Financial Decision making for Managers

Smart decisions rely on solid foundations

We apply a number of decision “principles” to help guide our clients’ wealth management success.

Many are based on research from the fields of economics, psychology and decision making analysis. Others, however, reflect how we look at things, driven by both our values and experience. While these principles are focused on wealth management issues, most of them have much broader application.

Some key principles that we think will help you make better decisions are discussed below under the following headings:

1. Understand opportunity cost

Opportunity cost is an important concept in economics. It says that the cost of any action is not the direct cost incurred in taking that action but the highest value alternative action you choose (perhaps, unknowingly) to forego. The decision rule that applies is that you should only choose actions that have benefits in excess of their opportunity cost.

Let’s make that a little more concrete with an example.

Assume a surgeon wishes to have a brick wall built at his residence. A bricklayer, costing $50/hour, could build the wall in one hundred hours for $5, 000.

However, the surgeon is a capable bricklayer – he could do the work in one hundred and fifty hours. So he takes three weeks off work, builds the wall and saves himself $5, 000. But has he really?

In his medical practice, the surgeon can earn a net $300 per hour or, say, a total of $45, 000 over three weeks. The surgeon’s opportunity cost is therefore $40, 000 in excess of the benefit of building the wall himself. He should choose to hire the bricklayer, rather than give up his day job!

Application of this principle implies that it does not usually make economic sense for most people to become amateur financial planners or wealth managers. This does not mean that you abrogate responsibility for your financial affairs but rather that you should focus on what you are best at to increase the likelihood you will achieve what is really important to you in life.

“... from the standpoint of building wealth, free time is better spent sharpening one’s professional skills rather than studying investing.”

Army Implementation of the DOD Financial Management Regulation, Volume 14, Administrative Control of Funds and Antideficiency Act Violations
Book (PN)


2003-08-20 19:17:44 by NoamChomskyLives

The fourth and final value is called self-management.
Economics affect how much say each actor has in decisions about production, consumption, and allocation.
In capitalism owners or capitalists have tremendous say.
Managers, and high level intellectual workers who monopolize daily decision-making levers like lawyers, engineers, financial officers, and doctors, have very substantial say.
And some people have virtually zero say.
In fact, people doing rote and obedient labor rarely even know what decisions are being made, much less impact them.

You might also like:

Infor EAM Asset Management Overview Video Demo Webinar
Infor EAM Asset Management Overview Video Demo Webinar ...
Budgeting and Financial Management are Keys to Financial
Budgeting and Financial Management are Keys to Financial ...

Report: Global C-Card Sales Volume To Reach $1.8 Trillion By 2015, With ..  —
The report “Commercial Payment Cards: The U.S. and Global Markets and Trends, 8th Edition” identifies commercial card market size and provides global forecasts through 2015, noting volume share among the leading global networks, which include American ..

PlattForm Makes Kansas City Business Journal's List of Top 150 Private ..  — PR Web
PlattForm recently announced its new enrollment and program management solutions, AttriBrandTM and Academic Program Management (APM), which have been launched in the United States, Canada, U.K. and Australia markets. ..

China Three Gorges Publishing House Pub. Date: 200 Zhejiang financial management of 22 Army Regulation(Chinese Edition)
Book (China Three Gorges Publishing House Pub. Date: 200)
Financial Adminstratino the Army Management Structure (Ams) Fiscal Year 1991 Army Regulation 37-100-91 July 1990
Book (Headquarters Department of the Army) A Soldiers Guide, FM 7-21-13, U.S. Army
Mobile Application (
  • This Field Manual is dedicated to the men and women of the United States Army ... machine. You are the soldiers that fight and win the Nation's wars. Be proud.
  • FM 7-21.13, The Soldier's Guide, is a pocket reference for subjects in which a...-alone document, the guide offers soldiers a ready reference in many subjects.
  • FM 7-21.13 is divided into seven chapters. Chapter 1 describes the importance ...ation on programs the Army offers to assist soldiers and their family members.
  • Front Cover
  • Inside Front Cover

Financial Planning Practice Management

Financial Analysis Manager Salary

Financial Risk Manager Exam