THE ECONOMICS OF DECISION MAKING
Every decision we've considered and consequential path taken in life, has been determined through the choices we've made.
Our civilisation, society and social standing, will largely determine the choices we have available to us at any given time, but we do have choices all the same. We have a choice to get up early, start making plans and to act on them. We have a choice to leave a bad job, relationship or non-beneficial situation. We are capable of making good decisions but equally, we are just as susceptible to making poor ones as well. If we allow ourselves to be led by our hormones, desires, moods and emotions, the outcome from these 'absent-minded' choices can be catastrophic. It's our cumulative choices, the decisions and consequential actions taken, that will define who we are. And so it follows, that better choices will influence our decisions to bring about success (whatever that implies), plus make us a better all-round individual too.
The Rule Maker
Many conscious and unconscious decisions will be founded on rules instilled in us through life experiences. Just as society will have varying consequences placed upon rules that we either choose to follow or break, we have our own sets of rules that have an economics value placed on them to determine how right or wrong we are in making them. Some choices are simple and beneficial for avoiding discomfort or pain, whereas others are more complex and will require greater thought to see the benefits. As with exercise, there is a necessary level of discomfort required for benefiting our health - no pain, no gain - this is a learned rule. With experience, we'll discover where immediate benefits can prove to be less valuable to those gained over longer time frames and through greater wisdom, choose to make better decisions based on our own rulebook for success.
Over time, we justify our rules through a continuous feedback loop, which measures their outcome for success or failure. It's how we interpret this information that will determine the true worth. We often manipulate the results to best fit the rules we've set ourselves and it's because we distort this information, that our poor choices can be made which will lead us along the wrong path.
When we 'feel' like something isn't going quite right, there will likely be an imbalance with our economics values at the heart of the matter. The actions required to achieve a result, will be strained, difficult to apply or in certain situations, self-sabotaged from happening. Our subconscious will be telling us that information we've processed and the rationale placed on decisions being taken, are out of kilter with what we need. Either our desires will not be being met or our goals unsuccessfully reached.
Our rules will be set for satisfying desires and/or attaining thought-out routes for success. It's understanding where the rules work in our best interests that will determine their greatest benefit in our personal rulebook along the economics scale.
Often, our feelings will be strongest where our desires for something and steps required for obtaining a successful outcome are at complete odds with one another. We'll not always easily be able to satisfy both interests at the same time. Removing desires from interfering with the decision making process, can potentially keep us out of trouble if it helps us to reach our goals. But suppressing our desires, can lead to feelings of unhappiness if we are going against our truest nature. It's our unconscious positive desires that potentially lead and direct us to towards finding our true path. It's untangling the positive desires from the potentially harmful ones that is the greatest challenge.
Studies have shown that our
subconscious mind can find the answers to challenges faster than our conscious rationalising brains can. We instinctively pick up on the minutest details and signals without even realising it on a conscious level. The rational, conscious part of our brain, will be vastly influenced by our subconscious mind - directing us towards making a decision based on a 'feeling' we've had. It's this gut 'feeling' that can give us the necessary clues for quickly spotting which are the best choices to make in life. The real skill is being able to identify and differentiate between good instincts and harmful desires. By
training out subconscious, listening more to our body, feeling with our heart and trusting our gut, we can improve this skill.
By knowing ourselves well, we can better interpret from our rulebooks in order to weigh-up the economics values placed on our decision making for achieving success in everything we do. This will enable us to avoid making those ego-based decisions that we know deep down are wrong and allow more space in our mindful decision making, to carve out a life path that we are happiest to travel along.
The Niche For Living
We perform duties in exchange for services and rewards. The basis of our offering will have a monetary value which entitles us to receive our desired services and rewards. It's called working for a living.
It's performing a job for better entitlement. And it's this type of work that we perform well without over-exertion, with a high monetary reward, that becomes our niche for living. This value on our niche determines what our exchange rate for rewards entitlement will be. The higher the ratio in favour of living - the greater our happiness levels we'll be.
A simple measure for the work to rewards ratio can be determined by first
working out what our hourly rate needs to be for covering our living costs. We can then determine how much of our money is left over for doing the things we enjoy doing in our spare time.
By having a clear understanding of our hourly/daily/weekly/monthly rate, we can determine the amounts required for keeping ourselves in good financial health and work out a budget of our spends and savings for enjoying the time we have remaining.
This knowledge will give us a ratio that can highlight what our work:live balance is. By looking more closer at this ratio, we can identify where changes are required.
By first identifying this base ratio, we can then make a further study based on the value of our output against the value we give to our free time.
So, for example - If we work at a job that has regular hours, regulated frequency of output plus added value for increased output - simply put, a 9-5 office job with fixed daily rates plus overtime paid where required, then it's a clear hourly rate against time ratio with a factor placed between 1-10 on the work quality/satisfaction against free time scale. Anywhere above a 5 in the satisfaction scale is good if we value our free time the most.
If the work output is higher, then the extra money earned buys us rewards. This can be measured against the value on our time. But if our hourly rate factor diminishes against the free time ratio (ie. A job with irregular times with extra unpaid hours), then we have to look at what our economics rules are for determining the work:live balance.
If we see where the decisions being made are affecting this balance, we can adjust our economics to alter the decisions using a mathematical equation as foundation. Once established, the new economics rules applied over time, will help our conscious rational brain to make the right decisions that will keep the subconscious brain happy too. When our gut feeling is in tune with the thought-out rational decisions being made - we know we've found our niche and the economics rules are in harmony with our life's path.
Working Out Hourly Rate
Let's use my freelance rate as an example of how many days I need to work a year.
Day rate is currently £250 per day or £31.25 per hour. If I work out my realistic working period for 45 months in the year, that equates to £56,250 gross or £45,000 after tax (£1000 per week). That also equates to £4687.50 pcm or £3750 pcm after 20% tax has been deducted.
Monthly Expenses
£344.75 - Rent
£535.91 - Mortgage
£478.17 - Loan
£400 - lunch and travel
£300 - Groceries
£100 - Accounts
Total £2200 pcm - £26,400 pa
Monthly Earnings
Earnings based on 45 weeks at £1250 per week = £4687.50. Taking off a tax allowance of 20%, that equals £3750 pcm. Therefore, money remaining to spend at the end of the month works out at:
£3750 - £2200 = £1550 or £507.70 per week and just £71.67 per day to play with.
In order to cover my minimum expenses for the month, I will need to earn £2200 plus the tax on top. I've estimated that my tax will be 20% so the figure needed to be earned every month is £2640.
How Many Work Days To Work
Estimating the hours needed to be worked in a month being based on the average of
21 days per month. First thing is to work out the hours for covering costs:
£2640 / 31.25 = 84.5 hours. At 8 hrs per day, that works out at 10.5 days which is half the days available in a month.
I'd need to work 127 days or 25 weeks a year just to cover my expenses.
This is purely an estimate but good for working out some figures for budgeting. I could likely bring my expenses down by renting my house and cycling to work - which will save me £120 on travel or 5 hrs extra work. Covering the mortgage with rentals could also mean working 2 days less a month as well. Once we see money in these terms, it's a lot easier to make decisions about where we are spending it.
