Small Spending Habits Can Damage Your Budget
Small spending habits, have an cumulative effect which can make a big difference in your budget. It’s not about the occasional minor purchases or even one daily spending routine. (I had one client who had to make at least one small purchase under $5 every working day. That’s not what caused her and husband to have severe budget issues.) It’s the accumulation of many minor purchases daily and weekly that will derail your budget.
In this article, I will discuss further about how daily spending of minor purchases can have a serious impact on your overall budget and ability to save.
The Latte Spending Routine Alone is not Damaging Your Budget
Contrary to popular belief, one daily coffee is not going to make you a pauper or make you a millionaire.
Let’s assume $5 day for a cup of coffee out vs. $.50 for preparing at home. A total of 240 days a year (time off for vacations and holidays) for 35 years assuming a 3% interest rate. At the end of 35 years, you would have $65,300*. A nice sum of money.
*I used this website to calculate the numbers.
It’s Many Spending Routines that is Damaging Your Budget
My experience with clients, is that they are not only buying one cup of coffee a day, they are also buying breakfast, a mid-day or afternoon snack and lunch. This can add up to $30/day or more.
Let’s further assume it costs $5 to bring your own food to work. Putting these numbers in the same website calculator above, at the end of 35 years, you would have almost $378,000!
Small Spending Routines Do Not Stop at Food Purchases
Small spending amounts don’t stop at food and drink we consume during the work day. Many services that in the past were free or one-time expenses are now monthly.
For example, listening to the radio over-the-air, can cost $13 for Spotify. Storing your data (photos, music, etc. in the cloud) can cost up to $9.99/month. If you using PC at home, then you may be paying $9.99/month for Office 365. A gym app subscription could be $79.99/year.
An Accumulation of Smaller Purchases Sabotages Your Budget
While I have highlighted a few on-going expenses, I have not addressed the smaller impulse spending. Smaller purchases can add up and can cause real damage to a budget. Mainly because we don’t think these minor purchases matter, therefore, we do not keep track of them.
What Can You Do to Reduce These Spending Habits
Here are three ideas to help reduce these spending routines:
- Set aside a specific dollar amount monthly and or yearly. Stick to this amount by using cash only.
- Many of these habits have developed over time. Identify which ones might be a want vs. a need.
- Make conscious changes in order to break your bad spending habits. Maybe walking on a different street from work, so you avoid going by a store that begs you stop in.
“The devil is in the details” might be a good way of summing this up. A $5/day habit is not going to bust your budget. It’s spending $5/day plus a many other small daily and monthly habits along with random impulse purchases that can cause overspending and in turn, increase your debt.