How To Make Good Decisions: 8 Simple Steps

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When I was 27 years old, my brother and I realized that our first business was a failure. We didn’t want to admit it, but after months of non-existent sales, there was nothing left to deny.

That failure resulted in a considerable loss of time and money, but we had to try again.

Not wanting to fail a second time, we spent months analyzing the pros and cons of our options. We flip-flopped between ideas, never able to settle on what felt like the right one.

After becoming entirely frustrated with not knowing what to do, I asked to meet with a successful entrepreneur.

During our meeting, I asked the entrepreneur if he ever got stuck because he couldn’t decide what to do. I was expecting him to be sympathetic and help me work through my ideas. But that’s not what happened.

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The entrepreneur answered the question rather abruptly by saying, “no, I never get stuck trying to make a decision.”

At first, his answer struck me as insensitive and arrogant. But, as he continued, I realized that his answer was the slap in the face I needed.

By the time the meeting was over, he had taught me a rough system for making decisions. Moving forward, my brother and I used that system to make our next business a multi-million-dollar success.

To date, I’ve spent more than a decade using and refining that decision-making system, and today, I’m going to share it with you.

An 8-Step System For Making Good Decisions

Your life is tied together by a long list of decisions. Those decisions determine where you live, your career path, and who your friends are. So it goes without saying that making better decisions can help you live a better life.

To that end, here are eight ideas that can help you make better decisions.

1. Gather Information

Without information, it’s nearly impossible to make good decisions. That’s because you have no basis from which to make your decision. To illustrate this point, imagine how effective a doctor would be if they knew nothing about their patient or their condition.

Gathering information is helpful because doing so expands your options and helps you solve problems.

Thankfully getting more information is pretty straightforward. You can research, take courses, or talk with experts.

2. Filter

Gathering information is helpful, but only to a point. Eventually, you have to filter through the information to find the most helpful data. If not, there’s a good chance you’ll be overwhelmed by information overload.

Quality Of Decisions vs. Information Graph—How To Make Good Decisions
Quality Of Decisions vs. Information Graph

Knowing this, here are four ideas that can help you filter information.

1. Always remember the goal. Not all information supports your goal. If any information doesn’t directly support the decision you are making, get rid of it.

2. Never use the finer details if the big picture will do. Some decisions only require a 30,000-foot view. If you’re making a 30,000-foot decision, don’t waste your time sifting through the details.

3. Don’t be a perfectionist. Most of the time, 90% is good enough. For example, you can lose a tremendous amount of weight by eating healthy 90% of the time. By comparison, eating healthy 100% of the time is significantly harder to do and will yield little to no additional benefit. To avoid this problem, hang on to the information that gives you 90% of the results and filter out the rest.

Results vs. Effort Graph
Results vs. Effort Graph

4. Consider the source. Many people will freely give you an unqualified opinion. If any information comes from someone who isn’t credible or doesn’t understand your situation, let that information go.

3. Use Logic And Reason

It’s not uncommon for people to let emotions sway their decisions. For example, fear often influences people to stay in the wrong relationship, and jealousy might persuade someone to act impulsively. Unfortunately, emotions like fear and jealousy often do not lead to the best decisions.

You can avoid this problem by relying on facts and logic. If you’ve done a good job gathering and filtering information, there is a good chance that your data will point to a narrow set of decisions. Then it’s up to you to choose the best rational option. Here’s an example.

Assume you feel jealous because someone you’ve been dating has left you for another person. If you are influenced by jealousy, there’s a good chance you’ll make a poor decision—like trying to convince that person to stay in a relationship with you.

Looking at this situation logically would likely lead to a different decision. That’s because it makes little sense to be in a relationship with somebody who loves another person. Expecting that outcome is unfair to you and your partner.

In this case, a more logical decision would be striving to fall in love with someone who loves you in return.

4. Think Long-Term

Many behaviors that offer short-term rewards are problematic if continued long-term. Eating dessert is a prime example of this type of behavior. While eating dessert is very rewarding in the moment, it can affect your weight and health if continued long-term.

You can prevent this problem by asking yourself a simple question. How will this decision affect my life in the next 10 minutes, 10 months, and 10 years? If your decision feels good in the next 10 minutes but leads you away from where you hope to be in 10 months or years, reconsider your decision.

Payoff vs. Time Graph—How To Make Good Decisions
Payoff vs. Time Graph

5. Don’t Stall

Most people stall when they feel uncertain. Here are two examples that explain this point.

Someone might stall when deciding to end a bad relationship because they can’t guarantee they’ll find love again. Or, someone else might stall when deciding to move to a new state because they can’t ensure they’ll be happy living there.

When my brother and I were starting our second business, we stalled because we wanted to be certain that we wouldn’t fail again. But, in doing so, we got nowhere.

Here’s the main lesson I learned during my meeting with the successful entrepreneur.

Few things in life are certain. That said, at any moment, you have a given amount of information. If you want to continue moving your life forward, you have to make the best decision you can with the information you have.

If you take a step in the wrong direction, that’s ok. Steps in the wrong direction add to your pool of knowledge and help you make better future decisions.

Authors Chip and Dan Heath suggest setting tripwires to prevent yourself from stalling. 1 Tripwires are markers or milestones that force you to make a decision. For example, you might decide to change your marketing plan if you don’t make a sale in the next three months.

6. Make A 100% Commitment

Partial commitment is the equivalent of being married but spending time every day to figure out if you should be faithful. With partial commitment, you waste a lot of time and energy.

One hundred percent commitment is powerful because it ends the discussion. So many decisions are made for you when you clearly define who you are and who you are not.

For example, when a business decides to serve a particular customer, they no longer have to worry about pleasing everyone. Or, when you commit to a daily meditation practice, you no longer have to decide if you should meditate every day.

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7. Make Decisions That Work For You

Author Tim Ferriss used to spend hours every day helping his customer service agents make decisions. As a result, Ferriss had little time to work on his business.

To solve this problem, Ferriss gave all of his customer service agents the authority to spend up to $100 when solving any issue. In doing so, Ferriss’ customer service responsibilities became nearly non-existent overnight. 2

You can easily apply this idea in your life. For example, you might decide to have a percentage of your paycheck automatically invested in a retirement fund. Or, you might eat the same meal every morning, so you don’t have to think about breakfast every day.

8. Test The Waters

Too often, people commit to a decision before they fully understand the outcome of that decision. Here’s a personal story that illustrates this point.

By trade, I’m a mechanical engineer. I chose a mechanical engineering major because I’m good at math and assumed that mechanical engineering jobs would be enjoyable. But I never tested that assumption.

A week after starting my career, I realized that mechanical engineering wasn’t what I assumed it would be. That was a painful discovery.

I’m not saying my engineering degree hasn’t served me well because it has. But, had I taken the time to test my assumption before defining my major, I could have made a better choice.

So, if you’re choosing a college major, spend some time job shadowing. Or, if you want to get engaged, it might be a good idea to live with your partner before popping the question.

How To Know When You’ve Taken These Ideas Too Far

Facts and logic will rarely steer you wrong. That said, there are times when you have to trust your intuition. Every time I’ve ignored my intuition in business, I’ve paid the price.

Here’s an example. Facts might suggest that partnering with another company is a good idea. Yet, your intuition tells you that you shouldn’t trust the managers of the company.

In my experience, trusting your intuition in this type of situation is a good idea—even if you can’t explain why.

In A Nutshell

Here are the key takeaways from this article.

  • Your decisions influence the outcome of your life.
  • Making better decisions can help you live a better life.
  • A decision-making system can help you make better decisions.
  • Use the following ideas to make better decisions.
    1. Gather information
    2. Filter
    3. Use logic and reason
    4. Think long-term
    5. Don’t stall
    6. Make a 100% commitment
    7. Make decisions that work for you
    8. Test the waters
  • Don’t forget to trust your intuition.

Books That Influenced This Article

The following book links are Amazon affiliate links. If you purchase a book after clicking one of the links, I will receive a commission.

Book | Audiobook | Kindle

Book | Audiobook | Kindle

Thinking Fast And Slow
Book | Audiobook | Kindle

  1. Chip & Dan Heath.
  2. Tim Ferriss.


Chris Thornham 80/20 Financial Planner
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