Want to Reach Your 2018 Goals? Learn This Simple Term From Economics
Want to make the most of 2018? Understand your opportunity costs.
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Historian Thomas Carlyle once famously called economics the "dismal science." And economists regularly get faulted for not predicting or preventing economic downturns, including the Great Recession that began in 2007.
Though it may be a tad dismal, economics isn't all bad. Even if you can't use it to predict the future, the field does have some concepts that apply to everyday life--and not just supply and demand. One of the most important and applicable economic ideas is opportunity cost, or the cost of foregoing the alternatives once you've made a choice. For example, the opportunity cost of eating a hamburger is not eating a taco. The opportunity cost of taking one job is not taking another. The opportunity cost of marrying your spouse is not marrying someone else.
Or potentially spending the rest of your life sleeping on the floor of your friend's apartment, surrounded by fast food sacks and semi-clean clothes. (At least that's how I spent my single days, which is one of many reasons why I'm glad to be married.)
Point being, opportunity costs are the opportunities foregone that result from the choices we make.
Examining opportunity costs in hindsight can be a useful learning tool. It can also be a form of self-punishment that causes you to stew in a toxic state of regret.
However, the start of a new year is a great time to try and anticipate your opportunity costs in the coming year. In other words, if you continue to make the same choices, what are your opportunity costs? What is the opportunity cost of staying in your current job or career for one more year? The security that comes from working for someone else has several opportunity costs, including the potential to become an entrepreneur and control your own destiny. Becoming an entrepreneur has its own security costs too, including a more secure paycheck and the ability to take a day off.
No matter how much we tell ourselves that we can accomplish anything, the reality is that there are a limited number of hours in a day. The things you do and choices you make aren't the only contributors to your success. The things you don't do and the options you don't get to explore also define how successful you are.
Economists may not be much help in helping you prepare for the next recession.
But the concepts of economics can offer useful ways of understanding the world around us.
Including how we spend our time.