Opportunity Cost are the Only True Costs in Reality

One summer’s day, in a field, a Grasshopper was hopping about, chirping and singing to its heart's content. An Ant passed by, bearing along with great effort an ear of corn he was taking to his nest.
"Why don’t you come and chat with me," asked the Grasshopper, "instead of toiling your life away?"
"I am helping to store up food for the winter," said the Ant, "and I recommend you to do the same."
"Why bother about winter?" said the Grasshopper. "We have got plenty of food at present."
But the Ant went on its way and continued its toil.
When winter came, the Grasshopper found itself dying of hunger, while it saw the ants distributing, every day, corn and grain from the stores they had collected in summer.
Then the Grasshopper knew...
Work and invest while times are good, so your savings can carry you through when time are not as good.

This ancient fable was written by Aesop around 2600 years ago. What I love about it is that it demonstrate the idea of "opportunity cost" very well. Opportunity cost is a key concept in economics, and is in fact the only type of cost that really matters in economics and in reality. It is used in attempts to understand all biological behavior. Economics is a science which studies the quality of decisions, by their effectiveness in achieving goals within a reality of scarce and limited resources.

An opportunity cost is the better opportunity you passed up for the decision you made. To get the most out of life, to think like an economist, you have to be know what you're giving up in order to get something else. Sometimes people are very happy holding on to the naïve view that something is free or what we immediately paid for it. They don't want to hear about the hidden or non-obvious costs. Thinking about foregone opportunities, the choices we didn't make, can lead to not maximizing our potential and weakening our ability to invest in our grand children.

We cannot see the future so we can not ever know what our true opportunities are, but we can make some very statically and probabilistic guesses. A complete disregard or ignorance of opportunity costs certainly isn't going to do you any good.

So for the grasshopper the opportunity cost of chirping and singing his heart content instead of storing provisions was surviving the winter.

The opportunity cost of spending $100 dollars today is $200 in savings 10 years from now or $3200 in retirement account, which would generate $128 in annual income for you, also it is $102,400 in capital that could be in your great grandchildren's inheritance.

The opportunity cost of procrastinating on your studying is the better wages you would have made from the better grades which will cost you thousands upon thousands in the opportunity costs of forgone wages.

You have the potential to live into your nineties with energy and health and to meet your great grand children. You can forgo that opportunity and eat poorly, gain weight and die in your eighties with chronic pain never meeting your great grand children.

Don't Be Naïve and Consider the Opportunity Costs When Making Your Decisions.