Do You Treat Missed Opportunities as Personal Loss?

While reading the book "One up on Wall Street" by Peter Lynch, I came across this concept of "regarding somebody else’s gains as your personal loss". While this concept is discussed in the book in the context of investing, it stuck a cord with me because of the way I treat the financial aspects of my personal life. My problem isn't exactly treating somebody else's gain as my personal loss. Rather, I view all missed opportunities (usually highlighted by somebody else's gain) as my personal loss. Let me explain –

I came to the US to get a Master’s degree and when I completed my degree I had two very lucrative job offers on my hands. At that time however, I had absolutely no concept of the importance of money and chose to turn down these offers and go for a Ph.D. In the decision process, money was not even a consideration. I have absolutely no regrets about this decision in general, but every now and then the financial implications of this decision strikes me with pangs of misery. I am quite sure every person out there who has chosen to go for a Ph.D. (or any other degree for that matter that requires a person to be in school for several years earning a little over minimum wages) can relate to a certain extent.

Further thought on this matter reveals that if everyone I know had made the same decision and was in the same financial boat as me, it probably would not bother me as much! But, on the contrary all my friends chose to take on well-paying jobs and start stabilizing their financial lives. During the course of the 4 years in school, I did realize that my friends were better off than me, but it did not really bother me much. When I completed my degree I had multiple job offers and while evaluating the different aspects of the package the huge gap between my financial situation and that of all my friends started to sink in. Among my offers, one company had no 401K match at all and the other had a 6% match. While I was reading up about whether this should be of any importance in my decision to accept an offer, I started to draw parallels between me and my friends. If all my friends had contributed the max to the 401K and had received at least a 3% match and earned an annual interest rate of 8% on their savings, then during the 4 years that I was in school, they had managed to put away around $75K towards their retirement account. That’s a *HUGE* head start when you consider the power of compounding and I don’t know if I can ever catch up.

Frankly, I don’t know if all my friends did contribute to the 401K or not. But I started to regard the lost opportunity as a personal loss. It was (and is to this day) a source of discontentment for me. While I have no regrets about spending the additional time in school (and view it as one of the nicest phases in my life), the fact that I did not know about 401K or IRA and did nothing to put away any money, is a thorn on my side. It is a great motivator for me to stay frugal and save as much as possible now. And maybe because of this keen sense of the “personal loss” I have a better appreciation for every penny I manage to save.

In the very long run, by the time we actually retire, I don’t know if it will really matter. Yes, I started late, but if I stay sensible from now on, maybe I can catch up eventually. Even if I don’t, I doubt if that will really bother me. Growing up in a middle class family, I am used to being surrounded by richer friends and have learnt to automatically disregard it. And, at this point in my life, I have come a long way from my childhood financial situation, and am quite content with what we have and feel blessed. So, why this sense of personal loss over lost opportunities? Why this self sabotage of the peace and happiness over a choice I made consciously (and will likely make again, knowing all that I know now)? Peace, happiness, contentment, joy – it seems human psychology has a masochistic tendency to destroy them every time you feel you have started to achieve them.

Do you treat missed opportunities as personal loss? Is it a real loss or is it a game your mind is playing with you? There must be a reason you missed those opportunities and in non-financial terms, maybe they mean a lot more to you than the money you could have made if your took those opportunities. So why fret and lose your peace of mind over it?

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1 Comment:

Casey said...

As my old cost accounting professor used to say - don't cry over 'sunk costs'.

You made a quality of life decision that had a financial trade off - it sounds like you do not regret it - you have a PhD after all...I would say with your mindframe you have plenty of time to catch up, and you will.

By the way - you would be surprised at how few people take full advantage of 401(k) benefits, especially when they are just starting out.