Note: This article is from J.D. Roth, who founded Get Rich Slowly in 2006. J.D.’s non-financial writing can be found at More Than Money, where he recently wrote about the difference between tenacity and talent.

There’s a divide in the world of personal finance. On one side are the folks who offer advice for scrimping and saving your way to financial success. On the other are the experts who scoff at frugality and champion big wins. I think there’s a place for both.

From my perspective, it’s important to do the small stuff — clipping coupons, conserving electricity — because doing so builds good habits. And, of course, many small actions combine to yield big rewards in the long term. (Plus there’s the fact that a frugal lifestyle costs less to support, which means you can reach financial independence all the sooner!)

On the other hand, the “big wins” camp has a valid point. Too many people focus exclusively on the small stuff because it’s easy to do and doesn’t require any real sacrifice. Yet you improve your monthly cash flow by hundreds of dollars by achieving a single big win, which is likely to be more than you save on all of the thrifty things you do combined.

Big wins vs. pyrrhic victories
The way I see it, there are four types of things you can do to reduce your expenses or boost your income.

  • Difficult (or time-consuming) things that provide small pay-offs. These pyrrhic victories include things like going door-to-door to collect old newspapers in order to earn money or making your own laundry detergent.
  • Easy (or quick) things that provide small pay-offs. Because there are so many of these opportunities, they’re the bread and butter of personal finance. They’re the daily victories with which we’re all familiar. On the income side, they include working overtime and participating in research studies. Small, quick ways to reduce spending include clipping coupons, buying clothes at thrift stores, and making use of the public library.
  • Difficult (or time-consuming) things that provide big pay-offs. Some tasks, such as moving to a cheaper home in a cheaper city, can provide huge rewards, but they take a lot of time and effort to accomplish. These are ongoing projects, and might include selling all of the stuff you’ve collected in your attic or garage. (An example of this is me selling my comic books last year.)
  • Easy (or quick) things that provide big pay-offs. Here’s where you should spend most of your time: Working toward big wins. These include negotiating your salary (which takes minutes, but pays off for decades to come) and reducing your transportation costs (which you can do in a matter of days).

Here’s a diagram to provide a visual representation of what I’m describing:

The reward quadrant
Some actions provide bigger payoffs than others. And some are easier than others.
Note: For convenience, I’m saying that the things we do fall into one of these four quadrants. In reality, all of this exists on a continuum. Some of the easy actions are easier than others. And each of us will obtain slightly different results.

As you can see, big wins are the best way to improve your financial situation. They’re easy (or quick) to achieve, but provide big rewards. If you want to improve your financial situation, start with these.

How to achieve big wins
Here are some examples of common ways to achieve big wins that will dramatically improve your cash flow:

Housing
Housing is the biggest expense for most Americans — and by a wide margin. According to the U.S. Bureau of Labor Statistics’ 2012 Consumer Expenditure Survey (CES), the typical American household spends 32.8 percent of its income on housing, which includes mortgage (or rent), maintenance, insurance, interest, and utilities.

In an ideal world, you’d slash your housing expense by buying an affordable home in a city with a low cost of living. But while that would provide a huge financial reward, it’s not exactly easy, which means it doesn’t qualify as a “big win” in my world. But there are easier ways to reduce your living expenses.

The biggest (and, admittedly, most difficult) is to move within your current city. Sell your home (or move out of your rental) and choose something more affordable. Think about it: If you’re an average American who spends slightly more than $50,000 per year, $1,408 is going to housing every month. Drop that by 10 percent, and you’ll save almost $150 per month. Drop it by 30 percent, and you’ll save more than $5,000 per year!

Transportation
Transportation is our second-largest expense. We spend an average of $750 per month (17.5 percent of the typical budget) to get around, including vehicle payments, gasoline, insurance, and repairs. I know Americans love their automobiles. They’re loath to let go of them, even in the face of logic. But imagine how much you could save if you could cut your car costs in half! How do you do that?

  • Sell your current car. Replace it with a used vehicle, one that’s fuel efficient. (Side benefit: An older, used vehicle will cost less to insure!)
  • Drive your car only when necessary. When possible, bike or walk to reach your destination. (Side benefit: Increased fitness, which also saves you money!)
  • Make use of public transportation. (Side benefit: Time to read!)

Usually when I recommend people make changes to the way they get around, I’m met with a wall of objections. No worries. I’m used to it. But let me suggest that instead of looking for reasons you can’t do this that you instead look for ways you can. You’ll save yourself buckets of money.

Other expenses
Together, housing and transportation consume half of the average American’s budget. There are enormous opportunities to save if you choose to economize on these two categories. But there are dozens of ways to achieve big wins in other areas too.

The CES reveals that the typical household spent $1,736 on clothing in 2012, $3,556 on health care, $2,605 on entertainment, and $6,599 on food (which doesn’t include the $783 that went toward alcohol and tobacco).

Because each of us is different and we spend in different ways, opportunities for big wins vary from person to person. For example, after tracking my spending for the last half of 2013, I realized that I was spending way too much on travel. This year, I hope to cut my travel costs in half. Doing so would allow me to save money toward other goals, such as, guitar lessons.

Examine your own spending. Where do you have the most room to cut back? How can you do it? Look for big wins — and make them happen.

Income
I’ve written before about the importance of increasing your income. While it’s great to cut your spending, you can only trim your budget so far. Your earning potential, on the other hand, is theoretically unlimited. If you really want to get rich — slowly or otherwise — you’re going to have to make more money.

But as with spending, some methods of boosting your income provide big wins while others don’t. Here are two easy (or quick) ways to make a big difference to the amount of money you make:

  • Take a second job. Earning more in your spare time is a quick way to boost your cash flow, and it’s something that almost anyone can do. Some people don’t like the idea of taking a second job (they feel like it’s beneath them) and others are full of reasons that doing so is impossible (they don’t have time, the job market is tough). But for those who choose this path, a second job involves less risk and planning than most other income-boosting strategies, and it’s likely to cause far less stress than your primary job.
  • Negotiate your salary. One of the best ways to increase your income is at the source: during salary negotiations when you land a job or during a performance review. For many folks, salary negotiations can be awkward or scary. But in his book Negotiating Your Salary, career coach Jack Chapman argues that those few minutes during which you ask for more money in an interview can make a difference of tens of thousands of dollars over your career. Maybe hundreds of thousands. That’s a big win.

There are other ways to supercharge your income — become better educated, start a side business, become a landlord — but they take more time and effort. You can find a second job this week and be earning more toward your financial goals. And you can negotiate a salary increase the next time you sit down for a performance review. Both provide big boosts to your earnings for a minimum of effort.

The bottom line
I’m not saying you shouldn’t make your own laundry detergent or collect newspapers to earn money. But I think it’s important to put these activities in their proper place and to realize that you will never get rich doing them. (In fact, they’re a poor way to get out of debt.) It’s better to focus on actions that are easier to complete and/or yield greater rewards.

The biggest barrier between the average person and big wins isn’t ability. It’s psychology. Big wins generally require effort and sacrifice, which can be tough to stomach, especially if you’re just getting started with smart personal finance. But the sooner you understand that these aren’t fringe ideas, the quicker you’ll get out of debt or reach financial independence. The small stuff forms a great basis for behavioral change, but it’s doing the big things that will make you rich.

This article is about Cars, Consumerism, Education, Frugality, Psychology, Savings