Every purchase has a hidden cost: the investment return you give up. A $5,000 car upgrade could be worth $14,000 in 15 years at 7%. That doesn’t mean you shouldn’t spend – just that you should know the trade-off.
How to use the Opportunity Cost Calculator
- Money to spend
- Annual return on savings
- Investment period
- Tax on investment gains
- Annual inflation rate
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the amount you are thinking of spending, the return you could earn, the period, the tax on gains and inflation.
Tips
- Use the nominal annual rate and pick the compounding frequency your bank or broker states.
- Small differences in return or fees compound into large differences over decades.
- Run the calculation with a cautious, a central and an optimistic return to see the range of outcomes.
- Past returns do not guarantee future returns – nothing here is investment advice.
Common mistakes to avoid
- Comparing an APR with an APY or effective rate.
- Ignoring inflation, taxes and fees when judging a real return.
- Entering a percentage as a decimal (5 instead of 0.05 is correct here).
Inputs explained
| Field | What to enter |
|---|---|
| Money to spend | Amount in your currency |
| Annual return on savings | In % |
| Investment period | Units: years, months |
| Tax on investment gains | In % |
| Annual inflation rate | In % |
What each result means
- Value if invested (before tax) = [Money to spend]×(1 + [Annual return on savings]÷100)^[Investment period]
- Total savings after tax = [Money to spend] + ([Value if invested (before tax)] – [Money to spend])×(1 – [Tax on investment gains]÷100)
- Opportunity cost in today’s money = [Total savings after tax]÷(1 + [Annual inflation rate]÷100)^[Investment period]
- Real gain given up = [Opportunity cost in today’s money] – [Money to spend]
Example values
How the main result changes when Money to spend changes and everything else stays at the example values above:
| Money to spend | Total savings after tax |
|---|---|
| 2,500 | 6,237.94 |
| 3,750 | 9,356.91 |
| 5,000 | 12,475.88 |
| 6,250 | 15,594.86 |
| 7,500 | 18,713.83 |
| 10,000 | 24,951.77 |
Formula
Future value = amount × (1 + return)^yearsAfter-tax gain = (FV − amount) × (1 − tax rate)Opportunity cost in today's money = (amount + after-tax gain) ÷ (1 + inflation)^yearsWorked example
Inputs — Money to spend: $5,000; Annual return on savings: 7 %; Investment period: 15 years; Tax on investment gains: 15 %; Annual inflation rate: 2.5 %.
Results — Value if invested (before tax) = $13,795.16; Total savings after tax = $12,475.88; Opportunity cost in today's money = $8,614.17; Real gain given up = $3,614.17.
Frequently asked questions
What is opportunity cost?
The value of the best alternative you give up when you make a choice.
Should I invest instead of spending?
Weigh the opportunity cost against the value the purchase brings you.
Why adjust for inflation?
So the future value is shown in today's purchasing power.
What formula does the Opportunity Cost Calculator use?
Future value = amount × (1 + return)^years.