Why spending $5 matters

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If you’re living paycheck-to-paycheck or you’re looking to save more money, how do you better control your spending, especially when it comes to the small purchases that seem insignificant?

For an example of a small purchase, allow me to pick on coffee, the omnipresent, caffeine-laced symbol of micro-consumerism in the 21st century. When faced with your $5/month coffee purchase, some financial experts unequivocally say go for it - it’s such a small amount that it doesn’t matter. However, this doesn’t apply to if you’re living paycheck-to-paycheck or needing to save more money because you don’t have the luxury of being thoughtless with your purchases.

Others experts will use the dark art of mathematics to compel you to skip the purchase. After all, they say, saving and investing that $5/month over 10 years at 7% will grow to $860. This argument certainly applies, but it’s too logical; it assumes that numbers alone will provide enough motivation to instantly propel you to relentless frugality. It’s the equivalent of convincing you to quit cold turkey, and while that may work for some, it won’t work for most. Overall, each argument falls short because it presents an all-or-nothing recommendation to make things simple and strips you of your power to think.

Why you should think about your $5 coffee purchase?

So then what’s the best reason for putting thought behind your $5 coffee? Putting thought behind your small purchase creates a lifelong mindset shift that will allow your spending to bend and flex according to your circumstances, a mindset that will apply to purchases big and small. If you’re aggressively saving or trying to trim expenses, your mindset shift will allow you to play defense with your spending. If you’re earning more money over time, your mindset shift will prevent you from undergoing lifestyle creep. And if you’re in a great spot financially, your mindset shift will allow you to spend more freely.

Three simple questions to ask yourself

When thinking about your small purchase – or any purchase – there are few questions that instantly must come to mind, questions that will become the basis of your mindset shift.

  1. Do I need what I’m about to buy?
  2. Can I afford what I’m about to buy?
  3. Is this the best use of my money given my budget?

If the answer to any of the questions above isn’t a definite “Yes”, then it’s a definite “No” and you shouldn’t make the purchase. Simple as that. Why are these questions so powerful? Because they take the most powerful reason for spending out of the equation: your emotions. However simple doesn’t mean easy, and having your emotions pushed aside is borderline painful – seriously. The key is to start small, using your new mindset shift to evaluate one purchase. Then another. And another. Until most every purchase is automatically and intuitively evaluated through this framework. Even better, when you have a better understanding of your finances, the answers to the questions are immediate.

Financial discipline is so important because you don’t get a second chance. A bad spending decision – or a large number of them – can set you back for many more years to come. Spending is the one thing you can control immediately, and developing the correct mindset will put you on a path towards being adaptable in any financial situation.


The contents herein express my views and such views are subject to change without notice. Moneyskope has no duty or obligation to update the information contained herein. Further, Moneyskope makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.

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