Monday, November 23, 2009

Micro Transactions

When I started getting more serious about saving a few years ago, I had trouble thinking about getting started. It seemed like the big numbers I wanted to try to save were just too big. Then I started to look at it from a different perspective. When you "chunk" away at saving by breaking it into smaller pieces, it decreases the pain from saving. For example, if you are trying to put $2,000 into your Roth IRA, it really sucks to write that entire check for a lot of people. An easier route may be to set aside (with automatic deductions) $80 per paycheck.

Another tactic I used was looking at so called micro transactions. These are those small purchases that tend to add up quickly, and really hurt your savings potential.

Let's take a look at a few easy ways to spend a lot of money without really thinking about it.
 You have work early this morning, but you have a second after your shower to load up your iPod with some new tunes. You grab that new single that you can't get out of your head, and play it as you finish getting ready. You realize you are not going to have enough time to make coffee. It's early, you had a late night, and you want some coffee for work. You decide to stop at Starbucks on your way, and grab a large specialty drink for $4. It's only $4 + tip, and you're making money today at work, so why not treat yourself? After that quick stop, you grab gas at the station next door, even though the station charges you extra for using your card. After a twelve gallon fill up, you notice they charge an extra ten cents per gallon when you use your card. Oh well, it was very convenient, and you needed gas to get to work.

The morning goes well, but you forgot your lunch as you rushed out the door, so you go out for lunch and spend a few dollars more than you really meant to. Again, you remind yourself that you are working today, so it's OK to spend a few extra bucks. It's food, and you're hungry, so you grab a $7 value meal with chips and a drink. Back at work, the afternoon is dragging after your lunch, so you decide to grab an energy drink. Because they are on sale price when you buy two, you grab an extra because you know you will need it for Wednesday. Finally work is done, and you head home. Once you get home you order pizza because it was a long day, and you don't feel like eating your lunch you forgot to take with you this morning. You click on your cable and call it a night!


By the end of this story, I think it's very apparent there are some places that would be easy to adjust to that would save you lots of money.

1.29 (music) +5 (coffee drink  w/tip) +1.20 (gas surcharge) +7 (lunch) +5 (energy drinks) + 25 (pizza w/tip) = $45.49

Let's half that amount, and use that for some quick math. ~$22 per day/4 days a week.

So four days a week, you spend quite a bit more than you really mean to on stuff you probably don't really need. While spending money on stuff we don't really need is part of why America is such a great nation to live in, it does not help your savings goals.

$88/week X 50 weeks (let's say you take a few extra days to save in there) will leave you with $4400 missing from your savings account, and nothing to really show for it.

I used to make many of these choices quite often, and I still do...but I am definitely more aware when I do! It's even easier to avoid spending on extra things that don't meet your savings goals when you set your account to automatically set money aside in a different account.

Remember that $80/paycheck I mentioned at the beginning? Yea, we just doubled that, and if you give it a shot you may not even miss it after a few weeks.

1 comment:

  1. This is so smart! It's hard to miss it when you don't even notice the money disappearing ;-)