One heuristic I find useful for making decisions is: will this increase or decrease my optionality?
In other words, will a given decision open up the range of future options available to me?
I have a friend who lived, for several years, off of 50% of his salary. This gave him several options that most of us don’t have:
- Each year he worked gave him enough money in the bank to spend a year not working, while maintaining the same quality of life. (Or, in his case, working entirely on personal projects without drawing a salary).
- He could take a much lower-paying job without having to adjust his lifestyle. If he found a job he was passionate about that paid only half his current salary, he could take it without downsizing his life.
Conversely, if someone is living off 100% of their salary, their options for other jobs are constrained — they either need to find work with equal or higher salary, or they need to downsize.
Debt is the prime example of a constraint on financial choices. If I take out a loan, it may increase my short-term optionality (I have more immediate funds to work with), but decrease my long-term optionality (a larger chunk of my income is now devoted to repaying debt)
Money is an easy example, but there are plenty of others:
- If I have a pet, will it constrain my ability to travel?
- If I take on volunteer commitments, will it constrain my ability to spend time working on a side project?
- If I take a trip and plan out what I’m doing every hour, will it hamper my ability to make choices in-the-moment and do what seems interesting?
I suppose this is all related to opportunity cost — time and resources are finite, so we can’t do one thing without reducing our bandwidth to do other things. Optionality is about understanding your priorities.
It strikes me that life is largely built around choosing where we’re comfortable reducing our available options, in order to open up more options.
I choose to work a full-time job because, even though it reduces my available time by 40 hours a week, it increases my available resources to spend on the other 128 hours.
I choose to work on my side projects because I value them more than I value whatever diversions I could spend that time doing.
At any branch in the path, though, I still find it useful to ask myself: will this increase or decrease my range of available options?