Is it Worth Stressing the Small Stuff?
If you happen to frequent personal finance blogs with any regularity, there’s a high probability that you come across certain advice that gets repeated numerous times. Many posts focus on tips to cut down your expenses with advice such as brew your own coffee, bring your lunches to work, and turn off the lights when leaving a room.
There are also a lot of debates in the personal finance community about whether it’s more important to focus on spending less money or earning more income. While some insist on optimizing every expense and cutting out any excess, others argue that you shouldn’t “sweat the small stuff.”
Both of these philosophies can be helpful to people looking to improve their financial situation, but they also bypass what’s truly important.
Does focusing on cutting out daily $3 lattes really matter? Yes and no.
There’s nothing wrong with spending your money however you want, but it is important to understand the behaviors and motivations behind your spending patterns. By analyzing how you choose to spend your money, you can clearly see where your priorities lie. Ideally, you should be spending money on what you truly value in life, and cutting out the rest.
Going back to the daily $3 lattes, what it really comes down to is your behaviors and mindset. Do you TRULY value that coffee, or are you just going through the motions and purchasing it since it has become a part of your daily routine?
Know Your Habits
Everyone has different views about money. Some people tend to spend more, and some people are natural savers. Your family background and financial education can have a big impact on your values and money habits.
Writer Gretchen Rubin has a theory about abstainers and moderators. Simply put, nearly everyone’s personality can fit into one of these two distinctions. Abstainers find it easier to completely avoid a certain temptation and have difficulty stopping a bad habit once it has started. Moderators on the other hand, need small indulgences along the way to continue to have the motivation to pursue an end goal. The thought of something being completely off limits gets them feeling too restricted.
An example of this could be eating healthy. An abstainer finds it easier to consider all unhealthy food off limits, while a moderator would be better served to have a “cheat day” once a week. Neither of these traits is superior, it’s just important to know which you identify with, as it carries into your spending habits.
It’s also important to be honest with yourself and be in touch with the emotions behind your spending patterns. Do you like to go to the mall when you’re sad for some retail therapy? Are you more likely to go out for fast food when you’re stressed? Knowing these triggers can significantly help in cutting out impulse purchases that are quickly forgotten.
This is why creating a budget and tracking your expenses is so crucial to your financial well-being. A budget isn’t meant to constrict you and take away your freedom, it’s simply used as a guideline to ensure that you have enough money to cover your essentials and the areas you find the most value. It helps you identify and refrain from meaningless purchases.
The Impact on Your Decision Making
The purchase itself isn’t the issue to focus on, instead it’s important to focus on the mindset. If a decision is repeated often over time it can have a big effect. Just like how the $3 coffees can eventually add up to large amount of money, what’s even more important is all these little decisions. These little decisions can impact various areas of life.
For example, every time you decide to cook at home instead of eating out, it slowly becomes easier to continue to repeat that decision. Buying store brand instead of name brand might be tough to do at first, but eventually it becomes second nature. Ideally, you get to the point where you aren’t stressing the small stuff, you’re making prudent financial decisions on auto-pilot since you’ve refined your decision making over time.
Once you’ve refined your decision making and have ensured that your budget reflects allocating money towards the areas you truly value, you’ll no longer have to scrutinize the small purchases so much. This frees up more time and mental capacity to put towards the bigger areas in your finances such as rent, transportation, and recurring bills. Small changes in these areas can have an enormous impact on your overall financial state. Knowing your spending patterns, attitudes towards money, and priorities are all keys to having more peace and freedom with your finances.
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