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Opportunity cost is the value of the next best alternative that you give up when making a choice.
In Depth
Every decision you make involves a trade-off. The opportunity cost is not the total value of all alternatives, but specifically the value of the single best alternative you did not choose. Understanding opportunity cost helps you make better financial decisions by weighing the benefits of your chosen path against the benefits of what you sacrificed.
Example
The opportunity cost of buying a new car might be the money you could have invested for retirement.