Originally Posted by robmandel
wow, this is right up my alley. I teach economics in high school and used to at local junior college (you know, until the budget cuts!!). here's the thing(s) to consider.
I give my students a scenario. I'll give you $200 now or $500 in two months. You take the money now there's nothing later. You wait, you get 2.5 times the money. what do you do?
well, there's really no "right" answer. if you've got nothing going on, and the $200 would be "nice" but is not needed, you wait. in other words, you really are giving up less. but, let's say your car needed new brakes, and you needed the car for work...well, you take the money now because sure you're "losing" another $300 but in the interim you'd be losing much more with work. waiting would mean giving up much more. (it's called opportunity cost)
now, obviously you NEED the money now. you don't work, you're going to lose a few months pay, for arguments sake, say $4000. so, you keep the gear( let's say it's worth $2500), don't work, you're out $1500. yeah this is hypothetical and all, but you can certainly translate it to your situation.
you sell the gear (which in this market today will fetch ALOT less than what you paid for it, which is irrelevant either way) for let's say, half or $1250. so, you get the surgery, you're up $4000 by working and to replace the gear, you spend another $2500. now, you're up $1500.(ignore the sales value as that's spent to get your knee fixed.)
but you see the point. what ever the numbers, I'd bet that not working will be far more costly. so, get the knee fixed now.
okay, option 3.
let's say you put the bill on a credit card. some things you have to. and it might make sense. let's say you put $3000 on it for the surgery. budget a 1-2 year payoff. let's say you pay at 15% interest (which compounded, monthly, yada yada, is about roughly $1000). you are forgoing some future options. however, you are both healed AND fishing. and even if you spend $1000 in interest, it's way less than replacing all the gear. so you're up $4000 (and more over time) working, you're not out the $2500 in gear, AND you're still fishing (which is value in and of itself. not measurable in dollars, but no matter. it's represents gain.) now, you have to factor that maybe the CC means that you go out to dinner a couple times less a month, or well, fill in the blank.
sometimes it's not about option A now vs. option B now. soemtimes it's about option C in the future. it all depends on how valuable the future is. we call that the future discount rate, or time preference. right now you're very present oriented. the extra $1000 of future satisfaction you are giving up is far less than the loss you'd sustain otherwise.
think of it this way, you're giving up some smaller chunk of the future for a greater chunk of the present. but, you'll be better off in the future as well. long winded answer. sorry. hope it helped.
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