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Why Focusing On the Small Things Is Distracting You From Financial Progress

Stop worrying about your morning coffee, and focus on big wins.

by Mike De Socio
April 29, 2021 | Money
financial progress. rewire pbs money
Credit: Lakee MNP // Adobe

Back in 2007, Tim Cole was working at a gas station in upstate New York. With a low income ($7 per hour) and previous spells of unemployment, he also had a big chunk of consumer debt and a rough credit score.

It was around this time he picked up a book about real estate that inspired him to reach for a big goal: Buying his own home.

It would take Cole eight years to get there, and his path was defined partly by frugality, but also by some big, strategic money moves. He worked his way into higher-paying jobs, he aggressively paid off his debt and he kept his eye on the investment he was hoping to make.

"I dug myself out of that hole, at the same time my income was going up," he said.

Cole now earns six figures and continues to invest in real estate. His financial success is a roadmap for how you can transform your life, even if you're starting as a young adult barely getting by.

In fact, no matter where you stand financially, experts say you need to look beyond your everyday spending if you want to make real financial progress.

"There are a few big wins in life where — if you simply get them right — you almost never have to worry about the small things," said Ramit Sethi, author of "I Will Teach You to Be Rich."

Here are three big ways you can level up your finances, instead of worrying about that morning latte:

Learn to negotiate 

The mere thought of sitting down with your boss and asking for a raise might send shivers down your spine. (Been there, felt that). Avoiding this conversation, though, can mean leaving thousands of dollars on the table.

"There's only so much you can cut, and a bigger focus really needs to be on how to increase earning potential, which is obviously easier said than done," said Erin Lowry, author of the "Broke Millennial" book series.

financial progress rewire pbs money
No matter where you stand financially, experts say you need to look beyond your everyday spending if you want to make real financial progress.  |  Credit: iracosma // Adobe

Lowry says there are a few ways to go about this. If you're working a full-time job where there's room to grow, prepare to sit down and negotiate your salary. But if you've never done this type of thing before, start small: Try to negotiate your cable bill, or run scripts in front of the mirror (Lowry's latest book is chock full of them). 

"When it comes to negotiating: It takes practice, practice, practice," Lowry said.

And that practice is a better way to spend your mental energy.

"If you had to use your limited willpower to cut back on $3 a day of something you love, versus learning how to negotiate a $10,000 salary increase, which would you rather do?" Sethi said.

Think of it this way: Even a $5,000 salary bump in your 20s can be worth over $1 million in your lifetime, Sethi said, if you invest that change and let compound interest do the work over 40 years.

But what if your negotiation fails? Well, take a hard look at your job, and ask yourself if you want to continue down that path. Would it make more sense to find a new employer, or even learn skills for a new career that's more lucrative? Lowry said these decisions are important to consider, too.

Rethink your student loans or credit card debt

For many young people, a mountain of debt might feel like an obstacle to pursuing any of these strategies. But Lowry said there are a few big decisions here, too, that will save you more money than cutting back on brunch ever could.

The first thing to consider is refinancing your student loans to a lower interest rate.

"That simple act could save you time and hundreds of thousands of dollars over the life of the loan," Lowry said.

That comes with one huge caveat, Lowry was quick to point out: If you refinance federal loans, they'll become private, which means you lose certain benefits like potential loan forgiveness or cancellation. It might still make sense for you, but proceed with caution.

If refinancing isn't an option, Lowry offered a couple of other debt payoff hacks:

  • Pay $10-20 extra per month above the minimum payment. It may not sound like much, but it will shave time and interest off your loan in the long run, without depriving other areas of your budget.
  • Try splitting your monthly payments in half, if your servicer allows it. Switching to biweekly payments sneaks one extra payment in per year, thanks to a quirk in the calendar.

Don't wait to start investing

I know what you're thinking: "Investing?! With what money?"

Well, the good news is you don't need much to get started.

"Please invest. That is one of the most efficient ways to start building wealth for yourself," Lowry said. "Do not wait until you're debt-free to start investing for retirement." 

If your employer offers a 401(k) match, take advantage of the opportunity to stash away a slice of your paycheck, however small. If you're self-employed, or you don't have access to a 401(k), you can still set up your own retirement account and contribute to it. 

It's not the amount that's important, but rather getting started early and letting compound interest do the work over time. Just don't forget to make sure the money in your account is actually invested in a fund — otherwise, it's just sitting there.

Sethi said the key to making this work for you is making it mindless.

"If we have to make the decision EVERY paycheck, we'll fail," he said. "Instead, set up an automatic transfer to your savings account (and investment account) that runs in the background every month."

At the end of the day, once you create these systems for yourself, you'll be freed up from worrying about spending $20, because the most important money moves are already taken care of.

Mike De Socio
Mike De Socio is a freelance journalist covering business, climate change, transportation and the LGBTQ+ community.
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