What is opportunity cost? Definition and everyday examples
Opportunity cost is what you give up when you choose one use of your money or time over another. Here is the definition, with an everyday example worked out.
Checked October 22, 2026
Opportunity cost is the cost of the next best use of your money or time when you choose to buy or do one thing rather than another.
What opportunity cost is
That is the CFPB's definition, and the important phrase is next best. It is not everything you could have done with the money. It is the one thing you would have picked if you had not picked this.
Every choice has one. Spend a Saturday on overtime and the cost is the Saturday. Spend $600 on a TV and the cost is whatever else $600 would have done.
How it shows up in your money
Opportunity cost never appears on a bank statement. That is why it is easy to miss. The TV shows as a $600 charge, and the thing you did not do with $600 shows nowhere.
A common mix-up is to treat it as the price. The price is what you pay. The opportunity cost is what you give up. They can be the same number or very different ones.
It can also point the other way. Saving can have an opportunity cost, since money kept in an account is not buying the thing you wanted now.
When two people choose
For a couple, the useful question is often: what is the next best use of this money for both of us? A purchase one of you wants can look different when set against a goal you both have, like a house deposit.
A $600 choice (made-up numbers)
- You have $600 and two ideas: a new TV, or paying down a card balance
- Say the card charges 24% interest a year
- Interest you would avoid in a year by paying it down: $600 x 0.24 = $144
- Opportunity cost of the TV: the next best use, which here is about $144 of interest you still owe
- The TV costs $600 to buy and gives up about $144 a year of savings
More words like this in money words, in plain English.
Questions people ask
What is opportunity cost?
The cost of the next best use of your money or time when you choose to do one thing rather than another.
What is an example of opportunity cost?
Spending $600 on a TV when you could have put it toward a debt. The debt payment is what you gave up.
Is opportunity cost the same as price?
No. The price is what you pay. The opportunity cost is the next best thing you give up.
Does opportunity cost apply to time?
Yes. The CFPB's definition covers money or time.
Sources
1 source · read October 22, 2026
Every number on this page comes from consumerfinance.gov. If a source has changed since, the source is right.
Wonderful gives general information. It isn't a financial or tax advisor.