What Is Opportunity Cost?
Opportunity cost is the value of what you give up when you choose one thing over another. When you spend $500 on a purchase, the opportunity cost isn't just $500 — it's the $500 plus all the growth that money could have generated if invested instead. Over time, this difference is enormous.
The latte factor is real (but also overblown)
A $6 daily coffee habit costs $2,190 per year. Invested at 10% for 20 years, that's over $137,000. That's real money. But here's the nuance: if that coffee brings you genuine joy and you're already saving 20%+ of your income, it might be worth it. The point isn't to never spend — it's to spend intentionally by understanding the true cost.
Big purchases vs recurring expenses
One-time purchases get all the guilt, but recurring expenses are where the real money hides. A $600/month car payment over 5 years costs $36,000 — but the opportunity cost is closer to $46,000 when you factor in lost investment returns. That extra $10,000 is invisible but very real.