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The Little Things and the Big Things: Which are More Important?

This article was written by in Personal Finance. 12 comments.


It’s easy to adopt one concept and use that concept to define your world. You commonly see this in religion, but I’m referring to personal finance concepts, as you might expect from Consumerism Commentary. One popular financial guru talks about The ECRD Factor. His followers — a guru can’t be a guru without a throng of fans who believe the guru’s words are gospel and question nothing — spread the word and this concept becomes well-known even if the name of the guru is not as widespread.

Outside of Consumerism Commentary, in what is usually referred to as “real life,” when the conversation turns to money for whatever reason, it is not uncommon for someone to share their advice. And often, someone will explain to me how wise and financially savvy they are because they’ve given up their daily morning coffee or doughnut or other expensive treat.

I will admit that saving four dollars a day is not entirely a bad idea. If this savings is repeated five days a week for fifty weeks a year, you’ve “earned” yourself $1,000 a year. Taking that concept to the next step, you could invest that $1,000 each year and grow your nest egg over time, doing much more for yourself your quality of life than a daily doughnut ever would. But the choice to forgo a daily treat does not exist in a vacuum.

In the cases of some of the people who have discovered their alleged personal financial freedom through their daily latte resistance, they’ve made this sacrifice only to lose ground on the larger, important financial decisions. They’ve taken daily baby steps forward but every so often, leap so far back that they’re worse off than they were when they started.

It’s very noble to have achieved the mindset that allows you to change your habit and break free from spending a few dollars each day. But if your real problem is buying clothes you can’t afford, or a car you can’t afford, or a house you can’t afford, any progress you’ve made by eschewing gourmet coffee or fattening doughy products can be rendered null and void. And the people I’ve spoken to who have been eager to flaunt their smart decision of going without a daily latte often fall victim to these other harmful behaviors.

If you pay $40,000 for a car when you only need one worth $16,000, you just undone twenty-four year’s worth of missing daily lattes. And that’s only if you pay cash. If you get a loan, the interest will harm you even further. If you pay $400,000 for a house when you should have spent for something smaller or in a different location $200,000, you can’t even live long enough to make that up in daily lattes. If you don’t manage your credit wisely, you could qualify only for a high-rate mortgage, costing you thousands of extra dollars — a thousand lattes or more — throughout the life of the loan.

The little things, like the daily small savings that accumulate over time, are helpful to your financial condition, but making wise decisions for the larger purchases can have a much larger bearing on your personal wealth. If an expensive coffee-related drink keeps you happy and sane, I say enjoy it, but make better decisions about the big things like cars, houses, the size of your family, and the location where you decide to live. The “mistake” of enjoying a daily treat doesn’t compare with the real financial decisions you make.

Keep in mind that I have no problem with people buying fancy cars or big houses, particularly if they can afford it. But someone opting to trim their expenses by skipping coffee is someone who wants to improve their financial condition, so it would be fair to assume that they should want to do so in the most effective manners. Everyone is free to set their own priorities, but life works better when those priorities actually match the goals.

Published or updated September 14, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 12 comments… read them below or add one }

avatar Save Money Hound

The daily latte resistance might be the litmus test of one’s ability to avoid splurging on bigger items! I guess it all goes back to what you value and how willing you are to outlay that money. Some people can’t do without their daily latte. Others just have to splurge on an expensive car even if they don’t really need it just because.

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avatar My Journey

Couldn’t agree with you more! I have a buddy who bitches and moans about cig prices and that he is quitting because he needs to save money (lets ignore the health implications) YET and I am not joking he is in the midst of signing a lease for a new C300 Mercedes! lol

I am sure everyone has a similar story

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avatar KC

I’m convinced its the big things. I choose to drive my 9 year old car cause its paid for (and its still in good shape). Not only do I save from having a car payment or paying cash for a new car, but I save on insurance (the older the car the cheaper) and I save on taxes (we have a property tax based on the value of your car). I really don’t pay that much on maintenance. I’ve had one $200 oil leak in the 9 years I’ve owned the car. Everything else was normal maintenance I’d have to do on any car.

I also keep my housing costs in check. I’ve had two houses – one very small that we stayed in way past the time we could afford something bigger. Then when we did buy the bigger house we made sure we had ample down payment and could keep our costs well below the 30% recommended. By saving thousands on these bigger things I’m able to splurge on the smaller things. I have a frozen yogurt weakness that I feed anytime I want – without guilt.

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avatar Kelly

The problem is with taking an either/or approach in my opinion.
Maybe those of us with high incomes, or no dependents can choose one or the other, but for most “typical” (whatever that means!) people you have to do both or you can’t even stay afloat.

Mainly because most of us have debt of one form or another.

In our case we made the right decision to buy a bigger house for our family, but the payments while within that 30% number are still big. We cut back on little things to help pay for the house which is important to us.

Or as my Dad (a CPA) says: “You can have it all, just not at the same time.” :)

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avatar Luke Landes ♦127,550 (Platinum)

I certainly agree that it’s a matter of priority. And it’s great that we have the luxury of choosing which wants to pursue after our needs are met. Not everyone has that luxury, though.

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avatar Jess

@Save Money Hound,
Actually, science would indicate that the daily latte resistance is the opposite of a litmus test. In fact, exercising your will power by not indulging in lattes may make you less able to resist the large purchases later. Here’s the study: http://www.psychologytoday.com/blog/dont-delay/200902/self-regulation-failure-part-2-willpower-is-muscle

There’s only so much will power to go around!

But I would tend to agree with Kelly – it’s not either/or, it’s finding a balance between the two. There are little places we can easily save money, but the big ones matter as well.

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avatar David@DINKS Finance

Big purchases and spending can obviously have a much bigger impact on your own personal bottom line. People who used to get Starbucks every day and then cut it down to only a couple days a week have the right idea, but if they only concentrate on these small purchases and blow off saving money on the big stuff, they need a new strategy. Living in a smaller/cheaper apartment that saves you an extra $200/month will probably save you more than your coffee cutout. But you could do both and save even more! Nothing wrong with that, either.

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avatar Neal@wealthpilgrim

First, this is very well written, thought-provoking piece.

The words that jumps out at me are “ACCOUNTABILITY PARTNER”.

It’s very difficult to find balance by ourselves. I believe that for some, making good (small) decisions is like working out. We get stronger and learn to make better larger decisions. Yet, I can’t ignore the truth in what Jess is saying – I’ve read the study and I’ve seen this kind of thing first hand.

That’s why the accountability partner is the only tool I can think of that helps me get balance. We need to run our ideas by someone and be willing to take direction.

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avatar Adam

Agree completely with your sentiments here. Nothing wrong with cutting back on expensive “treats” if you feel they are part of an overall spending problem, but it’s the overall picture that counts.

On a tangent, I’ve never understood the extreme frugality crowd, mostly because it seems like so much work to live in this frugal way. For me I’d rather have my brain working on how to improve my earning situation than figuring out how to live on less all the time. You can do both, of course, but I believe the constant focus on saving can take away from the focus on earning.

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avatar Donna Freedman

May I add another thought? It’s the value of rethinking these big-ticket items entirely. Recently my daughter and her husband needed to move to a dry climate for health reasons. Because they’re broke (one’s on disability, the other unemployed), I thought that I would give them my old car and buy a beater to use for my little bit of driving.

Then I thought, “Why do I need a car at all?” After some more thought, I decided that I really *didn’t* need one, because of my particular circumstances. (See the MSN Smart Spending post.) Now I don’t have to gas up, maintain or insure a vehicle. What other must-haves in our lives should be rethought? Do you *need* a four-bedroom house just because you have two kids? Do you *have* to be a two-car family? Will your children make out just as well with a state vs. private university (and graduate with far less debt)? Is it necessary to eat meat at every meal (or at all)? Etc. etc.

Examine the bigger-ticket items, as Flexo suggests — and you may find that not only can you cut them back, you can cut them out.

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avatar Robert

Big things are important, but they should be affordable. Little things are not important, but if one chooses to indulge, it should be affordable. I found myself being penny wise and pound foolish and it was quite an awakening for me. Good post.

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avatar Ms. Frugalicious

The problem with saving $4 a day by skipping that latte is that most people don’t put the money away, so they don’t actually end up realizing the savings over a year. Saving money is important, but it takes a long time for $4 a day to add up to much. After reading Loral Langemeier’s newest book, Put More Cash in Your Pocket (thanks to my friend for an advance copy!), I’ve been focusing on ways to earn more money each month, rather than trying to save a few bucks a day. The book tells you how to use the skills you already have to pick up side jobs and earn $500 to $1,000 more each month. I recommend it…it inspired me to ramp up my efforts to find freelance proofreading and tutoring jobs. Check out the book at liveoutloud.com/newcashbook/.

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