In our fast-paced lives, it's easy to get caught up in the hustle and bustle and lose sight of what's most important without having life balanced. In business and life, we're constantly bombarded with choices about how to best use our time, energy, and resources. In this article are 4 ways to leverage the power of opportunity cost for better time management.
As you consider how to find balance, there's a significant mindset shift that often is overlooked but needs to be considered… and it's called opportunity cost.
Opportunity cost is the idea that every choice we make has a cost, not just in terms of money but also in the expenditure of our time, energy, and other resources. Whenever we choose, we're giving up the opportunity to do something else.
As doctors, you know that your time is a precious commodity. You can't be in two places at once. You can only see a limited number of patients in a day. You can't be in the hospital and pick up your kids from school at the same time. That's why it's so important to consider the opportunity cost of any decision you make.
If you understand opportunity cost, you can make better choices. It's a powerful mindset shift that can help us focus on what's truly important. When you make choices with an opportunity cost mindset, you'll be able to see the actual value of each option and make the best decision for your life.
Here are four ways to leverage the power of opportunity cost for better time management:
1. There's Always a Hidden Cost
You give up forgone opportunities when choosing one option over another. On the other hand, Sunk costs are costs you've already incurred and can't recover.
Let's say you're considering opening your own practice. You know that getting the practice off the ground will take a lot of time and money. But you also know it will be successful, and the rewards can be significant.
In this example, the opportunity cost of taking those steps could include the initial stable income you forego by not working at an established practice. The sunk cost is the money you'll have to spend to get the practice up and running — including setting up your own office, hiring staff, and marketing your business.
The opportunity cost of a decision is often difficult to quantify, but consider what the trade-offs are. One way is to ask yourself, “What you could have done with the time, money, or resources you spent on your choice.” Another way is to compare your choice to the next best alternative.
Of course, there's no guarantee that your practice will be successful in the above example, but if you believe in your vision and are willing to take the risk, the opportunity cost may be worth it.
2. What's Your Time Worth to You?
When something is “fungible,” it means that you can exchange it for something of the same value. And this concept is something that all entrepreneurs should understand. In the context of your busy life and household, it means that you can exchange someone else's time for money.
If you're anything like me, you can probably think of a few times when you've waited in line for a freebie or lost track of your weekend by fighting the battle with Ikea furniture. But I've since realized my time is worth more than wasting it on those unnecessary tasks. If I spend my days working or getting bogged down in the details of a DIY project, I'll miss out on many essential things, including family time, hobbies, travel, etc.
One way I've found to get around this is by hiring people to help me with things that I don't have time for or that I don't enjoy. For example, I've outsourced as much as possible. One way is by hiring a virtual assistant to handle my administration and social media.
I'm not saying you should outsource everything, but you should consider where to make quick wins. When you have the funds, it's an easy way to free up your time to focus on the things that are most important to you. After all, life is too short to not take advantage of every opportunity — buying your time back allows you to spend your time doing the things you love with the people you love.
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3. Think About the Consequences
In a recent podcast, I discuss a prior learning experience through a property development investment or syndication. Along with teaching me a lot about due diligence, it also taught me I needed to look at prospective real estate deals with a different perspective: other than a simple yes or no, what else could I be doing with that money?
I realized I needed to look at opportunity cost when evaluating possible passive real estate investments:
- What else could I invest in, if not in this project?
- Could I make a higher return elsewhere?
- Is there another project I'm more passionate about?
With all this in mind, I've made better investment decisions and avoided some costly mistakes.
As entrepreneurs, we must be mindful of how we spend our time and ask ourselves if it's giving us the best return on investment. Just like we wouldn't invest all our money in one stock, we shouldn't spend all our time on one project. Are we working on the right things? Do we spend too much time on one thing and need more on others?
Our time is finite — we only have so many hours in the day.
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4. Beware of FOMO and Analysis Paralysis
When you decide to do something over another task, the fear of missing out (FOMO) is so real! I struggle with this too, but keeping FOMO from stealing your enjoyment of the present moment or leading you to impulsive decision-making is essential.
While FOMO is a shared experience, remember that you've chosen to do something because you want to. So next time you feel the FOMO creeping up, take a step back and assess whether it's worth your time and energy.
And in the same vein, sometimes deliberating too much, or having too many choices, can actually be a bad thing. In past situations, I've found myself stuck in these loops and being so overwhelmed that I ended up choosing nothing and losing out on everything. Analysis paralysis can also prevent you from being able to make any decisions at all.
The bottom line on the power of opportunity cost and better time management…
In reality, we often choose to do things without stopping to think about the opportunity cost of these choices. But having a better understanding of why we do what we do can help us make better use of our limited time and resources.
Of course, there's no guarantee that any deal or situation will work out how you want it to, no matter how well you've done your homework. But if you're clear about what your time, energy, and money mean to you, you can confidently decide and move forward with your eyes wide open.