Great Money Saving Tips People Hate: Reduce Small Spending

ESI Money  |

So far in this series, we've covered two great money saving tips people hate: moving to a cheaper area and not getting a pet. Today, we'll tackle another one that's just as unpopular: reducing small spending.

For this one we need to begin with a definition. What exactly is "small spending"?

Small spending is little, inexpensive purchases here and there that accumulate during a day. Think a candy bar at a vending machine, muffin at a bakery, or soda at a convenience store. It's usually minimal (under $5) and often goes unnoticed.

David Bach brought small spending to the big time in his book The Automatic Millionaire . He coined the phrase "the latte factor" to represent and highlight "those small expenses many of us don't even think much about spending—whether it's a cup of coffee, fast food, or ATM fees".

Why Small Spending is Bad for Your Finances

The problem with small spending is that it adds up and it adds up big. Just $5 a day spent here and there is worth well over $1 million when invested over the course of a person's working lifetime. If that money is put into a work 401k and matched, it doubles.

Imagine you have a bucket full of water (representing your income). Now make a tiny hole in the bottom, one so small and obscure that few would notice it. Then wait a while. It doesn't take long for the water to drain out completely and you're left with nothing. This is exactly the issue with small spending -- it can drain your finances quickly and secretly.

Why People Hate the Idea

Most dislike this tip because they say it takes the fun out of life. People work hard and want to spend on things that give them a bit of joy -- like a cup of coffee on the way to work.

If they make a conscious decision to spend $1,300 on coffee a year ($5 coffee, 5 days a week for 52 weeks), that's their decision. The problem is that so much small spending is like that hole in the bucket. It's not noticed because it's so small. It happens here and there and doesn't seem to add up to much. And then all your money is gone.

The impact can be significant. That $5 coffee is costing you $1 million. Is it worth it?

How to Manage Small Spending

Now obviously people can't and shouldn't eliminate all small spending because it does take some joy out of life. But we can look for alternatives that allow us to enjoy life while also saving money.

For instance:

  • Instead if a $5 cup of coffee from Starbucks, how about making your own at home for pennies a cup?
  • Instead of $1 snacks from the vending machine a few times every day, how about bringing your own healthy snacks to work for $5 a week?
  • Instead of eating $10 lunches out every day, how about bringing your lunch made from leftovers?
  • Instead of paying bank fees of all kinds for this and that, how about being just a bit more diligent with your money so you avoid all fees?

Just by making a few, simple changes you can save several dollars a day. Invest that money wisely and you'll be handsomely rewarded at retirement.

Two Vital Steps

There are two steps we all need to take to as we work to recognize and limit small spending:

  • Develop a cash flow plan and track all spending. Then review the plan regularly to see what's being spent and where. Once you know this, you can then control and small spending that gets out of hand.
  • Pay yourself first. A great way to make sure your money doesn't get eaten up by small spending is to save and invest first. Have money transferred automatically from your check each week into savings and investment accounts. Then it will begin working for you immediately and, better yet, be out of your hands and unavailable for small spending.

Join us next time in this series when we take on the costs associated with home sweet home.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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