Last week we took a look at a few of the more common hidden budget busters. What we discovered is that seemingly small purchases can have a large affect on our finances! It’s a very good thing for you to evaluate your spending to see what your budget busters are, and to try and get a hold of them. In fact, we saw how a modest eating out habit can run you almost $150,000 in 20 years!
Even smaller things such as paying for unnecessary channels with your cable TV package, buying coffee instead of brewing it at home, and even buying new books and DVDs instead of used, can have a large enough impact on your finances, that it pays to look at them!
However, we ultimately will reach a point where the savings from evaluating certain expenses are so small, that is becomes counterproductive to do so. Imagine if someone desires to get into shape and they spend an hour each day working the muscles in their fingers! Now, if they are a champion thumb wrestler or a classical guitarist, this type of detailed workout may prove to be quite useful; however, for the rest of us, it would pretty much be a waste of time.
The same holds true in personal finance. It can be very overwhelming to concentrate on every minute area of spending. If you are at the beginning stages of your financial journey, then you need to focus on reducing large expenses first. Then after you have taken care of those, focus on the budget busters that we talked about in the previous article.
Hopefully, you will come to a point where all of the major, moderate, and small budget items have already been address and set in order. Then at that point, you must make a decision about the finer points of your finances.
Before you begin to add water to your near-empty bottles of condiments, consider if that practice is worth the time, effort, and weakened taste. The same holds true for watering down your liquid soap (or dish detergent), and counting how many squares of toilet tissue you use per trip to the bathroom!
So, how do we know if we are going too far?
One strategy is to assign yourself an hourly rate – if you are employed, you can use that as a good starting point – this is in essence, how valuable you consider your time to be. Then if the money you save from whatever activity you are trying to evaluate is greater than what it would have cost you to hire yourself, then it’s ok to do.
For example, if you are someone who likes to add water to your ketchup bottle when it’s almost empty – in order to get every last drop – first consider how long it takes you to do this. Let’s assume it takes 30 seconds each time you do this, and you will do it once per month. If you set your hourly rate at $50 (I really value my leisure time), then it will cost $5 of your time to add water to your ketchup bottles for an entire year. Doesn’t sound like much, right? However, do you really think you’re saving $5 worth of ketchup by add water to the near-empty bottles? Of course not!
The better thing to do in this case – since you can actually buy a few bottles of ketchup with that $5 – is to buy an extra bottle and stop wasting your time! I’ll leave you to perform this analysis on your squares of toilet tissue!
You also have to consider any negative effect from these actions. One of my pet peeves is for someone to completely water down their hand soap, in an attempt to save $0.50! You have to use twice as much soap as before, and it is so watery that it just runs off of your hands! Now, I’m sure that you can find a balance, but unfortunately, my friends have not!
I’m going to really need your help on these questions in the comments…
- What tiny things do you attack in your budget?
- What things do you think are too inconsequential to pay attention to?
- How do you differentiate between the two?
- How many times will you perform one of these tasks, not in an effort to save money, but because you feel guilty about wasting even a drop?