the rewards for the action opposite outweighs the rewards for the desired action.

This applies to your finances, as well, and this is why personal finance is so very personal.

An example I have exhibited recently is with my car. I wanted to save; my intentions where to bring my net worth up by a substantial amount in 2012. I also wanted to go on a trip and be able to buy a new couch. My “price” was the prospect of having no car.

In simpler terms, I was excited and more than able to save for all of those things I listed above, but I wasn’t willing if it meant having no car. I obliterated my plans to reach those goals by taking on new debt, because for me, the opportunity cost of having a car outweighed the opportunity cost of buying those things and increasing my net worth.

Where this really gets people in trouble, is if their opportunity cost for material things or spending frivolously is higher than their opportunity cost for paying bills and being financially responsible.

In simpler terms, people get in trouble when their opportunity cost for the “wants” outweigh their opportunity cost for the “needs”.

Sure, paying for food and hot water, health and shelter, those aren’t fun things to have to pay for. I’d, too, rather spend my money on trips to Mexico and a cute dress from my favorite store.

But will I do that at the cost of my ability to pay for my means of getting to work?

If debt wasn’t an option, we’d really be able to see where our opportunity costs lie. If I wasn’t able to take on the car loan, would I have spent my entire income on a car, or would I have realized I couldn’t afford to do that and moved closer to work and school?

If debt wasn’t an option, would some of the people that Gail Vaz Oxlade helps on ‘Till Debt Do Us Part let their homes foreclose to pay for their boats and lattes, or would they cut those out of their daily spending diets?

Where do your opportunity costs lie? What are you willing to forgo for your lattes, your iPad, and your Manolos?

Before sinking yourself into more debt by purchasing that dress in the boutique below your office, think about this “If I didn’t have a credit card, what would I be not paying for to buy this dress?” If the answer is nothing, because you have more than enough cash in your account for the dress, your bills, and your savings, great.

If the answer is security, or the contribution to your emergency fund, you should be weighing the opportunity cost between your financial security and the amazing pattern of that adorable dress.

What if the answer is your RRSP or Roth IRA contribution? Are you willing to forgo your future stability for a dress you’ll grow tired of in six months?

Weigh your opportunity costs as if debt wasn’t an option. It’s hard to do, because debt is an option for most of us, but it really helps put some things into perspective.

Individual Opportunity Costs is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

When I closed my eyes and thought about retirement, I pictured volunteering. I pictured travelling. I pictured being able to camp with my grandchildren and try surfing in Hawaii. That’s an ideal, and I’m sure everyone wants something close to this type of life. I also pictured myself retiring earlier than the standard age of 65.

I know that things will change as I get older, move into my career, buy a house, have kids, and generally live life a little more than my 20 something years have allowed me. But I think that, by now, I know myself. I don’t want to be working until I’m 65, at least not a full time nine to five.

Don’t get me wrong, I’ll always want to work. I’m a worker. I don’t just sit around, ever. Like, ever. Even right now, I work full time, go to school, and blog, which is a job in itself (albeit a fun and relaxing one).

When I retire, I doubt I’ll be able to just relax. I’ll want to volunteer or work part time. Knowing myself, if I don’t keep busy, I’ll end up being the crazy dog lady.

But do I want to have to work for the majority of my life? No.

If you think about it, we spend a third of our time in life doing something that we don’t really want to be doing. No matter how much you love your job, there’s (usually) always something you’d rather be doing. 

Another one third of our time is spent sleeping. Lacking consciousness isn’t exactly conducive to living life to the fullest.

We spend another chunk of our time getting ready for work, or getting ourselves to work. Our waking, free hours are diminished by work, sleep, or work and sleep related activities. Oh, and trying to keep ourselves alive by eating and exercising.

So to me, it’s unfathomable to have to work for almost my entire life.

You could argue that when we’re children, we don’t work. True, but we go to school. Anything before school aged, we don’t remember.

You could argue that after retirement we have more free time. Definitely! But in our retirement years, there are only a few years after 65 where we are physically able to do everything that we could have when we are younger.

So to me, retiring early is the only way. Vacation time from work is great, but all of my dreams won’t fit into three weeks annually, and I doubt yours will either. Living life to the fullest less than 1/3 of the time isn’t feasible. And we only get one life – we need to choose how to use it very wisely.

What about you – do you plan to achieve early retirement? Late? Never?

My Thoughts on Early Retirement is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.