When it comes to costs, not all are created equal. Understanding the different types of costs can truly unlock opportunities that you may not have realized.
Opportunity cost: This is the cost of what you give up when you make a choice. For example, if you eat cupcakes, you can’t also eat brownies. Every decision we make comes with an opportunity cost.
Sunk costs: These are costs that have already been incurred and cannot be recovered. Whether it’s time, money, or resources, once it’s spent, it’s gone. The key is to realize that sunk costs should not dictate your future decisions. It’s important to let go of what no longer serves you.
Marginal cost: This refers to the additional cost incurred by making one more unit of a decision. For example, the marginal cost of watching another show on Netflix may be zero, whereas the marginal cost of a tuna sandwich is the cost of the ingredients. Understanding marginal costs can help you make more informed decisions.
While it’s rare to find someone who makes decisions solely based on these types of costs, being aware of them can guide you towards more intentional choices. Embrace the power of understanding costs and seize the opportunities they present.