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Showing posts from March, 2016

Impact of Wrong Decisions in Personal Finance

We have all made mistakes in past and most likely would also make mistakes in future. Making mistakes is not crime but is something human in nature.However, we must learn from past mistakes and failure to do so is most undesirable. When it comes to personal finance decisions, the best way of learning is by analyzing the opportunity cost for our bad decisions. Opportunity Cost: But before we start, let us first understand what is 'opportunity cost'. The opportunity cost can be understood as the cost of doing any action measured in value terms of the best alternative that is not chosen or is foregone. a sacrifice value of the second best choice available to someone who has picked among multiple choices Opportunity cost is a key concept in economics, and is used in decision making where there are scare resources to be optimally utilized. The concept can be applied beyond financial costs: you may apply it for lost time, pleasure or any other resource that provides