Life is short and full of choices. Choices that make or break us. We all love success and to look back someday and appreciate the choices we made. You won’t like regretting the decision you make today if its outcome won’t be as you’d expect, right? If you decide to do one thing, you won’t be able to do something else. Here are 7 examples of opportunity costs people incur every time they make a decision.
- Education vs Work
If you go to college, you’re more likely to spend at least four years for you to complete your studies. If you were to work instead, you could be having four years of job experience. The opportunity cost here is the value of the four years of job experience that you spent studying in school. Also, the wages that you could have earned during the time you spend going to college is the opportunity cost ignored.
- Business vs Business
Maybe you’re having some money and you want to invest in either business A or B for one year. And the returns you get for investing in A during this period is 20% and 14% for investing in B. If you choose to invest in B, the opportunity cost incurred will be the 20% returns that you could’ve made if you’d invested in A.
- Education vs Business
Education is expensive. There are different costs incurred such as accommodation, books, activity fee, and tuition fees among other costs. This is not a small amount for four years. You could also decide to invest this money in a small business. The opportunity cost is the value of the revenue you could’ve earned if you’d invested all the money.
- Education vs Education
There are very many learning institutions having the same curriculum. The quality of education you receive in institution A is better than that of B. If you choose to study in institution B, the opportunity cost will be the quality of education you could’ve received if you could’ve studied in institution A.
- Quality of Life vs Good Salary
Maybe you’re an employee in a company and you’re offered a new job elsewhere with a higher salary than what you were earning before. But the quality of life in the new destination is very low. The opportunity cost of the higher salary will be the low quality of life in the new place.
- Product vs Product
You could be owning a milk factory that can produce a certain amount of milk packets in a day. The factory can either produce fresh milk or sour milk. The opportunity cost of every packet of fresh milk will be one packet of sour milk.
- Service vs Service
You could be running a taxi business in your state. The taxis could take clients to different places of their choice around the area. The opportunity cost of offering a taxi service to a client from position X to Y is the ability to offer a taxi service from position X to Z.
Before making a decision, you need to weigh the pros and cons and understand the potential opportunity costs involved. Think about what you must give up when you’re making any decision. Don’t spend your finances blindly without considering the opportunities you may lose. So, always consider the opportunity costs of the next best choice. There are blogs relating to personal finance management that you can look for to help you make informed decisions.