Years ago, it became a running joke that millennials couldn’t afford to buy homes because they were too busy spending all their money on avocado toast. Millennials quickly clapped back that it wasn’t the avocado toast, Boomer. More like a historic recession (which they had nothing to do with), stagnant wages, and crushing student debt.
In the personal finance community, you’ll find strong opinions on both sides about whether small purchases should be a focal point in your budget.
What types of small purchases are we talking about? I’m talking things that aren’t on their own going to be big line items in your overall monthly expenses, but often become frequently occurring habits. Think:
- $5 coffee
- $20 food delivery
- $100 Target run
- $25 group fitness class
- $15 per month subscription service
- $10 lunch takeout
Why Some Say Small Expenses Don’t Matter
I’ve seen a few main arguments why we should stop worrying about these small costs.
First, none of these costs on their own would make or break most people, or even make a huge difference in your ability to achieve major financial goals like paying off debt or buying a house. If you have $100,000 in student loans, you would have to forego 8,333 $12 salads to pay it off. It’s hard to look at those huge goals and think that something so insignificant would have any impact on the big picture.
Many (or maybe even most) personal finance experts will tell you to focus on the big 3 line items in your budget: 1) Housing, 2) Transportation, and 3) Food. Making a significant reduction on your housing or transportation costs can be as simple as getting a roommate or selling your car. One change and boom – you’ve saved thousands every year. Much more simple than stressing over every single latte, huh?
Another argument I see often, especially from people who are in the thick of paying off debt or have lower incomes, is that these small luxuries can be a real bright spot in life. When you’re already not able to afford a vacation, or are stuck driving a beat-up car, or even when you know you’ll be chained to your debt for years to come, a delicious coffee from your favorite local spot can genuinely spark some joy.
How Small Spending Habits Make a Big Difference
Over the last few years, I have made changes to my spending habits, including cutting out many of these small expenses. But, not for the “it all adds up” reasons you’ve read before. Personally, although the magic of compounding interest does show that those expenses do actually add up, I also find that they don’t motivate me on their own.
Instead, as I learned more about financial independence and experienced a shift in my mindset, my overall lifestyle followed and I found that these small spending habits gradually took care of themselves. I didn’t eliminate them and feel deprived; instead I stopped being so drawn to these things as often. Now, I do indulge in these very things from time to time, but it’s a real treat when I do and doesn’t take away from any other important financial goal.
For me, no amount of “discipline” made me change my habits. In case you haven’t noticed, humans aren’t great at discipline and restriction. If this topic resonates with you, I’d encourage you to view it as an unexamined misalignment of your values and spending. Here’s why these types of expenses are so closely tied to mindset:
- They are mindless. The one goal of Woman Money is to empower women to use their money with intention. Habitual conveniences or subscription-type pricing are, by design, meant to take the decision out of the equation. Once we cease to spend on something consciously, we lose our opportunity to pause and determine whether it aligns with our true priorities.
- These costs often don’t align with our true priorities. I’m going to be very direct about this one: If you sat down and really thought about your true vision and values for your life, would it include the low quality crap that clutters your house or an overpriced mediocre sandwich? I doubt it. The things that matter most to us are almost never these quick fixes or immediate gratification.
- They lose their luster. When something that once was a luxury – e.g. having someone deliver food to your home, or send you a box of surprise “gifts” each month – becomes a habit, the sparkle fades quickly. That coffee that tasted so great when it was a treat now doesn’t even register as you chug it in a rush. Have you noticed this before?
Small Habits Form Your Mindset, and Your Mindset Forms Your Lifestyle
I approach personal finance like a good health coach might: If you want to see a long-term change, it all comes down to improving small habits consistently over time. A crash diet and miserable restrictions aren’t sustainable for your health, and the same is true of your finances.
So, while I’m not suggesting cutting out all the tiny luxuries in life at once, I do think these small expenditures play an outsize role in the most important part of personal finance: Mindset.
Examining your small but habitual expenses is a huge step in shifting your mindset about your money. And for me, mindset is the only thing that’s enabled me to change my financial situation long-term. It was only when I started valuing money differently and seeing possibilities for my life that I’d never imagined before that my core mindset changed. And when my mindset changed, I gradually started to change how I spent money and began to realize some of those possibilities.
If you’re ready for a mindset shift, check out my list of 8 ingrained beliefs about money that we need to let go of in order to kickstart our new outlook.
Let’s continue the conversation in the comments! Do you think small expenses matter? What spending habits have you struggled most to change?