Everything costs something bro
Winning somewhere, somewhere else you just lost something though
The cost of opportunities is always good to know
But if you know that then you're good to go
I could not have put it better myself.
You may watch the video but be warned that the G-Eazy also explores his feelings on non-economic issues with language some may find objectionable.
That is well said. The opportunity cost of an alternative is what you give up to pursue it. "Winning somewhere, somewhere else you just lost something though." He also made a good point by stating that "if you know you're good to go" there won't be any surprises or disappointments. Costs depend on what you give up, and this depends on the decision that you're trying to make. (Froeb, et al) When you spend money on one thing you forgo the opportunity to spend that money on something else. Everything does cost something.
ReplyDeleteWhen making big decisions like buying a home or starting a business, you will likely scrupulously research the pros and cons of your financial decision, but most of our day-to-day choices aren't made with a full understanding of the potential opportunity costs. If they're cautious about a purchase, most people just look at their savings account and check their balance before spending money. For the most part, we don't think about the things that we must give up when we make those decisions. However, that kind of thinking could be dangerous. The problem lies when you never look at what else you could do with your money or buy things blindly without considering the lost opportunities. (Investopedia)
By buying everything you may want you are deciding not to put money in savings or save your money for a trip or an emergency fund. There are many missed opportunities here that could be more beneficial. It's imperative to see what we're missing out on and not just satisfy our need at the time.
1. Managerial Economics: A Problem Solving Approach. Froeb, McCann, Shor, and Ward. 4th Edition 2016, South-Western Cengage Learning
2. http://www.investopedia.com/terms/o/opportunitycost.asp