Opportunity Cost, Compound interest and relation to Personal Efficiency

Brian Bojan Dordevic
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Brian Decoded

President at Alpha Efficiency

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I will assume that a good portion of your productivity goals are related to your financial success. Financial success can leverage all of our goals and relate to sustainability of our lifestyle. As a degreed banker, I’ve gained some valuable, financial knowledge, and I wanted to share a thing or two from the economic perspective, into personal, and business productivity.

First concept that you want to relate your personal productivity to is the concept of “opportunity cost”. Time is most scarce resource and you doing certain things, is certainly going to cost you other things. Which lead us to the equation of a choice. You choose how you will spend your time and that is the ultimate detriment of any time manager.

When you make a decision to spend time in a certain way, then you are unable to do other things. The decision how you spend your time is determining your entire life after that moment. Any action resonates, and impacts all the future actions, and reactions. Now I want you to think closely to your goals, each time you are doing a certain something. There is a time, and place for everything, and your choice determine how closer you will get to your goals. Choices you make right now.

Choosing to procrastinate on certain tasks might be beneficial sometimes, but if those certain things you are procrastinating on are getting you closer to your financial, and other goals, then the cost of procrastination is something for which you might pay, dearly. You might wake up one day only to realize you are too far away from living the lifestyle that you’ve dreamed about. If you wake up one day and you realize that you don’t dream anymore, that’s the day when you;ve been procrastinating for, far too long…

Your dreams and goals need to have that urgency. You simply don’t give up on your plans.

Now let’s get back to basic economic principle of “opportunity cost”. Everything we do comes at a price. When we are doing something, we are giving up on all other things we could do. We can be at only one place at the time and when we are at that certain place, we aren’t anywhere else. The price of reading this article means that you aren’t doing anything else, but reading this article. It was your choice to read this article and relate, to the energy that I am creating while writing it.

You could have spending time with your friends or family, but you made the decision to read this article, and I am ever grateful for your choice. But how does this decision relate to your life dreams and passions? If you forgot them, this is a good chance to remind yourself of them, and see what you can do about making them a reality.

We can’t determine personal efficiency and personal productivity if we don’t know what are our goals. If we don’t know where we are headed, every road will take us there. That’s a quote from someone who’s name I forgot. But it’s so true. Before you even start thinking about productivity, you need to consider the road you’re traveling. How fast you go on that road, is how efficient you are. Simple, right?

Now when we got down to the bottom of “opportunity cost”, we can move on the compound interest. I want to bring in two concepts in personal compound interest: positive compound interest and negative compound interest.

Positive compound interest is when you’re efficient, and when you wisely invest your time in the future, then as time flies by, your time investments from the past give you the benefit at a certain point in future. I will give simple examples on this. You got home back from the gym, now instead of throwing the bag away and saying to yourself, I am tired, I will deal with this later, you INVESTED your time in organizing dirty clothes and refilled your bag with the clean. Now you delayed the pleasure of resting, but you made an investment.

Next time, when you need to leave the house for the gym, there will be a clean clothes waiting for you in the bag, something that is already taken care of, from your previous, you. You will learn to appreciate the effort of your previous self, and what you’ve gone through for the prize of being organized, and making yourself procrastinate the next time you want to go to the gym. Not only that you spent the time, when you least needed it, you also saved time when you need it most.

Now multiply that investment and than think in the terms of interest rate. The more time we spend in paying the price in advance, the more thankful we will be in the future for the past self, that made a decision to invest time up front for the specific point in the future. Than it just adds up and saves us more time when we actually need it.

When we perpetually save time, and plan ahead, we can have the luxury of having time when we actually need it. That’s how we reap the benefits of having time when we need it the most. That’s how this article came to life. I was driving and I had the idea of it. Instead of just thinking about this article I invested my time in the moment when I was driving. I pulled over my car for brief 15 seconds to turn on the audio recording in my Evernote, and just recorded myself, while I was thinking about this epiphany, and stored this in my Inbox.

The day after that, when I decided that I want to clear my inbox to see what I could do, I had the energy from previous day, when I invested a couple of minutes of my driving, into jotting down the idea of writing this article. It was decision made by my previous self, that came into life in the future when I went through my Next Actions list, and noticed that there is something great to do, that I pre planned.

When you use these two concepts you can change the course of entire of your future. It’s in your hands. So know that you acquired a great idea, I want you to think about it, the next time you have free time, when you are waiting for something.


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