Opportunity Cost Calculator

Opportunity cost is the value of the next best alternative you give up when making a decision. In financial terms, when you spend money on a purchase instead of investing it, the opportunity cost is the investment return you forgo over time.

The basic opportunity cost formula is: Opportunity Cost = Future Value of Investment − Purchase Price. The future value is calculated as FV = P × (1 + r)^n, where P is the principal (purchase price), r is the annual rate of return, and n is the number of years.

The calculator applies your income tax rate to the investment gains (not the principal). So if you earn $5,000 in gains and your tax rate is 25%, you'd owe $1,250 in taxes, leaving you with $3,750 in net gains. The after-tax future value is your original principal plus those net gains.

Inflation erodes the purchasing power of money over time. Even if your investment grows nominally, the real value of that money in today's dollars will be lower. This calculator adjusts the after-tax future value by the cumulative inflation rate to show you the true real-terms gain.

It depends on where you would invest the money. The S&P 500 has averaged approximately 10% per year since its inception in 1926. A more conservative estimate for a diversified portfolio might be 6–8%. Use a rate that reflects your realistic investment strategy.

Thinking about opportunity cost encourages you to consider what you give up with every spending decision — whether it's a daily coffee habit, a new car, or a vacation. Even small recurring expenses can compound into significant sums over a decade or more when you factor in potential investment returns.

No — opportunity cost applies to any resource including time, energy, and attention. However, in financial planning it most commonly refers to the foregone return on capital. This calculator focuses specifically on the monetary opportunity cost of spending versus investing.

This calculator assumes a fixed annual rate of return compounded yearly, a constant income tax rate applied to gains at the end of the period, and a steady annual inflation rate. Real-world returns fluctuate, and tax treatment of investments may vary based on account type (e.g. tax-advantaged accounts like 401(k) or IRA).