OPPORTUNITY (COST) KNOCKS
There is a cost, and a gain, for everything. Thus the phrase "Opportunity Cost".
Even if someone else pays the meal ticket, you have paid with your time.
Beyond a full stomach, what did you gain (or lose) from the "free lunch"?
Quite often the lure of the "free lunch" blinds us to the need to carefully compare
our options.
EXAMPLES
An individual in need of obtaining a mortgage shops for the lowest
interest rate. He locks into the lowest interest rate, but the lender
never gets him to the settlement table because of delays that result
from having gotten the "best" rate.
An individual is buying a house and insists on offering the lowest
price. Instead he should have paid a higher price and let the seller
contribute to his closing costs. The potential opportunity cost? A slightly
higher price may have persuaded the seller to share your closing costs.
An individual doesn't want to pay commissions on stock transactions,
instead enlisting a discount broker. The opportunity cost here: You may
lose the personal interest necessary to monitor the market and your own trades,
and stop investing wisely and consistently.
THE BOTTOM LINE
Compare carefully before you choose your opportunity, keeping in mind these axioms:
- If it sounds good to be true, it's probably false.
- You get what you pay for... but only if youre paying attention.