Personal Finance 1st Edition by Jack R. Kapoor

Exercise 6

1 What opportunity costs are associated with money management activities?

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2 What are the three major money management activities?

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3 What are the benefits of an organized system of financial records and documents?

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4 What suggestions would you give for creating a system for organizing and storing financial records and documents?

Step 1 of 4

There is different opportunity costs associated with different money management activities. Opportunity costs are the trade-offs for different decisions related to money management.

Following are the main opportunity costs:

a) Saving for future entails lower current spending and vice versa. Thus, there is trade-off between current and future expenditure.

b) Spend more time for researching to find the most economical deals. Thus, there will be trade-off between time and money.

c) There will be also a trade-off between paying cash and buying goods on credit. Buying goods on cash reduces the amount available in the present whereas credit purchase reduces future availability of funds.