Following this advice from Ramit Sethi could change your financial life

Consider following this advice from Ramit Sethi to rethink the way you manage your money.

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Key points

• Many people manage their money by focusing on cutting small expenses, but Ramit Sethi doesn’t think that’s the best approach.
• He urges looking for a few big wins rather than asking $3 questions.
• Worrying about debt repayment, salary negotiations, and savings is more important than paying for a coffee, dessert, or ride-sharing service.

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Finding the best way to manage your money can be difficult. And, unfortunately, some people can end up focusing entirely on the wrong things.

In fact, personal finance expert Ramit Sethi recently warned that many people end up “losing decades” because they take an approach that doesn’t really work well in the end.

Sethi warns of a crucial mistake and suggests that a change in mindset could make all the difference in how much money you end up with. Here’s what he advises.

Ramit Sethi warns of small details

On Twitter, Sethi addressed one of the biggest mistakes he’s seen people make when it comes to financial decisions.

“I think people spend way too much time agonizing over small financial decisions and not enough time over big decisions,” he said. “Small questions for $3: coffee, dessert, price of an Uber.”

On the downside, they don’t focus enough on what he calls “over $30,000 issues,” which he lists as “buying or renting, paying off debt, negotiating salary, the savings rate, the distribution of assets”.

As Sethi explains, it’s those bigger decisions that will have a bigger effect on how much money you end up with. But there ends up being a lot of pressure to focus on the little things instead. “Everything in our culture pushes us to reduce our concentration,” he warned.

Rather than obsessing over whether to spend a few bucks here and there, Sethi suggests focusing “on 5-6 big wins.”

Is Ramit Sethi right?

Sethi’s advice is exactly what many people need to hear, and it can be life changing if you take his words to heart.

The reality is that frugality can only take you so far and you can’t get rich just by cutting back on your spending. Of course, you don’t want to live beyond your means or spend every dollar you earn. But if you waste your time and energy looking for ways to cut your budget by pennies, you might get bogged down in details that won’t make much of a difference in the end.

If you manage to shave a few hundred dollars off your budget every year, while cutting all the fun out of your life, it will be hard to sustain those savings. And getting rich will be long and hard work because there simply isn’t enough money “wasted” in many people’s discretionary spending to make a meaningful difference. But if you focus on big issues that could potentially net you tens of thousands more dollars to save, it will be much easier to build wealth in a sustainable way.

Sethi’s suggestions for things you should focus on can give you a good starting point for putting this practice into action. Making the right decisions about your housing costs and your job can have a huge impact on your financial life, as can being smart about what you do with your brokerage account assets.

By focusing your attention on these bigger picture issues – and trying to find other ways to focus on the big wins – you will set yourself on the path to success.