True or False: Opportunity cost refers to what you give up by making a choice.

Opportunity cost is fundamentally defined as the value of the next best alternative that you forgo when making a decision. When you choose one option over another, the benefit or value you lose from not choosing the alternative is your opportunity cost. This concept is crucial in personal finance because it helps individuals and businesses evaluate the potential impacts of their financial decisions, ensuring a more informed analysis of the trade-offs involved.

In the context of financial planning, recognizing opportunity costs allows for better resource allocation, as individuals must consider not only the direct benefits of their choices but also what they are sacrificing. Properly understanding this concept leads to more strategic decision-making when it comes to saving, investing, and spending. The statement is, therefore, true, as opportunity cost directly relates to what you give up by making a choice.