Create Your Own Windfall: Focus On What Matters
Last week I wrote about the ‘Windfall’, when you unexpectedly receive a bonus (often financial) that gives you choices you didn’t have before. This week’s post is about creating your own windfalls and planning your finances to purposefully give yourself extra choices, without leaving it up to chance.
There's a simple idea, famously expressed by Benjamin Franklin: “Keep an eye on your pennies (or pence) and the dollars (or pounds) take care of themselves.”
But it's just as important to stay focused on your dollars. If you can do that, it doesn't matter if you lose a few pennies here and there.
Here's an example. Business was slow when I was living in Thailand last year. In order to save money I was eating $1 bowls of soup every day.
But, as I focused carefully on decreasing my expenses by a few pennies, I was ignorant of a big expense that was to have a much more powerful effect on my finances. My $15/day visa overstay fee I had to pay the Thai government when leaving the country.
When I crossed the border, my final bill came to $400 or about 400 bowls of soup. If I had just paid attention to my visa dates, I could have bought as much soup as I wanted for myself, and 15 bowls for other people every single day. But alas, I was focused on the wrong thing.
I made the same mistake in Nicaragua. Calculating the long-term effects of drinking a $.20 coffee every day, while once again racking up a visa overstay fee with the government. (You’d think I’d learn!)
Don’t Focus On The Coffee And Soup!
Coffee, soup, and other negligible expenses can take your focus away from the BIG pieces of the financial equation that really matter.
BIG recurring expenses and BIG recurring incomes.
Focus on decreasing your biggest repeating expenses, like visa overstay fees, rent you can hardly afford, taxes, or credit card bills.
Focus on increasing big repeating income sources, like asking for a raise at your job, increasing the profitability of your company, or positioning yourself in a deal to receive long-term commissions.
Decreasing a big repeating expense by 30% is more effective than decreasing a multitude of small expenses by 100%.
Increasing a big repeating income stream by 30% has the same effect.
Put Your Focus Where It Counts
Don’t focus on small, distracting 'penny transactions' like coffee or soup.
When you focus on the BIG things you can have as much coffee and soup as you want. You won’t even need to think about it.
Action Step: Go grab a coffee, and write down all of your big, repeating expenses and income sources. Can you increase or decrease any of them by 30%? Slap yourself if you catch yourself wondering ‘Can I afford this coffee?’ at any time during the process.