44% of Americans think small purchases hurt their finances. You’re right?


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Should you sweat the little stuff?

Important points

  • New data shows almost half of Americans are worried about small expenses.
  • It’s good to be careful about what you buy, but small purchases don’t necessarily ruin your finances.
  • Prioritize the small purchases that are important to you and try to limit those that aren’t.

You’ll often hear that if you gave up your daily latte at your local coffee shop, you’d save enough money to retire a millionaire. Well, that’s unlikely to be true.

Saving $3 or $4 a day could definitely have a big impact on your finances, but the reality is you can’t retire a millionaire. Rather, you need to save significant sums of money on a regular basis and then grow that money by investing it.

But while a single indulgence like a daily latte won’t hurt your finances and prevent you from reaching your goals, a series of small purchases could have a bigger impact. And that’s something that a lot of people recognize.

According to Northwestern Mutual’s 2022 Planning and Progress Study, 44% of Americans believe that small purchases (like a daily cup of coffee) could impact their long-term financial security. But does that mean it’s time to abolish all indulgences? Not necessarily.

It’s about priorities and balance

When you’re struggling to maximize your IRA or increase your 401(k) savings rate, it’s easy to point the finger at small purchases that no doubt add up over time. But remember that life can’t just be about saving for future goals. It’s both sensible and important to spend some of your money on things that make you happy in the short-term. And if one of those things is a modest daily coffee purchase, so be it.

But let’s say you also spend $9 a day on a lunchtime sandwich that you could make at home for less than $1 and $30 on weekly takeout meals that you could pay half that would cost if you cooked for yourself. In that case, it might be worth considering those expenses. Similarly, if you’ve spent more on amenities like ride-sharing despite having good public transport where you live, it might be time to reconsider some of those habits—not all, but some.

In fact, it’s a good bet to think about the small purchases that combine to eat up a majority of your income and prioritize them. If you’re not happy with the progress you’re making toward greater goals, whether it’s building an emergency fund, saving money for a down payment on a house, or amassing a nice nest egg for retirement, then do yourself a favor and start cutting out some of the purchases that mean less to you.

Going back to our example, your daily coffee might be a source of joy and energy, while you might decide to skip your store-bought lunch. If coffee trumps lunch in your book, keep buying those lattes and making your own sandwiches.

If the convenience of getting home quickly on a late or rainy night improves your quality of life, keep paying for ridesharing — even if it means waiting six more months to buy a home. But then consider reducing takeout to avoid having to delay that goal by a year.

Make the decisions that are right for you

Small purchases will not necessarily doom you to lifelong financial failure. Many people retire with ample savings after decades of spending money at their local coffee shop every day.

But if you’re not happy with the progress you’re making towards your goals, cut out small purchases that mean less to you and keep those that mean more to you. This could help you maintain a great quality of life without worrying about falling short later.

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