Lost Opportunity Cost
June 11th 2008 18:46
A friend of my mine recently told me about something called “Lost Opportunity Cost”. He is also my insurance broker and financial advisor so when he says anything I usually take notes. I wanted to write about this because it may change the way some of you think about money or even how you spend your money. It may help you to become less wasteful because you will be more careful about the choices you make with money. Opportunity cost is basically the cost of choosing one thing over another. For instance if you have $10.00 and you use it to buy two large caramel iced mochas at $4.75 each, that money is then gone forever. Once you spent the money you lost your opportunity to use it for something else. The cost is how it might impact you in the future for spending it. Let’s say you spend your money on those treats and then next week you buy groceries only to get home and then realize that you forgot to get diapers for your baby. You have one diaper left and you spent every dime you have on food, so then you panic because you realize that the money you spent on that quick coffee fix, could have been used for a more important need. This same concept applies to larger purchases as well, but it more severely affects those who are living paycheck to paycheck. The same $10.00 could have been spent on a package of 30-40 diapers which usually lasts well over a week.
We all tend to be wasteful and make the wrong choices about how we spend our money, but next time you spend money it’s a good idea to think about how your purchase may affect you in another way. You might stop yourself from being wasteful buying one thing and rather spend the money on something that is a bigger benefit to you and your family. By doing this you will make better choices about the things you buy and learn how to make your money work for you.
We all tend to be wasteful and make the wrong choices about how we spend our money, but next time you spend money it’s a good idea to think about how your purchase may affect you in another way. You might stop yourself from being wasteful buying one thing and rather spend the money on something that is a bigger benefit to you and your family. By doing this you will make better choices about the things you buy and learn how to make your money work for you.
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Comment by Jen
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Money Baffle