How Little Expenses Add Up and Cost You

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Budgeting 101 Simple Money Saving Tips
Have you ever stopped to think about how the little expenses add up in your budget? If you're struggling to find money to save or pay off debt, read this.

I’m sure most of you have heard of the “Latte Factor” at some point. It’s supposed to illustrate that having a somewhat inexpensive daily spending habit can add up to thousands of dollars down the road.

It’s not false, either. If you’ve never stopped to track your spending, you could very well be spending close to $1,000 on coffee per year. Or $2,000 on fast food. Isn’t that a bit scary?

It should be. If you’re not careful, the seemingly little expenses in life can catch up with your finances very quickly. When you view your daily spending in a small box of just being in the present, it can be dangerous. You’re only framing your spending in that one window of time; you’re not thinking about how it’s compounding week after week.

If you’ve been struggling to find the money to save or pay off debt, it’s absolutely worth going through your spending to find the little leaks causing big issues.

A Few Classic Examples

Let’s go through a few examples so you can see the impact your spending can have on your big financial picture.

Say you really do enjoy that morning latte. It’s $4 every time you go. You go every weekday right before work, because you need a little treat on your way in. There are around 250 work days this year – so $4 * 250 = $1,000 flat.

What else could you be doing with that $1,000? That’s a pretty big chunk of change. You could have made a nice dent in your debt, saved up for a trip abroad, or created an emergency fund with it.

All right, let’s go to fast food, because most people are guilty of this one, and it’s not as cheap as you might think.

I’m going to use a friend to illustrate this. He tends to eat a lot, so even if he orders mostly off the dollar menu, he spends around $9 each time he goes to Wendy’s.

If he goes five days a week, $9 * 250 = $2,250.

If he goes three days a week, $9 * 156 = $1,404.

If he just goes once a week, $9 * 52 = $468.

Again, that’s still a decent amount of money! $2,250 could go toward a down payment on a car, and $468 is enough for a weekend getaway or the newest tech gadget.

What About Bills?

I know we’re focusing on “little costs,” but sometimes, we don’t even realize how much some monthly subscriptions are costing us. They seem small in the grand scheme of things, but if you want to get serious about saving (or paying off debt), you need to realize the potential for savings in your budget.

Most young adults don’t have cable, which is great, but if you do, let’s take a look at how much it can cost you.

Say your cable, phone, and internet package costs $120 per month. That’s $1,440 per year – on par with going out to eat three times a week.

Have a gym membership that’s $20 per month, but doesn’t get used? You’re wasting $240. That might not seem like a lot, but wouldn’t you feel better putting $240 toward your goals instead?

Lets not forget the dreaded cell phone bill, which we’ve already talked about. If you’re paying $70 per month, that’s $840 per year, and at $90 a month, is $1,080 per year. Ouch!

How to Minimize Small Costs Creeping Up

Okay, so you’re convinced you need to get a better handle on these small costs because you want to put your money where it will count. You want to stress less about finding that money in your budget, too.

It’s really simple. You just need to start tracking your spending. You don’t have to do anything fancy for this, either. If you use an online platform or app like Mint, you can connect all your financial accounts, and it will pull your transaction history. You can then categorize your transactions so you can see where you’re spending the most.

If you prefer, you can always go the spreadsheet route, too. There are plenty of templates available online – just find and download one that works for you. Then go back through the past 3 months or so of transactions to see where your money has been going.

You should start to see a pattern emerging after entering in your spending. You might be a little alarmed at first. I know some people who discovered they were spending around $800 at the grocery store on food once they started tracking their spending.

That’s okay – the important thing to get out of this is that you know where you need to focus your efforts. If you’re spending way too much on dining out, coffee, drinks with friends, you know where you need to cut back.

Besides tracking your spending, you can also play a little game each time you forgo whatever it was that was costing you so much. If you really enjoy coffee, every time you pass by your favorite place to stop, transfer that $4 (or whatever you were spending) directly into your savings account. This way, you’ll actually realize the savings from making that sacrifice.

Lifestyle inflation can also play a role in little costs adding up. You should be reviewing your spending every month, or at least every quarter, to make sure you’re sticking to your plan. If bills are rising, call and negotiate a lower rate – this is especially important when it comes to insurance.

You’re in Control

Just remember that you have control in this situation. You can choose where to spend your money. No one except the little voice in your head is trying to get you to sabotage your finances by spending $5 here and there. Tracking your spending and then controlling it is really empowering, and you’ll actually find more freedom by operating this way. It’s better to know where your money is going to so you can spend it meaningfully.

Have you ever been guilty of spending a bit too much on the “little things”? How did you stop? Did tracking your spending help open your eyes?

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