The following is a guest post from Anne @ Unique Gifter, writing about neglecting the little things and having a constant stream of packages show up from not planning out her gift giving properly. (Picture captions are mine. Canadian spellings are hers.) Thanks for the post, Anne!
Saving and making good money choices are a huge part of my lifestyle. Throughout our marriage, my spouse and I have taken the “right” steps to set ourselves up for future retirement. But that doesn’t mean everything is perfect – so here is our dumb money choice: neglecting the little things.
It’s no secret in personal finance that all those small decisions you make add up. Think about how much money you’d have today if you, for example, invested your 2019 take out budget into the stock market that same year.
But hindsight is 20/20 (pun somewhat intended) so it’s easy to see (and reflect on) all the small ways that we’ve made dumb money choices over the years.
How the Little Things Can Add up
It’s no secret in personal finance that small things can build up to something bigger. How easy is it to charge $1000 to your credit card? Well, if you don’t have that money to pay it back that little balance can turn into a big problem.
At 19.95% APR paying $100 a month on that $1000 balance will cost you an extra $100 in interest. That means everything you buy will cost an extra 10% on top of the price.
And you might not even remember where that money went!
My Story on Neglecting the Little Things
Last Christmas things were pretty depressing. We were in the middle of a pandemic and coming off the better part of a year without being able to travel or see friends and family.
I wanted to make things fun for my spouse. I also picked up gifts for family and friends. Instead of setting and sticking to a budget, I slowly picked up gifts that I thought everyone would enjoy.
After all, we needed cheering up – right?
Except I actually forgot all the things I ordered my spouse and was equally surprised as they slowly arrived before and after Christmas. (Thanks, COVID.)
When unexpected packages attack. Photo by Daniel Eledut on Unsplash.
While I don’t regret spending money on others (I mean, I run a gift giving website!), my credit card bill was definitely eye opening on how easily money can get away from you. I should have followed my own gift planning advice, but regular life was out the window in 2020.
If we hadn’t saved money not going out over most of 2020, it definitely would have impacted our finances and goals.
We Spend Money in so Many Ways
This is one example but definitely not the only time we’ve let small purchases add up. Who hasn’t forgotten to cancel a subscription service you rarely use, grabbed something from the grocery store checkout, or bought something because it was the latest fad?
Why Neglecting the Little Things is a Problem
Everything you do with your money has an opportunity cost. If you spend $40 on take out, you now have $40 less to invest or buy something else. Apart from racking up actual debt, that opportunity is what adds up.
Take a frequent habit and run that into a compound interest calculator to see how much money you’ve really been throwing away.
The second problem is that even if you’re not aiming for long term savings, you are still probably not optimizing your enjoyment from that money.
Take a vacation, for example: does the equivalent dollar value of small purchases equal the same amount of happiness you’d get from a trip? While it depends on what you’re buying the answer is: probably not.
How to Avoid Neglecting the Little Things
- Track your spending. Watch your bank account or credit cards for those small transactions that add up over time.
- Avoid shopping in stores. The less trips you make to a store the smaller your chances are of an impulse buy.
- Nix the online shopping. It really doesn’t feel like you’re spending much when you or something online here or there. Give yourself a waiting period before making an online purchase, or better yet, pull your credit card out of those apps.
What to do With That Extra Money
So you’ve cleaned up your act and you’re not wasting money on things you don’t even really want. What do you do with the money now?
Well remember what I said about investing your take out money? That’s probably your best plan, but how you spend it really depends on your current goals. Here’s some ideas:
- Invest in the stock market
- Pad an emergency fund
- Pay off high interest debt
- Make extra payments on your car loan or mortgage
- Add it into your retirement account
- Upgrade something in your home that will save money or increase its value
- Pool it and spend the money on something you’ll actually enjoy like a trip
Spending Money on Yourself is a Good Money Choice
Saving every penny you earn isn’t much fun. The reason we make these small impulse purchases is because we think they’ll make us happy. Sometimes purchases make our lives worse, but done right, they’re worth every penny. The hard part is finding the right balance in your life; there’s no magic sauce that will determine whether or not something is worth it in the long run for you.
One of my favorite hobbies is cycling. It’s expensive, but the amount of enjoyment and health benefits I get from the money spent is well worth the cost.
Reading is another, but less expensive, hobby. I like to purchase books for multiple reasons (to support the authors, so I can loan them to friends, and I like to re-read), and a $25 book can give me 10-20 hours of happiness.
By contrast, I don’t bother with most subscription services (we just have Netflix) because we would only watch a few hours a month. It’s not worth the cost even if we can “afford” it.
I don’t think you should feel guilty about spending money on yourself – but spending it wisely will help avoid regret.
Final Thoughts on My Dumb Money Choice: Neglecting the Little Things
If you’re not happy with your finances, looking over the small things in your budget is a great way to get control of your money. While it takes a lot more work to change the big ticket items (debt, housing, cost of living), you can adjust your variable spending right now.
And if you’re working on FIRE, you’d be surprised at how good turning that savings into small investments or debt payoff can feel. If you see the results of that, it will help motivate you to continue working on the bigger picture.
Anne loves finding the perfect gift idea that’s on budget. She has been writing about gift giving and personal finance online since 2012, as owner of UniqueGifter.com. Her favourite beverage is champagne and she loves figure skating, even if it’s harder now that she’s not 20!