How Opportunity Cost Can Help You Make Better Decisions

Smarter and Harder

Opportunity cost is a figure commonly used in fields like economics and finance. But it's also something we can use to make better choices throughout life.

Simply, opportunity cost is the missing value of an option not taken. It's what you give up when you choose something else.

For example, if option A would pay you $10 and option B would pay you $25, then the opportunity cost of option A would be $15, the additional money option B would have paid.

Of course, it's not always so simple in practice. Weighing the potential gains and costs of different choices can be quite nuanced.

However, thinking about decision-making in this way can be incredibly valuable for people who make large-scale choices about money and investments.

But at the same time, it can also be a useful way to approach decisions in everyday life, even ones that have nothing to do with money.

For instance, how do you choose between a cozy night in, or going to a party with friends? Not always an easy choice.

Opportunity cost can offer a new way to approach these decisions. Which will likely make you feel happier? Which is more likely to cause regrets?

Again, these answers aren't always easy or clear-cut. But looking at the problem from a new perspective can offer valuable new insight and clarity.

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