Understand The Importance Of Opportunity Cost

Individuals should understand the importance of opportunity cost and how vital their decisions are when it relates to money. What exactly is opportunity cost? The opportunity cost is simply what you give up or sacrifice to obtain an item or something in return. Individuals seem to be mindful of the noticeable costs when it pertaining to their direct cash or finance. On the other hand, the cost that can be more important is the indirect or cost that we do not seen. The overall goal is for individuals to make the best personal financial decisions once they have a complete understanding of opportunity cost. When purchases or decisions are being made does the individual ever think about what else they can do with their money or is this the best investment when making a choice. Personally, from experience I do not recall thinking too much about me

Explicit costs are usually recognizable for classification and recording” and implicit cost is defined as an “The cost associated with an action’s tradeoff, namely the wages the employee could have earned if the vacation was not taken.” (Business Dictionary 2017). When individuals make important purchase decisions that are costly such as becoming a homeowner, purchasing a new vehicle, or investing in other real-estate, are decisions that more thought is put into and looking at their advantages and disadvantages. Individuals who do not pay attention to important details such as other options when making purchases can result in a high-risk deal and outcome. In my opinion, for the individuals such as myself who are not used to considering other options when making purchases and decision and who never consider opportunity cost, it may be hard to think about opportunity cost in the future when making important purchase