The Latte Factor: Does it Work?
Aug 20th, 2009 by Nut
What’s better: saving money in small, incremental ways or in big, sweeping changes? That’s the big difference between Trent’s The Simple Dollar and Ramit’s I Will Teach You To Be Rich.
These are two of the top personal-finance sites on the Net, and since I’m such a Ramit fan, I usually side with him. Yes, small changes can make a difference, but they aren’t as effective as the big things like making more money instead of not drinking coffee every morning to save $2/day.
I bring this up because Patrick has a post about going beyond the latte factor over on Cash Money Life that piqued my interest.
It’s all about small changes that can save quite a bit of money. As I ran down his list, I realized I’ve been doing most of these things for a while so I decided to tally them up and see how much I’ve actually saved.
Use a high-yield savings account: According to my last ING statement, I’ve earned $1,544.79 in interest since I opened my account in 2006. This isn’t money I’ve saved, mind you, this is free money I’ve made from just keeping my money there. And this is with the interest plummeting over the past year.- Transfer your credit card balance to a 0% interest rate: I don’t pay interest on my card (although a snafu last month saw me pay my very first bit of interest on my balance…ever) so this doesn’t apply to me. I pay my balance in full every month. Oh and guess what, last month we got $250 from our points! Since 2006, I’ve earned around $1,100 dollars.
- Pay lower expense ratios: I used to have all my Roth IRA holdings with Scottrade. A few years ago I wizened up and decided that, since most of my holdings were index funds, I should switch over to the index-fund kings: Vanguard. That brought my expense ratios from 0.5% down to around 0.15%. That’s saved me roughly $200 so far but will start to really ramp up as my Roth gets larger and more time passes. We’re talking thousands of dollars…eventually.
- Improve your driving habits: I don’t drive to work, but I did enroll in my transportation program at work, which takes out my monthly all-you-can-ride pass. Before taxes. This has saved me around $960 over the past four years.
- Get a programmable thermostat: I rent and I don’t have central air, so this one doesn’t apply either. I try to turn the air off while we’re gone and close the windows, but this one I can’t quantify. Although seeing this one listed so many times on different sites means I know what to do once we finally buy a place.
Total savings: $3,804.70.
Guess what? The little things do indeed add up! Throw in being boring with your lunches and we could add another $2,000 to the pot.
Anyway, try to tally up your own “small things” and see how much money you’re saving (or could save).
Image by dailyfood
It’s great to see how your numbers work out for you. There are a lot more examples that can be added to my short list – including HSAs for medical needs, using a discount brokerage for stock trades (if that’s your thing), using the library instead of buying books at $20 a pop, brown bagging, etc.
I don’t advocate living a boring life and cutting all expenses to the minimum – just making small changes that can have a big impact.
[...] It may not sound like much, but like I said yesterday: the little things add up. [...]
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