When given an option between a reversible decision and an irreversible decision, we tend to prefer the former. We like money back guarantees. We like no strings return policies. There is something comforting about knowing that we can change our minds in the future.
There is less pressure on us to make the perfect choice. We are not stuck if we make a bad decision.
Imagine that you spent $100 to book a ski trip to Michigan that seemed like it would be a lot of fun. You later spent $50 on a ski trip to Wisconsin that seemed like it would be even more fun. After spending your money on both (and finding out that they cannot be refunded or resold) you realize that the trips are for the same weekend. Which one do you go on?Continue reading “Saving Time and Money – Avoiding the Sunk Cost Fallacy”
One of the central concepts in decision-making is the concept of opportunity cost. Every decision we make on a daily basis, whether it is an involuntary part of our routine or an active choice, can be evaluated using this overarching concept. Essentially, the idea behind opportunity cost is that oftentimes a choice that we make will close the door on other choices. If I go to the beach this weekend, I can’t also go to the mountains this weekend. If I spend $300,000 on a Ferrari 458 Speciale, I can’t invest that $300,000 in the stock market (or ever retire). Continue reading “The Importance of Opportunity Cost in a Happy and Wealthy Life”
I tend to focus on three distinct categories here: building wealth, becoming happier, and thinking smarter. Usually there is some overlap between these subjects. Even if there is not a direct overlap, there is always at least some connection behind the scenes. Correcting cognitive biases can make you wealthier. Well-spent money can make you happier. Being happier can lead you to better performance at your job.
So we’ve learned that everything we do is for the sake of happiness and that this site is aimed at maximizing happiness for you, my lovely readers. That’s all well and good, but how much can our thoughts and actions actually boost our happiness?
The vast majority of decisions that we make are made, whether consciously or subconsciously, because we think that they will make us happier.
We end a relationship because we think there is someone out there that will make us happier or we start a new relationship because we think it will bring the happiness that we have been missing. We take the higher paying new job so that we can buy more things and experiences that make us happy. Or maybe to pay others to do things that make us unhappy, like cleaning the house or mowing the lawn.Continue reading “It’s All About Optimizing Happiness”