Modern Windows computers have a setting called “allocation unit size.”

Put simply, it’s the smallest chunk of data your hard drive wants to deal with, when it comes to storage.

The default allocation unit size for most Windows computers is 4 kilobytes (KB). An easy way to imagine bytes: 1 byte = 1 character. For example, the word “money” has 5 characters, so it’s 5 bytes.

Hence, an allocation unit size of 4 kilobytes = a file with roughly 4,000 characters inside.

This interesting quirk of modern computing leads to some wastage.

For example, if you had a file with only 2,000 characters (i.e. 2 kilobytes), it’d still take up 4 kilobytes on your hard drive. Your computer knows your file’s only 2 KB, but it’ll still chuck it into a 4 KB storage unit.

Why?

For optimizing performance.

Set the allocation unit size too small, and your computer would spend too much time dealing with small sections on your hard drive — too slow. On the other hand, set the allocation unit size too big, and your computer would waste a lot more storage.

4 kilobytes must have been chosen by the good engineers as a nice compromise — big enough to matter, but not too big that it’s wasteful.

A lot of things work like this in money and life.

Default Minimum Size

The default “allocation unit size” when we think about money is usually one cent.

In other words, when you go shopping you see prices like $9.99. Shops can’t set prices at $9.9888 because the smallest unit is $0.01.

Of course, one cent is the absolute minimum size. Depending on situation, minimum size can go up.

For example, in recent decades, countries like Australia, Canada, Singapore and Malaysia have actually stopped issuing 1-cent coins. Cash transactions are rounded up to the nearest 5 cents. Message from the government: “Physical 1-cent coins aren’t worth thinking about. Let’s raise the stakes.”

You can see this in the investing world too. Nowadays, with modern apps and fractional investing, the minimum investment size can range from $1 to $5. Message from the companies: “You’ll need to invest at least $1 to make it worth our time.”

But go back to the early 2000s — the minimum size to invest in a mutual fund (unit trust) could have been as high as $1,000.

The concept of minimum size should change to suit your circumstances.

What’s your minimum size when it comes to thinking about your money?

Big Enough To Matter (To You)

Bestselling author (and now Netflix superstar) Ramit Sethi is fond of saying: “Stop asking 3 dollar questions. Ask 30,000 dollar questions.”

What he means is to focus on the big wins. For example, banning yourself from drinking lattes ($3 question) probably won’t help you much, but negotiating for a salary raise will.

What’s Ramit’s minimum size when it comes to managing money? Definitely much higher than 3 dollars.

The key to understanding this concept: different people have different levels of minimum size.

Nick Maggiulli has a terrific article about the levels of wealth which covers this. Paraphrasing some of the levels he wrote about:

• Level 2: Grocery freedom — I don’t care what grocery items (<$10) cost
• Level 3: Restaurant freedom — I don’t care what stuff in restaurants (<$100) costs
• Level 4: Travel freedom — I don’t care what vacation stuff (<$1,000) costs

For example, someone at Level 4 doesn’t spend time comparing prices between budget airlines. They’ll happily fly Delta, Emirates or Singapore Airlines.

Their minimum size might be $1,000 — meaning they don’t feel any difference between a $400 and $100 flight ticket.

Different Points of Time; Different Minimum Sizes

The other thing to remember — and this helps with dealing with jealousy — is that people go through different seasons in life.

For example, I can remember times when saving one Malaysian ringgit meant something to me. I would drive a longer route, spend 15 minutes more in traffic, just to save on toll charges.

(On the other hand, I’ve never cared about cents. There’s no tangible difference saving 90 cents vs 1 dollar. But you’ve gotta draw the line somewhere. For me it was one buck.)

Fast forward many years, with a higher income, I don’t care about one buck anymore.

I’m somewhere between Level 3 and 4. Most local restaurants are fine now. But if I’m traveling to a first-world country like the UK, our family still budgets carefully because of exchange rates.

In other words, I’ve now increased my minimum size to match my wealth.

This leads to an important question — especially if you’ve worked hard your entire life to get to your level of financial success:

“Even if you’re earning a good income, isn’t it dangerous to stop calculating the small stuff? Isn’t that lifestyle creep? Why not be a millionaire who still cares about saving dollars? After all, a $3 latte every morning leads to $1,095 a year…”

When Moving Levels Feels Harder Than You Expect

First of all, yes, there’s value in learning how to manage money at the lower levels. You don’t want to move to higher levels before you’re ready.

Say you’re earning $5K a month — setting your minimum size at $500 means you only have 10 chunks of money to play with every month. That’s obviously too high.

On the other hand, if you’re earning $10K a month, but setting your minimum size at $1, that’s probably too small. Will a dollar saved here and there make your life better? Probably not. Worrying about these small amounts is wasting your energy.

What if you stopped thinking about these immaterial amounts, and diverted the time and energy into things you loved instead? How much richer would your life be?

One of my favorite hobbies in my 20s was to research every financial decision to make sure I got the best deal. Before buying anything, I’d do a ton of online research, or even walk from store to store comparing prices.

Today, realizing it’s not the best use of my time, I’ve slowed down. I still love deal hunting, but I save it for big things beyond my minimum size — like if I’m buying a laptop.

Sure, this means feeling like you’re overpaying for things sometimes: “Oh, if only I’d walked a bit further, I’d have saved $1 for coffee”

But what’s the purpose of money if you can’t enjoy it?

Moving levels isn’t easy, especially if you’ve hustled hard to get here. Just remember that money isn’t the end goal. Money’s merely a tool to help you reach a better life.

Your Most Precious Resource Isn’t Money — It’s Time

Warren Buffett is worth >$100 billion and 92 years old. Would you swap places with him — give up decades of life to have his money? Would anyone healthy below 40 do it? I don’t think so.

Zoom out far enough, and people agree that time is more precious than money.

If it’s so important, what if we applied the same “big enough to matter” concept to your time?

Here’s an extreme example: There used to be a (false) urban legend that Elon Musk schedules his time down to blocks of five minutes. Supposedly, being CEO of three companies + #1 Twitter troll meant every five minutes count.

Just like money, there’s some level of minimum size that works for your time.

Set your minimum size too tight (e.g. five-minute slots) and you’ll be perpetually stressed. Probably an asshole to anybody who interrupts your schedule. Not an enjoyable way to live.

Set your minimum size too loose (e.g. you take full days to finish stuff others do in an hour) and you’ll be unproductive. You career will suffer.

In an ideal world, I’d love to schedule my time according to two-hour chunks.

But that’s just me. It’s much harder to quantify this vs money, as there’re more variables to think about. Weekdays vs weekends. Work vs social responsibilities. Kids.

I don’t have a recommendation here other than to find balance. A reasonable size to think about when managing resources — whether it’s your time, money or energy.

Big enough to matter, but not too big that it’s wasteful.

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Pic from Pexels: Towfiqu Barbhuiya