Considering This Will Make You Smart With Money!You are sitting in a restaurant looking at the menu and you have a choice of ordering chicken or fish. Both meals are $10 and the server recommends the chicken. You order the chicken, pay $10 and leave the restaurant.
What did that chicken meal cost you?
To determine the total cost, you must consider the amount you pay plus the Opportunity Cost.
‘Opportunity Cost’ is the value of what you give up when you choose to do one thing over another.
The cost of the chicken meal is $10 plus the satisfaction of eating what you gave up . . . the fish.
Financial decisions become clear choices when you consider opportunity cost.
For example, if you spend $100 on a night out, you miss out on the benefit of putting that $100 into a savings account, earning interest and having money available for a future emergency.
Every time you spend money, there's an opportunity cost associated with it.
So, whenever you buy a product or a service you are in fact faced with two costs; the price of the product/service and the ‘opportunity cost’ of not being able to use that money for anything else.
Opportunity costs are neither good nor bad. They're simply the price you pay to have what you choose. The problem comes when you make a choice to spend money without considering opportunity costs.
To ensure you are smart with your money - Always Consider the Opportunity Cost!