Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts

Monday, December 10, 2012

Net present value of running the Ho Ho Ho 5K

$5 compounded over five days, carry the one...
When I studied economics in college, the concept of time value of money was often discussed. In a nutshell, it's the idea that money available today is worth more than the same amount of money in the future. In consumer terms, the longer you hold your cash, the more you can grow its worth. So what does this have to do with running?

Next Saturday is the Ho Ho Ho Holiday 5K run that is held in Bethpage. I ran it last year and had fun. I almost broke 26 minutes and enjoyed seeing competitors dressed up as reindeer, elves and Santas. I've had this race on my schedule all year, but in the last month, I've decided to take a break from competing until 2013. Now I'm considering it again but I'm still not convinced that I want to do it.

This brings me back to the time value of money. If I signed up today, it would cost me $20 and that would be that. However, if I waited until the day of the race and then decided to run, it would cost me $25. So the price of indecision would be $5. Although five bucks isn't much to save, it can still buy you a couple of slices of pizza at Mario's.

But here's the thing. If I spend $20 to save five, and then decide on Saturday that I don't want to race, I'm out four times the amount I'd "saved." For that reason (and the fact that my wife may have already told me that we have plans for Saturday), I'll bite the bullet and take the $5 hit on race day. That seems to be the most economically sound strategy.

blogger templates | Webtalks