One of the ideas I learn from I Will Teach You To Be Rich (my review) is the importance of focusing on the big wins. Focusing on the big wins means focusing on things that make the most difference. Instead of spreading your effort on many different things, you should focus only on things that give you the most return. In personal finance, one way to apply it is by focusing on the big expenses (like the interest you pay for your mortgage) instead of the small ones (like the three-dollar latte). Many people do the opposite by focusing on the small expenses instead of the big ones. As a result, they lose money more than they save. But why don’t people naturally focus on the big wins? Isn’t it clear that we should focus on things that make the most difference?
Optimizing your personal finance is one of the most important things to do. The reason is that your financial situation affects other parts of your life. If you had financial problems then it would be difficult for you to live life to the fullest. That’s why I was glad to receive a review copy of I Will Teach You To Be Rich by Ramit Sethi. The book aims to help you optimize your personal finance. Though the word “rich” in the title might mean different things for different people, here is what it means for the author: What does rich mean to you? For me, it’s about freedom ”” it’s about not having to think about money all the time and being able to travel and work on the things that interest me. I agree completely. Being rich is not about having a lot of money. It’s about having the freedom to enjoy life without financial worries.
In the post Making Money with a Purpose, I wrote that having the ability to make money is more important than having money. Now I’d like to discuss how to increase your ability to make money and therefore make more money. Let’s start from the beginning by answering a basic question: what is money? Steve Pavlina in his book Personal Development for Smart People has a good answer: The money you earn is society’s way of saying: “In exchange for your valued contribution, you are hereby granted the right to extract equivalent value from society at a time of your choosing.” So the amount of money you earn is proportional to the amount of value you contribute to the society. What you need to do to make more money is simple: contribute more value to the society.
There are some interesting comments in the post The Importance of Being Smart and here I’d like to discuss one of them. It’s a comment by Chew: I have something to add to being smart. It’s about beginning with the end in mind. The objective was to acquire 100,000 arrows, which is not the same as making 100,000 arrows. Most of us would have framed the challenge as “making 100,000 arrows” instead of “acquiring 100,000 arrows”. No amount of smartness can outsmart the need to begin with the end in mind.
In A Simple Guide to Finding Good Ideas I wrote that to find good ideas you should produce a lot of ideas. You can get quality out of quantity. I recently realized that similar principle also applies to finding success in life. While to find good ideas you should produce a lot of ideas, to find success you should do a lot of experiments. This quote by Thomas J. Watson now makes perfect sense to me: Would you like me to give you a formula for success? It’s quite simple, really. Double your rate of failure. What this quote means is that you should increase your rate of experiments. Many of your experiments will fail, but some of them will work and a few will work very well. It’s just like finding good ideas: the more ideas you have the more likely you will find good ones.