44% of Americans think small purchases hurt their finances. Are they right?


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Should you sweat the small stuff?

Key points

  • New data reveals that nearly half of Americans are concerned about minor expenses.
  • It’s good to be aware of what you’re buying, but small purchases won’t necessarily ruin your finances.
  • Prioritize small purchases that matter to you and try to cut back on those that don’t.

You’ll often hear that if you were to give up your daily latte at your local cafe, you’d save enough money to become a retired millionaire. Well, that’s unlikely to be true.

Saving $3 or $4 a day could certainly have a big impact on your finances, but the reality is that you can’t make your way to a millionaire retirement. On the contrary, you must regularly save large sums of money and then make this money grow by investing it.

But while a single indulgence like a daily latte might not hurt your finances or keep you from reaching your goals, a series small purchases could have more impact. And that’s something a lot of people recognize.

According to Northwestern Mutual 2022 Planning and Progress Study, 44% of Americans think small purchases (like a daily cup of coffee) could impact their long-term financial security. But does that mean it’s time to cut out all indulgences? Not necessarily.

It’s all about priorities and balance

If you’re struggling to maximize your IRA or increase your 401(k) savings rate, it’s easy to point the finger at the small purchases that undoubtedly add up over time. But remember that life can’t just be about saving for future goals. It’s both sensible and important to spend some of your money on things that make you happy in the short term. And if one of those things is a modest daily purchase of coffee, so be it.

But let’s say you also tend to spend $9 a day on a lunchtime sandwich that you could make at home for less than $1, and $30 for weekly takeout that would cost you half of what you cook yourself. -same. In this case, it may be useful to think about these expenses. Likewise, if you’ve been spending more on conveniences like carpooling when there’s good public transport where you live, it might be time to reconsider some of those habits – not all of them, but some. .

In fact, a good bet is to think about the small purchases that collectively eat up a large chunk of your income and prioritize them. If you’re unhappy with the progress you’re making toward bigger goals, whether it’s building an emergency fund, setting aside money for a down payment on a home, or raising a nice retirement nest egg, so do yourself a favor and start cutting out some of those purchases that matter less to you.

Going back to our example, your daily coffee can be a source of joy and energy, while you can decide to skip your store-bought lunch. If coffee trumps lunch in your book, keep buying those lattes and making your own sandwiches.

Likewise, if the convenience of being able to get home quickly on a late or rainy night improves your quality of life, keep paying for carpooling, even if it means having to wait six more months to buy a house. But then consider reducing takeout so you don’t have to delay that goal for a year.

Make the choices that are right for you

Small purchases won’t necessarily doom you to a life of financial failure. Many people retire with plenty of savings after spending decades at their local coffee shop on a daily basis.

But if you’re unhappy with the progress you’re making toward your goals, cut out the small purchases that mean less to you and keep the ones that matter the most. It could help you maintain a great quality of life without having to worry about running out later.

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