Opportunity Cost
The value of the best alternative you give up when you make a choice.
Opportunity cost is what you forgo by choosing one option over another. In personal finance it is a reminder that money spent today is also money that could have been invested and compounded, making the true cost of a purchase larger than its price tag.
Examples
- Spending $5,000 now means giving up what that $5,000 could have grown into if invested.