The Pitfalls of Micro-Spending
We are all guilty of it. You go to Target for that one pack of batteries. Next thing you know, you’re at self-checkout, the total incrementally increasing as you scan each item and place it in the bag. Before you know it, you’ve spent $30. Some days it is $15. Other days it is $50. Over the course of a month those trips to Target can really add up.
I once had a client who would go out to eat or buy a Starbucks coffee every day. I asked how much they estimated they spent daily on those items. It was around $15. To keep the math simple: 52 weeks in a year x 5 work days in a week x $15 =$3,900. My client was surprised to discover they were spending around $330 per month or about $4,000 per year on these small expenses.
In many instances, micro-expenses are often overlooked or not thought about when creating a budget. However, it is these small items that make a big impact on your budget. Most budgets I see don’t take into consideration miscellaneous monthly expenses. Including a buffer in your budget for micro-expenses will help.
The best place to start taking control of micro-expenses is by reviewing your monthly bank statements. You may not even realize how much you are spending on multiple transactions of less than $5. Another tip is to set a fixed budget for the micro-expenses. Cash is still king. Withdraw a fixed amount of cash for the week or month to be spent on certain items. Once you run out of the cash, you stop spending. If you can’t live without your Diet Coke, that is cool. Maybe it makes more sense to buy it in bulk instead of picking one up every day at the convenient store.
We could replace Starbucks or Diet Coke with new clothes for your growing child, school supplies for that class project, or cough drops for your ailing spouse and the same principles still apply. It is amazing how $5 spent here and there impacts your overall financial well-being. Living is expensive. Being mindful and aware of where your money is going will help you make those day-to-day financial decisions.
We all know the big expenses we have to pay every month like the rent or mortgage payment, insurance, car payment, etc. Make it a priority to understand the micro-expenses in your life as well. Life can change in big ways in a flash. If and when that occurs, you or someone you know may find it difficult, if not impossible, to keep up with the expenses of everyday life.