Death By A Thousand Cuts

A recent study by The Consumerist indicated that the average American spends almost $1,100 a year on coffee. Whether or not you believe that total, there is a budget buster principle here that you need to think about.

Sometimes it isn’t the big things that destroy our budget. It’s tons of little things. But we totally miss what is killing our budget because it’s just a couple dollars here and a couple dollars there.

  • It’s the $4 I spend every day getting my Starbucks fix.
  • It’s the $7 I spend going out to eat at lunch 3-4 times a week instead of packing my lunch.
  • It’s $2-$3 I spend each day grabbing a soda and a candy bar out of the vending machines.

You name it. We all have our little habits that seem pretty minor on the surface. Since each individual expenditure may seem almost like pocket change we don’t really realize the impact that we are having on our finances. One eye opening way to look at this is to annualize those expenses.

  • That Starbucks fix over the course of a year is costing me about $1,000.
  • Going out to lunch 4 times a week…  almost $1,500.
  • My vending machine trips… another $800.

Suddenly those insignificant expenses start to sound like real money when looked at through a long-term lens.

Now, if you love Starbucks and you look at that $1,000 total and say that’s ok. It’s worth it to me because I really enjoy that cup of coffee each day, then that’s fine. Enjoy it. The point of this exercise isn’t to suck all the joy from your life. If you cut everything from your budget that you enjoy, you’ll get discouraged and throw out this “dumb budget idea” in about a month. The point of this exercise is just to understand over the long haul what these little expenses cost.

If the thought of eliminating some of your guilty pleasures sounds too difficult, but at the same time they are damaging your ability to get ahead, how about a little good old fashion compromise.

I really like Starbucks coffee too, but I don’t like paying that much for a cup. So instead I just buy a bag and brew my own. I can enjoy my Starbucks for a month or more for less than $10.

Perhaps you really enjoy going out with your co-workers at lunch. Could you cut that back to 1-2 times a week instead of every day?

How about going to Sam’s Club and buying a large box of candy bars and throwing one in your lunch bag each day instead of hitting the vending machine. Or better yet pack a healthier snack and your waistline as well as your wallet will thank you.

These are just some simple examples. Examine your own habits to see what “little” daily expenses may be adding up in your budget. Then decide for yourself if the expense is worth it for the pleasure it brings. If it is worth it but you can cut back. Or if when you annualize the expense it just doesn’t seem that fun anymore. The point is be aware of the cost and then make your own decision.

So what’s your “guilty little pleasure” that may be busting your budget?

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