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OPPORTUNITY COSTS

27/3/2014

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Editor: Crass Cash
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Opportunity Costs are one of the core principles taught in collegiate economics class.  And for a good reason!  It's very important that you know this concept since like gravity, it applies to everybody.  

Unless you're a whacked out philosopher who doesn't believe in time, then this applies to you.  Every second that goes by is an opportunity cost.  Simply stated, an opportunity cost is just the cost for doing one activity versus another one.  What is the opportunity cost of going to the beach?  For buying a new car?  For taking this job over another one?

Here's a simple example.  You work at a job that pays you $10 an hour.  But there's another job out there where they will pay you $12 per hour.  So while you're getting paid $10 an hour you're 
"costing" yourself $2 per hour.  From a financial standpoint it's important that you reduce or eliminate your opportunity costs as much as possible.  

However, there are limits to this.  Things such as health, happiness, and risk are factors that can't be quantified, so a rational, yet still emotional judgement needs to be made regarding these decisions.  Taking a job that makes you miserable for an extra $1 an hour isn't worth it.  It's important that you weigh these options carefully.  
1 Comment
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    This website was created due to the atrociously misguided financial advice that I've heard over the decades.  Financial freedom is not intellectually strenuous, but it takes discipline. 

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