Decision Matrix

A decision matrix is a quantitative tool for comparing multiple options against weighted criteria. It transforms subjective comparisons into structured analysis.

When to Use

Use a decision matrix when:

• You have 2+ options to compare
• Multiple factors influence the decision
• You want to reduce emotional bias
• The stakes justify systematic analysis

Example: Investment Account Selection

Which account type should you prioritize for retirement savings?

How to Read This

1. Winner — The option with the highest weighted score
2. Confidence — How much the winner leads (low = close race)
3. Scores — Weighted contribution of each criterion
4. Strengths/Weaknesses — What each option excels at or lacks

The Method

1. Define Options

List the choices you’re comparing. Be specific:

• ❌ “Invest more”
• ✅ “Max 401(k)”, “Max Roth IRA”, “Taxable brokerage”

2. Define Criteria

What factors matter? Common financial criteria:

3. Assign Weights

Weights reflect importance. Must sum to 1.0 (or be auto-normalized).

Tax Advantage: 0.30 (30% importance)
Flexibility:   0.20 (20% importance)
Growth:        0.25 (25% importance)
Employer Match: 0.25 (25% importance)
─────────────────────────────────────
Total:         1.00

4. Score Each Option

Rate each option on each criterion (typically 1-10):

5. Calculate & Analyze

The matrix multiplies scores by weights and ranks options. The winner isn’t always obvious—that’s the point.

Limitations

Decision matrices are tools, not oracles:

• Garbage in, garbage out — Scores and weights are still subjective
• Doesn’t capture everything — Some factors resist quantification
• False precision — A score of 7.23 isn’t meaningfully different from 7.18
• Close races need judgment — If confidence is low, other factors should decide

More Examples