What is opportunity cost? 💵

published on July 15, 2020

A gaming console or a new phone? Hmmm New trainers or a big night out? Hmmm Choosing between things you really want is hard If you've created a budget to try and save some money,

You'll have to decide what your needs and wants are You only have so much cash, so you need to make choices Opportunity cost is what you lose by choosing one alternative over another For every opportunity you choose, there might be something you have to give up Mario is torn He needs a new phone pretty badly, but he's desperate to upgrade his gaming console too

Small problem – he's only got $900 and that won't buy both, so he has to choose Mario could settle on a cheaper phone which costs $500 and walk away with both the phone and console The opportunity cost is that he's ended up with a less fancy phone with fewer features Or Mario could work an extra shift at his job, so he has more cash for a newer phone,

But there's an opportunity cost there as well He'll have to spend money on public transport to and from work His time is also a cost If he didn't have to go to work, he'd have more free time, to hang out with his mates or just sleep There are other factors to consider too Maybe Mario needs a better phone for work,

Or he could be driven by emotion He wants to keep up with his mates My five cents is, it's easy to forget about opportunity costs because you can't really see it, but it's a handy tool to help you to stick to your budget and decide how to spend your precious dollars Hmmm

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