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Opportunity Cost
What you give up when you choose one option over another. Every dollar and every hour has a second-best use.
Example
You spend $40 on a new game. The opportunity cost is the next-best thing you could have done with that $40, like saving it, putting it toward a trip, or buying two cheaper games. The game cost more than its price tag.
How it fits in
The cost of any choice is not just what you pay. It is also what you cannot do with the same money or time afterwards. Asking 'what is the next-best thing I could do with this?' is one of the cleanest tests of whether a purchase, a job offer, or a project is worth it. Sometimes the next-best option is much better than the obvious one.
Where this is taught
Related terms
When the money you earn from saving starts earning its own money on top.
Interest paid only on the original amount, never on the interest you have already earned.
Needs are the things that keep you safe and well. Wants make life nicer. Mixing them up is what empties most budgets.