Every day we face decisions on how to intelligently invest our valuable resources: time, energy, and money. When we make a decision, there is always an opportunity cost. We forgo that we believed had less value.
An opportunity cost is defined as the value of the second-best opportunity. For example, if we invested in a property, we had to forgo investing in something else. When we make a choice, we forgo all other options; those options are what we call opportunity costs.
What if Elon Musk decided to retire after PayPal was sold? What if Jeff Bezos decided not to start an online bookselling business? We all face decisions that affect our future and those around us.
What if we took that job offer several years ago? Where would we be? What if we spent more time with our family? Would it have made a difference in our relationships? The decisions not chosen are paths to possible futures where it could have been better or worse; that’s our opportunity cost.
Benjamin Franklin said, “Beware of little expenses; a small leak will sink a great ship.”
Fortunes can be lost and earned back again, but reputation, legacy, and quality of life are not as easily regained when lost. The opportunity cost of not getting it right can be much higher in these areas of our life.
Here are three questions to ask ourselves, whether it’s regarding an investment or a life choice, to help you make better decisions and improve the odds the opportunity cost of our other options turn out to be truly the second-best option:
- Are we honest with ourselves? – We can easily deceive ourselves just because we want something bad enough.
- Will this decision affect our credibility or reputation? – This is one of the most important things to consider and often least thought about until it too late.
- Is this a wise thing to do? – Seek out counsel when it comes to important decisions.
By asking ourselves these questions when faced with a decision isn’t a guarantee what we decide is better than the opportunity cost. Still, it will definitely improve the odds we will make wiser decisions with fewer regrets.
Are you self-aware enough to ask the right questions before making a decision, so more of your choices will be without regret?