Whether you’re looking for ways to cut monthly expenses or you’re spending your budget every month, you may need to investigate where you’re overspending. It’s important to become more aware of your small expenses and how they can add up to larger amounts than you expect. These small purchases can accumulate quickly.
Small Expenses in Your Budget
Small expenses can come from different things on a daily basis. Maybe you love that hot cup of personalized coffee or the pastry on your way to work. You might spend a few dollars each day renting a DVD from Redbox or a similar site. It might be that afternoon soda or a new book every few days for your e-reader. Some people might make multiple in-app purchases for a game for themselves or their child, and feel like they have to eat lunch out every day.
These are the expenses you might not include in your budget because the amounts don’t seem large. It may also be something you don’t include in your budget because you don’t want to spend money on it anymore, like eating out at restaurants. You might tell yourself that you’ll stop and will go grocery shopping, but then you still end up eating out and wasting more money.
The Real Cost of Small Purchases
It’s important to know how much you’re actually spending on these specific categories of small expenses. This can be done in several ways.
One way is to write down all your expenses based on specific categories for a week or a full month. Writing it out by hand or recording it on your phone will make you more aware of what you’re spending and why.
Another way to monitor yourself is through a budgeting app. Mint.com and Acorns.com are two mobile apps for tracking expenses. Mint will send you a report on your expenses by category. Acorns uses the investment reward of spare change as a means to change behaviors.
If you’re using cash, you can either write it down manually or keep receipts to review at the end of the week. If you’re using a credit card, you can check your expenses online each day.
How Much is Too Much?
How much overspending is considered a large amount depends on each individual specifically. Once you realize you’re spending about $70 a month on coffee – about the cost of one cup a day – that adds up to $840 a year, you can determine whether this seems reasonable for you to spend on coffee each year. However, if you’re nearly scraping by at the end of the month, that $70 a month could make a significant difference in hitting goals or paying bills.
Similarly, if you’re eating out at restaurants every day for lunch at work, you might feel justified in your spending. However, you might be surprised by how much that adds up. If you’re really frugal and only get a value meal for lunch every day, you’d spend around $6 daily, which equals about $30 weekly, totaling $1,560 annually or $130 monthly. However, if you go to a nicer restaurant and spend about $10 daily, that becomes around $216 monthly or $2,600 annually.
When looking at the overall numbers, you might see some amounts that seem like large overspending to you. But what’s truly excessive depends on your current financial situation. If you’re struggling to make ends meet, even $6 daily can make a big difference in your budget. If you’re debt-free and saving for retirement, you may be able to afford more each day.
The key
It is important to understand your current financial situation and how small purchases can impact it.
Matching Spending with Priorities
Finally, you should ensure that your spending aligns with your priorities. When you realize how much you spend each year, you can determine whether you really want to spend that large amount on something or if there is another place where you would prefer to allocate your money.
This is one of the reasons why using budgeting software or apps is very helpful. It becomes easy to track your spending and see the bigger picture. Seeing the total amount you spend each year can really motivate you to make changes.
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Source: https://www.thebalancemoney.com/small-expenses-can-add-up-to-overspending-issues-3998366
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