Opportunity Cost
The value of the next-best option you gave up by choosing something else.
Every financial choice forecloses others. Opportunity cost is what you gave up — the return you didn't earn, the debt you didn't pay down — by using money one way instead of another. It's the concept behind questions like "should I pay off this loan early or invest the money instead?"
Worked Example
Putting $10,000 toward extra mortgage payments guarantees you save whatever interest rate the mortgage charges. Investing that same $10,000 instead trades a guaranteed return for a shot at a higher, uncertain one — the opportunity cost is whichever path you didn't take.
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