Have you ever noticed that we look at most of our expenses in terms of monthly payments? We often justify these expenses by saying, “It’s just a few dollars a month.” Sometimes, we even break costs down into weeks or days. But this type of thinking can be dangerous to our finances. Looking only at monthly expenses can mask the total impact of what you’re spending. And when we view our expenses in isolation, we don’t always see our full financial picture.
Here are some things to think about when you tell yourself, “It’s just a few dollars per month.”
It all adds up
When you think of your expenses as individual costs that you pay on a monthly basis, you’re seeing only a very small part of your finances at any given time. Combine these monthly costs, however, and you’ll see how quickly they can add up and make it hard for you to save. This is especially true with subscription-type services, in which you may pay a seemingly low monthly fee for a product or service.
Netflix is just $9.99-$11.99 per month. Your news subscription may be $7. You have subscriptions for meal planning services like Blue Apron, and clothing delivery services like StitchFix. None of these subscriptions may seem costly in and of themselves, but when you add them up, they could comprise hundreds of dollars in monthly expenses and leave you with very little left over. And because they’re subscriptions, they may be automatically deducted from your checking account or credit card, so you may not even be fully aware that money is leaving or when. (See also: Are Meal Prep Subscription Boxes Worth It?)
You’re being manipulated
How did we get into the habit of thinking of expenses in the context of a month or less? Because the people who seek our money want it that way. If a company can get us thinking about costs in smaller chunks, we’re more likely to spend money. A gym could easily charge you $480 a year to join, but instead, they charge $40 a month and advertise that monthly amount because it seems like less. Your cellphone company could just ask for $1,200 upfront when you sign a two-year contract, but it’s less scary to charge you $50 a month.
Granted, most of us would prefer to pay in monthly amounts because we may not have tons of cash on hand, but most companies don’t even offer us the option to pay in bulk amounts if we want to, because they don’t even want us thinking about how much they take out of our accounts each year. (See also: How Scarcity Marketing Tricks You to Spend More)
Resist the coffee analogy
Every once in a while, someone will encourage you to donate money or buy a product, arguing that it will cost you “less than a cup of coffee” each day. The suggestion is that coffee is a fairly low and everyday expense, and it’s a compelling sales tactic. But the next time someone comes at you with this pitch, consider examining it in a different way.
First, ask yourself if you’d be willing to cut out your daily coffee in order to buy this new product or service. If not, then accept that your expenses will definitely rise. Second, recognize how much…
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