Decisions, Decisions, Decisions….

Hello class, welcome back to Fire University.

Today I want to talk about decisions and how today’s decisions, affect the decisions we make later in life.

The better the decisions we make today, the more choices we will have later in life.

Life is full of decisions and often times we are forced to make those decisions without fully understanding their consequences.

What we may not realize is that by making a decision to do one thing, we are also deciding not to do something else.

In finances, we call this opportunity cost. Opportunity cost put simply, means that by deciding to spend money on one thing, means that we can no longer use that money for something else.

An example would be by purchasing a car with a high monthly payment, we are also deciding to forgo other things every month that we can no longer afford.

The more decisions like this we make, the less options we have and the tougher decisions we have to make later in life.

If for example, we choose to take on several large monthly payments, we are choosing to have very little disposable income.

This decision could also carry a large opportunity costs as we will not be able to take advantage of opportunities that may present themselves.

On the flip side of the coin, good financial decisions can open us up to a world of opportunities and other fun decisions.

For example, if we decide to attend college, we are deciding to forgo that time that could be spent working but we are also deciding to invest in our future earning potential.

If we choose to save and invest in our retirement, we will have the ability to decide later in life how we want to spend our time and money.

How do we know if we are making the right decision? Is there a way to tell the future?

Well, unfortunately nobody that I know of can tell the future but we can use history to make the best decisions possible.

Historically speaking, we know that stocks have outperformed all other investment options.

Historically speaking, we also know that most investors fail to outperform the market.

By taking this information, we can make a pretty good guess that investing our money into index funds, which track the market, will most likely yield a good result.

We can also look back and know that by practicing sound financial advice will open us up to lots of opportunities.

Sound financial advice, involves spending less than you earn and investing in long term wealth building assets.

This is where FIRE or Financial Independence Retire Early, comes into play.

By following the easy to understand principles of cutting costs and investing in broad market index funds, we can with some certainty expect great results.

By making these decisions in the present, we will open up a world of opportunities, that will allow us to make great decisions later.

For instance, by making the decision to follow the FIRE lifestyle, we will later be able to decide whether we want to continue working or spend time doing something else.

We will be be faced with decisions such, whether to wake up early or not, whether to shower and get dressed or just stay in bed and watch TV all day.

We may even be forced to decide where in the world we want to visit or even move to.

We will surely have to decide what charities we want to donate to.

See, our earlier decisions really affected the decisions we were faced with later in life.

What if we hadn’t decided to follow the FIRE lifestyle? What decisions would we be faced with then?

We may have to decide between buying medications we need or having money to go out to eat.

We could be forced with deciding if social security benefits will be enough to live on or if we need to work part time.

Maybe, we have to decide if we can afford to visit the new grandchild or not? Whether we can even afford to take off from work to visit family at all?

Other tough decisions such as whether or not we can afford to stay in the family home or be forced to sell to afford medical bills, will be in store for sure.

This principle of making good decisions now, so that we have the opportunity to make better decisions later in life, applies to almost all areas of life.

Deciding to eat healthy and exercise now, will allow us to decide how we enjoy our health later in life.

Deciding to study in college and work hard at your career, will allow you to decide where you want to work and how much you are willing to accept as a salary.

What are some tough decisions you’ve made lately? How do you think they will affect your future? What advice do you have for young people facing tough decisions right now?

Leave a comment and let us know, we look forward to hearing from you.

In closing, we remind you that Fire University is not a registered or licensed financial advisor. All material is for entertainment purposes only and everyone should seek the advice of a licensed professional before making any financial decisions.

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