The Little Things Add Up: One Way To Save Money
A few weeks ago I was at Starbucks buying a Tall Hot China Green Tips tea for $1.90, like I typically have done most mornings. As I swiped my debit card to pay I started thinking about how much this daily luxury was costing me on a weekly basis. At $1.90 a day times 5 days a week I was spending $9.50 per week or $38 per month just on my daily tea ritual. It’s amazing how quickly a seemingly nominal expense can add up. Then I started to think about all the other small items I purchase throughout a typical day that never seem to register on my radar as a major expense. Things such as soft drinks, lunch, snacks. I did a quick calculation for an average week and discovered that between lunches, snacks, morning tea and scones I was spending on average $55 per week on these items. That is $220 per month or $2640 per year!! As you can see by these calculations it is so easy to miss the large picture of how these seemingly small purchases can really add up. What could you do with $2640 per year?
Here is an exercise to try for a week. Get a small notebook and carry it around with you. Write down every purchase that you make during the week. Write every purchase down no matter how small or inconsequential it may seem to you at the time. You may be as surprised as I was at how quickly the small seemingly incidental purchases will add up.
Habits and Rituals Cost Us Money
Many times these small purchases are habits or rituals. At my office there is the morning coffee/soda run. This was typically where I would get my morning tea and scone. It’s a time to socialize with co-workers, get out of the office and just plain forget about work for a few minutes. It can also be an addiction to caffeine or sugar. So first we need to identify these habits/rituals of our day that end up costing us money. Breaking habits is never easy. There is no magic bullet, no short cut to rid yourself of it. It takes hard work. We need to ask ourselves what the reason is we find these purchases so compelling? Is it because we really enjoy the items? Is it the ritual we enjoy? Are we addicted to the items? Now think carefully about the items you purchase on a daily basis. Are they in line with your goals of personal and financial freedom? How do these daily purchases fit in with those dreams and goals? Make a commitment here and now to your dreams. Concentrate on your long term goals and focus on what you are gaining, not what you are losing.
Substituting For A Better Lifestyle
Let’s take a look at making substitutions for the items we habitually purchase. Instead of not buying the tea in the morning, or lunch or the afternoon snack we can make substitutions that are more cost effective and healthier. Rather than buying tea and a scone every morning I now bring my own tea to work. I can buy a whole box of tea that lasts several weeks for a fraction of what I was spending on a weekly basis at Starbucks. Instead of a scone every morning (which contains lots of sugar) I bring fresh fruit to eat which is not only cheaper but healthier as well. I also bring my lunch to work which allows me to not only eat healthier but saves me on average $5.95 per day. I cut out all purchases of soda, sports drinks etc. and just carry around a water bottle which I can refill for free from any tap. When I get that mid-afternoon craving for a snack I break out a bag of trail-mix which I purchased in bulk. Is it as convenient and sexy as going to Starbucks every morning, or going out to lunch every day? No, but I am focused on my dreams of living overseas, of traveling the world with my family so I am more than willing to sacrifice and make changes to my lifestyle so that I can realize those dreams and goals. It’s a conscious choice for me and it can be for you as well. It’s not easy. There are days when a sugary scone from Starbucks fits the bill and I cave to the impulse purchase. You may stumble but always remember to regain focus on your ultimate goals and dreams. Don’t dwell on and regret the purchase. Just recognize it for what it is and move forward with your plan.
The Road To Financial Freedom: Avoid The Impulse Purchase
The commitment we make to refrain from making small daily purchases can be expanded to include any purchase. We’ve all made the impulse buy, the unplanned spontaneous purchase. Often these purchases can seriously undermine our ability to reach our goals. With all the marketing and advertising bombarding us on a daily basis it’s difficult to avoid. Here are a few things we can do to reduce and eliminate the impulse purchase.
- Implement a 30-day waiting list. If you really feel you need something put it on a 30-day list. At the end of the 30-days if you still feel you need it then buy it. Chances are that after 30-days you won’t care about the item.
- Take the cost of the item(s) you want to buy and calculate how many hours you need to work in order to make the purchase. To calculate this take the cost of the item you want to purchase and divide by your real working wage to get the number of working hours and then divide by 8 hours a day to get the number of working days it would take to pay for the item. For example, you want to buy a new flat screen TV which costs $900. You make $20 per hour. $900/$20 per hour = 45 working hours. That is a 5 day work week needed to pay for the TV. Often when we think of the cost in terms of work hours we get a different perspective of the ultimate price.
- When you do go shopping (groceries etc.) make a list and stick to it no matter how good the sale is. Sales come and go. There will be more sales. If you stick to what is only on your list the temptations for an impulse purchase will have no effect on you. Stick to the plan!
- Avoid and ignore the sales pitch. As I already mentioned sales come and go. The sale we see today may be even better tomorrow. I was in the market to buy an electric guitar. I had to have it. It went on sale locally so I went down to buy it. But something held me back and I didn’t make the purchase that day. A few weeks later it was Father’s Day and the same store had a huge sale and the guitar was marked down significantly more. Sales come and go. You are not missing out if you wait.
- Keep your end goals and dreams in the forefront of your mind. Do you really want that new iPhone 3GS or would you rather be sipping drinks on the beach in Bali? Don’t let the little things stand in the way of realizing your dreams.
- Examine your needs verses your wants. You need food, water, utilities, love. You want a new iPhone, flat screen or car.
The Bottom Line: Create The Life You Really Want
The bottom line really comes down to you and I. What do we really want? How does what we do on a daily basis fit in with our dreams? It’s up to us to create the lifestyle we truly want. Others cannot do it for us. We can make our dreams come true. But it will take hard work, self examination, sacrifice and lifestyle changes to reach them but if in the end we are living the life we really want isn’t it worth it?