Read Time: 4-minutes
Happy Saturday,
Here is this week’s edition of 6-Point Saturday — financial insights to help you make smarter money decisions.
Table of Contents*
*Clickable in the online version.
Point #1 — “North Star” Decision Trees
At 15, Jewel Kilcher ran away from home and ended up living in her car in San Diego. She waited tables in coffee shops, but chronic kidney issues kept her trapped in a cycle of getting sick, losing work, and starting over.
When she developed symptoms of sepsis, a life-threatening condition, the ER turned her away for lack of insurance…
Fortunately, a doctor found her in the parking lot and treated her for free, saving her life.
Still homeless, she began stealing food and small items to survive. One day, she caught her reflection in a dressing room mirror while shoplifting and realized the “control” she thought stealing gave her was just another form of powerlessness. She remembered a Buddhist quote: “Happiness doesn’t depend on what you have or who you are, it depends on what you think.”
That moment became a turning point. Jewel began journaling every thought for two weeks to observe her mind. By the end, she noticed she hadn’t had a single panic attack. She had stumbled into mindfulness — and with it, a sense of control. She kept writing poems, stories, and songs as a form of self-therapy.
Eventually she started performing them. San Diego’s clubs required artists to pay to play, so she struck a deal with a struggling café called The Inner Change: she’d bring in customers, and she’d keep the door money.
Her first show drew two people. She played for five hours straight. Those two came back the next week, and brought friends. Within six months, The Inner Change was packed every Thursday. Word spread, and soon every major record label, Sony, RCA, Warner, Columbia, was calling.
Atlantic Records made the biggest offer: a record deal and a $1 million signing bonus. For a young woman who’d been homeless, it was the kind of offer that could fix everything.
But Jewel hesitated. She knew money always comes with strings. She went to the library, checked out All You Need to Know About the Music Business, and learned that the “bonus” was actually an advance, a loan she’d owe back through album sales. If her first album didn’t sell enough, she’d be in debt to the label and under pressure to conform to whatever would sell.
That realization forced a bigger question: what was her top-level goal? She built what she called a “North Star decision tree.” At the top: be happy and stay in control of my thoughts and actions. Beneath that: be an artist, not a celebrity. The money only mattered if it aligned with those two priorities.
She realized taking the million would compromise both. So, she turned it down. Instead, she negotiated a unique back-end deal: no large upfront bonus, but increasing royalties for every million albums sold. It was a structure that rewarded long-term success over short-term cash.
Her debut album, Pieces of You, was mainly recorded live at The Inner Change and released in 1995. A year later, her single “Who Will Save Your Soul” climbed to #11 on the Billboard charts. Then “You Were Meant for Me” became a major it.
By 2006, Pieces of You was certified 12-times platinum, selling over 12 million copies in the U.S. alone, one of the best-selling debut albums of all time. More importantly, she did it on her own terms.
“I wanted a long, 60-year career,” she said. “I didn’t want a career at the cost of being happy and in control.”
There are tradeoffs with every decision.
Choosing one option means losing potential gain from another, a dynamic typically referred to as an opportunity cost.
Jewel could’ve taken the $1-million signing bonus option…but what would it have cost her?
Her biggest priorities: Happiness. Control. Artistic identity.
As Jewel put it:
“That wasn’t a price I was willing to pay.”
Opportunity costs show up everywhere in your finances:
Evaluating job offers: One offer might pay $5k/more now, but another provides mentorship with a senior leader who could accelerate your career and salary by thousands. Neither is necessarily “better” than the other, just be mindful of the tradeoffs & what’s most important to you.
Building an emergency fund: Splurging on extra vacations now means a $2,000 car repair becomes a 20%+ APR credit card problem later. Not having an emergency fund can can cost you months of progress and peace of mind.
Managing credit card debt: Making minimum payments might feel somewhat responsible, but a $10,000 credit card balance costs $2,000/year in interest. That's real money that could be building your future (instead of enriching your bank).
Salary negotiations: Staying quiet about a raise or not exploring the market rate elsewhere is costly. The gap could be $15K-$30K annually, money that accelerates many of your other financial goals.
Unused subscriptions and expenses: We all accumulate these over time. Even $100/month adds up: investing at 8% per year over 25 years is nearly $90,000 (!).
Money Mindset: Believing everything will “work itself out.” The opportunity cost? Another year of financial stress, another year paycheck-to-paycheck, another year of sleepless nights, wondering why your income never feels like enough.
As you’ve probably gathered, money is just one currency you spend when making decisions. Let’s look at the others.
Point #2 — 16 Opportunity Cost “Currencies”
Every decision has an invisible price tag: the value of what you give up by choosing it.
The most obvious currency is financial, but we trade in other currencies, as well.
You can use this opportunity cost currency checklist to more thoroughly evaluate your options:
Money — The most obvious, but rarely the only cost that matters
Time — Your most finite resource; once spent, it's gone forever
Energy — Mental and physical capacity; high-stress choices can drain you
Hassle — Convenience has value & complexity often costs more than you think
Happiness — Will this bring genuine satisfaction or just temporary relief?
Relationships — Does this strengthen or strain the connections that matter?
Values/Integrity — Does this align with who you want to be?
Autonomy/Control — Does this increase or decrease your freedom?
Health — Your physical health might be your most prized possession.
Focus — Every commitment is attention you can't give elsewhere
Optionality/Flexibility — Keeping your options open vs. locking yourself into a path
Skills/Growth — What capabilities are you building or sacrificing?
Reputation/Credibility — Professional or personal standing: it’s hard to build, but easily damaged
Peace of Mind/Mental Space — Different from energy or happiness, this is about cognitive load, worry, and financial anxiety
Safety/Security — For example, working in a stable industry or your investing risk tolerance
Momentum — Some choices build positive momentum, others create drag
These help reframe the overly-simplified question of “Can I afford this?” into “What else could my money and other resources buy me?”
Before saying “yes,” ask: What am I saying “no” to?
Action Step: Which of these currencies do you want to prioritize when assessing your next big decision?
Point #3 — “Would you pay off your 2.4% mortgage or invest elsewhere?”
I'm 4 years into a 15-year 2.4% mortgage on my house. We now have about 2x the amount needed to pay it off completely. About 40% of that is in stock-based funds that are currently doing really well, so we are tempted to pull out of the market when it's high and pay off the mortgage. We also have money in a HYSA that used to earn 4.5%, but now it's down to 3.5%. We hate having loans over our head, but at 2.4%, this is about the cheapest money there is.
Additional context: We bought the house as a starter home 11 years ago, refinanced to the 15-year mortgage in 2020…
They’ve got the money to pay off the mortgage and become debt-free. So, why not do it? Let’s examine the opportunity costs.
Every dollar you use to pay down the mortgage “guarantees” a 2.4% return, but it also gives up the chance to earn whatever your investments might earn.
If your portfolio averages 8%, you’re still coming out roughly 5.6% ahead by keeping the mortgage.
When emotions or unhelpful beliefs around debt are involved, sometimes the “numbers” like these don’t seem relevant: many people simply feel better being debt-free. There’s nothing necessarily wrong with that, as peace of mind can be real.
But for those with a stable income and who can easily pay their mortgage, it can help to at least explore reframing the story you tell yourself about debt.
Instead of seeing a low, fixed-rate mortgage as a burden, it can be viewed as a strategic tool. One that allows you to keep your money working harder elsewhere.
For example, when a thought like “I still owe money on my house” starts to cause stress, remind yourself that your money in the market is also earning. If your mortgage only costs 2.4% while you expect your investments to earn 8%, you’re building wealth overall.
Point #4 — One of the Biggest Opportunity Costs
One of the most expensive opportunity costs?
Overtrading.
It’s the impulse to act when headlines go to extremes (e.g., currently around A.I. bubbles, layoffs, & upcoming economic data).
But that usually leaves investors with sub-par returns. Morningstar quantified this exact cost [Emphasis mine]:
“We estimate the average dollar invested in US mutual funds and exchange-traded funds earned 7.0% per year over the decade ended Dec. 31, 2024. That estimate, which is akin to an internal rate of return calculation, accounts for investors’ purchases and sales of fund shares during that 10-year period.
The 7.0% annual dollar-weighted return is about 1.2 percentage points per year less than these funds’ 8.2% aggregate annual total return (which assumes an initial lump-sum purchase) over the 10 years ended Dec. 31, 2024. That gap’ is explained by the timing and magnitude of investors’ transactions during the period.”
“But 1.2% isn’t that much.”
Over one year? I agree with you. But let’s look at the power of compounding:
Investing $10k per year for 30 years at 8.2% grows to $1,175,000.
Trade too frequently and earn 7%? You’re left with $944,000, or $230,000 in opportunity cost.
Bottom line: Time in the market beats timing the market. Next time you feel the urge to "do something" with your portfolio, consider the opportunity costs.
Point #5 — Quotes of the Week
Continuing the “Opportunity Cost” theme, which of these is your favorite?
Point #6 — My Question of the Week
What’s something you love spending money on (e.g. live music, weekend getaways, etc.)? If you considered this your opportunity cost of spending, are there any expenses that no longer bring you as much value that you could redirect to spend more on what you love?
Reply to let me know! I read every response.
Thanks for reading — I hope you found a helpful idea or two.
I’ll see you next Saturday with more.
Have a great weekend,
Benjamin Daniel, CFP®
Founder, Money Wisdom
P.S. Want to take control of your money, stop stressing about your expenses, & feel confident about your financial future? There are 2 ways I can help you:
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Disclaimer:
This material is not investment or tax advice. No responsibility for loss occasioned to any person or corporate body acting or refraining to act as a result of reading this material can be accepted by the publisher.
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