Every dollar counts when it comes to managing your money. If you think "it's only a buck" stop and examine that thought. Not spent, that dollar is worth more.
The big questions are how much those $1 coins add up to over time and how to find those extra dollars.
Tom Hartmann, managing editor at the Commission for Financial Capability (CFFC), ran some numbers on those single-dollar savings, assuming 4.5 per cent growth after fees, taxes and inflation. "For that $1 that you save and invest today we expect it to be worth $1.55 in 10 years' time, $2.41 in 20 years, $3.75 in 30 years $5.82 in 40 years," says Hartman. Every extra dollar paid down on a mortgage or other debt snowballs even faster.
You might say: "why bother" for $5.82. It's true. Saving a single dollar on its own is a bit pointless. If you can make a game out of saving more and more single dollars or go on a cash diet and look for ways to save more of those little gold coins it adds up. Even $2 a day is $60 a month, and $630 a year, which then multiplies over time.
Do you say: "it's only a buck", "too easy", "why not"? All those little phrases make us buy whatever it is. Yet every dollar serves a purpose and the question to ask yourself is if that is the best use of that single dollar over your lifetime.
The day before I wrote this article found myself thinking "it's only $1.50" when I spotted a rather nice Bialetti Tuttocrema milk frother in the local Salvation Army shop. Perfect for my camping kit beside the stovetop espresso maker.
You might say I'd saved $88.49 if I'd bought the one in the Sallies shop instead of paying $89.99 at Stevens. But let's face it, that $1.50 was saved when I stopped in my tracks and thought about whether I really needed it. Black coffee on holiday isn't too much of a deprivation.
Black coffee will suffice on camping trips. Photo / 123RF
It's very easy to knock up several hundred dollars a month on these small purchases if you don't track them and be more mindful around the purchase.
A clever approach to finding more dollars that I have modified from a post on Following the Barefoot Investor New Zealand, is to choose not to use the car. The poster said he saw his net worth go up by $1 every time he didn't use the car. When I view that as saving $1 or $2 every time I leave the car at home, I could save another $5 a week by using my feet or bicycle for short local trips.
It can be difficult to be completely in control of your single dollars. Marketing plays with our minds by turning psychology against us. Our brains evolved for survival, not for making rational economic decisions.
Behavioural economists see us taking mental shortcuts. In the case of the milk frother I was being led by the fact this nice piece of kit was such a bargain.
Things are cheap in the Sallies, so why not just buy them? That's "framing" the decision in behavioural economics.
We also fall into "anchoring" with a purchase such as the milk frother. Anchored against $89.99 the $1.50 seems like a steal. If you need the frother that is.
"Confirmation bias" is easy with little purchases. The price tag allows us to confirm the decision.
Behavioural economists also warn against creating multiple buckets in your head for money from different sources. Maybe that $1.50 spend doesn't matter because it's loose change floating around in hand or man bag. Yet money is money.
Finally, if you have joint finances it's just as important to discuss those single dollars as it is the big picture. If your priorities are out of sync then it's quite likely tensions will build between you. The simple way around that is "me money" for both of you.
