Why bother saving small amounts of money?

Save small amounts of money

Thanks to 401(K) 2012 on flickr.com

If you are starting out trying to be more frugal then starting small is a good idea. Some of us like to jump in head first and attack being frugal by making large changes in every aspect of life – but making too many changes too quickly can be a disaster. You’re more likely to stay the course if you make a series of small changes over a long period.

Think about trying to make one small saving per month. Soon enough, you will see the benefits of those small changes without ever feeling like you have had to adjust your lifestyle in the slightest. If you want some money saving ideas – look no further than my best 82 tips on the subject.

Focusing on small cost cutting measures won’t radically change your financial picture quickly – it won’t happen over night, but it will happen! – but the key is to make one good decision after another until as a collective the big picture starts to improve. As much as anything focusing on the small stuff is good training for your mind when it comes time for the big ticket items.

Small savings ideas for immediate action include:

  • Cancelling cable
  • Switching to a cheaper phone plan
  • Walk or ride a bike to work
  • Make your lunch for work
  • Turn off the lights when not in use
  • Use the library instead of buying books
  • When renewing accounts (insurance, phone, internet, or anything recurring) make sure you are getting the best deal you can

A common example

The mindset that saving small amounts of money isn’t worth worrying about is not necessarily unhealthy – but it can be a sign of financial sloppiness that can transfer into bigger money decisions. The truth of the matter is that lots of little savings can really add up to significant savings when combined, and when done consistently over a long period of time.

The following are things that most people wouldn’t think twice about spending money on in an average week:

  • A takeaway coffee ($5)
  • Lunch at work ($10)
  • A soft drink from the vending machine ($1)
  • Movie tickets for two ($20)
  • An unhealthy snack ($5)
  • A magazine ($6)

Each is easy to justify because it’s a small purchase – but the total is significant ($47). For some the above would be a very modest discretionary budget, and the truth is that many spend far more on small transactions every week. But in this example – $47 is now gone on things that give very short lasting pleasure that can all be replaced by much cheaper or free alternatives. I’m not saying don’t ever go to the movies, but what I am saying is to try to think carefully about every transaction, not just large ones.

Saving small amounts add up fast

I’m a big fan of thinking about spending over a long period – using the $47 example above – is a $2,444 saving over the course of a year. It is the equivalent to the flights for an international holiday for two people! Or it’s the start of an investment account – or a whole host of other much more valuable experiences than a takeaway coffee or magazine.

Cutting your phone bill from $60 to $35 a month doesn’t seem like a lot at first, but that extra $25 is really useful – for me, it is extra money to go towards paying down our mortgage, or into a savings account for our next holiday away. When you have a series of small savings like this, your budget will feel a lot less tight, and it becomes much less hard to meet your financial objectives for the month.

Money as a unit of time at work

Another good tactic is to think of every purchase in terms of your hourly rate at work. Say it is $20 per hour. When buying the $10 lunch at work from the example above – instead of viewing the purchase in terms of its monetary value – consider it as 30 minutes of hard work at your job.

Are you really willing to trade 30 minutes of hard slog for a meal you could have brought from home?

Perhaps it is worth it – but its a decision that is worth some thought rather than being made automatically or because you’re “too busy” or because it’s an ‘insignificant’ amount of money.

Critics of thinking small

People who aren’t interested in being frugal or working towards financial independence or an early retirement are often vocal critics of those that are. Frugal people are criticized as being stingy or misers – and while some are, the vast majority are just being responsible about their financial future and trying to live within their means.

One of the most common criticisms is “why bother trying to save a dollar here or a dollar there?” and “why not just enjoy yourself?”

For me, this was a real issue at the start. People can make you feel ridiculous if you are caught in a situation and need to explain why you don’t need a particular item or why you are trying to save money, especially where the amount involved is small. The key here is to avoid those conversations as much as possible. Bring food to work so you have a ready-made reason not to go out for lunch – go for a walk, but skip the purchase.

Don’t try to justify your position because most people won’t get it or think it’s a reflection on them in some way. Just stick to your guns and watch the bottom line improve.

Open a savings account

If you don’t already have one, open one today. Make a list of the small changes you are making and deposit the money you are saving into this account. You might find that later on this money is better used to pay off debt or for investments, but to start out put it in your savings account and watch your small changes add up. 

It’s easy to say that saving small amounts of money add up, but there is nothing quite like literally seeing them add up in your account. As the account grows, your motivation to continue and even broaden your money saving tactics will too.

View every dollar as a willing worker

Each dollar that you don’t spend is another dollar that works for you. Think of each individual dollar as an employee that is capable of working for you so you don’t have to work yourself. The more of them you keep in your possession the better off you will be in the long term – ideally when they are sitting in an investment account earning you interest and dividends, which in turn, creates a new set of willing workers.

Hopefully one day you will have amassed enough employees so they can do all the work for you and you can be free to do as you please, whether that is pursuing your career or pursuing a life of leisure, or learning.

But it all comes back to the small decisions you make each day about letting dollars out of your possession – don’t let them go without a good reason, and don’t view any small group of them as being unimportant.



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