What a helpful metric Opportunity Cost is.

Opportunity Cost is an essential decision-making tool because it reveals the hidden costs of a decision.

For example:

• If you buy that pair of shoes, the material cost is easy to calculate. It will cost you $100.

• If you buy that pair of shoes, the opportunity cost is not so straightforward. And it’s affected specifically by your unique priorities and values.

Here are some examples of the opportunity cost of buying that pair of shoes, depending on your interests.

• That purchase cost you good seats for you and your person at that new show.

• That purchase cost you 3 movie nights for the whole family throughout the year.

• That purchase cost you 10 books that might change your life.

• That purchase cost you gift cards for your children’s teachers and daycare instructors.

Each of these opportunity costs, in turn, has resulting ripple costs.

For example, the opportunity cost of forgoing 3 movie nights for the whole family really breaks down into:

• Losing a potential opportunity to reward the kids for doing something outstanding

• Losing a potential opportunity to cut tension and clear heads during a difficult moment

• Losing a potential opportunity to show the family you support them having fun in life

And the opportunity cost of forgoing buying 10 books is beyond limitless.

• ​Books are, in my view, one of the highest-ROI items you could ever purchase.

Let's bring it home lest the message escape from us. (Remember, too much opportunity cost analysis is menacing too: it might cause analysis paralysis, which won't do you any more good than the alternative of rushing forward into a decision.)

The point is this: for any finite resource you control, such as time and money, consider a wider range of possibilities you have for spending it.

For instance, I've found one technique provides a good balance in my decision-making: not too fast (thus missing better uses), and not too slow (thus losing out on further opportunities).

A good decision-making trick is to run my decisions by one filter:

Is this going to add value to me or someone else in my life?

It’s not always a cut-and-dried choice from there. But sometimes it is. And if that doesn't narrow it enough, that means you're probably going to make a pretty good decision no matter what you do. So just go ahead and make one, silly!