In addition to immediate missed opportunities, you may also lose out on interest you could have earned by saving or investing that money. On the flip side, you may end up owing more money in interest by not using the money to pay down credit card debt or other loans more quickly. In those ways, spending $100 could end up costing you hundreds—even thousands—of dollars over the long run.
Good Choice or Bad Choice?
Opportunity costs refer to everything you can’t use money for once you’ve spent it. For example, if you spend $100 on a night out with friends, you can’t save that $100 toward your new car or use it to pay down your student loans more quickly. It’s about the opportunities you miss out on when you spend money. That doesn’t mean spending your money that way was a bad choice; it just means you lost the opportunity to use that money a different way once you’ve spent it.