Since I left my tech job in September, I keep asking myself one question: what did I say no to when I said yes to that?
I was 45, and I walked out. I had a portfolio, a spending tracker and a lot of “are you sure?” going round in my head. Every time, the answer came back to the same idea: opportunity cost.
What is opportunity cost?
It is the value of the next best thing you gave up when you chose something. Not the price on the receipt. The price of the road you did not take.
The easiest way to see it is a treat budget. Say you have room for just one treat this week, either a nice lunch out or a movie ticket. Picking the lunch is a no to the movie. The lunch is not just lunch. It is also the movie you did not watch.
Money works the same way. A dollar can only be in one place at a time.
Why is it “hidden”?
Because nobody sends you a bill for it. When you buy a latte, you see the price. You do not see what that money could have become. I wrote about this in Conscious Spending, where I said I would happily pay for a good coffee. The point is to choose it on purpose, knowing what I am choosing it over.
It also hides in time. Hours are the one thing you cannot earn back. A weekend of overtime is also a no to whatever else those hours could have held.
And it hides in things you do not do. Money that sits still, a decision you keep postponing, a plan you keep researching but never start. Doing nothing is a choice, and it has a price too.
What is the opportunity cost of my own yes?
Here is my honest version.
- I said yes to leaving work. The cost is the salary I would have kept earning: a five-figure monthly paycheque.
- I said yes to living off my portfolio. My income now comes from dividends, covered call ETFs and selling options. The cost is that there is no consistent income coming in. The portfolio goes up and down, and I no longer have a paycheque to lean on.
- I said yes to time. Time is the thing I now have more of. For example, I can pick up my daughter from school. I can swim or cycle every morning. I can take a leisure breakfast without rushing to work.
- I said yes to tracking my spending every month. It takes time and a bit of honesty, and it is a no to not knowing. What it showed me are the areas where I am spending more.
I also still hold about 218 CSPX shares. I’ve never sold them, and that’s a choice too. I keep them for growth.
Does opportunity cost show up in my past decisions too?
Yes, and it is easier to see looking back. This blog already covers a few of them: the March 2020 drawdown, the 2024 layoff and my energy ETF loss.
In any drawdown, the choice between selling and holding is really a choice between two futures. Selling gives up whatever might come back. Holding gives up whatever the cash could have done elsewhere. In March 2020 I wanted to buy more, and I did. I bought during the dip, using my salary at the time. Now I do not have a salary, and I think twice about buying the dip. Same market behaviour, different cost of saying yes.
A layoff, like the one in 2024 that I wrote about in I will be laid off, makes a choice for you, and then you have to pick what the next yes will be. The lesson I took from it: no matter how valuable you think you are to a company, you are just a number to the company. Staying always costs you something too, and it is worth knowing what.
The energy ETF was a different lesson. I wrote about it in The Sunk Cost Fallacy in Investing. People mix up sunk cost and opportunity cost, so here is the difference. Sunk cost looks backwards: “I have already put so much in, so I should carry on.” Opportunity cost looks forwards: “If I carry on, what am I giving up from today?”
Money already gone should not drive the next decision. What the next dollar or hour could do instead should.
How do I use it in a real decision?
Nothing fancy. Five steps.
- Name the alternative. What is the next best thing I would do with this money or time? If I cannot name one, I have not thought about it enough.
- Put a rough price on it. This is where tracking my spending every month helps. I know what a normal month looks like, so I can see what a yes will eat into.
- Ask “would I still say yes?” If the answer is yes when I can see the alternative, great. If it wobbles, that tells me something.
- Count the time too. A yes that costs no money can still cost a whole weekend.
- Write the decision down. One line is enough: what I chose, what I gave up, and the date. Later I can look back and see whether the trade was worth it.
How do I check my own yeses every month?
A single decision is easy. The harder part is the small yeses that repeat. I already go through my spending once a month, and I’m planning to add a short review to it.
- Pick the three biggest lines. Not every coffee. The few categories that take most of the money.
- Ask what each one is saying no to. A subscription you barely use is a quiet no to something you would enjoy more. This is something I am starting soon: I am adding a subscription and expense review to my monthly check.
- Pick one change. Just one. Cancel something, move something, or say no to one thing this month.
Where CPF fits in
CPF is a good example. When I think about topping up my CPF, I ask what else that money could do. Once it goes in, it earns a steady rate but stays locked away. If I keep it in cash or invest it instead, I keep it flexible but take on more risk. Neither choice is wrong. I just want to know what I’m giving up each time.
Your situation may differ
I left work with a portfolio behind me. Your situation may differ, and that changes the maths. There is no right or wrong answer here. The goal is not to say no to everything. It is to say yes with your eyes open.
So what about you?
I keep going back to Increase Income vs Reduce Expenses and Why Earning More Matters. Cutting costs is one side of the ledger. The other is what your time and money could earn.
Every yes has a price. I just want to see it before I pay.
Think of the last big yes you gave, to a purchase, a job, a commitment or your weekend. What did you give up to get it? Tell me in the comments.
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