“Wealth is largely the result of habit.” ~John Jacob Astor
If I could tell my younger self one piece of advice that would help create a life of financial independence it’s this: ‘Small expenses make a huge impact on your saving and spending habits.’
Saving money consistently starts with self-discipline in your spending. When we routinely spend money today – whether it’s $5 for a coffee, $15 for lunch or $20 or more for dinner and drinks with family and friends – we are essentially robbing ourselves of our future. I’m not saying you should cut those expenses out altogether, I just believe that you need to be more conscientious of what you are spending on and how much those things add up to on a weekly or month basis. Start saving on small things, and you will end up with big savings!
If you want to start tracking your expenses, check out my post. It’s something that can be a huge eye-opener to most people on how much they are really spending on all those luxuries that seem so insignificant at the time.
For example, cut out the daily coffee habit and save $5 a day – in 20 years you would save about $80,000 if invested at 7% (average market return). The true value of compounding is awesome. Reduce your grocery spending and restaurant spending by $100 a week and you will have about $150,000 in 20 years.
People waste so much money on random stuff they don’t even realize the true financial impact. I’ve seen folks just throw down their credit card and not even look at the bill; or they sign up for Amazon Prime and keep buying things that seem really cool at the time because… well, why not?
“Beware of little expenses. A small leak will sink a great ship.” Benjamin Franklin
There are many little things that impact our financials on a daily basis – small changes in your Utilities, Groceries, Entertainment, Travel, Transportation. It could be $5 here, a few dollars this, and a few more on that… it really all adds up. Think of those times you get your credit card statement at the end of the month, and you’re like “WTF? Why is it so much?” Then it becomes out of sight, out of mind.
Making small changes will create a habit. Your habit will soon become a routine that operates on autopilot. Thereby when a decision presents itself to you, the choice is easy – you choose to save instead of spend because that is your habit. It becomes harder to spend your hard earned money and easier to save money. Make one small change today and your future self with thank you for it!