So, I’ve been stuck on personal finance books lately, probably because Natalya and I are finishing school soon and will be out in the real world. Just finished All Your Worth: The Ultimate Lifetime Money Plan by Elizabeth Warren and Amelia Warren Tyagi. It was a good book, a great book for people new to personal finance, but most of the ideas I had heard before.

One idea that was new to me, and contradicted what I had been told by so many other personal finance books, was the idea of focusing on the dollars rather than the cents. (Actually, I have heard this idea before, from Ramit Sethi’s blog I Will Teach You to be Rich, can’t remember the exact post.)

Many personal finance books talk lots about eliminating a few dollars here and there. This approach could be called “The Latte Factor”, as David Bach puts it in The Automatic Millionaire and others of his books. Save a dollar here, 50 cents there, and in forty years you’ll be a millionaire. While I agree that this approach is beneficial and will help one become wealthy, I was interested by what the authors of All Your Worth had to say about timing. They tell us to focus more of our energy on reducing large expenses rather than small ones:

“When you add up all the time you spend making decisions about how to spend your money, what gets the most time? If you’re’ like most people, you spend hours every month thinking about the price of little stuff. A pair of shoes, a pound of tomatoes, a bottle of wine—you look at the price tag, you comparison shop. You weigh your options, thinking twice before you buy.

Now think about the big-ticket items. Your home or apartment. Your car. Your insurance. Sure, you probably thought hard about those purchases…once. But when was the last time you thought about them? You probably just write those checks, month in and month out, without thinking about whether you’re getting the most for your dollars.”

The authors advocate focusing your attention on lowering these large expenses before the small ones. They then devote a whole chapter to lowering these expenses. Check it out!

Tags: All Your Worth, Elizabeth Warren, Latte Factor

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