There’s a saying in England that I've heard my Dad quote on more than one occasion; “look after the pennies and the pounds will look after themselves”. The implication is, that when it comes to building wealth, watch your spending habits by paying attention to the small expenses is the habit that will have the biggest impact on whether you reach your financial goals.
“It’s the little details that are vital. Little things make big things happen.” – John Wooden
If you’ve read some of the posts I’ve written for Retire Happy you’ll probably have picked up on the fact that I’m just a tiny bit passionate about the idea of giving your money a purpose. Unpurposed money has a habit of drifting off and becoming shoes or lattes or some other spontaneous purchase and it’s surprising how quickly those small purchases can add up to a significant amount of money.
Would you pick it up?
Sometimes those small amounts don’t seem to be worth saving but Gail Vaz-Oxlade’s Money Rule #229: Would You Pick it up? puts things in perspective by asking the question “if you came across some money lying on the sidewalk, would you pick it up?” Chances are, if it was a loonie or a toonie you would and if it was a stack of $5, $10 or $20 bills you’d definitely pick it up.
I wrote a post a few months ago about creating money by reinventing your spending habits but it’s not just our small purchases we need to pay attention to. Chances are there are a number of places in our regular monthly expenses where we’re paying more than we need to and investing a little time in reducing those expenses can lead to big rewards.
Check Your Statements
Too often when a bank statement or a bill comes in, we look at the balance or the amount we owe but we don’t necessarily look at how those charges were calculated. Whether it’s a bank statement or a cable bill there are plenty of opportunities for organizations to apply fees for late payments or using services that aren’t included in our regular service package. Those fees can really add up, especially the small ones like charges for using another bank’s ATM or for making more transactions that your monthly service fee allows. I have a client who was paying $20-$30 each month because he was using the ATM machine in his office building to withdraw cash rather than walking down the street to his bank. The nominal $1.50 transaction fee really added up over time and when he realized it was costing him over $200/year it wasn’t hard for him to change the habit. The added bonus was that he was mostly withdrawing the cash for impulse food purchases; having to walk a little further to get the money made him question whether he really needed to spend it which saved him even more! Taking a closer look at your statements and making note of any additional fees that you were charged is worth the time, you may be surprised how much a change of habit or a change of package could save you.
Opt Out of Protection You Don’t Need
If you have a credit card or a line of credit you may well be paying for some form of credit protection that is intended to either pay off your balance if you die or cover your minimum payments if you get sick. Often these products are opt-out rather than opt-in, meaning that they’re automatically applied unless you check a box to opt-out of them when you complete the application form. The premiums are usually based on the amount that you owe and they’re calculated monthly; they often seem low, but $0.40/per $100 soon adds up when your balance gets high, especially if you have protection on a number of different products. If you have life insurance and a emergency fund then there’s a good chance you’re paying for protection you don’t need. If you don’t have life insurance then take a look at how the monthly payment on a small term policy compares to the amount that you’re paying in credit protection. You could save yourself some money and you’ll be better protected in the event that something happens to you.
Related article: Are you protected from financial disaster?
Call Your Service Provider and Negotiate
Customer retention is important to service providers and their habit of attracting new customers with incentives and deals on services gives existing customers plenty of room to negotiate. If you’re willing to spend some time on the phone with customer service there’s a good chance that you can reduce your monthly cable, wireless or internet costs or get more benefits for the same monthly fee, especially if you’re open to leaving your current provider and taking your business to a competitor. Plans and deals are constantly changing so, if you’ve been with the same provider for a while, there’s a good chance that there’s a better deal available.
Watch your spending habits
It seems to me that it’s often the simple strategies around your spending habits are the most effective when it comes to cutting expenses, saving money and building wealth. A $10 saving may not sound like much but chances are, if you saw $10 on the ground, you’d stop to pick it up! Those small amounts can make a surprisingly big difference to your monthly cashflow and that difference is compounded over time. You work hard for your money and it should be working hard for you rather than your favourite retailer or service provider. If you have strategies for reducing fees or getting a better deal from a service provider or other spending habits, let me know, I’d love to hear them!