Personal finance is typically spoken about in relation to big financial decisions. From things like establishing long-term savings goals to purchasing a home, choices made surrounding money are frequently thought about on a large scale. More often than not, smaller financial decisions are overlooked or disregarded, many deeming them too small to make an impact. However, seemingly tiny money choices made daily tend to add up to make a significant impact in the long run, especially when analyzed over time.
Deciphering between purchases made based on wants versus needs is an important step in reassessing how you look at small financial decisions. Discretionary spending is a broad, vague category by nature, so spending some extra time to think about how you allocate money there is critical.
One way to find the money to meet your spending or saving needs is to examine your current spending habits and consider eliminating money wasters.
The following represents some of the top money wasters:
- Bargain Shopping ... and its Expensive Cousin, Impulse Buying
Fire sales and impulse buying (such as buying products sold on infomercials) can be money wasters, made worse by how often items purchased this way sit idly in a closet or drawer. - Unused Gym Memberships
At a monthly rate of $40-50, unused memberships can add up over time. Begin your fitness commitment inexpensively by walking or jogging; you can graduate to the gym once you know you’re going to stick with it. - Cable and Cell
Call your provider and see if it’s possible to negotiate a new rate. Cell providers, who face stiff competition, may be responsive. Cable companies may be less so, especially if they are a single provider, but you can review your package and make sure you are not paying for service you don’t want. - Paying for Water
Switching from an essentially free product to one that may cost up to $1.50 a day or more makes for a real budget leak. Consider purchasing a reusable container and refilling it during the day. - Gourmet Coffee
$2 or $3 a day may not seem like a lot of money, but when Americans step into a gourmet coffee shop, they may often buy more than just the coffee. Consider brewing your own coffee. It can be ready before you leave for work, and it’ll save you the wait in the drive-through line! - Eating Out
Americans now spend more money dining out than they do at the grocery store. Consider the cost of going out to lunch twice a week. If you spent $10 each time, it would cost you $1,040 annually. While dining out may be one of life’s pleasures, it is often less about socialization and more about convenience. Twice a week may not seem like much, but over time it can add up.
Budgeting for discretionary spending will help to curb a lot of the above habits to work within your financial plan. The simple practice of analyzing what small purchases you may be overspending on will play a valuable role in readjusting bad habits that can make a big financial impact.