Think Big

A few weeks ago I wrote about 3 steps you could take to completely offset the $245,360 cost of a child. Here were the 3 steps:

1. Buy less house
2. Buy less car
3. Buy cheaper investments

One of the reader comments I got was pretty interesting. She asked why I was focused on these things when I could have given more “practical advice” like couponing, breastfeeding, using cloth diapers and shopping at thrift stores. Why wasn’t I focused on the everyday things you could do to save money? Why only talk about such a small set of opportunities?

It’s a good question. And it’s a common one. Most of the money-saving advice you get does focus on all kinds of little ways to reduce your everyday spending, and the truth is that those little tips can help. I use many of them myself.

But there’s a big point that’s missed when you focus so strongly on the little things:

If you can get the big stuff right, you don’t have to spend so much time and energy worrying about the small stuff.

There are a million small things you could worry about every single day. How much you’re spending on gas. Whether you’re allowed to stop for ice cream after your daughter’s soccer game. Whether you could find the same can of beans for a few cents less. Whether going out with friends for dinner will mean you can’t put money into your emergency fund this month.

You could spend your whole life worrying about each of those small things every single day. Or you could structure your personal financial system around a few big wins that make all the small decisions a lot less important. A few big wins that decrease your anxiety and make it easier to accomplish your biggest and most important goals.

All you have to do is think big.

Why do we focus on small wins?

I like saving a few dollars on diapers just as much as anyone else. By no means am I trying to belittle the small wins.

But why are so many of us willing to make the effort to save those few dollars, then turn around and spend hundreds of thousands of dollars more on a house than we really need? Why are we willing to spend a few minutes in the grocery store looking for a cheaper can of beans, but we won’t willing to go the extra mile to save tens of thousands of dollars on a car that simply gets us from Point A to Point B?

Why do we put so much effort into the small wins but let the big wins slide by without a fight?

I think it comes to down to things.

First, it’s easier to focus on small wins. It’s easier to find a $2 coupon for diapers than it is to research your professional value in the marketplace, track your accomplishments at your current job, and leverage that information into a sizable raise. It’s easier to shop the sales than it is to face the questions from your friends about why you bought a smaller house, or (god forbid!) maybe even decided to rent.

Second, small wins are constantly rewarding and big wins are infrequent. You only buy a house or car every so often, so while the big win might feel good at the time, that feeling quickly fades into the monotony of everyday life. On the other hand, small wins are all around us. We feel good every single time we find a slightly cheaper way to go about our daily errands, and that constant positive reinforcement makes us want more.

Small wins are easier and more rewarding, so we spend more time thinking about them. But if you can shift your mindset just a little bit, you can open yourself up to some really big opportunities.

Why you should think big

Before I get into the advantages of thinking big, let me quickly give a definition. To me, thinking big means finding opportunities with two important characteristics:

1. They either save or earn you a significant amount of money, and
2. They usually require a big one-time effort but little or no ongoing effort.

Here are some common opportunities for you to find a big win:

• Negotiating your salary
• Buying a house
• Buying a car
• Choosing a cell phone plan
• Re-thinking college education
• Choosing your investments (specifically how much they cost)
• Automating your savings

Each of those things requires a one-time effort that allows you to reap the savings month after month. Some are bigger than others, but they all share some really positive characteristics.

1. The financial benefits can be HUGE

My favorite example of a big win is simply buying a slightly smaller house. The average single-family home sold in the US in 2013 was 2,662 square feet. That’s 2.5 times as large as the 3 bed, 2 bath house that I currently live in with my wife and two kids (an we’re pretty comfortable).

You don’t have to go tiny, but even finding a slightly smaller house can save you money in all of the following ways:

• Smaller down-payment
• Smaller monthly payment
• Less interest paid over the life of the mortgage
• Cheaper insurance
• Cheaper property taxes
• Cheaper electricity bills
• Less maintenance
• Fewer things bought to fill the space

Add those up and you can easily save hundreds of thousands of dollars over the years simply by living in a slightly smaller space. Not to mention all the time saved by not having to clean all that extra space!

Similarly, negotiating a raise can immediately add thousands of dollars to your available income every year. Buying a used car every 10 years instead of a new one every 5 years can save tens of thousands of dollars. You may even be able to save $100 per month (or more) on your cell phone plan.

Those are big dollar amounts that can make the rest of your life a lot easier and open up some big opportunities.

2. It requires less effort

Here’s the difference between big wins and small wins.

Each small win is pretty easy. It doesn’t take much effort to stroll down the diaper aisle at Target and find the pack that’s currently on sale.

But you have to do that every single time you go to the store. And you not only have to do it for diapers, but paper towels as well. And toilet paper. And batteries. And on and on. Over the long haul, that’s a lot of time spent making a lot of very little decisions.

Big wins usually require much more effort up front. It’s a lot of work to research the car you want, negotiate with 40 different dealers (over email) and find one for thousands of dollars less than if you had simply gone to the closest dealer and picked the best thing they had. It’s not easy, and it’s that large amount of effort that usually scares people away.

But once you’ve done it, it’s over. You have the car. You’ve bought the house. Your investments are chosen. Your salary is raised. Past that initial investment of time and effort, you get to see the benefits month after month without any ongoing effort.

So yes, thinking big is more work in the short-term. But over the long-term it’s actually less work for better results.

3. It decreases the your stress-level

When the big financial decisions in your life are all working together to put you ahead, you don’t have to worry so much about all of the small decisions.

You don’t have to stress about whether your grocery strategy is optimized to the penny when you’re saving hundreds per month on your mortgage. An impromptu family night out for pizza and a movie isn’t going to put you in the hole. Stopping for coffee on the way into work isn’t going to rob your kids of their future.

The small decisions still matter. Paying attention to them is still a good idea. But when the big things are in place, your financial security isn’t on the line with every small decision you make.

And when you don’t have to sweat the small stuff, your life becomes a lot less stressful.

4. It creates more room for fun

Buying a smaller house might save you a couple hundred dollars per month. Buying a used car might save you another couple hundred. Finding a cheaper cell phone plan can add another hundred. And if you can negotiate a raise, you might find yourself with a few extra hundred dollars in income as well.

When you start putting these big wins together, all of a sudden you can find yourself with hundreds or even thousands of dollars extra in your budget every single month.

Some of that money can help to build savings or to pay down debt, but some of it can be used for fun as well. You can go on more date nights without feeling guilty. You can travel more to see family or just relax on the beach. You can make more stops for ice cream after soccer games.

Big wins don’t only make it easier to pay your bills. They make it easier to enjoy your life.

5. It creates more room to dream

If you’re living paycheck-to-paycheck, it can be hard to think about anything other than getting to the next month without missing any of your bills. It’s a matter of survival, and dreams get pushed to another day.

But what if you knew that your bills would be handled with room to spare? What if you didn’t have to spend the time and energy to maximize every single spending decision? What could you do with that newfound time and money? What would you dream about accomplishing?

With the big things in place, and with the smaller things holding less weight, you have more room to dream big and take a chance on something that might not work, but might get you closer to the life you truly want to live. Maybe that’s being able to stay home with the kids. Maybe that’s changing careers or starting a business. Or maybe it’s as simple as spending more time with friends and family.

Whatever your dream might be, it’s going to be easier to chase when your biggest financial decisions are already made and they’re all acting to save you money.

Think big

There’s nothing wrong with finding small ways to cut costs. I still do it all the time. I still like to find the cheaper diapers or the paper towels on sale. I still see the value of making my own lunch in the morning instead of eating out.

I still sweat the small stuff because it still helps and because it’s part of who I am. But I like that my financial survival doesn’t depend on making all of those little decisions. And that’s because I care so much about the big decisions that the small decisions matter a lot less.

So I would encourage you to keep on making those good small decisions, but don’t forget to put your biggest efforts into the really big opportunities that come your way. Turning those big opportunities into big wins is the real key to building the kind of long-term financial security you and your family deserve.