Question: My brother stole money from my parents 30 years ago. He said he was borrowing it, but he never paid it back. After they died, the stolen money was never brought up and the inheritance I got was the same as him. This has always been a sore spot with me. I won’t be around much longer to enjoy that money, but my kids might get something out of it. Do you think he owes me the money, or the money plus interest? How would I figure that?
Answer: Lost opportunity cost.
The term is used in economics to describe the true cost of something lost, stolen or wasted.
If I should have gotten a $1,000 refund on my taxes each year, but didn’t discover this fact for ten years, then I am out not only the $10,000, but also the additional money I might have reasonably earned on it if I’d had it.
Then suppose that, due to the fact that I didn’t have the $1,000 each year, I was incurring credit card debt at an 18% interest rate. The additional interest charges would exceed $17,000. Wow, that starts to add up.
So allow me to hypothesize that your brother borrowed $10,000 from your parents 30 years ago. You didn’t mention your understanding of why he borrowed the money. But usually when I see this sort of thing, it’s because Brother has fallen on hard times (self-inflicted or not) or because Brother believes he has a “too good to pass up” opportunity and Mom and Dad are the only ones who believe in him enough to fork over the cash.
Either way, the money is gone and has never been mentioned again (to you). This perceived familial fraud has cost you not only your half of the $10,000 (remember, Brother would have gotten half), but growth on the funds. If you assume a 5% cost of money, the lost opportunity cost is about $33,000. If you assume a 10% cost of money (pretty darn high), the lost opportunity cost is over $150,000!
As you can see, the calculation of a lost opportunity largely depends on your assumptions about what you might have otherwise done with that opportunity.
But even though you can attempt the mathematical task of calculating the cost of your lost inheritance, can you calculate the relational cost of demanding that your brother make things right (as you see them)?
Russian author Leo Tolstoy wrote a little fable he titled “A Lost Opportunity.” The story involved two neighbor families who once loved each other, but were then divided by a feud. The feud escalated to the point where one family set the other family’s house on fire. Then a spark from that fire caught the other family’s house on fire. Both families lost their houses to the flames of unforgiveness.
Something tells me your brother might not consider what he did theft. And by never bringing it up (to you), something tells me your parents didn’t consider it theft. Perhaps it was, but I suggest you consider the possibility they didn’t see it that way.
You say you are most concerned about your children. Great. It sounds like they only have one uncle from your side of the family. What happens if your determination to “make things right” burns down the relational house they have with their extended family?
Is it worth that?
It might be a good idea to consider that lost opportunity cost as well.
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Byron R. Moore, CFP® is Managing Director / Planning Group of Argent Advisors, Inc. Email him at firstname.lastname@example.org. Write to him at 500 East Reynolds Drive, Ruston, LA 71270 or call him at (318) 251-5858. The opinions of any single advisor do not necessarily reflect the opinions of Argent Advisors, Inc. No forecasts can be guaranteed. Argent Advisors, Inc. does not offer tax, insurance or legal advice. The information contained in this column should not be construed as a substitute for personalized investment, tax, insurance or legal advice.