Life By A Thousand Cuts
How can you save money without killing yourself in the process?
When it comes to personal spending, the little stuff both does and doesn’t matter.
Using the last bit of shampoo, shopping for the lowest-priced gas for the car, not getting a latte from Starbucks…. These things add up, but it takes a lot of them over a long period of time to add up to anything worth worrying about.
Let’s compare not getting a soft drink with lunch everyday ($1.85 plus tax for 5 days per week for 50 weeks = ~$500) and what you can use that savings for (a fancy dinner at a fabulous restaurant such as Fiat Maison). This works in theory . . . maybe.
Coke is a powerful drug.
When everyone else is enjoying the real thing, it is hard to chase that onion burger with just ice water. The theory is we save up little-by-little and spend the surplus once. Without a tedious accounting, it is hard to know if this big expense is the spending from lunchtime savings (over what time period?) while that big expense is the spending from drinking free [black water that passes for coffee] at the office rather than hitting up Starbucks. The theory isn’t looking so good.
In practice saving the money might fare better than theory expects since humans tend to be habitual creatures. The problem isn’t so much getting us to not get the large soft drink every day. That’s a habit we can probably inculcate within ourselves like repeating a mantra (e.g., “I create my own path and walk it with joy.”; “Bless us, O Lord . . . .”; “The leader is good, the leader is great.”).1
The problem is pulling the trigger on the spending—or perhaps the regret once we do. We can imagine hating ourselves in the morning, “I sacrificed all year for that, but was the one meal worth it?”
Seems it is perhaps easier to save than to spend once we put our minds to it. Before you label that a success, understand that the purpose of life is living. Saving is for deferred spending. Don’t confuse means with ends.
Back to the first concern, this small sacrifice everyday adds up in both directions—benefit (eventually) and cost (perpetually). This method has us working very diligently, all the time, and for relatively little in return. To get massive savings we will need to do lots of these little, constant sacrifices.
Let’s summarize where we are so far.
If you are going to try to do the tiny savings 1,000 times, you will have to suffer through doing it until you build the habit (if you ever do), and then what? Where is the benefit side of the tradeoff? How much faster can you actually retire? What do you really have to show for it?
Permanent changes to expenses matter, but the smaller they are the more difficult they are to consistently achieve. And it takes a LOT to get more than just a little ultimate savings.
How else can you get that savings?
Ramit Sethi2 has a lot of great advice along these lines. He will tell you to look for big wins like squeezing if not cutting entirely the cable company, put your spending on a sustainable autopilot, invest in index funds, and avoid the undesirable, doomed strategies:
Notice what they’re telling us: THAT BAD STRATEGY DIDN’T WORK…so DOUBLE DOWN. They never consider that maybe it’s a bad strategy in the first place! Save $3 on lattes! What, you’re not a millionaire? Cut back on water and make your own soap, you poor bastard.
Focus on the big changes for savings and don’t sweat enjoying the small stuff provided you have good, broad parameters around all the small stuff added together. That is my advice so as to live and enjoy life while staying financially stable.
I know I can afford a drink with lunch everyday. That doesn’t mean I want that extra expense, but it does free me from thinking that it is a point to stress over. I know I cannot afford to eat lunch everyday at the places Google labels “$$$”, and I know if I want to get to a place where I can, I need to focus on areas of big savings while looking for new/higher income opportunities.
Here are some other thoughts on finding big-impact savings.
Always try to be treated like a new customer. Loyalty almost never gets rewarded with a lower price unless asked for if not demanded.
Legacy media like newspapers have always depended on this—I saw it from the inside. They churned through new subscribers offering crazy teaser rates and great discounts for resubscribing once the trial period ends all the while gouging consistent, long-term subscribers. The only people paying the top rate-card rates were the people who had been subscribers since the time it was printed on papyrus.
The same is true in all the media platform and publishing models. The cable company, Internet provider, mobile phone company, satellite radio/streaming music service, online national newspaper/magazine, etc. will not give you a discount unless you demand it usually with at least a minimal threat of exit (cancelation of service) being required. Despite these all being industries with consistently declining cost curves, they do not make a profit by passively passing the savings along to you.
Similarly large-expense categories like property insurance, lawn care and pest treatment among other household services, gym and country club memberships, car leases, etc. price discriminate by rewarding new customers cross subsidized from existing/continuing customers.
Make them treat you like the new hotness they desperately are seeking rather than taking you for granted. Ask for discounts making them make the first move/offer. Be friendly, firm, and frank (the “three Fs” as we’ll forever now call it).
Obviously within these and in the broader category not all are equally virtuous. For example, “. . . Satan is good, Satan is our pal . . .”
Admittedly he has a bit of life-coach cultishness to him, but he makes great points and offers much strong advice.