I find it helpful to think of all nontrivial expenditures, income gains, etc., as (1) representative of a consistent “strategy” and (2) annualized. So when you choose to buy a latte, you should consider what general principle you’re acting on (e.g., “have a latte every day”, “have a latte on Monday mornings when thirsty and in a hurry”, etc.) and then figure out what annual difference it will make. If you get a raise it’s automatically annualized (though you should also think about its effects on your future salary, hireability, status, etc.). If you get a one-off bonus from your employer, you should consider it (something kinda like) equivalent to the annual income you can get from investing it. Etc.
(Of course you don’t want to be doing this in detail every single time you make a decision with financial consequences. But if you get into the habit of thinking this way, your quick judgements will probably get better.)
I find it helpful to think of all nontrivial expenditures, income gains, etc., as (1) representative of a consistent “strategy” and (2) annualized. So when you choose to buy a latte, you should consider what general principle you’re acting on (e.g., “have a latte every day”, “have a latte on Monday mornings when thirsty and in a hurry”, etc.) and then figure out what annual difference it will make. If you get a raise it’s automatically annualized (though you should also think about its effects on your future salary, hireability, status, etc.). If you get a one-off bonus from your employer, you should consider it (something kinda like) equivalent to the annual income you can get from investing it. Etc.
(Of course you don’t want to be doing this in detail every single time you make a decision with financial consequences. But if you get into the habit of thinking this way, your quick judgements will probably get better.)
That’s a cool way to think about it.