The Hidden Opportunity Costs of Dining Out
Did you know that you can typically purchase the ingredients of a restaurant-prepared meal for 60-80% less than the restaurant will charge you for the meal?
And that's doesn't even account for the tip that's added on top of that!
How do I know? Because ... I owned a restaurant for seven years!
During that time our food cost as a percentage of the menu price typically ran 22% for breakfast, 33% for lunch items, and 40% for supper items.
So what's so bad about that? Well, nothing if you only dine out on special occasions. Unfortunately, that is not the case for most people.
And while you might be aware of how much you spend dining out, what you might not be aware of is the opportunity cost of your spending.
Opportunity cost refers to the value of what you give up when choosing one alternative over another. As it relates to the subject of dining out, opportunity cost refers to the value of what you give up by choosing to dine out instead of choosing to prepare the meal at home.
When you choose dining out over dining in, you automatically give up the right to purchase anything the added cost could have purchased. And what else could you have purchased with that added cost?
"No big deal" you say? Adjust the following selections to reflect your situation and then read the eye-opening customized text that follows the form.
If you continue your present dining out routine, by the time you reach retirement age you will have spent a total of $41,600 on dining out -- $5,426 of which represents tips alone. But that's just the "tip" of the opportunity cost iceberg.
If instead of dining out you chose to prepare all your meals at home and take bag lunches to work, you could save as much as $29,120 over the course of the next 20 years (assuming you can buy the at-home ingredients for 30% of the dining-out cost).
Then, if you invested the savings on a monthly basis and earned a 6% return, by the time you reach retirement age your dining-at-home savings account would be worth $56,341.
Finally, if you converted your savings into a retirement annuity you could withdraw $626 per month for 10 years, bringing the total opportunity cost of your dining out to $75,060.
Now I'm not trying to talk you into never dining out again. Instead I simply want to make sure you are aware of what you are giving up in the process. After all, part of making wise financial decisions is to know ahead of time whether or not the benefits outweigh the costs.
The problem is, sellers only make you aware of the benefits, not the hidden costs. That's where I hope to be of some assistance.