There has been a long-honored (?) concept among personal finance gurus: The money you spend on small purchases, say, a latte every day or so, could be redirected towards huge savings on a compounded basis.
You are encouraged to look at the hundreds of thousands of dollars of unspent funds over a 30 years period. These proponents have included Suze Orman, Penelope Wang of Money Magazine, and author David Bach.
On the other side of the argument is another personal finance writer, Helaine Olen. Who claims that “we weren’t spending more money on luxuries,” Olen said of the late 1990s. “We were spending less.” Using herself as an example, Olen says the cost of coffee and other small expenses pales in comparison with the rising cost of health care, education, and housing.
The above is true, but when you look at the $5 late at 20 times a month by 12 months that is $1,200; this could have growth potential. While unfortunately we can do little to control the cost of our medical insurance. Especially if you medical insurance comes from your employer. You may have two flavors HMO or PPO or maybe not even that many flavors any longer. We also have limited control over education costs and just a bit more control on our housing.
Now when we look at those little slices of pleasure that we spend small amounts on regularly, they may have other benefits as well. Such as a way of making your lives more bearable for the day ahead; or the day that just past. We all need those small pleasures, otherwise why are we on this treadmill?
We can cut all unnecessary spending from our lives, but is that a life worth living? It is usually the small things in life that add that spice to most to get out of bed and live their lives to the fullest.
What I typically recommend to clients is that the prudent thing to do is control the spending that you can. Save wherever and whatever you can. As well as maximize the revenue that you bring in. That is what all successful businesses do. Why would you do any less for yourself than your employer?