Decision Making Process: How to Make Better Decisions?

Decision making is the process of gathering relevant information in order to choose the best decision based on a range of available options. Good decision-making is a step-by-step approach that allows a person to constantly make better decisions, resulting in a less stressful and happier life.

Unfortunately, few of us use the right decision-making process. We make our decisions instead based on our whims, and often our intuitions, which can make life more difficult for you. This is because you will often find yourself in situations that you did not actually want to. So, how can we use our decision-making process to make better decisions? The answer lies in the process you use and the information you collect.

What is the Best Decision-Making Process?

The best decision-making process is one that begins with a general premise and ends with a firm decision. Good decision-making processes help you make better decisions by carefully evaluating all available information. These processes usually reduce psychological pain and increase relative levels of happiness.

The right decision can be related to almost anything in your life, for example, your career, love life, friendships or anything else. Apart from that, most of your life stresses, troubles, happiness and joy are all a direct result of the decisions you make. The reason why we need to make better decisions is by improving our decision-making process.

Here are our top five step-by-step decision making tips that you can use in almost any scenario:

1. Make a hypothesis:

It can be said that this is the most important step in the decision-making process, and this may be a reason why it is the first step. It is the basis of your decision and will make your life easier or otherwise. A hypothesis is the formation of an idea that has a cause and an effect. In fact, most of us fail here when we try to make better decisions. You may have the best goals in your mind, but the end result will not be suitable for your life if you act according to the wrong beliefs and assumptions.

What prompted me to write this article was my need or perhaps my desire to have a car. I moved from San Francisco to Los Angeles, and though I had been without a car for three years, I thought I'd need one in Dreamland, but I didn't want to own one.

This is because I loved not having to pay car bills and the less stress of not worrying about the hidden costs of owning a car.

This led me to a fork in the road, which is "Should I buy a car? Or rent it? Or continue not to own a car at all?" In any case, when I approached this particular decision, I formed a simple hypothesis: “Owning a car would make my life easier in Los Angeles, and my definition of “easier” came from the convenience, benefits, and overall costs that would come with my car purchase.” Having made my hypothesis, the next step was to evaluate my options.

2. Evaluate your options:

Not having enough choices is one of the biggest mistakes people make when trying to make their lives easier by making better decisions. People who have better lives often have the most options available.

This is because more choices mean more opportunities, and when things go wrong, people with more choices are able to adapt quickly and continue to move happily toward an easier life.

You should always make sure that you have selected all the options available to you when making a decision, and through this method, you can make sure that you are choosing the option that has the greatest impact in your life, which is the option that enables you to reduce stress and increase happiness.

And herein lies my failure. When deciding whether to buy a car or not, I thought the only two options I had were to buy a car or to rent one, but I failed to decide on the third option, which was embarrassingly enough my case at the time, which was not owning a car at all.

But if you think about it, the cost of owning a car is about $4,500 a year, and if you don't use your car as much "like me", chances are you're spending less than $4,500 a year using private taxis, which means I was able to save money on average if I didn't buy a car, but then I ended up buying a car, and for me, saving money is like reducing stress and giving yourself more financial options; This is the point of this story.

I hope you will learn from my foolish decision that all your options should be weighed, and more choices can lead to better decisions, and this leads to a better life.

3. Define trade-offs:

Although you want as many options as possible, usually these options are related to each other. This means that if you choose one option over the other, you will inevitably give up one of them; This is known as 'bartering'.

Life is full of trade-offs, and usually the reason we make a bad decision is that we don't accurately evaluate what we're giving up when choosing something else.

The decision may seem great at first glance, but if the option to give up is great, the decision-making process will falter.

To continue using our aforementioned example, you have three options to decide whether to own a car or not:

• Buying a car "loan or cash".
• Rent a car.
• Not to own a car, then rely on public transportation.

Thanks to the previous step, we know that these are our three viable options.

The next step is to determine the trade-offs for each. For example, when you decide to buy a car, the trade-off is usually money. The price of owning a car will usually be committing yourself to a monthly payment and car insurance, and conversely, choosing not to own a car will deprive you of the freedom or luxury of having to hop in your car for a road trip in a matter of moments.

With a lease, the trade-off is that you'll never be able to pay it. You will always have a rent payment as long as you have a lease contract; however, the positive side is that you will be able to get a new car every two years. However, the positive side is that you won't have to buy a depreciating asset, and you won't be without a car either. There is no right or wrong answer here. The important thing is to determine what you are giving up by choosing one option over the other.

4. Calculate the risks:

I know I say every step is the most important, but this one is the most important to me. People are bad at assessing risk mainly because they think of the risk in physical or financial terms, but rarely in the qualitative aspect. This is why we see most people who earn a lot of money but work long hours and hate their jobs.

For me, I often look at risk as the risk of losing time or happiness. In addition to the trade-offs, there will be constraints on time and happiness whenever you make a decision, which are sometimes positive. That is, it increases your free time and your happiness, and sometimes it is negative. That is, it consumes a lot of your time and reduces your happiness.

Making good decisions develops the decision-making process, which helps you reduce both quantitative and qualitative risks. For my time and my happiness, they are the two most important things to me. So, doesn't it make sense for decision-making to take these factors into account?

Let's turn away from the car example and talk about home ownership. I am currently looking for investment properties in Austin, Texas, and I should make the right decision. The rental potential is there, and I will be able to find tenants to rent out my apartment for the majority of the year, but what about the windfall costs? What if the occupancy rate for the rooms is lower than I expect? What if I have to fly to Austin multiple times to check on my apartment?

Of course, I may achieve a financial return on my investment, but what is the corresponding cost? It seems like the cost may be just my time and happiness, or it may not be, but the important thing is to identify all the quantitative and qualitative risks involved in your decision-making, and if you set it, you won't make your decisions motivated by external causes or people's judgments alone. Instead, you'll be able to make decisions based on your inner understanding of important matters that you can't risk.

Time is valuable, and your ability to generate a positive return as a result of a decision does not necessarily mean that it is the right decision. Therefore, make sure that you value your time and happiness in the same way. If the financial return is positive, but the time you give up is negative, it may be best not to make the decision until the expected positive return is large enough, or the time constraint is less than enough, when it makes sense.

5. Make a decision and don't look back:

After you have had a sound hypothesis, evaluated your options, determined the consequences associated with each option, and calculated your risks, the next step is to make a decision.

You have to be assured that you have developed the best decision-making process and have the information needed to make better decisions. The only thing left is decision-making, but the important thing here is not to look back. There are always multiple options during the decision-making process, and there will often be a little regret that accompanies decision makers, but the best thing to do is to look forward, not backward. That's because you made the decision and it's over.

Fortunately for you, humans have an uncanny ability to adapt to new situations. So, no matter what decision you make, chances are high that you will be glad you made it. Your physiology will make you happy.

If you ask me: "If I chose to move to Los Angeles without a car, would it be more cost-effective?" Or “Did I make the mistake of not considering the option of living without a car when looking at my transportation options?” Maybe, but that's okay now, I love my new SUV.

Conclusion:

The right decision-making process can help you make better decisions. Better decisions result in a better life, and if you follow the aforementioned decision-making process and steps, you will be able to create a life full of all the things you want and get rid of all the things you do not want.