There’s no doubt that cutting big expenses can be a welcome treat for your pocketbook, but many forget about the small expenses. Some bloggers even stress to not sweat the small expenses but instead focus only on the bigger wins. I don’t really agree. In fact, I think over time, small continuous cuts can often amount to bigger financial gains.
In 2005, when David Bach’s bestseller The Automatic Millionaire hit the shelves and introduced us to the Latte Factor, many got so fixated on the idea of a latte, that they got lost in the metaphor. The point that Mr. Bach was trying to make was that even the littlest things can add up to a lot. Whether it’s fast-food lunches, magazines or your daily cup of joe, even cutting out $5 a day from expenses you won’t really notice, can have a substantial impact on your savings.
Small is the new big
For many, owning a car can be one of the biggest expenses in your lifetime, aside from owning a home. You dish out $10,000, $20,000, maybe more for a vehicle. And you talk the dealer down $2,000. Excellent! But that’s a one-time cost reduction. How many times have you replaced your vehicle? My own car is now 12 years old. My wife’s car 13. My mom’s car is 10. And so on. So while that original $2000 seems awesome, if you think about it over the life of that car you just bought, it’s not all THAT impressive.
Anyone that owns a vehicle, knows that the real costs come after you’ve bought it – fuel, insurance, maintenance costs. Well, it could be easy to say, “drop the car and take the bus,” but let’s pick this one apart. I call around for insurance companies and find one that saves me $30 a month on car insurance. And by planning my trips and getting my friend to come over to my place once a week instead of me always driving there, I estimate I can save about $20/month on fuel. That’s $50 a month – back in my pocket. That amounts to $600/yr. How old did I say my car was? 12 years x $600 is $7200 (and even much larger, if invested). According to the latest stats from R.L. Polk Co., the average age of cars and light trucks currently on U.S. roads is about 10.8 years. But even at 5 years, it’s still a huge saving that you didn’t have to work for. You see my point.
Food is also one of the biggest family budget categories. Yet, if you can find ways to cut out even $10 a week on your groceries or dining out less, that amounts to $520/yr. And there are plenty of ways to save on your weekly grocery bag without living on beans and rice. On average, I bet most people throw out a lot more than $10 of groceries a week because they’ve bought more than they’ve needed. Shop with a meal plan. I can’t stress this enough!
So we’re already at $1120/yr without putting a penny into investments and I haven’t even touched entertainment — yep, cable TV, cellphones, movies, concerts, sporting events, gym memberships, etc. It’s not hard to find more savings on this one. It’s actually not hard to find savings on many categories, including utilities, right up to your daily latte. Yes, they may seem small and insignificant, but as you can see, they can quickly add up to big dollars even a year from now.
It all adds up
Many assume that if you’re cutting something, you’re depriving yourself of it or having to eliminate it completely, and that’s simply not the case. It’s never an either-or situation. As I mentioned about food spending, if you can try and cut back on the wasteful spending, there’s no need to sacrifice even what you’re eating. And I’m not saying don’t drive your car or even drive your car less, but take 10 minutes of your time to call up your car insurance broker and get lower rates. Or even something as simple as ensuring your tires are pumped to the appropriate pressure, could save you. Small changes, can make a big impact. You don’t have to cut the cord to your cable TV either, but look at other options or eliminating channels you don’t use. Heck, you don’t even have to give up your daily latte, but choose to make your own instead, or consider indulging, say, once a week, if you really can’t live without it. In the end, it’s all about making wiser choices with your money.
I’m not arguing that big wins aren’t important. They absolutely are, but they tend to overshadow the often ‘bigger’ wins that are spread out thinly over a year or more. All the expenses I mentioned above, can apply to everyone and it’s something everyone can start doing more of today.
Small wins can quickly add up to big wins, if you just take the time to find the savings, and invest it!