Every decision closes off alternatives. The opportunity cost is what a person gives up by making a choice. This cost, commonly referred to as the trade-off of a decision, sometimes cannot be measured in dollars. Decision making will be an ongoing part of your personal and financial existence. This, you will need to consider the lost opportunities that result from your decisions.
This is especially important in this economy/financial environment. It is real easy to want to take your money and hide, rather than look for hidden opportunities in a dismal market. Another choice is to get ultra conservative when the rate or return will be guaranteed or reasonably assured, rather than look for a long-term potential for a nice return - though with a bit of risk.
Decision making is a circular, ongoing process in which current decisions influence future choices.
What does this means for your personal financial plan? Well, you need to "work" the plan - so get it out, look at it, evaluate the goals (do they still work?), and see where you are in attempting to reach those goals. Do you need to re-visit you risk tolerance in light of the markets over the last year? Do you need to re-visit your time horizon in light of the same? Maybe that "early retirement plan" is out the window (maybe it is, maybe it isn't - maybe the time line needs to be adjusted by a few years).
I always tell my student, if in my later years, you see me pushing you a cart saying "Welcome to Wal-Mart", I want that to be my choice, not my necessity!!!
So . . . . take the time to re-look at your financial goals - look at your savings, budget, spending habits, time horizon, ability to deal with risk, and the current plan. Does it still make sense? If not, adjust the plan! If so, you need to work the plan! The people who make money, long-term, in the financial markets understand risk, time, opportunity cost, historical perspective, and have a knack for a little speculation! If you can control your greed factor - you too can succeed.
Like the saying goes with reference to the bull (thinks market it going up), bear (thinks market is going down) -----
There is the bull . . . . the bear . . . . . and the hog . . . . . . and hogs get slaughtered!
