Oct 11
3
Would You Pick It Up?
About a mile away, a dollar bill is lying on a sidewalk.
Would you get in your car right now and go pick it up?
Probably not. And yet, at the same time, there are thousands of people who will drive 5 miles out of their way to save $.05 per gallon on their next tank of gas. Mathematically, there’s no difference.
This illustrates a very simple concept that — if you understand it — will save you HUGE amounts of time and money….and will allow you to earn a huge income in the process.
In fact, since we’re talking about money lying on sidewalks, let me give you another example, one that you probably have heard of.
Have you ever heard the old joke about how much money that Bill Gates makes? Imagine Bill Gates were walking along the sidewalk and saw a $1,000 bill lying on the ground. If he had to stop earning money long enough to bend over, pick up the bill, and put it in his pocket…..he’d be better off just leaving it lying there.
It’s basically just a fun way to point out that, at one point, Bill Gates’s net worth was actually worth more than $1,000 every few seconds.
Whether that particular claim is true or not, one thing IS true: both of these examples illustrate a concept that most people have never heard of. It’s called “opportunity cost”.
What is “opportunity cost”? It’s the value of what you give up by not doing one thing in order to do something else.
I’ll give you an example that might assist you in understanding what I mean.
Years ago, I used to mow my own lawn. Why? Because that’s what I’d always done. We had a lawn-mower and it seemed silly to pay someone to mow my lawn when I had a perfectly good lawnmower myself. Besides….all my neighbors mowed their lawns on Saturday morning. Everything in my environment pointed to the idea of me mowing my own lawn.
A little while after I got involved in the home business industry, I got a different perspective. It went something like this:
1. It takes me about 3 hours to mow my lawn, run the weed-eater and then cleaning up.
2. It takes me about 3 hours to earn $1,000 in my home business.
3. Hiring someone to mow my yard will cost me about $70.
4. Doing it myself will save me $70….but it would COST me $1,000 in lost income.
Read that #4 again. That’s what I mean by “opportunity cost”. Sure, I can mow my own yard and save $70. But what does it cost me to do that? In my case, it costs me the ability to earn $1,000 or more in my business.
Opportunity cost is not something new. It’s actually a common concept taught in any economics class. But it’s not something that is taught in most American schools. Nor do parents always pass it along to their kids. But, if you understand this, you can absolutely get RICH.
Why? Because getting ahead financially is all about engaging in high-value activities and delegating low-value activities. If you can earn $1,000 for your family in just three hours…..why on earth would you spend those same 3 hours doing something that pays you far less? The opportunity cost is much too high.
Here’s another example: how much does your JOB cost you?
Most people — when they think about their job — they view it as a source of income. But, what’s the opportunity cost of your job? In other words, how much money do you LOSE every day by choosing to spend 8 hours working for someone else?
Moms are good at spotting this problem in their own lives. A mom can often look at the income at her job AND the money she pays out for child-care and immediately thinks:
“Why on earth am I doing this? If I do the math…..by the time I pay the daycare, the gas, the wear-and-tear on the car, the cup of coffee in the morning, grabbing a sandwich at lunch, the snack in the afternoon,….my dry-cleaning, etc………I’m only bringing home $20 per day in personal net income. I could work from home AND be with my children all day and earn WAY more than $600 per month.
Read that again. That’s someone who understands the concept of “opportunity cost”.
Here are some other examples for those of you who are already IN the home business industry.
- What is the opportunity cost involved when you choose to learn how to design your own webpages instead of spending that time putting prospects in front of your company’s presentation? (Designing websites is not an income-producing activity; putting prospects in front of presentations IS.)
- What is the opportunity cost involved when you work in a company where you earn $20 commissions instead of spending that same time, energy, and effort in a business that pays you $1,000 commissions?
- What is the opportunity cost involved when you go to a 40-hour week job that pays you $4,000 per month…..when you could spend that same time earning more much more?
No one can answer these questions for you. But, when I understood the concept of “opportunity cost”, I started making a LOT more money. I quit my job. I stopped mowing my own lawn. And I was able to earn a multiple six-figure income in less than 3 hours a day and spend the rest of my time living the lifestyle of my dreams.
So, the question is: what low-value activities are you engaged in that you can delegate elsewhere? What high-value activities can you start spending MORE time on?
If I can assist with these questions, feel free to post your questions or comments below!
Tony Rush
http://www.tonyrush.com
