This post is 1,255 words a 6-minute read.
On Friday as I was mowing my lawn (it looks so beautiful), I was listening to one of my new favorite podcasts called 50 Fires. It is hosted by Carl Richards, a financial planner. The podcast is various discussions with people from all works of life about money. Everything from what money means to them to what enough looks like. I love the podcast because it removes the heavy focus we tend to have on the mathematical aspects of money and dives into the psychological and emotional questions about money. As you know this is the aspect of money that I prefer to talk about.
Anyway
On the latest episode, he had Professor Hal Hersfield, A Professor of Marketing, Behavioral Decision Making, and Psychology at UCLA’s Anderson School of Management. This guy is one of the world’s leading experts on decision-making. I would implore everyone to check out that episode it has so many gems in it.
The biggest thing that I took away from the conversation was how easy it is for us to make exceptions out of individual decisions. In doing so, we miss out on how those simple seemingly one-off decisions can quickly add up over time. There is an old African proverb that says, “Droplets of water make a great ocean.”
I personally love the way Proverbs expresses the same notion
Catch us the foxes,
The little foxes that spoil the vines,
For our vines have tender grapes.
That gave me the idea to run an analysis on my spending as the “money guy”. I wanted to see how many times I spent money on small purchases that were easy to ignore in March. I also wanted to know how much it cost me.
I chose a spending range of $0-$35 because this amount of money is easy for most of us to spend without thinking too much about it. Especially when these are all single one-off expenses that we make throughout the day to meet specific needs at specific moments in time. In other words, they are easily justifiable and exceptions can be made for these expenses.
As someone who uses multiple accounts, this process could have been more complicated and taken more time. Thankfully I use Monarch Money which aggregates all my accounts into one place for me to easily manage. I did a breakdown on Monarch Money a while ago. Check it out.
Before I reveal the results of my analysis, I want everyone to either reply to this email or put in the comments their best guess of how many of these $0-$35 purchases I made and how much the total of these purchases was.
I used Monarch to get all the transactions
Unfortunately, there were a few transactions that Monarch did not categorize as spending because they were things like transfers to friends or family. I took the information into Excel to complete the calculations.
I could not believe my eyes. How could all these purchases add up to so much money? The spending as you can see ranged from $4 for parking to $35 for a quick meal. If we assume that I spend about that much every month, that is close to $7000 that I am spending every year without much thought. Or that I am spending while coming up with justifications for why I can spend that amount.
Each one of those transactions by themselves is not that big of a deal, but when added up they become a much larger item. This is why we can look at our finances and feel overwhelmed because it feels like we are not doing anything major yet life feels tight.
These are the small foxes.
The droplets of water.
It’s the $20 for lunch yesterday and then $30 for dinner cause we're too tired to make the food in the fridge. Then $15 for a snack on Wednesday combined with a stop on the way home at Target for deodorant turns into $35. Each one of these on its own isn't a big deal but combined that's a quick $100 that left your account in a blink.
Hal mentioned the best solution to our inability to make these connections that can end up costing us so much. He said the best thing we can do for ourselves is to MAKE THE DECISION ONCE. This means that rather than letting each one of these decisions at the moment, decide ahead of time what you want to spend your money on and where you want your money to go.
It means automating your money, so it goes where you want it to go.
It is deciding to not take your credit card with you when you go for a walk in your office because you always pass that cafe that has all the snacks you like.
It is removing your credit card from Amazon and inconveniencing yourself to a degree, so you are forced to go through the steps of entering it every time you need something.
It is saving and investing automatically so it does not matter if you spend a bit more here and there because the core thing is taken care of.
It is deciding to review your spending regularly to get an idea of where your money is going.
None of these things are a silver bullet, I mean I am the “money guy” and even I have these purchases. The goal is not to have none of these purchases, it is to ensure that these purchases do not derail us. As I love to say,
Money is like water; it finds the path of least resistance to escape my pocket.
I want you to run this analysis on your spending. I believe you will gain amazing insight into your finances. If you are open to it, share your results in the comments or email me. Just share the number of transactions you have and the total amount. I want everyone to realize they are not alone in this. No matter how good you are with money, we all have these phantom costs that creep up on us. The best thing we can do is account for them by leaving room in our spending.
Thanks for reading.
Generosity > greed
God bless you.
✌🏾
April Financial Challenge Week 1 Results
If you missed last week’s post, we began a Challenge in honor of Financial Literacy Month.
These are my results for Week 1
Here are some of the conversations that I had:
Travel with Charles & Jazmine - April 2nd
Wedding expenses - April 2nd
Talking about money in prep for UIU event - April 2nd
What to eat for lunch with coworkers - April 3rd
Guy at my ref job talking about how I set up my finances - April 3rd
Joke with coworkers about looking like the owl from the Tootsie Roll commercial
led to me looking up the toy - April 4th
Plantain Chips for my sister’s husband - April 5th
It is very interesting how things are shaping out. I look forward to the next one