Don’t Get Nickel And Dimed

by Ryan Yates

You’ve heard that by avoiding the $5 a day Latte will help you build wealth. It makes perfect sense when you run the numbers; $5 per day times 365 days per year equals $1,825 per year. If you only purchased a taste Carmel Latte on work days and assumed you have 3 weeks’ vacation the total would still be $1,225 per year.

Just like the latte, they are many other things that we do every day that destroy our wealth building potential. Running into the 7-11 to grab a $1.29 cup of coffee and a package of Hostess donuts will cost you 3 bucks. Grabbing a quick snack from the vending machine at work is an easy 2 plus dollars including the soda. Purchasing a pack of $6.00 cigarettes will definitely break the bank (I’m so glad I quit this habit).

Record Keeping

The little things are what add up bringing down your financial house of cards. The best way to stop the downward spiral of nickel and diming is to record your spending. I know I know, you don’t have the time to record every expense the moment it happens. It’s only a few dollars here and there right? Nope, those few dollars are stopping you from make your money work for you instead of you working for your money.

There are plenty of ways to track your daily spending. Some people like to write them down in a notebook. Others like to record them in an Excel spreadsheet. Everyone else loves using the vast array of financial/budgeting software available. When I was getting a handle on my spending I recorded the amounts in a notebook. I did it for 1 month, in an effort to understand how my “disposable” money was being spent.

I found that carrying the notebook was a pain my… I decided to collect the receipts instead of using the notebook at the point of purchase. I was able to keep the receipts in my pocket until the end of the day. Each night I would review and record my daily burn. I understand some people will not like this method because old Mr. Redwood was sacrificed to produce the paper on which the receipt is printed. That’s ok; you could use an electronic method. One that uses energy derived from coal. The point of the exercise is to capture your daily cash burn so you can make adjustments to save money.
The beauty of the receipt is its ability to capture data quickly and completely. If you don’t have the time to reconcile your spending daily you can collect the receipts and enter the data later.

The Review of Your Spending

Once you have some data it’s time to start reviewing it. Look for patterns, like the latte a day pattern. Your pattern might be a newspaper and a cup of coffee for the trek to work. Add up the spending on these “pattern” purchases and carry them across the whole year. We can use the paper and coffee example to illustrate the point. The coffee costs $1.29 a day and the paper is $0.75 a day. This daily spending pattern is $2.04 a day. I’m sure that you usually don’t have the 4 cents so you’ll get $0.96 in change that will probably be collected in a jar and forgotten about. The $2.04 a day times the 245 working days from the previous example shows us this little habit will cost $499.80 a year. That may not seem like much but once you record all the data for each day, you’ll notice you are spending too much on crap that isn’t doing your wallet or your body any good.

Here’s your challenge. Take one week to record all of your spending and see what your are really spending your money on. If you’ve never done this exercise you will be very surprised at the results.

Remember, the less money you spend the more money you’ll have. You can use the extra money to pay off debt, invest for retirement, or even save it for a vacation. Good luck 🙂


Austin @ May 7, 2010 at

Nice post — very informative. Indeed, its easy to save than earn.

Thanks for sharing!

Forest May 8, 2010 at

Hey Jeff, Great advice as always…. I am going to start trying the receipt thing as I fail miserably at the note book method.

Jeffrey Kosola May 10, 2010 at

@Forest, as long as you are doing something it will help. Good luck.

Odysseustoday May 8, 2010 at

I agree 100% on your post, and have advocated those very facts to my wife on many occasions. I recently heard a great podcast (one of the Quicken Personal Finance podcast) and the speaker made a very valid point that made me step back a second.

He said yes you can save $1,800 dollars a year as you show above, but you are denying yourself a life. Often if people would put the same energy into the few BIG decisions they make a year (Car purchases, home loans, auto repairs, insurance, etc) they will often have much less daily financial stress and can splurge on coffee now and then without feeling like they are unable to pay the mortgage.

Like I said I agree 100%, but that podcast just opened my eyes to a new way of looking at how the 1-2 big decisions and impact the 365 small decisions we make daily.

Jeffrey Kosola May 10, 2010 at

@Odysseustoday I write and look at finance from the broke person’s point of view. I agree that saving $1,800 can be denying yourself, but if you are in debt there needs to be a ton of denying to get out of debt. It all goes back to each person’s view of money and life. If you are in debt and want to get out, you need to make sacrifices. If you are just looking to save a few bucks over the coarse of the year, then more effect in the big stuff will pay off faster.

Financial Samurai May 8, 2010 at

Record keeping is key. It’s what I do for all my business expenses, which is critical!

Ryan @ Planting Dollars May 9, 2010 at

haha, I went through the same process… first notebook, then collecting receipts… much easier to just have a box of receipts for each month and add them up.

MFO May 9, 2010 at

Nice point. Funny you posted this because due to a current super busy couple of weeks at work, I have made many little trips to 7-11 to pick up coffee and snacks. These trips only cost me between $2-6 each time, but looking over my bank statement, they really add up. However, I view it is partially necessary – when you are working all night to get a project out, spending $4.00 on a cup of coffee is the least of your worries!

Jeffrey Kosola May 10, 2010 at

@SAM yep, without receipts for business expences you’d be in big trouble 😮

@Ryan Oh, the good old shoe box of receipts. Thanks for the reminder, I use to love that method.

@MFO I hope you were close to 7-11 otherwise you may have wasted more time than just brewing the coffee yourself. I understand your point, but I work crazy hours too. Planning ahead makes all the difference.

Christine | Money Funk May 12, 2010 at

Oh ya, don’t remind me… just opened up my paycheck to find I nickle and dimed it at the coffee cart for lunch and breakfast at a tune of $79 for 2 weeks. Ouch. Now we know where that overtime money is going. *sigh* On a good note, I did pack my lunch today. So there is no going to the coffee cart except for my Earl Grey tea topped w/ milk. 🙂

Jeffrey Kosola May 13, 2010 at

@Funk Oh snap Girrrlll, $79 in coffee and lunch!?!? Maybe you need to review my “2-liter of pop” post and the “Ramen” post. You’ll save a butt load 🙂 Good luck at getting it back under control.

Juan October 23, 2011 at

Keeping track is really good for the long run I see. Never really paid too much attention.

{ 5 trackbacks }

Previous post:

Next post: