This article is by GRS staff writer Adam Baker. Despite his best attempts, Baker struggles to budget while adapting to life in New Zealand.

Earlier this week J.D. tackled an important issue with his tenet Large Amounts Matter Too.

This concept goes by many names:

  • Focus on big wins.
  • Pick the low-hanging fruit
  • Attack high-leverage areas.

You get the point: It’s efficient to do things that have major impact with minimum effort. J.D. wrote:

Some people spend so much time sweating the small stuff that they don’t bother to do the same on the big stuff. They’re penny wise and pound foolish, negating their daily scrimping and saving by making poor financial decisions that burden them for years. Kris has a co-worker who once bought an SUV for $43,000. After a year, he decided to trade it in, but could only get $23,000 for it. Ouch!

His advice is spot on. An intense dedication to frugality can often do more harm than good. Getting caught up in the details can lead to mistakes or oversights in areas that cost us thousands.

But there’s another less-talked-about side of the coin.

While you certainly don’t want to miss the opportunity to capitalize on a major event, you also don’t want to develop the habit of relying on them either. These type of large gains for minimum effort can make us lazy.

After all, why should you clip coupons when you could spend that time planning your next pay negotiation? Why would you save money by making your own products at home, when you could be aggressively monitoring the classifieds for the next killer deal on a car?

Why casinos want you to win money
People that have been around the gambling industry will tell you that winning on your first trip to the casino is much worse than losing. Why? It changes your mindset. Most people will go from “I’m probably going to lose, so I’ll just plan to have a little fun” to “Wow, that was easy! Next time I go back I’ll be playing off my winnings”.

Next, you convince yourself that the losing streak you’ve bumped into is just a natural part of how things work. Hitting just one hand will make up all your loses. From there, it only gets worse.

Casinos make their profits when they can detach you from the value of your money. If you win the first time you visit, that process has already started. They know the average person will be back and will spend far more money than the guy or gal who lost it quickly on the first visit.

Encouraging lifestyle inflation
In our finances, the big wins have the potential to detach us in the same way. The value of these events is lost if you use them as an excuse to not attack your impulse spending or creeping lifestyle inflation. We are a culture that loves to celebrate shaving $200 off our monthly mortgage with a new $300/month car payment.

The problem is that all to often, we create a zero-sum game. We end up shuffling back ten steps in our daily lives and then trying to make it up in one big leap. That works well as long as we can keep leaping back up. Occasionally, though, we stumble when trying to leap. And when we do, we fall flat on our faces.

A constant reliance on these big wins is not sustainable. They aren’t meant to be Band-Aids to cover our daily financial boo-boos.

Reversing the curse
The cure for this curse is balance: Neither obsessive frugality nor an intense concentration on the big-ticket items will lead to long-term success. Balance will.

These big wins can be powerful influences in our financial lives. We can use them as sparks to turn around a desperate situation, or as fuel to build momentum on our existing progress.

For Courtney and me, focusing on correcting our day-to-day habits has actually fostered more big wins. Getting the basic principles of money management and frugality under control has given us more time, relieved stress, and provided more freedom to pursue larger activities.

What about you? Have you experienced the curse of the big-win mentality? Which has been the leading focus in your financial life: the small daily habits or the higher-leverage large amounts?

Photo by Haundreis.

GRS is committed to helping our readers save and achieve their financial goals. Savings interest rates may be low, but that is all the more reason to shop for the best rate. Find the highest savings interest rates and CD rates from Synchrony Bank, Ally Bank, GE Capital Bank, and more.