Every day we make small purchases that can seem insignificant. But can these types of expenses have a significant impact on our budget? Is cutting back on these small purchases going to make a difference?
While every purchase has some impact, getting focused on the small things may not help us save as much money as we had hoped. Instead, it's best to focus on the things that will give us the most value. It takes a lot of digging deep to understand what is worth the cost and worth cutting.
So, is cutting back on small purchases worth it?
First, let's look at the numbers and the psychology of small purchases.
Let’s Look at the Numbers
To understand whether cutting out small purchases is worth it, we must start by looking at the numbers with a familiar and polarizing example: coffee purchases.
Let's assume a latte at the local coffee shop costs about $3.50. If we purchase this every day, how do the numbers come out?
- After 1 Week: $24.50
- 1 Month: $98
- 1 Year: $1,277.50
- 10 Years: $12,277.50
If we cut this back to three times a week:
- After 1 Week: $10.50
- 1 Month: $42
- 1 Year: $425.83
- 10 Years: $4,258.33
Looking at the numbers for our reoccurring small purchase can give us an idea of the true cost for that habit. The goal here is not to make anyone feel guilty about this type of purchase but to educate yourself on how you spend your hard-earned money.
Knowing what you're spending over time will help you to decide whether if that actual cost is worth it to you.
Is it Worth the True Cost?
I'm not going to tell you it is wrong to purchase a latte every day or that cutting that expense is going to change your life. The fact of the matter is that buying one latte is not a big deal. But as we can see, purchasing a latte every day can quickly add up.
Whether or not the cost brings you true value is something only you can decide.
When looking at whether cutting an expense is worth it, ask yourself these questions:
- Is this cost giving me true value?
- If the answer to #1 is yes, is there a way to get the same thing for less money?
- Can I replace this purchase with a cheaper alternative?
- At the end of my life, will I have wished I purchased more of this item?
Working through these questions with our small reoccurring expenses can help determine what is worth reducing or eliminating. If something gives you value and you are okay spending the money, then go for it.
With that being said, eliminating or reducing small purchases will only get you so far. Unless you make these small purchases daily or several times a week, your long-term savings likely won't amount to enough to make much of a difference. To ramp up your savings, you must look at the bigger picture.
8 Expenses to Cut to Save the Most Money
Of course, you should look at your overall budget and all budgeting categories when looking to save money, but focusing on the more significant items can bear more fruit.
Here are the 9 expenses that will make the most significant impact when trying to save money.
1. House/Rent Payment
Housing is typically our biggest monthly expense. It is recommended that we spend no more than 30% of our take-home pay on housing, so if you're currently paying more than that, it might be worth considering finding a cheaper option.
Of course, that doesn't mean you have to compromise on everything. There are going to be things that give us more value than others. Two things I've learned that I don't want to cut back on with housing are having a nice kitchen and having a bathtub where I can take baths. These things help me relax and also make cutting back on other categories easier.
Again, depending on what is important to you, it's worth reassessing your housing situation to see if you can save money by moving to a cheaper option. You can also house hack your way to saving on housing costs.
No matter what you decide, housing will likely have the biggest impact on your monthly budget and will make the most difference when cutting back on expenses.
Buying food varies significantly between families, but there are many great ways to save money on groceries, and it's worth another look to see if you can save more.
I've seen some budgets that went from $1,000/mo grocery budget to $300/mo with some planning and a few simple changes.
I've saved a large amount of money learning to create huge batches of freezer meals, which ends up saving money and time.
Learning to cook can not only be fun, but you can make things that are tastier than what you can get at most restaurants. Plus, there are tons of recipes out there for cheap meals and quick meals that can help you eat well on a budget.
3. Dining Out
Eating out is expensive — if you go out four times a week, that could quickly end up being $500 or more a month.
If you tend to go out regularly or buy food out of convenience, try cutting down to going out once or twice a week. Not only will cutting back on dining out save you a ton of money, but it will make those times you do go out more special.
When you do go out, you can still save money eating out by avoiding fancy restaurants, drinks and taking advantage of happy hour, specials, and loyalty programs.
4. Health Insurance
It may not be worth cutting down this expense because healthcare is essential and good healthcare can mean the difference in your quality of life.
But if you are paying a lot out of pocket already, it might be worth downgrading to a high deductible plan with a lower monthly premium. Also, utilizing programs like GoodRx can save you money on prescriptions.
Having a large car payment can not only be expensive, but you are spending a good chunk of money on a depreciating asset. It isn't uncommon to see car payments for new cars soaring over $500 a month for 7 or 8 years.
Driving vehicles 3-5 years old or older will save a ton of money because the car will have already depreciated around half of its value, thus costing you much less upfront.
You should also factor in fuel economy, how much fuel we use based on how much we drive, and whether we could get by on one vehicle.
Vehicle costs are one category that affects many other categories (gas costs, insurance costs, maintenance costs), so it is worth taking a closer look and seeing if you can swap your vehicle for a more affordable one.
6. Date Night
If you have a partner, prioritizing date nights is essential. Unfortunately, date nights can also be expensive if you're not careful.
Luckily, there are tons of cheap date night ideas that you can try out that are either free or frugal. You don't need to spend $100+ on meals and drinks to have a great date.
Instead, focus on activities that allow you to spend quality time together. Watch a movie or show at home, play a game, go on a hike, or make a meal together.
The money you save will allow you to save for those special occasions or even a trip together!
Purchasing high-quality clothing that lasts a long time can be worth spending a little extra money. However, with most people buying new clothes every month or so, the chances are that you won't keep those clothes as long as you think.
Instead of buying designer brands and purchasing from high-end stores, see if you can find styles you like at discount retailers like Ross, TJ Max, etc. Often you can find high-quality clothing at these stores for a fraction of the price.
If you're not too picky, you can also find great used clothing on Facebook Marketplace and other Craigslist alternatives.
8. Miscellaneous Spending
The last major category to check is miscellaneous spending. This includes all purchases you made that don't fit nicely into other budget categories and may even fall into impulse spending.
Take a look at what you purchased in the last year to see if you can identify large amounts being spent on particular items. For example, buying a $2,500 4K OLED TV is like buying a latte every day for two years!
Again, some of these purchases might be worth the cost, but it's essential to know where your money is going and how much is going toward these purchases. If you realize these purchases aren't worth it, then you can be more planful in the future and avoid those purchases that don't bring you true value.
Is cutting back on small purchases worth it?
It's certainly worth looking at being as they can add up over time. However, if you are looking to cut spending as much as possible, taking a close look at larger budget items can save more money.
But remember that the goal isn't all about money; it is about figuring out what gives you true value and what is worth the cost. Often, we can get the same amount of value with cheaper or free alternatives.
If you decide something is worth the cost, then you shouldn't feel guilty about that purchase. Everyone will have a different idea of value and what purchases are worth it.
What expenses have you cut or reduced from your budget? Have you discovered ways to reduce spending without feeling like you are living without?
Tawnya is an elementary special education teacher by day and co-blogger at Money Saved is Money Earned by night. She holds an Honors BS in Psychology from Oregon State University and an MS in Special Education from Portland State University.
Tawnya and co-blogger Sebastian have a wealth of knowledge and information about personal finance, retirement, student loans, credit cards, and many other financial topics. They teach people how to save money, make money, and understand money.
Josh founded Money Buffalo in 2015 to help people get out of debt and make smart financial decisions. He is currently a full-time personal finance writer with work featured in Forbes Advisor, Fox Business, and Credible.