"Watch the pennies and the dollars will take care of themselves." This quote is so on the money.

All too often Kiwis reach the end of the month and what was a half-decent pay cheque is gone. And sometimes more.

Lots of little purchases add up fast. Yet each and every dollar takes a lot of effort to earn. Even frittering $10 a week adds up to $520 over the course of a year.

Master your inconsequential spending and those dollars multiply in value if you can save them or use them to pay down interest-bearing debt.


The cost of not buying it

Sometimes personal finance journalists are a bit like the builder whose own home is never finished.

I've been carrying out an interesting decluttering exercise over the past nine months, often downsizing by three items a day.

Many of these items may have only cost $1, $2 or $10, but those small-change items have added up to thousands of dollars of unnecessary spending over the years.

Behavioural economist Dan Ariely makes the point that I shouldn't be comparing that $2 op-shop purchase with the $30 I might have paid new for the item.

The real relative equation is comparing the $2 I spent with the zero dollars that not buying it costs. Apologies to Ariely, but I borrowed his book Dollars and Sense from the library for free. Knowledge is power.

The fritter factor

It's not unusual to blow 10 per cent or more of our income by frittering a few bucks at a time.

My personal frittering involves op shops, school fairs, twice-weekly cafe trips, probably as many lunches out a week and various electronic gizmos. Totally unnecessary.

I read a really useful suggestion - concentrate on shrinking just three variable spending categories of your budget where you fritter the most - for there is the biggest leeway for savings.

In my case that would always be dining/cafes, groceries and general merchandise. The antidote to the fritter factor is to keep and analyse a spending diary, even if you don't actively budget.

The grocery con

Groceries are necessities and therefore we think that everything in our trolley is necessary.

In fact most of what we load up is unnecessary or overpriced. For convenience I grabbed a pre-packaged pack of dried Sun Valley kidney beans at the supermarket a few weeks back.

They cost more than double the price they would be from a bulk-bin shop. Even more important is the third of all fresh food we buy that gets wasted.

Being lazy

A lot of the dollars and cents we throw away are due to failing to reorganise our accounts or transfer money so we get hit with huge fees.

We buy things without shopping around because we "need" them. A few bucks here and there soon adds up.

Buying because it's a bargain

OK, so that tent may be reduced by $200 at Kathmandu. That doesn't mean you need to buy it.

With high/low pricing models - where the original price is something no one in their right mind would ever pay - the reduced price could well be more than you would pay elsewhere for something of the same utility and quality.

Buying because it's a bargain is one of the many ways we delude ourselves.

It does matter

The night before writing this article I spent $2 on a treat from a vending machine.

Very unusual for me. But my justification was: "Stuff it". When it comes to our personal finances that is totally the wrong mantra.

Dumping it

I know it takes effort to sell items on Trade Me or via a local buy/sell group. But dumping stuff that is saleable is cementing the loss of all those wasted dollars.

Selling it takes longer, but means you have to reflect on your money wasting for longer.

There's another saying: Penny wise, pound foolish. It refers to people who fixate on one small thing, such as the flatmate of mine in my university days who demanded that we re-use matches if one gas element was already on. Both the big stuff and little stuff matter.

Watching the pennies works best if you're monitoring and analysing all of your spending to discover where the major leaks are. If you can master the small stuff you'll pretty soon see the payback in your accounts.