My goal in life is to be happy and money is one of many tools that allows me and my family to do the things that bring us happiness. I am going to go over some of the many things you can do today that will set you up for success in retirement (hopefully) without impacting your quality of life.

Simple opportunity cost calculation

There is a simple way to understand the opportunity cost that you encur in your everyday life. Any dollar that you spend could have been invested and that creates an opportunity cost, we can calculate this with this simple calculation:

rate-of-return^{years_until_retirement}x100
example: 1.07 ³⁰ x 100 = 761%

My portfolio has a 7% expected real return and my retirement horizon is 30 years, this gives us ~761% meaning that a dollar invested today will grow ~7.5 times its current value, $1 invested today will be $7.50 (adjusted for inflation) in 30 years!

How to use this information

Do not let this number scare you away from all discretionary spending, money is a tool and you should use it on things that help you achieve your goals and bring you hapiness!

Do use this number when looking at your expenses at the end of the month and consider how they contributed to your wellbeing.

Opportunity cost of "normal" expenses

1. Investing fees: This is by far the worst offender IMO. Many mutual funds have fees ~2%, for $10,000 of invesmtents this is ~$17/month or a $125/month opportunity cost! Switching to self directed investing can mostly eliminate this.
2. Mobile plan: The average Canadian pays $101/month for their phone bill! Switching to a smaller carrier like Fizz, Public Mobile, Videotron, etc can cut your bill in half (or more!). Reducing your bill by $50 results in an oppotunity cost reduction of nearly $400/month!
3. Bank fees: That $4/month fee is really a $30/month opportunity cost! Is there something about that bank thats worth that much? Even if your lucky and your bank waives the fees you are still losing (link).
4. Subscription services: Can you reduce your subscription tier or eliminate it completely? Moving from Netflix premium to standard goes from $19/month to $15/month, thats another opportunity cost of $30/month
5. Food rituals: Nobody should feel guilty for going to a restaurant or coffee shop to socialize with collegues, friends, family, etc. but stopping off at Tims or Starbucks on the way to the office for a coffee can be more costly then any of the above items. 22 business days a month at $3 a visit is $65/month, nearly a $500 monthly opportunity cost.
6. Consumer Electronics (phone/laptop/tablet/tv): These devices are pretty much essential to live in 2021. Buying pre-owned or certified refurbished devices and using them longer is the best way to reduce opportunity cost. If you can use your phone for 3 years instead of 2 years that means you only need to buy 10 phones in a 30 year period vs 15 phones in that same period which can save you 10's of thousands of dollars when you account for opportunity cost.
7. Housing: Housing is the largest expense for most Canadians and the easiest to overspend. Studies suggest that more space or more luxury renovations don't necessarily lead to more hapiness, rather externalities like your house location relative to things around it is much more important!
8. Car: A car is an expensive asset that only depreciates (not to mention gas, insurance, and maintenance). COVID has created an inflated preowned vehicle market but just like housing you should try and avoid overbuying cause its unlikely you ever get your money back. $15,000 vs $17,500 doesn't sound like much but thats $18,750 opportunity cost in the long run (a whole other car!).

Thinking about your expenses in this context allows you to accurately compare if the value you are getting today is worth what you're giving up tomorrow. You shouldn't make huge life changing cuts as the goal is to simply "cut the fat" and eliminate the things that don't bring value or add to your happiness, if you do this correctly you should barely notice a change in your overall happiness today and your future self will be better off as a result.