Key takeaways:
- Small savings add up big in the future;
- Human brain loves joy and the chemical coming with the joy;
- Analyse your past spending on Excel; you will be surprised!
- Cut subscription-based spending items will save you a lot;
- Prepare your healthy food and beverage is nicer and cheaper than buying them.
If you buy two less take-away coffees per week, then with a 6% annual investment return rate, you will have $5,500 in your pocket in 10 years. The $5.5K can fund one or two holiday trips. Sounds nice, doesn’t it?

Well, it’s hard to achieve for most people for two reasons. First, small spending is hard to cut because you don’t feel it simply because it’s small. Although we know small things add up to big things, human behaviour psychology tells us that human brain is biochemically designed for short-term gains and is easily influenced by environment cues. In the case of saving the daily cup of coffee, intuitively we will go for the joy of having that coffee because of the aroma of coffee (our brain loves it!) and addiction to caffeine, perhaps?
Second, since human brain will go for short-term gains (so don’t blame yourself too hard!), we also fail to recognise the need of taking actions that only result in long-term benefits. So, are you still going to buy a coffee next time, now that you know how much you could save for the coming decade? I guess, you still will and you have just missed your $5,500 dollar holiday by doing so.

Spending less is hard simply because spending more is too easy. In my coaching cases, if my clients need some guidance and tips for finance, then the first thing I ask them to do is to download their credit card and bank account statements and load them onto Excel. Many banks nowadays also conveniently ‘label’ each of your transactions into some simple categories such as foods, grocery, travel … etc. After compiling your transaction history for the past 12 months, then you can see your spending behaviour.
The first thing to focus is on those on-going spending items such as your mobile phone bill, utilities, gym memberships, broadband, pay-tv and other subscriptions. Ask yourself, do you need all these or you can downgrade a bit without lowering your life quality too much?
Gyms never tell you that on average gym members visit gyms about 3.5 times per month. So, do your math: if you don’t go to your local gym more than 3 times a week, then you are financially better off to buy single-visit passes than being stuck in a monthly membership plan. You simply spend the $ without enjoying spending! The same for all other subscription-based items.

The second thing to focus is on your food and beverage. Dining out is always more expensive than preparing your own foods. I don’t suggest that you don’t dine out. If you don’t, then your life is gonna be bloody boring! I’d suggest that you start having your breakfast at home (or bring your breakfast to work) and prepare your own lunch instead of buying your lunch. Also, get yourself a nice bag of Starbucks coffee beans for your morning coffee and perhaps for your day. With this, you will only spend $15 as the ‘total cost’ for your coffee, breakfast and lunch. If you buy them during the day, then it will easily cost you $30.

Saving money is a good habit to have, but remember that saving money can’t make you a millionaire. If you ‘over-save’ and don’t spend, then of course, your saving account would look nicer, but you will have a miserable life! Remember why you make money apart from feeding yourself and family? The fun of making money is to spend money.
Save more, then you spend less. If you put your saving into a proper investment channel, then you will have more money to spend in the near future. As simple as that.
Dr. C. Richard Wu @ REEAConsulting.com

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