Opportunity Costs or How Not Watching TV will Help You Make Money
Posted: 09 Aug 2007 09:45 AM CDT by www.DoshDosh.com
The amount of money you can earn online depends on how you manage your opportunity costs. The principle behind this is simple: Review the time commitments you currently have and focus on projects that give you the greatest returns.
It’s difficult to personally work on multiple businesses or websites and expect to do well on them. I’ve mentioned before that knowing when to quit your projects is an important factor for success.
The trick here is to take a good strong look at the current commitments you have and decide if the costs and requirements are beyond what you can afford.
It is also important to estimate the returns on investment for the project. How much can you expect to make from it? Will it take 6 months before it brings in revenue? Will you be sustainable until then?
Here’s an analogy. Did you know you can earn a million dollars by not watching TV?
Guess what? If you decided to give up TV and invested the money you saved, you would get that $1 million — and probably a lot more.
People rarely consider the cost of watching TV, and when they do, they usually focus on the cost of their monthly cable bill. The truth is that there are a wide variety of costs associated directly and indirectly with having a TV.
This recent article suggests that TV drains your finances because one often purchases add-ons to complement the television set. This includes cable, pay-per-view, entertainment systems, gaming consoles, movie rentals and electricity.
These products and services are the associated expenses that come along with a TV and are usually manageable if you know how to really operate on a budget.
However, there are some other implications from having a TV. These includes the subtle influence of commercials as well as the opportunity costs involved in not having a TV.
A huge hidden cost of TV that people never consider are all the commercials they watch. The commercials are there to get you to buy products — and they are effective…
At $200 in extra spending for each hour watched, that means that the average person spends an extra $6,300 a year due to TV commercials that they wouldn’t have spent if they didn’t watch TV.
Another cost often overlooked when considering the price of watching TV is the opportunities forfeited when you choose viewing over something else.
Assuming that your time is worth at least the minimum wage of $5.85 per hour, your opportunity cost is $737 a month if you view the average amount of TV.
The article concludes that if you invested the money spent on TV watching, you would make more than a million dollars in the long run by investing the money and time elsewhere.
How to Measure Opportunity Cost for Your Money Making Projects
This case study on TVs exemplifies the considerations one should take into account before embarking on a new business or website.
Opportunity cost is a very important concept which involves one question: Would you make more money doing something else with the same time and money investment?
Here’s a checklist of other questions that may help:
- When will this new project start making money?
- How much can I realistically expect to earn from it?
- What is the amount of time required on a daily basis?
- What other projects do I have at the moment that are equally important?
- Can I outsource the work for current projects effectively?
- What are the expenses involved in this project?
- Can I take on this new project and still expect to do well on my current work?
- Do I have a long term business model for this new project?
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