The Curse of a Big-Win Mentality

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.

More about...Psychology

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Pat
Pat

I love the big-win mentality, I’m all about the higher-leverage amounts. That being said, I do have to agree that at times, it can easily inflate your lifestyle. You do have to be careful, so I really appreciate this article to remind me to do just that.

Still though, I once heard Ramit talk about getting that Starbucks whenever you want (if you do things to get that big-win), and that will continue to be my plan.

Thanks Adam! Cheers mate!

Sam
Sam

I think that the big “wins” are important, not buying too much house, refinancing to take advantage of lower mortgage rates (something we did earlier this year), moving away from car debt. But big opportunities to save money don’t come up that often. As a result, I think focusing on daily behavior is easier (in a way) and the results can be dramatic. When we resolved to change our financial habits it began by tracking our spending, cutting up the credit cards and using debit (we tried cash but it was too hard to track). Tracking our spending morphed into… Read more »

Gordie Rogers
Gordie Rogers

One external factor that should be mentioned is that accommodation in Auckland, New Zealand is shockingly overpriced. New Zealand is renowned for high taxes, high rent and housing costs and low incomes. It’s an external factor that will have an effect on trying to budget in New Zealand.

Think MPS
Think MPS

I’ve always been fairly frugal, so I don’t really have a problem with the big stuff. For me, having recently moved to the Big City, the smaller stuff has become a lot more important as it generally costs more to live in the city; also, due to increased social pace and the simple fact that there are more opportunities to spend in the city, I find this to be the most threatening category. I’ve always struggled with monthly budgeting (the timeframe is too large for me to accurately estimate the small stuff), and the typical categories of budgeting have always… Read more »

Mrs. Money
Mrs. Money

This is really interesting. Two years ago when we bought our house, we were making probably $20k less than we do now. It felt like we were strapped for cash. Now we’re making more money and it’s a struggle to live like we used to. Because we have more money, we want to spend it.

Ben
Ben

It depends on the person… I have found numerous small ways to save money just as I think I have one thousand $1,000 ideas but no proverbial million dollar idea.

Others are completely the opposite.

And others yet are balanced.

If you are going to be penny wise just don’t be pound foolish.

Four Pillars
Four Pillars

Are you suggesting that “big wins” are addictive so if I save a lot of $$ on a new car, I’ll want to buy another one soon to experience that feeling again? I don’t think so. 🙂 One thing to keep in mind is that the “big” vs “small” idea is relative. For someone who perhaps younger, paying off debts, working on a career/increasing income – the “big” expenses might not be that big compared to someone who is has a better financial situation. But they are still bigger than the small stuff (and therefore more worthwhile). For someone like… Read more »

Foxie || CarsxGirl
Foxie || CarsxGirl

My problem has always been on finding the big wins… I honestly don’t have that many, if any at all. That and you ought to be maximizing the opportunities when it comes to those anyhow, so it’s always sounded like common-sense advice to me. (But isn’t all financial advice common-sense-sounding? Hmmmm…. Conundrum.) You can bet I’ll be maximizing opportunities every chance I get when we move. We’ve got the potential to make a little bit of money, and that would be nice comfort for someone staring at another stint of unemployment. 🙂 However, I like my small wins, because I… Read more »

Little House
Little House

My husband struggles with the “Big Win” mentality. He often decides to start a new business idea with the idea that it will make a lot of money. But then after spending money on the project, realizes it will take much longer, if ever, to make any money. He’s getting better at this, but I often have to stop him and have him reevaluate his ideas. Talk about how much it will cost, when we will see profit, and if he has the time for such an idea. Lately, this approach has helped him redefine some ideas.

Jeff @ Sustainablelife blog
Jeff @ Sustainablelife blog

I think that for me, tracking the small stuff has allowed me to see when I can get the big wins. For example, if I bring my lunch every day during the week, I can save $30 per week, and at the end of the month, i’ll have an extra $120. If I can add this to what I am already paying on my credit card, I can pay it off sooner, and move that money to save for something so I wont have to use credit for next time. I do agree that many people trip over dollars to… Read more »

Nate
Nate

I have a question for you Little House @7 (if you don’t mind of course!). I am pretty much exactly like your husband, in that, I take on way to many entrepreneurial projects. Many of them are profitable – but I actually can tell that I am not performing at my full time job at the level I have been for the past year (outperforming). My question(s) is(are): Does your husband attempt these projects while maintaining his performance at his full time job (or are these projects his full time job)? Is this a hobby for him, or simply a… Read more »

Lesley
Lesley

I think one thing that’s key is that if you are accustomed to the “little wins”, then the big wins seem all that much more important. If you are working hard to save and in a frugal mentality, it’s that much harder to justify the fancier car, the bigger house, the new toy. Whereas if you are accustomed to treating yourself to life’s little luxuries in all areas of your life, I suspect it leads to a bit of a sense of entitlement when it comes to the big areas too.

Rob Bennett
Rob Bennett

I think the small daily habits are far more important.

It is how you think about money that matters most. You don’t learn to think properly by reading a good article. You learn from daily practice. Things take a long time to sink in.

Rob

elysianconfusion
elysianconfusion

I think we’ve always had this “big win” mentality, and coupled with a tendency to look at available credit more like available cash, we haven’t done ourselves any favors. Pay off a car? Great, let’s get a new one! Get a job (from stay at home mom), great, we can afford more stuff! This past winter and spring I was shocked as I added up our debt, and saw that it had actually increased since I went back to work. And it’s not all childcare costs (though that’s not cheap). I’d spent the previous year saving bits here and there… Read more »

mario
mario

“Too much of ANYTHING is not good for your health.” It applies to anything and everything in my opinion.

KC
KC

I try to combat the big win mentality by keeping my recurring costs small. In other words I don’t like the “subscription” based services. I don’t have TiVo or a regular cell plan. I can’t stand that so many services these days want you to pay monthly (for the rest of your life). I don’t mind making a one time purchase to upgrade my lifestyle, but I hate to pay for it for what will seem like eternity. I also transfer this to one time purchase things I buy. I don’t pay monthly for anything other than my house. If… Read more »

Dan
Dan

I won’t be cursed until next year. I was without a job for four months prior to starting this current one in January — and it wasn’t until the middle of February when I got my first paycheck. So this year has been coupled with what I consider to be three major wins — first, I landed a job that pays better than I expected, and second, I landed an apartment whose rent is lower than I expected. Third, I’m getting married at the end of the year; my fiancee is a student, and at my income level, the tax… Read more »

Dan
Dan

@KC Yeah… part of my “big win” is saving for my car replacement. I still drive the first car I bought, a ’99 model that I got in ’01. It’s nearing the end of its life, but with the 6 miles I drive each way to work, I figure I have two years to save for its replacement, if not longer. I’ll drive it until I worry about whether I can get to work or not, and then I’ll take it to the junk yard. But I hope to never have a car payment again for the rest of my… Read more »

Debi
Debi

I’m completely in agreement with Rob Bennet when he says that the “small daily habits are far more important.” I think that Sam, with his amazing story, will agree. By concentrating on the small, everyday things, we managed to pay our $59,000 mortgage off in 5 years, pay cash for all car purchases, and send 2 children to college. The big things will follow if you take care of the small stuff.

elisabeth
elisabeth

This is an interesting post, particularly the warning not to lose sight of what has been saved in life style inflation. I would also stress not to lose sight of “big wins” that are NOT associated with saving a large amount in a single effort — the “big wins” that take place over time, like quitting smoking since over the years of the saving from a change the savings can be enormous (and with quitting smoking the added benefit of fewer health costs).

KM @ Long-Distance Life
KM @ Long-Distance Life

Interesting post. Like others in the comments, I’ve struggled with finding those big wins in the first place. I’d love to increase my salary, for example, but it won’t happen for a while. I want to stay at my current company, and there’s a freeze on raises, so I can’t negotiate for one right now. And everyone seems to be hanging onto their jobs, so no positions are opening up that would allow me to go for a promotion. Also, I think there is a difference–in mindset anyway–between an big win and a big choice. If I had a mortgage… Read more »

Shane
Shane

“We are a culture that loves to celebrate shaving $200 off our monthly mortgage with a new $300/month car payment.”

This is completely true. We love shaving off expenses just to spend more somewhere else. One that I have seen a lot is the “I just paid off my $200 per month credit card bill, so I’m moving from my $700 apartment to the one in downtown that’s $1000.”

Here’s my slogan, “save more, worry less”

Rick Francis
Rick Francis

@Rob >It is how you think about money that matters most. I agree 100%… that is why I titled my blog pondering money 🙂 >You don’t learn to think properly by reading a good >article. True, information without action accomplishes nothing… however I also believe that the information we see influences our actions too. I still read PF blogs not only to learn more, but to keep my focus. @Foxy >My problem has always been on finding the big wins… They don’t happen all the time, but you will see a lot more possibilities if you are thinking about them.… Read more »

Oleg Mokhov
Oleg Mokhov

Hey Adam, The most effective personal finance system isn’t a balance of big wins and small savings, it’s a combination of big wins and self-discipline. You maximize results and minimize time spent getting them by focusing on the big wins. The trick after that is to not spend the money saved on something you don’t need. I agree with your quote: “We are a culture that loves to celebrate shaving $200 off our monthly mortgage with a new $300/month car payment.” We just need to use good ol’-fashioned self-discipline to not buy that new car we don’t need (or change… Read more »

Kevin M
Kevin M

An easy way to combat lifestyle inflation is to automate. 2 examples:

If you get a raise, automatically transfer the difference between your new net paycheck and your old one into savings or invest it. You’re used to living off the old amount, so it is easy.

If you refinance your home and save $300 a month, automatically transfer the $300 to a savings account on the due date of the mortgage payment (or better yet, keep paying the old payment and designate the overage to principal).

Tyler Karaszewski
Tyler Karaszewski

I don’t think this post makes a coherent point. It first makes an analogy between gambling and “financial big wins”. The analogy is flawed. In gambling, a loss in actually a *loss*. In a financial “big win” situation, a loss is simply a return to the status quo. If the deal to refinance your mortgage falls through, you lose an opportunity to *save* $200/month, but it doesn’t *cost* an extra $200/month, either. If gambling worked that way, we would all gamble all day long, and the casinos would be out of business. Then you make a slippery-slope argument about big… Read more »

Nate
Nate

I have a question for you Little House @9 (if you don’t mind of course!). I am pretty much exactly like your husband, in that, I take on way to many entrepreneurial projects. Many of them are profitable – but I actually can tell that I am not performing at my full time job at the level I have been for the past year (outperforming). My question(s) is(are): Does your husband attempt these projects while maintaining his performance at his full time job (or are these projects his full time job)? Is this a hobby for him, or simply a… Read more »

Strick
Strick

I think its also important to not mix up the big and small “purchases” from the big and small “wins”. Some people consider saving $1K off a $2K item to be a big win and cutting their cable bill by $40 to be a small win, but $40/month savings will surpass $1K very quickly (plus the fact $40/month in savings reduces the required nest egg for retirement by $12K at a 4% withdraw rate). Also don’t forget the magnitude (and ease) of “medium-sized” wins on big purchases. Its amazing how the human mind doesn’t even recognize the difference between paying… Read more »

Foo Finance
Foo Finance

I agree with most here that small wins add up to big ones. I also want to add that a small or big win does not have to be a dollar amount! A win for me, no matter the size, is something that relieves stress, pushes me closer to my goals, and generally makes me happier. Examples: 1. I paid off the remaining $900 on a small loan early. I gained $50 a month in cash flow but more importantly the great feeling of paying off one of my debts completely. I am motivated to attack the next! 2. I… Read more »

DC Portland
DC Portland

It looks like both the writer and readers of this story have missed a key point. The fundamental psychological driver of this “curse” is hedonic adaptation (aka, the “hedonic treadmill”). Here’s how it works: 1) People inevitably adapt to “good” things (e.g. a big raise) by taking them for granted. 2) As accomplishments and material possessions increase, expectations rise. 3) When things and deeds no longer make you feel happy or satisfied, you pursue more (i.e. seek-out more “big wins”). This is a “zero-sum” game that wreaks havoc on our sense of well-being. Importantly, research shows that we habituate much… Read more »

nick
nick

I often use the 80-20 rule both in my professional and personal life. It goes like this: If you can achieve 80% of your objective by investing 20% of the total time required and the the other 20% will take 80% of the time, then it’s probably not a good idea to invest more time/effort on it. Pocket the 80% as a quick win and move on. You spend your time effort on something else and get a quick win there. you can apply this principle on any project at home/work. If you think about it, you can apply it… Read more »

chacha1
chacha1

@ Nate, I saw your comment in here twice and yet nobody answered you, so, hi. 🙂 My advice: examine your security needs (risk tolerance) and make a five-year plan based on that. If you are single, free and easy, with no debt, your security needs may be a lot lower than if you have high financial commitments. If you have low risk tolerance, back-burner some of your entrepreneurial ideas (maybe choose your favorite/most profitable to pursue with greater focus/energy in your free time) and put your head back into your day job, because you won’t get the promotion if… Read more »

Peter
Peter

@Nick 31:
That concept is from “The 4-hour work week”. Good point.
If you read it, you might want to give credit to the author.

Ryan
Ryan

I think you need to be focused on both the little and the big items. My wife focuses on the little (coupons, cheaper food, ect – this is her choice) and I focus on the large items in the budget. While it may seem like I save a lot of money on a single large purchase, we have added up all of the little savings and found that on average my wife saves us more money than I do!

Patty - Why Not Start Now?
Patty - Why Not Start Now?

Ah, yes, we sure are a culture that yearns for the BIG win. I love your explanation of the gambling industry. I also see it in the lottery business – same thing really. And this mentality, this yearning for the immediate win that will fix everything, this striving for more, is part of the hedonic treadmill, as DC says. But it’s also an archetypal story that’s operating at a very deep level. It’s actually a combination of two stories: magic and rescue. Thanks for exploring it.

LeanLifeCoach
LeanLifeCoach

@Peter 33 – Tim Ferris wrote a great book but credit actually belongs to Joseph Juran, he popularized the principle first observed by Vilfredo Pareto. However, it is just a rule of thumb, in many cases it does not really work.

Adam – Great post! It is amazing how polarized the PFblogoshere is on this issue of small vs large opportunities. While the ratio will vary for everyone we should all take advantage of both opportunities. Frugality is not cheap it’s efficient use of resources. Efficiency works on both big and small uses of money.

LiveCheap
LiveCheap

Balance is important. The big wins are ultimately give you the snowball effect in a positive direction. The more money you make, the more opportunities for big wins. But many of the big wins are more complex than whether you get a good interest rate when buying your house. The big win might have been not buying the house at all or waiting till it dropped $100K. So many of these are hard to measure and feel good about because its not as easy as I saved $500 on car insurance. The most successful people I know have dozens of… Read more »

David/Yourfinances101
David/Yourfinances101

If you can balance your time, I think you can benefit from both. I will invest more time into a “big” win then I will some of the small stuff for obvious reasons. If you start to obsess, and starting wastng inordinate amounts of time on small things, then I think you begin to lose course

Susan
Susan

My 10 year old was reading blogs with me. He LOVES the picture of the hamster!

kenyantykoon
kenyantykoon

about the casinos, i couldnt agree with you more. you just have to look at the casino billionaires that have capitalised on this human flaw. And the strange thing is that they themselves dont gamble- this i read in a book. they just make a conducive environment for the addicted gamblers like changing their mindsets and pumping pure oxygen in the casinos to keep people awake. i hate being controlled by powers that be and that is one of the reasons that i never gamble and try my best to increase my financial education. I would rather be the billionaire… Read more »

Robert J. Fischer
Robert J. Fischer

In The Black Swan, Nicolaus Nassim Taleb argues that black swans occur much more often than people think. Black swans he defines as extraordinary events like 9-11 or the banking crisis or Google that have a profound influence that no one can forsee before hand. He points out that the reason wealth is very unevenly distributed in our society and that many people are able to capitalize on these extraordinary black swan events. In other words, there are far more opportunities to make a substantial amount of money than most people realize. The intersting thing is that if one invests… Read more »

Kyle
Kyle

The nice thing about being poor is that every win seems like a big one.

Last month, I saved $60/month in my budget by reducing our phone plan to match our usage.

Next month, our car will be paid off, knocking out a $175/month payment. With that, I can drop our insurance down to liability only, another $100/month savings.

That’s $335/month without changing our lifestyle a bit, and that represents about 15% of our income. Big win!

Rosa
Rosa

I think the point DC Portland made at #30 is really important – you get used to wherever you are, so a “big win” is really rewarding…for a little while. The little things do more for establishing you as a frugal person, or a successful person, or a person with self-discipline, or whatever it is you’re trying for. But also, because of the “hedonic treadmill” a big frugal choice can carry over into later ones by making future frugal choices more delightful. Like, for me – I had a car with no radio and no AC for a long time.… Read more »

Sierra Black
Sierra Black

Nice article. I find that what works for me is a balance between the two. Being in the practice of paying close attention to my finances and making frugal choices day to day on small items helps me spot the opportunities for big wins when they come up, and it means I’ve already got the skills in place to cash in on them.

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