Too often I see budgeting or personal finance advice along the lines of cutting your daily coffee or treat from the vending machine every day. In reality, there are much more efficient ways to save that don’t force you to cut out the little things that make you happy or drastically change your daily routine.
My approach to saving is to save a lot on the big things so you don’t have to worry too much about the day-to-day expenses.
Part one of this philosophy: By cutting the small things that make you happy, you’re reducing your happiness by a significant amount for only a small amount of savings. For example:
You love coffee from the coffee shop down the street. Therefore, you go and get a $2 cup of coffee EVERY single day. This adds up to $730 dollars in coffee expenses.
In order to save money, you decide you’re going to make your coffee everyday for the year. You buy a cheap coffee maker for $40 and cheap generic coffee for $7 for 36 cups ($77 for the year). This ends up costing you, $117 for the year, which means you’ve saved $613 in one year! Not bad!
However, you had to give up something small that made you happy every day, spend 10 minutes making your own coffee and drink bitter, cheap coffee all year.
Part two of this philosophy: A one-time cut of a big expense or adjustment of major monthly expense can go much farther! Often, you won’t notice this type of change and it can make a big impact. For example:
If you can cut your rent by $100 a month, you will save $1200 a year. If you live in a large city, often rent of very similar places can vary by more than a few hundred dollars. When my roommate and I were first looking, we almost signed on a place that was $400 more a month ($200 each) before we found our current place. It might take a little more effort and time looking at different places, but it can be worth it! I’ve saved $2400 this year just because we explored all of our options and shopped smart.
If you live in an area with less supply, or are already getting a fabulous deal, rent may be unrealistic to cut. There are other large expenses such as car insurance (or other insurance) internet/cable packages and minimally-used subscription services that can save you a ton each month.
Cutting the small things that make you happy, such as your daily coffee or your weekly happy hour with friends WILL save you money, but so will small adjustments to big-ticket items. I’m not saying don’t cut back on the daily frivolous spending (because you definitely should try!), but that it’s not the only way to save money throughout the year and you might end up unhappy day-to-day because of it. Saving is a mindset, and sometimes all you need to do is adjust your focus a little to see huge improvements!