Small amounts matter

This article is the fifth of a fourteen-part series that explores the core tenets of Get Rich Slowly.

Getting started with smart personal finance isn’t always easy. It’s one thing to read about the steps you should take, but it’s another thing to actually do them. Your debt is so overwhelming or your saving goals so lofty that you begin to believe that the only way you’ll ever get where you want to be is by winning the lottery.

Part of the problem is that we live in a society that idolizes the Big Winner. Nobody celebrates the guy next door who bikes to work, grows his own food and cooks his own meals, shops at the thrift store, and gets all his books from the library. That sort of life isn’t glitzy. Yet it’s that sort of life that can (and does) lead to true wealth.

This image was submitted by GRS reader Karen L.

Starting Small

I can’t remember the first thing I did when I decided I was tired of being buried in debt. But I do know one thing: It was something small. When I became concerned about my finances, it was months before I had any big decisions to make. But there were tons of small things I could do right away.

It’s true that it’s important to save money on the big stuff, like a home or a car. Any time you make a large purchase, your opportunity to save is magnified. But large transactions are rare. How often do you spend more than $100 on anything?

You have more opportunities to save when shopping for groceries. You can clip coupons or buy in bulk or shop for store brands or compare unit pricing. And you can do it today. Saving fifty cents a week on milk might be inconsequential as a one-time occurrence, but over the course of a year, it amounts to $26. Taken together, many such small economies make a real difference. Small amounts matter.

Maybe you save fifty cents a week on milk by using a cheaper brand, save $4 a week by clipping coupons, save $2 a week by taking the bus to work on Fridays, save $25 a month by dropping to basic cable, save $47/year by canceling your subscription to The New Yorker, and save $100 during the summer months by growing your own vegetables. These are small changes, but these choices alone would save you over $750 a year.

Remember: A penny saved is more than a penny earned. You earn pre-tax dollars, but you spend after-tax dollars. So what? Well, depending on your tax bracket, you might have to earn $111 or $133 or $150 to actually put $100 in your pocket. Assuming you’re in the 25% tax bracket, saving $750/year is like giving yourself a $1000 raise!

Starting small has an interesting side effect. As you get in the habit of cutting costs on one thing, you find that you can transfer that skill to other parts of your life. One small step leads to another.

An Uncertain Future

Some folks frown on frugality. They equate it with being “cheap” and consider it beneath their dignity. Others are unwilling to make sacrifices today when the future is so uncertain. They’re not willing to “live like that” when they could get hit by a bus tomorrow. I think this is crazy for a couple of reason:

First, spending is not the same as happiness. Second, most of us are likely to live a long time. Which would you rather do?

  • Prepare for a long life by saving and investing, but then die tomorrow.
  • Spend money you don’t have now, and then be unable to afford what you need when you’re older.

Recently, I had a chat with an acquaintance who runs an adult foster home. She told me anecdotes about her elderly residents who’ve run out of money. Their quality of life is not high. If you think it’s a burden now to give up your cell phone or to take the bus, try having to pinch pennies on necessities when you’re 70. Or 80. Or 90.

Remember: Don’t confuse frugality with depriving yourself. If pinching pennies makes you feel lousy, then loosen up. Spend a little more. I am not advocating “retail therapy” or spending above your means — I’m telling you that it’s okay to spend more for your favorite brand of yogurt or to get your favorite cut of beef. If you don’t like shopping in thrift stores, don’t.

There’s real value in boosting your income — I don’t deny that. But frugality is an important part of personal finance, too. And for each of us it’s different. I might be able to cut back on clothing and transportation, but I’ll probably always spend a lot on food. On the other hand, food may be a perfect place for you to cut costs, but you’re not willing to compromise on your wardrobe.

Frugality doesn’t mean living like a pauper. Frugality is a good thing. Thrift is a responsible choice. When we restrict our spending on the unimportant, we’re able to indulge ourselves on the things that matter most in our lives.

This is the fifth of a fourteen-part series that explores my financial philosophy. These are the core tenets of Get Rich Slowly. Other parts include:

Look for a new installment in this series every Monday through the end of the year.

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There are 70 comments to "Small amounts matter".

  1. Neil says 29 March 2007 at 13:43

    Love this thread.

    Thrift + Savings +Time = Wealth

    I mean at the end of the day isn’t that what it all comes down to? And I agree being thrifty does not have to mean deprivation, however, it may mean exploring alternative sources of entertainment and leisure, it may mean coming up with more creative ways to not entertain yourself but also to make ends meet. Which, I can say from experience has only enRICHed my life. Really.

  2. Erika says 29 March 2007 at 13:47

    I heartily agree with the idea of letting oneself indulge (responsibly) on occassion.

    Frugality is like having a good diet. You don’t want to deprive yourself or put too much will power in to it; if you do, you’ll just giving up. Instead, you just need to determine what things are most important for keeping you happy.

    For example (both a diet and frugality example!), my husband and I will buy a pack of fancy cookies that cost as much as or more than a larger pack of lower quality cookies. We enjoy the expensive cookies a lot more, so we are willing to eat less of them to decrease the cost impact.

  3. Hudster says 29 March 2007 at 17:32

    Had I discovered your blogsite earlier, I would have been salivating to get a piece of your previous post. Nonetheless, this is a good place to jump in. Definitely good threads.

    Frugality probably sounds and looks worse than it really is. It does not seem to be a curse for a few wealthy people I have met. Penny wise and pound foolish can be the curse when the driving force is to cut costs at all costs. For example, I lived with someone for several years who had no problem asking me to drive with her across the state line to catch a “sale”.

    What I find important about this discussion is the practicality of weighing the cost of, say, purchasing a higher quality package of cookies. I believe it to be a sign of balance in one’s ability to rationalize, when different alternatives come to mind. The proof of the benefits of being frugal might be in the way we grow our self-esteem. Gotta run, I think I hear my rainwater boiling.

  4. ewrfv7ty2igq says 29 March 2007 at 20:16

    My approach to frugality is that it is a game. I track my expenses and look at monthly and yearly totals. I enjoy the satisfaction of successfully keeping expenses down.

    You know, all those stores at the mall – they are really conspiracies put together by the all of the employees. They want to retire on your money! Don’t fall for it. Keep your money and retire sooner.

  5. JP says 30 March 2007 at 06:36

    Like my grandfather would say: “Take care of the pennies and the pounds take care of themselves.”

  6. Sam says 30 March 2007 at 07:43

    If you have got an exciting goal that you are working towards (paying down debt, saving for a first home, saving for a vacation/trip, saving to build your dream retirement home) I find that the denial of the Starbucks or the new shoes or the new/leased car can be enjoyable. I know that by denying myself I am rewarding myself in the long run. I think a lot of folks just don’t know where they stand when it comes to finances, they don’t know how much they owe in unsecured debt, how much they owe in secured debt, how much they have in investments, assets, etc. When you take the time (and boy does it take time) to figure out your finances and to track expenses and investments its a lot easier to stop spending money b/c you goals are TOMA (top of mind awareness).

    Another trick, I go shopping on-line for clothes, books/music, furniture and leave the items in my shopping cart/shopping bag. I go back in a month or so and (1) determine what I still want and (2) pick 1 item to buy. The process of picking out things that I want on-line generally gives me the satisfaction without every purchasing the items.

  7. Anne-Marie says 30 March 2007 at 11:11

    Let me explain my lifestyle and how I save and how the little things can add up, yet still be able to buy better quality and more expensive items. I love Starbucks coffee. But at $1.89 a cup twice a day, that can certainly add up. ($117.00 a month!)….So now I buy it from the supermarket. I can buy 1 pound of Sarbucks coffee from the supermarket that costs $16.00. Sure sounds like a lot, BUT I’m saving $100.00 a month! Still having my luxury, yet still saving. I do the same for lunches. I put $5.00 away a day when I bring my lunch to work and the money at the end of the month goes towards my grocery shopping! Very simply put, a little adds up to a lot.

  8. TJP says 30 March 2007 at 21:44

    Also remember the time value of money and interest. When you spent $1 a day, most people think this accounts for $365. This estimate is only half correct. You must also account for a year’s worth of missed interest, which may be between 3 to 10%, depending on how well you manage money. So the $365 sum turns out to be $400 assuming you would have invested the money wisely.

    Just imagine this same outcome over the course of 20 years. That’s why wealthy people understand that small amount count.

    Great post, not enough people stress the importance of small savings!

  9. Neil says 27 July 2007 at 09:18

    I do agree…small amounts do matter…as a student…i used to save up nickels in the 1 liter pepsi / coke bottles…at the end of my first year…i took the bottle to walmart where they have those coin change machines..and all teh pennies went into the machine…I got back $ 54.25 which was quite surprising.

    I used to buy some grocery and my camping sleeping back ( $ 20 ) from Walmart.

    Lesson Learnt:- Small amounts do matter..Save up your pennis you never know when you might need them 🙂

  10. Nikhila Pai says 19 March 2008 at 09:32

    I don’t go into debt with large purchases. I am the type of person who spends exactly what she earns by charging $5, $10 and $20. While I might hem and haw over spending $50, I barely blinked or considered the $30 purchases until I got my credit card bill for $1500-2000 a month on ‘stuff’ that disappeared into my mouth or got lost in my home. I wasn’t going into debt, but I wasn’t saving either and found myself on the treadmill or spending my next month’s earnings before I saw it.

    Cash saved me and my fiance. Paying cash means that extra dollar saved is really noticeable and dropping even $5 is more ‘painful’ if it’s not something I really want or need.

  11. Beth @ Smart Family Tips says 26 October 2009 at 05:25

    “When we restrict our spending on the unimportant, we’re able to indulge ourselves on the things that matter most in our lives.”

    I think this aspect of frugality is really important. I’ve been reading Greg Karp’s 1-2-3 Money Plan (on J.D.’s recommendation) and this is something he underscores throughout the book.

    Frugality and saving money don’t have to be about depriving yourself. If the focus is on saving small (or large) amounts on all the things that don’t really matter to you, then you’ll have more money to spend on the things that really do. This concept has changed my view of thrift and made it much easier for me to save money and feel less guilty about the things I choose to spend more money on.

  12. Jeff says 26 October 2009 at 05:30

    Frugality is so much more too. It allows us to concentrate on what we decide is important instead of physical things that aren’t. If you own a farm, buy a tractor, if you don’t have a farm you don’t have a tractor. Seems obvious? How many people have a boat and only got boating a few times a year, or have skis and never ski or have a garage full of stuff they never use. Or throw away dozens of items a month out of their fridge. More physical stuff makes life more difficult…so if you have a farm, buy a tractor, if not, skip the tractor.

    From a mental perspective being frugal is great as well. When you have 150 channels of cable it clutters your life. The same is true of many other things we spend money on, they occupy our mind, if we spend money on them we have to do something with them.

    I won’t harp on the environmental impact of being frugal, as its well documented.

    But the most important point to frugality is taking back control of your money. Not allowing advertising and marketing to pick your pocket and leave you feeling miserable about your finances!

  13. Dotty says 26 October 2009 at 05:44

    I agree that small amounts matter. But if you save .75 cents at the grocery store by clipping a coupon, and then go into another store and spend that .75 cents, you haven’t saved a thing, right?

    My question is: how do you actually *save* what you’re saving by being frugal or by buying on a deal?

    I know that if I get a 50% off discount on a shirt, I’m not putting away the other 50% in my savings. Should I be? Should I be considering those small savings found money? Or should I be thinking that since I saved on one item, it gives me license to spend that money on something else?

  14. Tyler Tervooren says 26 October 2009 at 06:01

    @Dotty (#3),

    “how do you actually *save* what you’re saving by being frugal or by buying on a deal?”

    I think the answer to that question is different for everyone. How much are you saving already? What’s really important to you?

    If you’re saving enough already, maybe you’ll feel a bit too restricted trying to direct every penny you save while shopping into a savings account. If you’re not and you genuinely want to save more, then you need a system that will facilitate that.

    Maybe you can keep a notebook and quickly jot down your savings each month on items that you normally wouldn’t save on and then redirect the difference to your savings account at the end of each month.

    Most folks are probably somewhere in the middle. Why not try it out and see how much feels comfortable “saving” and how much feels comfortable redirecting to other important purchases?

  15. Foxie || CarsxGirl says 26 October 2009 at 06:04

    Loving the emphasis here, it’s great to remember that “extravagant expenses” don’t necessarily correlate with “horrible finances.” Overall, my money skills aren’t bad and we’re doing pretty good, but the spending on the cars can’t be classified in any other way other than “over the top.” But we love it and make it a priority, right next to saving for me. 🙂 If I get money, I like to split it between my car savings and my other savings, and then I never feel guilty about spending my cars’ money on them! (Yeah, they have their own accounts, like kids…. Heh.)

    @Dotty, #3 — You’re still coming out ahead by 75 cents in your scenario, whether you spend it elsewhere or not. If you weren’t planning on spending it and it was somewhat impulsive, then perhaps not, but you freed it up to spend it elsewhere and are ahead if you would have spent it anyhow. (Does that make any sense? It is morning…)

    I know some people will take the coupon savings printed at the bottom of their receipts and stuff it into savings accounts, to make it “real savings.” For me, I just let it roll over into the budget. I already put away money for savings, so freeing up more of it just allows me to have more left over for fun.

  16. Little House says 26 October 2009 at 06:09

    Thanks for mentioning the person riding their bike. Last year when gas was peaking out at $5.00 a gallon, I started riding a lot more. My husband and I were able to start saving some money and paying down debt. Of course, it wasn’t all because of my bike riding. But this was a small start.

    Small starts are important!

  17. Tomas Stonkus says 26 October 2009 at 06:14


    Thank you for sharing your thoughts about money. I could not agree more.I just started noticing, that most of my saving could come on skipping on random desire to buy some food, or a snack, or even a book. Those things do add up.

    I believe that most people understand that small things add up, however the biggest challenge that most of us have is not seeing the big picture when we make that purchase. At least I am guilty of that. A great technique to make yourself realize how much your HABITS are costing you is to put it in terms of years : how much my habit would cost me in a year? That actually gives you the real picture.

    It is similar to when stores look at losing a customer: the customer has a value of a lifetime of this purchases, not a single purchase.

    Yet, the real question is of awareness and forming a habit of living frugally. I am sure a ton of people are going to read it and agree with what you are saying, yet most of them will go on not changing their spending habits.

    I do believe that this site is a great starter for spreading awareness. One of my other favorites for frugality is – a great supplement and resource of simple living.


  18. rachel says 26 October 2009 at 06:33

    I love the “back to basics” you’re doing, JD – it’s really helpful to have even the obvious stuff stated clearly and consisely as an aide-memoir if nothing else…

    i am fortunate to only have debt in the form of my student loan at the moment but i am trying to desperately save up for a small deposit for a house (well, bigger the better, right?) and i am trying to increase my income – but frugality is easier and much more immediate!

    also, just wanted to say thanks for the work you do here, i love GRS and check it out almost daily, i have found so much useful information here!

  19. Alexandra says 26 October 2009 at 06:34

    I hope that Tenet #6 is “Big Amounts Matter More”.

    No matter how many coupons you clip, or how many lattes you skip, this will never outweigh making careful, well-thought out decisions about the BIG things in life.

    The best thing to cut back on? Your house. Only buy enough house to fit you and your life. No empty rooms, guest bedrooms, etc. That extra $100,000 you save will equal all the lattes you can drink while living in that house.

    I still scratch my head at people who obsess over little things like coupons and cable bills, but at the same time make poor choices about the big issues (like stocks allocation, mortgages, salary negotiations…the things that can really matter).

  20. Caitlin says 26 October 2009 at 06:46

    @Dotty (#3)

    I agree with Foxie – you are still ahead the $0.75, even if you don’t pop it into a savings account.

    Unless you say to yourself “Hey, I have an extra $0.75, I think I’ll go waste it” and then spend it on something you would not have purchased anyway, then you’re ahead. Saving $0.75 on bread and then putting that $0.75 toward milk still saves you $0.75 overall.
    If you’d rather see the savings, Tyler has a good idea about tracking the amount you save and putting those amounts into your savings account each week/month.

    I personally love shopping in thrift stores. Like-new jeans for $7 instead of $50? Yes, please!
    I can’t wait until the only-shops-there-during-Hallowe’en crowd clears out. 😉

  21. Ami Kim says 26 October 2009 at 06:51

    I like the idea that frugality is more than just cutting off all unnecessary spending. For me, using frugality on one aspect of my spending to enable a desired purchase makes both the frugality AND the purchase more fun. So, for example, if I want to buy a particular book (because I know I’ll keep it), I scan my day-to-day expenses to see what little things I can cut and, based on how much I save each day, how long it’ll take me to save up the purchase price. That way, the small daily sacrifice doesn’t seem burdensome – and I get the anticipation of the desired purchase over a period of days and the payoff at the end. If I’m not willing to make the little sacrifice to buy it, then I must not have really needed/wanted it.

    I think if you think about your purchases in this way – as a decision about what you’re willing to give up to make the purchase – you end up appreciating the things you do purchase more.

  22. J.D. says 26 October 2009 at 07:15

    @Alexandra (#9)
    Shhhh! You’re anticipating! 🙂 We’ll cover big amounts next week. You’re right. They’re important. But too many people dismiss small changes as meaningless, but they’re not. They form the foundation of good personal finance. They help you develop habits that will stand you in good stead for the rest of your life. Small changes come first, I think.

  23. hanna says 26 October 2009 at 07:18

    Have you ever read the children’s book “A Chair for My Mother” by Vera B. Willians?

    Probably not… but it’s a great book for giving children the message about saving up for something important and all the ways a family can cut costs and contribute. My kids love this book in spite of the anxiety they feel that this family lost everything when their house burned down.

    *Spoiler Alert*

    1) It’s a great lesson (for parents) on why you need home owner’s or renter’s insurance 🙂
    2) It’s a great lesson in charity and giving your extras to those who truly need it. All the neighbors and family make or bring them the essentials (dishes, plates, curtains, rugs and so on) but they don’t have anything soft and comfy like a couch or soft chair.
    3) The mother is a waitress and keeps all her paychecks and dollars to pay the household bills. The tip change goes in a giant jar.
    4) The grandmother puts in all the money she saves from the household budget when she gets a good deal on tomatoes or bananas.
    5) The daughter puts in the money people give her or that she earns helping out at the restaurant.

    When that giant jar is finally full, they roll all the change and bring it to the bank and then go shopping for a beautiful, comfortable chair that they pay for in cash and share as a family.

    This book communicates so much of what is basic in life and finances. I think it’s a worthwhile read for adults as well.

  24. Kandace says 26 October 2009 at 07:22

    When I was trying to build up my saving account, I tucked those savings from coupons, sales, etc. into my savings account. It helped me focus on how much I was spending, what I could be saving, and if I really needed to buy what I was buying.

  25. Avistew says 26 October 2009 at 07:27

    I think the “don’t deprive yourself” part is important.

    Before my husband and I came up with an actual budget, we were just trying to spend as little as possible.
    We were doing things wrong. We made sure to get the cheapest of everything, and we ended up cutting the wrong things out.

    For about 6 months, our entertainment “budget” was 0. We were not allowed to spend money on eating out, buying a book, movie or game, going to the theatre, having a drink somewhere. We were not allowing ourselves to buy treats either (no candy, no cookies, no alcohol, no junk food).
    None of that was a planned budget. But because we were considering every single purchase, asking ourselves “do we need this”, we didn’t buy anything that wasn’t a necessity.

    It was terrible. We were miserable, and yet not really saving.
    When we came up with a budget, it was important to us to have an “entertainment” category. We looked at the numbers and gave ourselves a joit entertainment fund and an individual one each (40 dollars + 20 dollars each per paycheque). It is still relatively small since we live on one income, but it was more per paycheque than we had spent on ourselves in the previous 6 months altogether. It was scary.
    That made a huge difference, though. Now this is part of a budget, so we don’t ask ourselves “do I really need this to survive?” we ask ourselves “how much money is left for entertainment this paycheque?” or “Is there anything else we want that we should save up this money for?”

    We save less, but we are a lot happier. We are less likely to snap and start spending it all on something stupid. And we are enjoying our life.
    We also took some lessons from that “no money spent” period of time. We are more likely to go to the library and borrow a book and movie than buy one. We are more likely to go have a picknick then go to a restaurant.
    We also know that when there is a budget category for something, we will probably spend that money. It is a good lesson. We might want to plan large and give ourselves more money just in case, but if it ends up spent because “it’s in the budget”, there is no point.

    However, it left some marks on me. I stil have trouble spending on myself. My individual entertainment money has been piling up, as I’m saving it all. I still didn’t buy treats so my husband ended up deciding that every week, $5 of the food budget each should go towards a treat. And still, I have only spent it twice (both times spent under 3 dollars) in the couple of months since he introduced the idea.

    The lesson is, you have to be careful. The goal isn’t to have lots and lots of money. The goal is to lead a happy life and be prepared. Sure, some people overspend, but some people underspend, too. You have to find a balance.

  26. Alexandra says 26 October 2009 at 07:43

    Sorry J.D.! 😉

  27. Angulo says 26 October 2009 at 08:03

    I have to agree with Alexandra #9 regarding that “big amounts matter more”.
    While I save 35% of my income into my retirement and a mutual fund,I still spend almost as much on gambling at the casino…
    I have absolutely no debt of any kind and live extremely frugally to the point of being considered cheap by my co-workers…
    Yet I still have this guilty pleasure which is literally my only excuse for going out of the house other than for errands.
    If I didn’t spend so much on gambling maybe I would be able to alleviate my anxiety over retirement…but at the cost of
    becoming a shut-in.

  28. Kristin @ klingtocash says 26 October 2009 at 08:19

    It’s because of this principle that I love David Bach’s books. All of his books include a chapter on the latte factor and how those little transactions really add up to some big money.

    I started buying my husband really good coffee beans and a thermos. He takes a pot of coffee with him each day. This saves us over $1,000 a year. Invest that money over the course of your life and it’ll make a huge difference in your savings.

  29. Kristin @ klingtocash says 26 October 2009 at 08:22

    @ Doty (#3)

    I have a budget each month. If I save on a category, it either allows me to stretch my dollars further or take the left over money and use it for savings or debt repayment. You need to have a plan for those savings and apply them to your plan.

  30. Tyler Karaszewski says 26 October 2009 at 08:31

    Given only your two options:
    1) Prepare for a long life by saving and investing, but then die tomorrow.
    2) Spend money you don’t have now, and then be unable to afford what you need when you’re older.

    I’d actually choose the second. I bet most others would as well. 😉

    But, like some of the other people here have mentioned, I’m not sure how much I agree with you on this point J.D. You use a collection of examples to arrive at an effective $1000/year raise. I see that and think “Eh, that’s not really a huge deal”. If I wanted an effective $1000/year raise, it would have been a lot less effort to just rent a house that was $100/month cheaper than the one I live in. That change alone makes more of a difference than all your small changes combined, and I only have to think about it once, when choosing a place to live, rather than having to think about it every single day when I buy groceries.

    I feel like my general philosophy is big things matter, and small things are borderline irrelevant, and I think I’ve done ok with that.

  31. Rob Bennett says 26 October 2009 at 08:31

    My experience is that the small expenses that are repeated many, many times count for a lot more than the large expenses that are repeated rarely. Yet 80 percent of our money management efforts are directed to the rare, big items.

    This is one of the reasons why I am pro-budget. It is only by looking at the numbers that this reality clicks.


  32. elisabeth says 26 October 2009 at 08:31

    I was reading along with JD’s list of “small changes” thinking, no, I have to buy the organic milk, but yes to using public transportation, yes to going down to basic cable, yes to using coupons, but oh no, not giving up the New Yorker subscription! — for about a dollar an issue I get so much to read (plus we recycle them to our local hospital waiting rooms) that it actually seems like a very thrifty purchase.
    But, that just goes to prove that everyone has different indulgences. And even if making these kinds of small thrift choices may not lead directly to getting rich, it can certainly mean that you don’t go into debt for your pleasures.

  33. Ross Williams says 26 October 2009 at 08:36

    I think the mistake people make is trying to control their spending rather than taking control over their desire to have things. If you develop a lifestyle that is within your means, you don’t have to be constantly telling yourself no.

    Start by throwing out your television. You will discover that you have a lot less things you think you need.

  34. Dustin | Engaged Marriage says 26 October 2009 at 08:39

    “Spending is not the same as happiness” says it all for me. When we put our focus on our true priorities in life (our spouse, children, spiritual life), it becomes much easier to let go of trivial spending in order to build a solid financial foundation.

  35. Frugillionaire says 26 October 2009 at 08:54

    I think the *psychology* of starting with small amounts is just as (maybe more?) important as the pennies saved.

    If you’re not used to cutting back, it’s much easier to start with your latte than your Land Rover. Once you realize, “hey, this frugality thing’s not that bad,” (ie. giving up a luxury didn’t make you as miserable as you’d thought), you’ll gain the desire and confidence to tackle bigger expenditures.

    Also, the opportunity to save on BIG expenses tends to occur once in a blue moon. It’s nice to be able to take some steps (however small) toward your financial goals in the meantime.

  36. ebyt says 26 October 2009 at 09:05

    I guess ever since I started to really care about money (vs. my free-spending ways in college), I’ve realized that it’s easiest to be frugal where you can rather than trying to do something unsustainable. For example, I don’t own a car and don’t need one right now – I can walk to work. That saves me hundreds of dollars a month on parking, insurance, gas, and a car payment. I also don’t spend money on things other people my age do such as drinking and partying every weekend. On the other hand, I just bought myself $60 body lotion to match the expensive perfume my mom bought me for my birthday. So I am frugal in ways that work for me, but not in other ways. If I had the car payment, partied, etc. etc. then the lotion would probably be a really bad idea. I like little luxuries that make me happy, but I know now not to go overboard.

    On things like groceries I try to cook from scratch where I can, since pretty much anything you make from scratch you can make in bulk and will be way cheaper than its processed counterpart (like spaghetti sauce for example). I also buy generic where I know there isn’t much taste difference. You just have to figure out what things you really can live without, and what things you don’t want to live without.

  37. IngaG says 26 October 2009 at 09:14

    A great post. And just a little illustration to some of the life approaches you touched:

    My mother knew how to be frugal in many respects, but she also had pleasures she refused to sacrifice. Her lifestyle in many ways was an example of balance. She always bought very few things and only those she truly needed. She never accumulated clutter and she came from poverty, knowing exactly how to make life beautiful on a limited budget. But that is also why she treasured luxuries and experiences. She may have only owned 6-8 pairs of quality shoes for several years – but then she’d spend $350 on a hotel room with a view to watch sunrise in the mountains in her bed of plush Egyptian cotton. Because experiencing that truly mattered to her.

    She retired at 45 with an amount of savings that was not going to last too long – definitely not enough to support her in her 80s or 90s. And she always smiled and said that she wanted to live now, and that when she runs out of money to live just the way she wants to, she will simply commit suicide.* And I always knew she truly meant it.

    If anything… that’s consistent. And that’s about living in tune with your beliefs.

    (*Not that I would ever let her do that or leave her without support…)

  38. Gee says 26 October 2009 at 09:16

    Regarding big expenses vs. small ones…

    I don’t understand why you can’t save in both areas. They aren’t mutually exclusive concepts.

    And sometimes, when you make a mistake in a big purchase, you have to live with it. But everyday frugality involves making amaller puchasing decisions all the time. So there will always be a new week when you can cut that grocery bill or not let food spoil.

  39. K at Resqdebt says 26 October 2009 at 09:29

    This is quite useful advice and demonstrates why this site has the following that it has. Being able to save, and more importantly to developing the mentality to want to save, is vital to the mission of being debt-free.

  40. Mike Wachowski says 26 October 2009 at 09:56

    Don’t neglect to “Focus on earning more vs. solely focusing on cutting costs.”

    I’ve been able to build a freelance career that nets $300,000 per year, which is a better strategy than focusing solely on reducing my Netflix subscription or saving 50 cents on milk (both of which I’ve done as well to maximize savings).

    Far easier to earn thousands than to cut thousands.

  41. Greg says 26 October 2009 at 10:00

    “Given only your two options:
    1) Prepare for a long life by saving and investing, but then die tomorrow.
    2) Spend money you don’t have now, and then be unable to afford what you need when you’re older.

    I’d actually choose the second. I bet most others would as well.”

    If I were single, maybe (but probably not), for me the comfort of knowing I will leave my wife and kids in as good a financial position as possible is worth the risk of a little sacrifice now.

    For those that think it’s only the big expenses that matter, you forget about the cumulative opportunity cost/profit.

    You can’t eat an elephant in one sitting but you can eat it one bite at a time.

    And really, when you consider most of these “little” expenses are luxuries and impulse purchases’ the money is coming from what you would have saved. How much do you have to earn to save $100. At a 5% savings rate you must earn $2000 to have enough to pay all your bills first!

  42. Rick Francis says 26 October 2009 at 10:09

    @Dotty (#3), wrote;
    “how do you actually *save* what you’re saving by being frugal or by buying on a deal?”

    By limiting yourself to enough! You don’t have to spend just because you aren’t broke!

    Money will accumulate in your checking account if you are spending less and earning the same amount. Move it to savings as you see fit.

    If you can’t resist spending when you see a bit extra in your checking account then move some money to savings when you are paid and use frugality to make it to the next paycheck!

    -Rick Francis

  43. Suzanne says 26 October 2009 at 10:12

    Well, I’m single and it’s all the MORE reason to prepare for my own future. No one else will! I won’t have kids to bail me out if I spend it all now. I can’t believe anyone would rather have nothing when retirement comes (or not retire at all) than spend it now since there’s a very small chance you’ll die young. Now if you’re a smoker, are morbidly obese or have some genetic propensity to die early, maybe I can understand not caring about your “golden” years. But for the rest of us, life is truly bleak for someone who can’t retire and can no longer work like they used to. Medicare-only funded nursing homes are no place to aspire to.

  44. Oleg Mokhov says 26 October 2009 at 10:17

    Hey J.D.,

    Better to achieve a small goal than plan (but not do) a larger one.

    Small steps are not only easier to do psychologically (less daunting), but they establish a foundation to achieve bigger goals. You’re building your ladder. The more steps you build, the closer you’ll be to your big goal.

    Much more effective than just trying to jump up to that top window that is your ultimate goal, then getting frustrated and quitting – or not trying to begin with because it’s too high.

    However, I also think that you should analyze your steps and make sure they’re bringing you maximum results. 80-20 it: focus on the 20% of steps that’ll bring you 80% results. Ruthlessly ignore the rest.

    By focusing only on the results-maximizing small steps, and consistently building your ladder, you’ll be well on your way to establishing your base and confidently reaching your bigger goals.

    Thanks for the reminder to sometimes take things a small step at a time,

  45. chacha1 says 26 October 2009 at 10:40

    Like Gee above, I think doing both is important but the whole point of discussing small amounts and big amounts separately is to give readers the chance to review what they’re doing and decide what, if anything, they want to change. I have to assume that most readers of PF blogs in general read because they think they still have something to learn … no?

    Frankly, I think it’s essential to micro-manage the “small stuff” at any time, but crucial if your income is low. This attentiveness can pay off big time once income starts to go up.

    I’m fortunate to be employed in a high-wage sector – my DH, too. We spend a LOT on rent, but very little on cars (now that they’re paid off). We spend pretty freely on media and food, but we do most entertaining and eating at home so our costs are lower than if we made full use of our city’s infinite options. By bringing my own milk and brown-bagging my lunch, I save time and money I can then spend on a book to read on my lunch hours.

    It’s all about that balance. I don’t think it’s better to spend with abandon now and let the future take care of itself, but it is important to spend enough to enjoy life.

  46. HollyP says 26 October 2009 at 10:50

    Great post, JD!

  47. nickyt says 26 October 2009 at 11:46

    Love this post!! Since starting to follow your site I have done alot of thinking about the “little changes” I could make to help our budget and in doing so discovered what was REALLY important to our family.

    We don’t need to go see the latest release as none of us like the crowds of the theater. Instead we can wait until the movies come out on DVD and rent them using our Netflix account. Plus, we can get pizza and candy and popcorn for home and have a better time on the couch where we can talk during the movie if we want to and we are spending less than our friends who go see the latest release every week.

    I love to read and am a pretty voracious reader. A wonderful used bookstore is only two blocks from my office. I now am a frequent visitor turning in my old books for credit and purchasing “new” used books. I don’t need the latest release when it comes out but can wait a few months when it is sure to be available there. Plus, I only pay a portion of every dollar I spend because of the credit so I have discovered authors and genres that I never knew I enjoyed and would not have spent the money on at the bookstore. (Yes, I know about the library but it is inconvenient to where I live and work. And my life is all about convenience at this point!)

    I could go on and on about changes to our vacationing habits, eating habits, entertainment habits. We don’t feel like we are missing out on anything because we are spending money on what is important to us and not just because our friends are or we feel we “need to keep up with the Jones'”. And I have been able to increase the contribution to savings and my husband was able to start contributing to a 401k which is office just recently offered its employees. We wouldn’t have felt like we could have afforded to contribute before we started making the “small changes” you recommend, JD.

    You are right with the idea of finding the happy medium. The changes have been really small but have made huge changes on our family’s over all lifestyle. I think we are much happier now than we were at this point last year even despite a difficult year full of unexpected changes. Thank you! 🙂

  48. K says 26 October 2009 at 11:56

    Disagree with many that state big items are important and small items are not worth the time/effort. It is not the $$ amount of a purchase but the ideology that matters. If a person is not thinking frugally while making purchase decisions on a daily basis on small things, there is no way they will think frugal when buying larger things. Case in point: I consider myself frugal as I clip coupons, think about saving $.50 for milk etc. and I chose to buy a compact car while buying a car. My not so frugal co-workers who would rather pay $2.00 for lemonade because they are thirsty on they way home from work than wait 15-20 minutes to drink water at home have all bought SUVs. Then they justify their purchase saying its only a few hundred dollars per month more than your small car. Standard salesman pitch! I can tell you none of them is even considering the extra amounts they will be paying in Finance charges, Insurance, maintenance and not to mention gas. The concept of “small things add up” and “consider the whole picture not just the monthly payment” never got drilled into their brains.

    To me the purchase decisions I make on a daily basis on small things is a practice session for the bigger things that I buy later in life. I would rather practice and hone my skills daily than wait for the big one and be completely clueless about cutting costs.

  49. Patty - Why Not Start Now? says 26 October 2009 at 11:57

    You’re so right. We do live in a society that idolizes the big winner, which leaves so many people feeling stuck because they can’t live up to that. The truth is small amounts matter in every area of life: money, health, work, relatationships, etc. And when we shift to that mindset it’s such a relief, and we actually have a sense of moving toward goals (and having more fun.) So thank you once again for being the voice of reason!

  50. John Steed says 26 October 2009 at 12:12

    A few posters have suggested that it’s better to focus money-saving efforts on big (and usually infrequent) purchases rather than smaller, everyday purchases. However, I don’t think that it’s an “either-or” proposition, it’s more of a mindset about spending money. I try to follow a few simple rules.

    The first is to “spend money on purpose” — that is, spend it on what you value most. For example, my wife and I value tasty, nutritious food so we are willing to spend money on fresh, high-quality ingredients. However, we save money because we don’t eat out often, and I usually bring my lunch to work. This doesn’t feel like a sacrifice, though.

    The second is to focus on getting value for your money. I know what I am prepared to pay for *all* of my purchases. For example, I like to run, and need to replace my shoes a couple of times a year. I have a favorite brand of shoes that I’ve used for many years, but I am not prepared to pay “full retail” for them, so I will buy last year’s model, which gets marked down when the new models come in. I will also check e-bay to see if they are available, although this is a something of a hit-and-miss exercise. In general, I am prepared to pay more for high quality items, which will last longer and need fewer repairs.

    Third, be content with what you have, and avoid “lifestyle inflation.” We kept our TV for more than 20 years, and then gave it away last year to some friends who were looking for a used TV for their cottage. (We didn’t rush to replace it, but waited until we found a great deal on a floor model. In the meantime, some friends took pity on us and lent us one of their TVs). Since moving to this city 20 years ago, we have only lived in two houses, and we have no plans to move unless our health deteriorates significantly.

    Fourth, if you are married (or living together), agree that you will consult with your “better half” on any purchases above a set amount. It may be tricky to find the right balance — it can’t be so high as to eliminate all but the largest purchases, but can’t be too low either. Early in our marriage we set an amount based on a % of our pre-tax income, but we have only raised it twice since (we’ve been married more than 20 years). We even apply this rule to the one budget category for which we each have separate annual limits. This rule is especially helpful as it discourages impulse purchases and helps to ensure that we communicate regularly about our finances.

    By following these rules and spending less than we earn, we find that the financial side of our lives is relatively stress-free.


  51. Madeline says 26 October 2009 at 13:03

    With you on this in so many ways, but mostly because of the psychology aspects so many of your readers have chimed in with above.

    The small amounts matter because it’s practice for the big stuff. Like you say, this doesn’t mean stripping to bare bones, it just means “Pay Attention!”.

    A small example:

    I had to rush and pick up some milk yesterday at the grocery store around the corner. This is a “fancy” store but I only had a few minutes because someone was doing the favor of watching the kids for me. The “cheaper” grocery store was too far and besides, what I would have saved on the price of the milk would’ve been offset by gas prices. However; when I got to the store, there were three brands of Organic milk– each one ten cents apart. The fact is, I noticed this! My (ex) husband wouldn’t have. He would’ve reached out and grabbed the first organic milk he saw. This thinking plays out all of the time for me– small, medium, and large purchases. It gets into your brain and in a GOOD way.

  52. Chaturon Wattaporn says 26 October 2009 at 13:05

    I agree with Mike (#30): So long as one is mindful of wasteful spending, it’s more important to focus on increasing earnings. You can only cut so much from your budget, but earnings are theoretically unlimited.

  53. Tyler Karaszewski says 26 October 2009 at 13:27

    @Greg (#31):
    I haven’t asked her, but I think my wife would rather be poor and married to me than rich and widowed. If my wife was dying, I’d gladly give up my 401k balance and all my outstanding stock shares to make her healthy.

    @K (#38):
    I don’t clip coupons. If I wanted coffee and Starbucks wanted to charge me $5 for it, I’d pay it. I don’t even look at prices in the grocery store, I just fill my cart with the items I want. Also, I live in a one bedroom house and have no television, dishwasher or air conditioning. My wife’s car is paid for. My car is a 2007 model and will be paid off in December. I save approximately 25% of my pre-tax income.

    There is no inherent “all or nothing” dichotomy of lifestyle like you imply. Maybe your friends have all gone for “all” and you’ve gone for “nothing”, but tat doesn’t mean that nowhere in the middle exists.

  54. Ms. Clear says 26 October 2009 at 13:36

    I’d suggest that there is somewhat of a relationship between frugality and household income. The less money one has to spend, the more frugal one needs to be.

    Small things especially matter to those who are living on modest means.

    However, big earners have to watch out. Yes, many can successfully pursue the “middle ground,” indulging while putting aside plenty for the future, but more than a few fall into the $5 bucks here $5 bucks there trap.

  55. corey says 26 October 2009 at 15:42

    You crossed a line, sir! Give up my New Yorker subscription?!?! Never! I’d rather give up solid food and shelter.

    Seriously, I have cut so many small things the last few years, and it works. It works great. I’ve greatly reduced my debt and started saving and investing because of it.

    But give up my New Yorker subscription? No way.

  56. Broke M.B.A. says 26 October 2009 at 15:57

    The hardest part of most projects is *starting* the actual project. Much like the “debt snowball” approach used when paying off debt, small and quick wins do add up and lead to bigger accomplishments down the road.

  57. Richie says 26 October 2009 at 16:04

    Uh oh, you aren’t going to tell us to start using 1.5 tablespoons instead of 2 tablespoons for our hot chocolate are you? hehehe

  58. E says 26 October 2009 at 16:10

    Tyler #43, if we could tell the future we would all agree with you; no one wants to be rich and dead. I for one cannot, so I will prepare for a long life while trying simultaneously to enjoy the present.
    Also you say you’d toss your 401k etc etc to save her if she were dying. What if she were dying and you didn’t have those things? THAT is the point.

    There is no either/or. You have to try and cover as many bases as you can with what you’ve got, even – especially – if it’s not very much. If skipping Starbucks or cable makes that difference for someone, you won’t find me judging them for it.

  59. Michael says 26 October 2009 at 16:22

    I love the article. Especially the part about earning before tax dollars and spending after tax dollars.

    And the comments, all so on point.

    It seems after you get out of debt, and all bills get paid, it’s almost difficult not to save. For if you’ve had the discipline to get out of debt, with the same amount of money that you earn, it becomes difficult not to save.

    And if you’re smarter about saving money, it would appear you get smarter at making money too. I find my expenses get smaller, ways to become frugal greater, and my income increasing.

    Now I’m looking at extended vacations. My wife doesn’t want to open our home to a home exchange club, but I look at it as a way of travelling the world and being able to save loads of cash. If I could stay in England for a month at someone’s house, and they do the same at my house, it sure seems like a win-win to me.

    Also the idea of either making more money or cutting expenses. I never cut coupons though I shop at Costco, $.99 store and Walmart. I save tons of money that way, but yet it seems a whole lot easier to just make more money.

  60. Sarah says 26 October 2009 at 16:29

    I think the best way to be frugal is to stop spending money on things you don’t really want anyway. I hate the bus, so I bike. No more bus fare! I don’t like to dress up, and I got a job where I really have to dress down. Score! I bring my tea from home every morning – I make it better anyway. I love to cook and I’m a picky eater so I bring my lunch to work and save a lot of money that way.

    I still spend money on all the things I actually want, like screenprinted t-shirts and concert tickets and traveling, and I don’t feel bad about that at all.

  61. Ross Williams says 26 October 2009 at 18:44

    I think the most useful advice here all adds up to what I said earlier. Adopt a lifestyle you can comfortably afford and you don’t need to be constantly cutting back on things in order to have enough money.

  62. Mike Hunt says 26 October 2009 at 23:53

    Do what the Asians do- save up as much as you can (cut back on the little things to do this) and then buy your residence and pay it off as quickly as possible. Keep working and that dramatically increases your free cash flow.

    Then you can splurge on the little things without worrying about it.

    But you need to ingrain the habit to avoid frivolous spending and purchase for value.

    I sometimes shake my head that I still scour the menu to find the best value for money when going out to eat even though we have more than a million in the bank! Still feels right to keep looking for deals!


  63. Monique Rio says 27 October 2009 at 06:24

    Frugality has the added benefit of being better for the world too.

    It’s not only more expensive to drive to work than to bike, driving’s also putting chemicals into the air.

    It’s not only cheaper to buy clothes at the thrift store, it also gives clothes another life before the landfill.

    Buying refurbished appliances is cheaper, they work as well as new, AND they don’t end up in a landfill.

    Totally agree with frugrality not being about deprivation.

  64. HollyP says 27 October 2009 at 08:17

    Small and large changes each have their place. Both are important, in different ways.

    In my experience, small changes can often be implemented more quickly than large, thus are helpful in achieving short term goals. Some of the big changes, such as increasing income, require a longer term to implement. I can improve my financial situation by choosing *not* to buy a latte today, but I cannot start a consulting practice this morning and be earning $300,000 per year this afternoon.

    It took my five years of night school to earn my MBA, and another five years to quadruple my salary. In the interim, I was able to keep my financial boat afloat by clipping coupons, shopping around for bargains and bringing brown bag lunches.

  65. David/Yourfinances101blog says 27 October 2009 at 20:05

    Reminds me of a mantra I stood by during my journey out of financial hell–ten bucks is ten bucks!

    Also, reminds me of a phrase that makes my skin crawl when I hear it–It’s only money.

    You can tend to your money carefully without being a slave to it

  66. jamenjaw says 29 October 2009 at 18:15

    My only problem with being frugal is that i fell cheated a bit even if it is something I am going to use. yea shure i save a buck but shurg i guess im still kinda living in 2006-2007.
    @JD I love this site and it has opened my eyes a lot to saving and spending less. now to get myself in the habbit of brown bagging it for work.
    ohh one thing i do to help out m cash flow is insted of buying 3 20 ounce bottles of soda for my brakes and lunch i just buy a 2 LT (20 is about 1.78 a 2 LT is 1.63) i figure i save about 25ish a week just doing that.

  67. Matt@Self Improvement Resources says 29 October 2009 at 19:13

    This is a very important message in my opinion. I think one of the biggest blocks for people trying to move toward financial freedom is that they look at their situation (for example 200,000 in debt) and they think… well what the heck, this $5 wont make a difference.

    But a slow drip of water can wear a hole through a rock! Wealth is always a long term process.

  68. Vas says 11 November 2009 at 23:29

    Without no small – big is impossible. We all have to start somewhere.

  69. Kenny says 13 November 2009 at 15:28

    My Lord…..You are so RIGHT.

    I cannot agree with you but 1000%. I have been following these rules for decades, and have always had a good life every day of my life. My kids are now catching the wave and realizing that Dad is going to pay 100% for College Tuition and Expenses with savings. But, when we go out as a family, we all drink water to save on $2.95 per drink at TGIF or $1.95 at Olive Garden or $1.75 at CeCe’s Pizza!

    Just yesterday, I previewed jeans at Aeropostle and agreed to buy them 2 pairs of cool jeans since they were finally on sale from $54.99 to $12.99. Bought them 2 each (2 sons) instead of their need being 1.

    KKP’s Coined Phrase “Everything Does Not Revolve Around Money, but without Money, Nothing Much Revolves for Too Long”.

    Small stuff matter, and we have to STOP saying ‘ONLY’. Only is the enemy of Small Stuff. If you put only in front of $1.95 Coke, you will justify it and buy it.

    You are thirsty on your way home from work. Unless work is more than an hour away, HANG ON. From next day onwards, take some water in a glass bottle and keep it in the car or refill a bottle at work and then sit in the car.

    KKP’s Coined Saying “Small Sacrifices Today, will Relieve You from BIG SACRIFICES TOMORROW”.

    Now in my 40’s, I am able to buy my wife two VVS1 / F / 1.5carat diamond earrings with laser encryption on it (and a certificate) without trouble with all of the savings from earlier years.

    Accomplish Dreams, and Goals in Life, by controlling the small stuff……

    Thanks for listening.


  70. nancy says 17 November 2009 at 13:53

    I love the thought a slow drip of water can wear a hole in a rock. Little things do matter I was just figuring and I have to work every Saturday and I guess since I have to work I would treat my self to Dunkin Donuts at 4.85 a week for a year that’s 252.00 that could go to my debt I guess I will give up that treat. It’s all about what’s important to you paying down debt which is the reason I work every Saturday in the first place. It is definitely the small things that can become become big. It was not big purchases that put me into debt in the first place it was the small stuff I thought I needed. Great article

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