Whether you are looking for ways to save on your monthly spending or you keep blowing your budget each month perhaps you need to investigate where you are overspending. It is important to become more aware of your small expenses and how you may be spending more money than you realize. These small purchases can add up quickly.
Small Expenses in Your Budget
Small expenses can come from many different things each day. Perhaps you love that steaming cup of custom coffee or pastry on the way to work. Maybe you spend a couple of dollars each day to rent a DVD from Redbox or another such location. It could be the afternoon pick-me-up soda or a new book every few days for your e-reader. Some people may make several in-app purchases for a game for themselves or a child and others feel they must eat lunch out each day.
These are expenses you may not include in your budget because the amounts do not appear significant. It could also be something that you do not include in your budget because you do not want to spend money on it anymore, like eating out. You may be telling yourself that you are going to stop, going grocery shopping, and then still eating out and wasting even more money.
What Little Purchases Really Cost
It is important to find out how much you are really spending on these specific small expense categories. This can be done in a few ways.
One is to write down all of your spending based on a specific category for an entire week or month. Physically writing it down or recording it on your phone will make you more aware of what you are spending and why.
Another way to monitor yourself is through a budgeting app. Mint.com and Acorns.com are two such mobile trackers. Mint will send you a report on your spending by category. Acorns use the reward of investing your spare change as a hook to change behaviors.
If you are using cash, you can either record it manually or keep the receipts to look over at the end of the week. If you are using a credit card you can review your spending online each day.
How Much Is Too Much?
How much is too much to spend is specific to each individual. Once you realize that you are spending around $70 a month on coffee—about the cost of one cup a day—and that adds up to $840 a year, you can determine if that sounds reasonable for you to spend on coffee each year. However, if you are barely getting by, that $70 a month can make a huge difference in reaching goals or paying bills.
Similarly, if you are eating out every day for lunch at work, you may feel that you are justified in your spending. However, you may be surprised at how much it is adding up. If you are really frugal and just get a value meal for lunch each day, you will spend around $6 a day, which adds up to $30 a week, and ends up being $1,560 a year or $130 a month. However, if you go out to eat a nicer restaurant and spend about $10 a day, that adds up to about $216 a month or $2,600 a year.
Looking at the overall numbers, you may see some that stand out to you as being too much money. But too much money really is dependent on your current situation. If you are struggling to make ends meet, then even $6 a day can make a big difference in your budget. If you are not in debt and saving toward retirement, you may be able to afford a bit more each day.
The key is understanding your current financial situation and how small purchases can impact that situation.
Matching Spending to Priorities
Finally, you should make sure that your spending matches your priorities. When you realize how much you are spending each year, then you can determine if you really want to spend that much money on it or if you have somewhere else where you want to spend your money.
This is one reason why budgeting software or apps are so nice to use. It is easy to track your spending and see the bigger picture. Seeing the amount you spend each year can really help motivate you to change.