4 Ways to Leverage the Power of Opportunity Costs for Better Time Management

In our fast-paced lives, it’s easy to rush and lose sight of what’s most important without keeping life in balance. In business and in life, we are constantly bombarded with questions about how to best use our time, energy, and resources. This article has 4 ways to harness the power of opportunity costing for better time management

As you consider how to find balance, there’s a significant mindset shift that’s often 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 only in terms of money but also in the expenditure of our time, energy and other resources. Whenever we choose, we are giving up the opportunity to do something else.

As a doctor, you know that your time is a valuable commodity. You cannot be in two places at once. You can see a limited number of patients in a day. You cannot stay at the hospital and pick up your children from school at the same time. That’s why it’s so important to consider opportunity cost in any decision you make.

If you understand the opportunity cost, you can make better choices. This is a powerful mindset shift that can help us focus on what really matters. When you make choices with an opportunity cost mindset, you’ll be able to see the true value of each option and make the best decisions for your life.

Here are four ways to harness the power of opportunity costing for better time management:

1. There is always a hidden cost

When you choose one option over another, you give up missed opportunities. On the other hand, sunk costs are costs that you have already incurred and cannot recover.

Let’s say you’re considering opening your own practice. You know it will take a lot of time and money to get the practice off the ground. But you also know it will be successful and the rewards can be significant.

In this instance, the opportunity cost of taking these steps may include the initial steady income you forgo by not working in an established practice. Sunk costs are the money you 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 measure, 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 with the next best option.

Of course, there is no guarantee that your practice in the example above will be successful, but if you believe in your vision and are willing to take the risk, it may be worth the chance.

2. What is your time worth?

When something is “fungible,” it means that you can exchange it for something of similar value. And this concept is something that all entrepreneurs should understand. In the context of your busy life and household, this means you can trade someone else’s time for money.

If you’re anything like me, you can probably remember a few times when you’ve waited in line for a freebie or lost track of your weekend by battling Ikea furniture. But I have since realized that my time is more valuable than wasting it on unnecessary tasks. If I spend my days working or drowning in the details of a DIY project, I will miss out on many essential things including family time, hobbies, travel, etc.

One way I’ve found to get around this is to hire people to help me with things I don’t have time for or enjoy. For example, I outsourced as much as possible. One way is to hire a virtual assistant to handle my administration and social media.

I’m not saying you should outsource everything, but you should consider where there are quick wins. When you have the funds, it’s an easy way to free up your time to focus on the things that matter most to you. After all, life’s too short not to 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 discussed prior learning experiences through a property development investment or syndication. Besides teaching me a lot about due diligence, it also taught me to look at my potential real estate deals from a different perspective: Without a simple yes or no, what else can I do with that money?

I realized that when evaluating a potential passive real estate investment I need to look at the opportunity cost:

• What else can I invest if not in this project?
• Can I make higher returns elsewhere?
• Are there any other projects I’m more passionate about?

With all this in mind, I made better investment decisions and avoided some costly mistakes.

As entrepreneurs, we must be aware of how we spend our time and ask ourselves if it is giving us the best return on investment. Just as 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 another?

Our time is limited – we only have so many hours in the day.

Interested in learning more about the power of opportunity costing for better time management? Let’s talk about “opportunity cost”.

4. Beware of FOMO and analysis paralysis

When you decide to do something over another job, the fear of missing out (FOMO) is so real! I struggle with this too, but it’s essential to prevent FOMO from stealing your enjoyment of the present moment or leading you to make impulsive decisions.

Although FOMO is a shared experience, remember that you choose to do something because you want to So the next time you feel FOMO creeping in, take a step back and evaluate whether it’s worth your time and energy.

And in the same vein, sometimes wanting too much, or having too many choices, can actually be a bad thing. In past situations, I found myself stuck in these loops and so overwhelmed that I chose nothing and lost everything. Analysis paralysis can prevent you from being able to make any decisions.

The bottom line is the power of opportunity cost and better time management…

In reality, we often choose to do things without thinking about the opportunity costs of these choices. But 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 are clear about what your time, energy and money mean to you, you can make decisions with confidence and move forward with your eyes open.