The Simple Life & Opportunity Cost

Year 12 Economics, a long time ago. What is Opportunity Cost and how does it relate to simple living or living within your means.

Basically if you are living cash only, you can't think of opportunity cost. You have to let some things go. It is very hard to do, and I admit lately I haven't been doing it. Mostly because of the place in where I live. I would rather get things when I see them. Yes, it probably impacts my finances, yet I think I still let some things go, some opportunities. It impacts my finances the most when I am paying for car repairs as I am now, and did in the spring.

What is opportunity cost? Opportunity Cost is an economic term that refers to the advantages of the second best business alternative, which are forgone as a result of accepting the best alternative.

The costs of a missed opportunity.

What does that mean? Basically if you see a sale, you don't have the money and you have to buy it when you do have the money and the price has gone up.

That is how I remember it. What we seem to do as people is to convince ourselves that we have to buy it now.

In my case, it may not be there next week, or I may not be in that town again for 12 months.

Yesterday I saw two punnets of lavender bushes, twelve plants for a hedge I was advised to get for our property for selling purposes. I won't see these bushes again. Technically I shouldn't be spending any money because I need it for something else. There would be a cost to missing this opportunity as they were $10 for both punnets. I did buy them, but I didn't buy the fruit trees early this year that we had been advised to put in, I couldn't afford them.

Here is basically what the net says it is.

Interesting reading, very heavy. And another. This too is interesting. It says: Opportunity cost is what you have to give up to get something.

Lavender Hedge Edging a Path (Lavandula), Watering Can by Linda Burgess

Comments

Tracy said…
For me, I think a certain amount in the budget put aside for those specials that are too good to pass up is a good idea. Sometimes, I will use my 'pocket money' to buy those little extras for the home or garden.
Linda said…
Yes, that is a good idea. I found it a lot easier to manage when I had savings for my son's twice yearly uni accommodation. I lent the money to myself sometimes and didn't get into a muddle with it. It has been a year now since he is working and harder to remember.

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