Will Asking These $30,000 Questions From Ramit Sethi Make You Rich?

Don't sweat the small stuff, but make sure you nail the big stuff.

For years, financial advisor Ramit Sethi has told readers to stop asking $3 questions. These are questions like whether you should buy coffee or switch to a new savings account with 0.001% more interest. Lots of personal finance advice revolves around these small financial decisions, and that keeps people focused on minor issues.

Instead of doing that, Sethi says you should be asking $30,000 questions. These are the decisions that have a significant impact on your financial situation and are a big win if you get them right. He has a reasonable point here, so let's look at where he suggests you put your energy.

Ramit Sethi's $30,000 questions

Here are some of the major financial questions that Sethi says you should ask yourself:

• What's your target savings rate? Saving money consistently is an important financial habit. Once you decide on a savings rate, such as 10% or 20% of your income, Sethi recommends automating it so it doesn't require any work on your part every month.
• Have you ever thought about negotiating your salary? You can only save so much of what you earn. If you're able to raise your income, that can easily be worth over $100,000 over the course of your career.
• How much are you paying in investment fees? Some investors underestimate the impact of seemingly small fees. But a 1% advisory fee could end up costing you 28% in returns. Sticking to low-cost index funds is a good way to avoid this.
• How's your asset allocation? An investment portfolio that fits your age and goals is another decision that can be worth tens of thousands of dollars.
• What are your housing plans? Housing is most people's biggest expense, so finding a stable, affordable place to live is extremely valuable.

These are some of the most notable examples, but you may run into other big financial questions that are worth your time. For example, if you need to buy a car, that's a decision that could affect your finances for years.

The idea here is to devote your time and energy to the decisions that have a significant financial impact. For everything else, don't overthink it. If you want to buy a latte or a book, go for it. When you're getting the big decisions right, you don't need to micromanage your money.

Focusing on big decisions is good advice -- within reason

For the most part, Sethi's approach is a smart one. The big financial decisions matter a whole lot more in the grand scheme of things. Unfortunately, there's a lot of guilt-based advice out there that shames people for every dollar they spend on "unnecessary" expenses. Sethi's attitude that you can do this, and that you shouldn't feel bad about it, is a welcome change.

However, it's important not to take it to an extreme. Spending, say, $15 at a cafe every now and then is fine. Doing that five times a week would add up to $300 per month. To avoid overdoing it, you should still set an overall limit on how much you can spend per month. Sethi himself suggests spending 20% of your take-home pay on fun, guilt-free spending.

You also don't want to get so focused on the big decisions that everything else becomes background noise. For example, deciding whether to keep a streaming service is much closer to a $3 question than a $30,000 question. But if you have a few of them, and there are one or more you rarely use, then it's time to cancel some streaming services. That's still extra money you can free up.

Spend the bulk of your time on the personal finance topics that matter most, like your income, savings rate, investments, and large expenses. They're going to make the biggest difference in building wealth. You don't need to ignore the smaller decisions entirely, because they can still make a difference. Just don't overthink them, because they aren't critical if you're doing everything else right.