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Two readers sent me a New York Times story from M.P. Dunleavey that addresses a problem many of us face, especially this time of year. We do our best to set budgets, to track our spending, and to make smart financial decisions, but when we sit down to run the numbers, somehow we’ve spent too much. Dunleavey writes:
I [totaled] the extra and unexpected costs that had cropped up throughout the year: $4,900 for new windows, $3,100 in co-payments for my appendectomy and $1,500 in car repairs.
I deducted those chunks from our total income — and was horrified to conclude not only that some money was missing, but that someone had apparently absconded with $10,000. There was no way we could have spent it.
Was there?
I ran through the numbers again with my husband, and he reached the same conclusion: approximately $10,000 was missing in action. That was the vacation we didn’t take, part of the new roof we might need, some terrific wine we didn’t drink. Now we really wanted to know where that money went.
It wasn’t long before it showed up. After sitting there for a while at the kitchen table, stunned, my husband said, “Thirty dollars.”
He explained his theory. One day, we were about to visit friends and had offered to pick up dessert and wine — which came to about $30 . The next day we had a birthday to attend and a prescription to pick up, and we spent about $30. We took out the calculator: $10,000 divided by 365 is about $27.
It wasn’t that we spent $30 mindlessly every day, but once we started digging for the “we’re not really spending any money” money — a trip to Lowe’s, new shoes for my son, iTunes downloads for my husband, a new work outfit for me — all the little things fell into place.
I’ve experienced this too, especially after receiving a Christmas bonus or a tax refund. Without noticing, I’d begin to spend a little extra here and there. Just a few bucks — nothing major. When I’d sit down to run the numbers, my forehead would get cold and clammy. My stomach would tie itself into knots. How could I have spent my entire $500 tax refund already? It wouldn’t seem possible.
Some experts argue that we should only pay attention to the Big Stuff because that’s where the most money can be saved. I agree that the Big Stuff is important — but I think the Small Stuff is important, too. We deal with the Small Stuff every day. And as Dunleavey’s story demonstrates, Small Stuff becomes Big Stuff in time.
[The New York Times: A little here, a little there and it's gone]
This article is about Basics, Frugality Thursday, 20th December 2007 (by J.D. Roth)
December 20th, 2007 at 5:12 am
I completely agree. And that’s why it’s important to keep track of your money, if not every day, at least on a weekly basis. It’s easier to catch the leaks in your budget by being involved.
I find that when I get busy and don’t balance my checkbook for a couple of weeks, I start spending more on incidental items, because I forget about the $30 I spent two days before on unnecessary items. I convince myself that “it’s just this once”, but I forget about the “just this once” two days ago.
December 20th, 2007 at 5:15 am
Whenever we get a bonus or any extra money that goes into a mini budget so that the money doesn’t disappear into unnecessary spending. This has allowed us to always tell the money where to go.
December 20th, 2007 at 5:50 am
Excellent post. The most useful info we get from tracking our spending is where we are “bleeding”. Yeah, that $40/week or so DH and I give ourselves for “allowance” DOES add up to $2500 or so for the year. $40 is a relative pittance, but $2500 is a chunk.
We made most of our lifestyle spending changes based on seeing that over a few months or a year, certain categories were way out of whack. (We’re spending WHAT on books/dining/entertainment????)
December 20th, 2007 at 6:05 am
I tend to believe that watching the “small stuff” is more important than the big stuff. When the bonus or the tax return comes in (I know you are supposed to get your W-4 exemptions right but I always look forward to this money!) you have the ability to budget and divvy it out. We get out plain white envelopes, fill them up with money and write on them what they are for vacation, presents… We open them when we need them. This works out great.
The small stuff just happens day to day and is very hard to budget for and you forget about the purchase as soon as you spend the money.
December 20th, 2007 at 6:36 am
This is so true. I’ve been using MS Money since 1998 and it has been a real eye opener. Every single expenditure is (supposed to be!) recorded and allocated to a category. I mention the caveat ’supposed to be’ because what I call a cash account has accumulated an unallocated (to a category) total over 9 years of $3,000–which means I spent money and duh! don’t know where it went. Well, not really: I probably bought lunch, snacks, gas, wine, poppies/apples/chocolate bars, etc etc. I remember after the first year of using Money and the realization that (1) I give a stupid amount to the government in income & consumption taxes, and (2) throw away a lot on impulse purchases. I’ve done as much as I can about #1 by reorganizing investment choices between investment & RSP accounts, and taking advantage of tax deferral opportunities like an RRSP; and also by cutting back on the impulse purchases in #2 not only are consumption taxes reduced but I’m saving money brown bagging and eating healthier. Watching where you spend your money tells yourself a lot about what’s important to you.
December 20th, 2007 at 6:38 am
The little stuff is like financial friction. It is constantly there and always slowing you down. Some of the best opportunities for saving are often hidden in that pile of spending.
Peter
December 20th, 2007 at 6:45 am
I decided to track my Christmas spending in detail. I always tracked it, but this time I really focused. A baby shower present here, a gift to cheer up a friend who lost their job there and before I knew it my budget was gone.
I look forward to assessing my Quicken finances this year to see if I can account for lost money. I only recently began to watch our actual cash. Though we don’t have cash on us much, I am curious to see where it goes.
I appreciate MP’s honesty about the 10k.
December 20th, 2007 at 6:47 am
The “Small Stuff” needs to be lumped together to make big stuff. Instead of saying, “We spent $27 per day on small stuff,” they should be able to say, “We spent $200 on household needs and clothing, $400 on entertainment, $200 on gifts, and $100 on clothing last month. That $400 on entertainment is too much, we have to keep it to $250.” Then, when you buy a household need, you can think of what you’ve spent in that category–you keep track of four numbers in the hundreds rather than thirty numbers in the teens.
December 20th, 2007 at 7:13 am
Seems to me like this is a good opportunity for “pay yourself first.” By not letting the money even enter our checking account, it makes it easier for us to say “we don’t have that $30 right now” to ourselves.
December 20th, 2007 at 7:14 am
I agree wholeheartedly, and posted about it recently. The “big things” make a more visible impact, but the opportunities don’t present themselves often. The “small stuff” occurs daily, is easier to control, and over time, makes just as big an impact as the big things.
December 20th, 2007 at 7:17 am
This is why it is better to make your budget forward looking instead of backwards looking.
For years I played with living on a budget, and always gave up after a month or two because we would look back and the actual spending didn’t match the plan.
Now, for the last two years I’ve been using a zero-based budget, which I learned from Dave Ramsey, and it actually works! Before I get a paycheck I decide how it will be spent. If $100 was planned for dining out, and there is only $7 left, then dessert and wine can’t be ordered.
We keep a chart on the fridge of how much is in every budget category, and when I get back from the store I stick the receipt to the chart with a magnet. Then every few days I take the receipts and adjust the chart so we know exactly how much is left to spend.
For other things, like going out for lunch at work, I carry cash. When the cash is gone, I’m done.
Now, can I go back and tell you exactly how much we spent on various things over the past year? Maybe, maybe not. But I can tell you, it was whatever we decided it would be at the beginning of the month. 100% of the time.
December 20th, 2007 at 7:23 am
I don’t know anyone for whom this is not a problem- the little things add up. It reminds me of something I read recently about saving very small amounts:
http://www.paidtwice.com/2007/12/14/five-golden-rules-for-snowflaking/
December 20th, 2007 at 7:43 am
This is why having a written budget is so important.
A written budget allows you to tell every dollar what to do instead of the old way of managing money; wondering where everything went at the end.
Good post…it reminds people how fast money can leave your hands if you don’t manage it well.
December 20th, 2007 at 7:55 am
There is an old English saying, “Worry about the Pence and the Pounds will come.”
In our budgeting process we make sure that everything has a label. If I want to download a bit from iTunes, I can, but it comes out of my “allowance” for the two weeks (and I have some left!).
A big mistake that some make when budgeting is to not budgeting for certain categories, like clothing. Then expenses catch up to them.
December 20th, 2007 at 7:58 am
Things simply cost more than they used to and if one is not careful, the little recurring costs really do add up fast. A few dollars here and there will balloon to a surprising amount. It’s important to make a concerted effort to be frugal because unexpected spending can be scary!
-Raymond
December 20th, 2007 at 8:24 am
My husband and I just celebrated our 40th anniversary - so I can speak from years & years & years of experience.
Watch the pennies, sweat the small stuff. Track everything. It really adds up. We did, we still do and that’s why we have been able to retire in our 50’s, and now live on husband’s SS & pittance of pension. Investments are for later use. We live well, own everything, can do what we want and all without worrying. What a wonderful feeling!!
December 20th, 2007 at 8:41 am
Great post. I would argue that the small stuff is actually more crucial than the big stuff.
December 20th, 2007 at 8:52 am
[...] a great post in the New York Times, via JD and Get Rich Slowly. It’s a piece by MP Dunleavy, A Little Here, a Little There and It’s [...]
December 20th, 2007 at 9:11 am
I love MP Dunleavy! Good find.
I track all our expenses for the year. When you look at the little things in a 12-month total, this is when you can clearly see the little things do add up. But this can be a good thing, because you realize if I spend so much money HERE, I have the money and can simply reallocate it THERE.
Frankly, I think it is that person’s business if they enjoy a habit of going to 7-11 and spending about $3,000 a year there (my boyfriend), but just be aware of how your choices add up. It’s much easier to eyeball the big number and think, ‘gee, I could cut that expense by $1,200 next year.’ Now you realize you can put an extra $100 into your monthly savings money and still enjoy, instead of thinking you have to make more money or cut out the … joys of 7-11 (I don’t understand how joys are to be found there, but we all have out weaknesses).
December 20th, 2007 at 9:39 am
This is sooo true.. my husband and i recently started with our budget and its the 30$ thingie that really adds up. We get invited by friends for lunch and parties and always take a bottle of wine or some desserts etc and this has been really adding up. End of the year celebrations are the worst time for this ( on top of the gift giving season)
Im hoping to put the tax refund we get splitting into a Roth IRA and the rest towards a car we need to buy this year. So hopefully we dont use that money for anything else.
December 20th, 2007 at 10:03 am
It’s definitely a both/and. With big purchases it’s definitely important to save money. But little purchases “hurt” less and slip away so much more easily. Plus I don’t think we make as many big purchases in a year as little ones. So I’d tend to focus on the little ones–as the article says, they can be daily–without neglecting the bigger oens when the come around…
December 20th, 2007 at 10:09 am
My Leisure and Entertainment category has totaled about 3k this year, worth every penny. I cannot fathom how a couple can spend 10k in a year and not notice. 30 dollars has always been a lot of money to me.
Dessert and wine? Birthday and a prescription? Does this couple run into these kinds of events every day? I find the husband’s “theory” hard to believe.
It sounds like they were just spending on luxuries and didn’t want to admit it. Do they not track their expenses? Do they not have a leisure and entertainment budget? If they do not, then this kind of spending is fairly normal for people who don’t know how to manage their money.
December 20th, 2007 at 10:17 am
Oprah recently featured the widow of the guy who wrote Don’t Sweat the Small Stuff. Richard Carlson died at 45: http://en.wikipedia.org/wiki/Richard_Carlson_(author)
December 20th, 2007 at 11:01 am
Little things are always what killed my budget. It’s amazing how fast buying lunch rather then bringing it adds up. Or even just buying a soda every day. At $1.25 a day (price for a bottle of soda from our machine) thats over 300 dollars a year…on sugar water.
December 20th, 2007 at 11:08 am
Yes you will be amazed how money creeps out of your bank account. I have found that if I just stick to using cash instead of credit cards, then I can budget more appropriately.
December 20th, 2007 at 11:38 am
My dad gave me two pieces of advice that I found to be extremely helpful.
Don’t sweat the small stuff.
Everything is the small stuff.
The life lesson was that you need feel happy no matter what. How you define success determines whether or not you obtain success. It was a lesson about self esteem, and it was a lesson about not letting unimportant things ruin things that are (like bickering destroying marriage).
December 20th, 2007 at 11:43 am
Small stuff adds up FAST. I realized one day that by buying breakfast and lunch at the work cafeteria and the occasional snack and soda or cup of coffee, I was spending about $7-$8 per day. Figuring about 220 working days a year, that’s more than $1500 a year.
I used to justify it by saying how much time I saved by not having to brown-bag. Then I realized not spending 15 minutes a day fixing my own meals cost me more than I was spending on my main hobby. So I started brownbagging and putting the money toward my hobby.
Eventually I started cutting back that hobby spending and using most of that money to pay down debt–$1,500 a year is two mortgage payments, so it’s hard to call that snowflaking. It’s pretty substantial.
I’m not saying it’s necessarily the right way to do it, but it was easier to make the transition from spending that money on lunch to something enjoyable and then to debt retirement than it was to go straight to debt retirement.
I’m a big believer in going after the small stuff. The small stuff sneaks up on you, while big stuff looms overhead like the Enola Gay, ready to drop its deadly payload on you. Plus, most of the small stuff is controllable. A lot of the big stuff isn’t.
December 20th, 2007 at 11:48 am
Reading the article made my head spin. I appreciate the transparency, but here is a financial writer who “lost” 10000 dollars–that is, 15-20,000 before taxes. I believe the median family income in the US is in the mid-40s? She has a stay-at-home spouse; surely he could spend 15 minutes a week making plans (i.e. buying a few extra bottles of wine, birthday gifts on sale to prevent the “daily” $30 emergencies).
The article also shows why Eliz Warren is incorrect when she counsels not sweating the small stuff.
December 20th, 2007 at 11:53 am
Andrea - He died of a PE. That is the small stuff. Miniscule really.
December 20th, 2007 at 12:55 pm
emily: Ever been a new stay-at-home parent with a 14-mo?
Back to general stuff: I find myself disagreeing with the idea that the small stuff is more important than the big stuff. They balance out. If your big stuff is messed up, the little stuff doesn’t matter. If you let the little stuff get out of control, than your choices on what to do about the big stuff become pretty limited. The little stuff is harder to handle, because it’s frequent, spur-of-the-moment, often peer-driven, and habitual. But the big stuff usually has a longer-lasting impact.
December 20th, 2007 at 1:22 pm
It is easy to lose large amounts of money in small stuff. I prefer to budget for that, and if I get a larger sum like a bonus or something I always make sure I have a plan for the money before it can be spent. Usually the plan involves either saving/investing it, or buying something that I had been saving for.
December 20th, 2007 at 1:49 pm
I always sweat the small stuff. My friends harrass me about nickel and diming but all those nickels and dimes add up pretty quick.
I used to buy a coffee and muffin every morning on my way to work and that was rapidly depleting my allowance each week. I made the investment in a coffee maker and a good travel mug and they paid for themselves in just over a month. I also replaced the muffin with toast before I leave the house which is economical and healthier.
Many of the people that I know that have no savings, including all of those same friends who harrass me about nickel and diming, are in that position mainly because of silly daily purchases like eating out once or more each day or multiple store bought coffees each day. For some people buying a coffee seems to be as much about actually purchasing the coffee than in just drinking it. A good friends fiance drinks at least 3-4 cups of coffee each day (extra large store bought coffees, not regular mugs) and not only does she refuse to make the coffee herself in the expensive coffee maker he bought for her but even when they visit us she will insist on going out to get a coffee instead of drinking the pot we have on the go. This couple is also trying to buy a house but just can’t seem to find any money for a down payment. My boss is the same way, we have a coffee maker in the office but she will go to Tim Horton’s no less than 4 times a day.
If you don’t sweat the small stuff you’ll wind up bleeding all kinds of money in all sorts of places.
December 20th, 2007 at 2:31 pm
It is in the small stuff. Big stuff is easy to see and control, but the small daily expenses can add up. This is only if you ever kept a budget then you will know the impact of every dollar spent on that grand total. I have automated my excel spreadsheet by categorizing my expenses and each time I add an expense to it based on the date and which category it goes to…you will see the grand total adding up. It truly makes my heart bleed when 3 days of eating out can be equivalent to my 2 weeks of groceries or 1 week of gas. I can justify it if I eat something I can never make, but not on something I can make on my own like coffee or sandwich. Really…do I need to pay that much for pasta when I can get 5 times more making at home. Have a spreadsheet and you will know where the tap is running…
December 20th, 2007 at 3:13 pm
I actually just wrote a brief post on this topic.
Keep in mind that, if you can lose large sums of money a little bit at a time, you can also save large amounts of money a little bit at a time. Turn the thermostat down two degrees, brush your teeth in the shower, turn the lights off in an empty room. Small, painless changes like this can save big money over the course of a year.
December 20th, 2007 at 3:13 pm
I’m very strict with myself, and give myself a daily allowance of 10 dollars (20 in some months, but I find I can’t spend a whole 20 dollars in one day). This is an easy way to keep track of my spending, because I pay for everything in cash. It’s simple: if I don’t have the cash on hand, then I don’t buy it.
December 20th, 2007 at 3:20 pm
Okay, I actually am one of those who thinks ‘don’t sweat the small stuff.’
Because I’m not interested in accumulating wealth. I’m interested in having enough.
If I pay myself first with what I need to save, then I know I have enough - and it really doesn’t matter if I go to Starbucks, if I buy a dessert to bring over to a friend’s house, if I buy a new pair of shoes. If it’s coming out of the money I don’t need, what’s the problem?
For me, THAT is the core message of All Your Worth.
December 20th, 2007 at 3:21 pm
Well…I wasn’t going to bother responding…but I had 2 children in quick succession…no I was not stay at home (nor was my spouse)…but I well remember having 2 in diapers while trying to publish enough to get tenure…while teaching 100 plus students/semester…grading papers while feeding one baby. And, yes, we found the time to keep track of our finances.
December 20th, 2007 at 3:42 pm
My DH is a SAHD, and I’m amazed at your superwomanhood. My DH had the hardest job of any of my working mom friends for quite a long time. YMMV, of course.
December 20th, 2007 at 4:00 pm
Sorry for taking things off-topic, JD.
December 20th, 2007 at 4:24 pm
You are so correct. A big number from one “Big Stuff” or a big number from lot of “Little Stuff” is still a big number.
Best Wishes,
D4L
December 20th, 2007 at 4:29 pm
I don’t sweat the small stuff, but at the same time I do not consider any type of costly habitual purchase (example: daily latte) to be small. My budget plan has built-in spending controls to limit my total purchases. I don’t really worry about any individual purchases, as long as I have the budget for it, but at the same time I know my debit card balance to the penny at any given time. The proof that not sweating the small stuff can be made to work is in the pudding: I’ve saved some 60% of my gross income this year.
That said, anybody who has $10,000 unaccounted for in their spending clearly has a SEVERELY broken budgeting system. Not sweating the stuff works great for me, but is unquestionably a humongous unworkable dream for the author of the article given their horribly undisciplined spending practices.
December 20th, 2007 at 6:10 pm
Jeremy Bettis, PHOTO PLEASE!! I am extremely interested in this.
December 20th, 2007 at 6:27 pm
I write down everything I spent, not so much to track my expenses as much as to prevent me from spending more than I ought to. It helps, although I have my moments of weakness too…
December 20th, 2007 at 7:36 pm
The “small stuff” is very important to take note of, as that’s usually the stuff that defines much of our day-to-day lifestyle. If it seems that expenditures in this category (or in cross-categories, such as “meals out” and “lattes”) are too high, it’s good to rein in the spending. However, it’s usually necessary to adjust lifestyle habits and other cultural factors. Instead of buying wine and dessert spur-of-the-moment, try to stock up on things on sale that you can use. If you must buy coffee everyday, try for a less expensive cafe au lait instead of a triple-pumpkin mochaccino; it may be that what you really enjoy is the transaction itself, not so much the beverage. In other words, it’s easy to bleed money, but find out how and why, and try to step off of the consumerist wagon a bit.
December 20th, 2007 at 7:56 pm
i read this article somewhere else, the woman that wrote about this is actually a financial advisor.
December 20th, 2007 at 8:28 pm
Being roughly $900/month over-budget?! How do you not notice that (unless you’re rich)?
I don’t necessarily agree that small stuff should be dealt with in minute detail — because if a proper budget is in place (which is a ‘big stuff’ item in my book), then things like this wouldn’t happen so easily. I personally don’t track every dollar I spend, but I *do* follow my weekly budget — I can have what I want if the money is in my pocket. Period. If there are unexpected expenses that must be paid (e.g. I have some upcoming dental work that won’t be covered by insurance), then I tap my emergency fund. If I’m over-budget for more than a single week, I look at what I’ve been paying for and make adjustments, and/or I consciously plan a couple weeks where I do less, and make up the money I’ve taken from my savings account.
December 20th, 2007 at 8:37 pm
Interesting post about the “small stuff.” I would love to save money by bringing my own lunch at work ( I think this type of savings would be categorized as “small stuff”), but after 2-3 weeks I get really bored of ham & cheese sandwiches ( or whatever variety of meat & cheese between 2 slices of bread). Anybody have any good sandwich combinations or ideas to break out the boredom? Peanut butter and jelly may be OK and it’s great for saving money, but I don’t particularly like PB&J.
December 20th, 2007 at 8:55 pm
The amount of money spent is inversely proportional to the impulse of thought spending it. We don’t go and by a house on a whim? We research neighborhoods, schools, builders, mortgage banks, realtor’s, etc…. before we purchase. Where as the 6$ cafe latte’ at Starbucks we give two seconds, if that, of thought to how much we are spending for something so trivial.
December 21st, 2007 at 12:05 am
This is perfect timing because I’ve been struggling and thinking too much about my small savings instead of the bigger picture most importantly earning more money.
I spent 5 minutes using the $5 off $20 coupon at walgreens to buy discount stamps. Then I also spent 15 mins to buy cheaper public transit tickets on Craigslist. While I saved 20% on public transit tickets for 15 minutes, it seems like the small stuff lately doesn’t amount to bigger savings.
So it’s a balance of both can make big dents in the budget and overall goals.
December 21st, 2007 at 5:23 am
Isn’t it funny how it always comes back to the idea of balance? Remember what Mr. Miyagi said: “Lesson about balance not for karate only. Lesson for whole life.”
I think if your personal concept of money is right, it will apply to all your purchases, large and small.
But, I also think there is an element of “Do what works for you” involved here. Some people are penny wise and pound foolish, while others will haggle over a car only to fritter away the savings on lattes.
I don’t think we should judge either too harshly. Some people will deny themselves to save up for the big payoff (i.e. the sports car). Others don’t care about such things and are more interested in the simple daily pleasures, like a bottle of wine at a dinner party. As long as you’re not squandering your retirement on either, do what makes you happy.
December 21st, 2007 at 6:20 am
I’m convinced this is where our money is going. My wife is very fond of “oh, but we’re going to need this eventually” and before I know it it’s another $80 this week at Target or $70 at Wal-Mart or an extra $20 tacked onto the bill at the grocery store.
I try to track our spending but don’t keep up with it enough. I often enter receipts into Quicken 3 weeks after the purchase.
December 21st, 2007 at 11:56 am
we just had one of these small things this past week. my wife wanted to go on a spa weekend and convinced me that it wouldn’t cost much because she was sharing expenses with another person. so, i go, ok, that means $x. so we buy the tickets, getting a discount that we were due from our travel agent. bonus! then the troubles began. her friend’s work was now going to pay so she wanted a separate room. great, now all of a sudden the lodging cost is double. too late to turn back since the tickets are already paid for. her friend was then going to drive them to the airport. wonderful save money on gas. oops, can you please drive us to the airport. great, now i’m flipping the bill for gas. so the story goes on and on.
it’s not the last straw that breaks the camel’s back, it is the accumulative weight of all the straw that does.
December 21st, 2007 at 3:37 pm
[...] One of my personal finance blog favorites, Get Rich Slowly, looks at Sweating the Small Stuff [...]
December 22nd, 2007 at 7:31 am
I can relate to this! Even though we do have a budget and try to stick to this, a small amount of money seems to be missing every month. Starting in 2008, we will try to solve this problem by having an “allowance” for gas and $20 weekly for other expenses. We’ll see how well it goes….
December 22nd, 2007 at 12:27 pm
I think the notion of “sweat” is a bit problematic: in terms of managing money, it should be “pay attention to”, not so much “worry about”. I always interpreted “don’t sweat the small stuff” as “don’t spend energy worrying about trivia”.
But some dangerously interpret it as “don’t pay attention to daily life”, and end up with all sorts of problems.
December 22nd, 2007 at 4:51 pm
@T: Try making sandwiches with any combination of: turkey, chicken, portabella mushrooms, eggplant, roasted red peppers, marimated artichokes. You can always roast your own pork loin, turkey breast, whole chicken, etc. in order to have high-quality meats. Grilled tuna is a good choice, in addition to the usual tuna salad, etc. Variations on egg salad, chicken salad, are good, too.
Also try varying your condiments. Instead of just mayo, mustard, ketchup, try hummus (very good with turkey), roasted eggplant spread (baba ganouj), red pepper relish (ajvar or romesco), and all sorts of chutneys and other relishes. Mix pesto or chimichurri into mayo; it goes well with turkey or roast beef.
December 22nd, 2007 at 7:09 pm
I think people misunderstand Elizabeth Warren’s viewpoint on this. Professor Warren is an expert on bankruptcy, and her advice is mainly about structuring your financial life in order to lower the risk that bankruptcy and/or foreclosure will happen to you. The problem with the big stuff is that it usually comes with a long-term contractual obligation, which becomes a dangerous weight to be carrying around in this Brave New World of routine layoffs and $5000 health insurance co-pays.
If you or your spouse lose your job, there’s typically nothing you can do to lower the car or house payment, unless you take the drastic step of selling the car or house. You can, however, cut out all of your “frivolous” spending — but only if you have frivolous spending to begin with. So, that habitual “frivolous” spending actually acts as sort of a cushion when things get bad, as long as you don’t get yourself into consumer debt (Warren is very much against consumer debt — she deprecates credit cards in favor of cash).
And that’s a point she makes in both of her books — Americans, in general, are allocating too much of their incomes to “Must-Have” expenses (Big Stuff)– typically by buying too much house for their income. Warren’s nightmare scenario is when a married couple decides to cut out all of the so-called “latte factor” purchases in order to afford a bigger house payment, and at times some financial gurus seem to advocate doing just that.
December 22nd, 2007 at 9:54 pm
I’ve always looked closely at everything we spend. It just seems logical to me. And it amazes me when I hear people talk about things that are “no big deal”. These same people are somehow always struggling or short.
December 23rd, 2007 at 8:11 am
[...] read an article over at Get Rich Slowly that really resonated with me. Called Sweating the Small Stuff, it points out how $30 a day expenditures can easily add up to 10K over a year’s [...]
December 23rd, 2007 at 10:22 am
I’ve been slowly narrowing my focus on things, looking to smaller and smaller units of things for cost cutting. I’m down to detailed analysis of my work lunch habits. Grabbing lunch out has been demoted to “I forgot to buy microwavables yesterday” status. I don’t know if I’ll get to the making my own stuff ahead of time mode. I know from experience that things like sandwiches don’t do well if made the night before and I’m not a morning person, every extra second in the morning routine is a burden beyond the imagination of those who are morning people.
Then there’s those unplanned expenses again. I had a problem with a fog bank and a deer and now I am restarting my emergency fund because of paying to fix the damage. (I will get that article finished one of these days, J.D.) Spare time, what is that? Spare money? HA!
December 23rd, 2007 at 3:00 pm
Although I understand the reason for this post, I find it difficult to believe that a couple does not realize how much money they spend until they sit down at year end to tally things up. I have found that if you keep a spreadsheet on a thumbdrive, and regularly visit your account balance pages for your bank accounts, credit cards, retirement plan(s), and mortgage account, you pretty much know how much money you have and get a feel for your spending habits pretty quickly. If someone assigned the task of creating a budget and tracking purchases to you (a friend, work, etc.), I’m sure most people would do a great job. But so many people won’t take the assignment from themselves. I had the same problem with stocks. If a friend or relative asked me what my favorite stock was, I’d tell them, they’d buy it, and make great gains, but for some reason I’d shy away from buying it myself. When I finally realized that I should treat myself with the same diligence and responsibility that I treat others with, my returns increased dramatically. Something to think about.
December 23rd, 2007 at 4:13 pm
“I cannot fathom how a couple can spend 10k in a year and not notice. 30 dollars has always been a lot of money to me.”
Same here. I’ve never even had a formal budget, but I never spend $30 without knowing exactly what I am buying, why I am buying it and that I cannot get it cheaper. And I earn a little over 100K a year. I don’t even spend $10 mindlessly. I can spend a lot more if it is something I really need or want badly, but I always know what I am doing.
$30 is NOT pocket change. $30 will buy you a nice blouse at Ann Taylor on sale. Add $20 to it, and it is a cheap scanner on amazon. There are a number of things one can buy for $30. When deciding to buy something, I found it is useful to think in terms of what else the same amount of money would buy. Really helps to put things into perspective.
OK, so they bought new shoes, attended a birthday party, spent $30 for wine and a present. Did they do it every day? A trip to Lowe? Any trip is a major expense, so you always need to know in advance how much you expect to spend, even if you don’t have a budget.
By the way, where I work there are lots of highly paid engineers and scientists. Yet, there is always a line to the microwaves. Sure, the majority buy in the cafeteria (thank god for that, I don’t want to wait longer for microwaves…), but quite a lot bring food from home. And our salaries are way above national average. Unless you are super-busy, there is absolutely no reason to buy lunch. Besides, home-made meal is usually better and healthier.