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?
Unfortunately, that’s not case. One reason is that the big wins are often not obvious. You can’t see them right away. You can immediately see that you save three dollars by not buying latte, but the amount you save on mortgage interest can’t be seen immediately. You can only see it by looking at the big picture and thinking long term.
That’s why it’s important to see the big picture when it comes to finding big wins. See how things will be in ten or twenty years. Think long term. What seems like a good deal in the short term might actually be bad in the long term. On the other hand, things that don’t give you immediate return in the short term might give you great return in the long term.
One more important thing to keep in mind is that not only should you identify big wins to get them, but also you should identify big losses to avoid them. If you focus only on the wins then there is a danger that one big loss could wipe them out. You need to be aware of potential losses as well so that you can avoid them before they hit you.
I learned this from personal experience. A few years ago, I went overseas with my family. Since I’m a book lover, I was happy to find used book stores that sell good books at discounted prices. So I bought many books. Only at the airport was I aware that all those books made my bag overweight. I needed to pay a hefty overweight fee that wiped all the savings I made from the discounted books. I loss money, in fact.
So don’t forget to look at both sides of the coin.
Photo by BombDog
Nice article Donald… I once worked for a brilliant guy on Oahu. We had a very small group of workers that were laser focused on only the biggest things that could make money for the company. The details were not focused on much. We looked only at things that could drastically increase income.
A good way to focus and I learned a lot at that company!
Great point, Donald!
I think a lot of people get stuck in small-picture thinking, or somehow they feel that they need to advance slowly, step by step.
But I see again and again how the most successful people ignore society’s expectations of step-by-step advancing, and go straight for the big wins.
[…] Optimizer notes in Focus Your Effort on the Big Wins that even though this focus should be a no-brainer, the reality is different: One reason is that […]
Vern and Vlad,
It seems that focusing on the big wins is actually an application of the 80-20 principle. Successful people are those who ignore the bottom 80% and go directly to the top 20%.
Yes. Recently I’ve been looking at that and I realize that if I can ignore the 80-90% that’s pulling me away from the 10-20% that’s making me $ I’m going to be really quite successful. If you put 90% of time into what is working – it’s really the best plan of action. Will reply to your facebook msg shortly here…
Good read. I certainly agree about this. Though regarding those smaller victories, I think you should still focus on them, but in a different way. Small steps done regularly still produce big results in the long term so they shouldn’t necessarily be neglected.
Donald, thanks for sharing this information. I absolutely love Ramit’s blog, and some of the ideas he has shared for wealth building, especially his posts on automating your finances. I agree with you, although I have definitely been one of those who has reversed priorities when focusing on saving money and cutting expenses. Just recently we got a new carrier for auto insurance, and are saving over $300-450 per year!
I agree. Just you shouldn’t focus on the smaller victories at the expense of the bigger ones. I think that’s the mistake that many people make.
I also love Ramit’s method of automating your finances. I need to modify it since not all of it can be applied in my country, but the idea is sound.
Regarding cutting expenses, I don’t think there is anything wrong with it. As James said, small steps can give big results in the long term.
I think focusing on BIG wins is important BUT i disagree with ignoring SMALL victories. I personally believe it is JUST as important as the BIG one.
Great Article. I guess it’s sort of an illusion instant gratification but then again five to ten years you wonder was it really worth it. Your not at the level you want to be.
This does seem to be an adaptation of the 80/20 principle, but it’s a refreshingly simple way to look at it. People focus more on the little things, like the $3 latte because it’s an easier answer to the question. For example, how can I save money…. don’t buy a latte, instead of pay of my mortgage or refinance for a lower rate. It requires less of the person and human nature tends to gravitate toward what is simple. Though, when people aren’t focused on the big win, as you call it, it’s easy to take the money you saved from not going to starbucks and spend it on something else that still doesn’t constitute a big win. Here’s a quote from somebody smarter than myself that I’m sure I am butchering to some degree…”To have the success that others don’t have, we must be willing to do what others are not willing to do. “
Comments are closed.