4 reasons to harp on small expenses
Personal-finance writers nag about small daily expenditures because these items are often overpriced, and less-expensive or free alternatives are easy to find.
I've been helping a neighbor attack her New Year's resolution to get her finances in order. She's been writing down all of her spending for a couple of weeks and I'm helping her identify things that can be cut back. Like many others, she spends a lot on things like coffee from Starbucks, movies, meals out, snacks from vending machines, books and other relatively small, "frivolous" expenditures.
The other day as I was pointing out, yet again, that she was wasting a lot of money on items like this, she turned to me and said, "Why are you so hard on me? You don't want me to have any fun. Every financial book I read says the same thing you do. All the fun has to go, even down to the littlest things. It's not fair."
I told her that the fun doesn't have to go, necessarily, but she does have to find cheaper sources of fun if she's serious about freeing up more money for her other goals. People often wonder why finance people tell them to cut all those little purchases down or out.
After all, the reasoning goes, if they're so small they can't do that much damage. There are four reasons we harp on these little items:
They are often overpriced. Coffee from a restaurant, soda from a convenience store, a meal out, movies in theaters, and snacks from vending machines carry hefty markups. While they might be OK once in a while, making them everyday occurrences means paying that hefty markup often. Additionally, they are often overpriced. A candy bar in a vending machine is no bigger than the one you can buy in Wal-Mart, but it can cost three times as much. You can find the same items or great substitutes at a fraction of the price. (Post continues below.)
There are usually free or low-cost alternatives. You can make your own coffee, buy your snacks or sodas at the store and take them to work, rent movies from Netflix or stream online, make quick meals at home, or get books from your library or used-book shop. It's so unnecessary to pay premium prices for these items when the same things can be had for much less. You're paying for the convenience and the "gotta have it now" factor rather than anything special about the item itself.
They aren't necessary. None of these expenses are necessary, which means that if you're trying to rein in your spending, they're all fair game for elimination. If you're choosing between your utilities and your lattes, the lattes go. You focus on things that are necessary first, and only add in the convenient, overpriced stuff when your budget can support it.
They can add up to a lot of damage.Coffee for $2. Snacks at the vending machine: $1.50. Lunch out, even if from the value menu: $5. That alone is $8.50 in one day. If you repeat that every workday, that's $42.50 per week and close to $2,200 per year. It doesn't seem like a lot at the time, I know. It's "only" $2 or $5. But the cumulative damage of small purchases can be just as large as a big spending binge.
It's not that you shouldn't have any fun or enjoy anything. You just can't do it all of the time and expect financial success. Financial people are hard on these expenses because we know how overpriced they are and that you have alternatives.
We also know that they are sometimes the hardest things to weed out because people cling stubbornly to these last indulgences. They feel like they've given up everything else, so they're going to cling to that coffee. But don't think of yourself as giving them up. Think of yourself as being smart enough to see them for the waste of money that they are and for being creative enough to find suitable and less-expensive alternatives.
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