I'd like to start a discussion about opportunity costs, specifically in regards to things with annual contribution limits, such as IRA's or I-Bonds.
Let's assume the following for the sake of discussion.
1. You have a guaranteed $10k bonus at the end of this year, and a guaranteed $30k bonus at the end of next year.
2. You have a 10k loan at 5%
3. I-Bonds are currently paying 2%
1. Pay off the loan the first year, and then use the $30k next year for $10k in I-Bonds and $20k in another investment.
2. Buy I-Bonds both years, and pay off the loan at the end of the second year, leaving $10k for another investment.
In both options, at the end of year 2, you will have paid off the loan, and $30k left over invested
Mathematically, the higher expected value is to pay the loan first. However, you will then forever lose the opportunity to have that extra $10k in I-Bonds. What if a few years later you wish you had money invested in I-Bonds instead of an alternative investment?
How should one think about this? Simply always maximize the current EV and not worry about opportunity costs?