Are you always weighing your options before spending money? Do you think about how you can invest your money more wisely? That, friends, is opportunity cost.
In a nutshell, opportunity cost is the benefits you miss out on by making one financial decision over another! A lot of the time, we miss out on potential opportunity costs because we don’t even think of them!
To properly evaluate opportunity cost, you need to think from every angle you can and weigh the costs & benefits of each of those angles. That’s not always easy and sometimes we might miss a great opportunity… that’s okay.
Self-Control… Do You Have It?
When we think of opportunity cost, there is something else that comes to mind that isn’t always explicitly associated with the concept: self-control. Sometimes we make less-than-smart purchases because we simply want to, and we lose sight of what we need.
A lack of self-control can be devastating for our personal finances. Self-control can help you make the most of opportunities so that you’re getting the most bang for your buck.
Battling With Yourself
To battle losing self-control we recommend two things.
Tell yourself (actually say it to yourself out loud) that you’re not going to buy anything big until you’ve done your research. And we mean REAL research. Did you check price comparisons for at least three different stores? Did you read online reviews from real customers on several different websites? How about asking people who you know about what product they’re using? Did you take a peek at the competitors?
Until you are a 10 out of 10 on the confidence scale, you should not be making any major purchases. Doing the research doesn’t only help us make smarter financial decisions, it also gives us time to sit back and think, “Do I really want or need to spend my money on this?”
Never lose sight of the big picture. You have goals and this means that you need to make sure your buying decisions support or at least don’t interfere with those goals. Opportunity cost reminds us that the way we spend our money matters, it can have a huge impact on our overall finances over the long-term. If you buy something for three times more than it really should cost, it hinders your chances of achieving the things that are actually more important to you.
So, how do you not lose sight? Write your goals down. Talk about what you’re striving for with your loved ones. Heck, make a vision board or even better… use ours!
Get your copy of Wealthing Like Rabbits
Learn more about opportunity cost by reading Wealthing like Rabbits! We’ll give you a complimentary special edition when you sign up to be a member of The Village!