Small Budget Cuts Lead to Big Savings


Finding ways to save does not always require large and painful cuts. Often you find the biggest savings by reducing small expenses. Recognizing low-value spending and trading it for high-value needs can reduce debt, increase savings, and lead to greater focus on the things that matter most.

Low-value spending includes the purchase of goods and services you do not actively use, or you can easily find less expensive alternatives. David Bach introduced the Latte factor, which simply states that when you cut a small expense like a $5 latte, it adds up to big savings over time. There are “lattes” in nearly every budget. When you identify and replace these small daily expenses with more cost-effective solutions, you save money without sacrifices lifestyle. In some cases, you can eliminate the costs rather than replace.

In the above example, by purchasing an espresso machine for under $100, instead of buying a latte at the local coffee shop, you reduce costs. Savings can add up to $150 per month and nearly $2,000 each year, from this simple change in your daily routine. To find these expenses track your daily routine for a week or more and seek more economical ways to gain the same benefits. Finding two or three areas to save $5 or more per day will lead to thousands in reduced costs over the course of the year.

Another place to find painless reductions in expenses is with recurring monthly costs for services you rarely use. Do you subscribe to HBO, Netflix, and Hulu? Cancel one or more service, and you likely won’t notice the difference. Review your magazine, newspaper subscriptions, and other recurring bills. Eliminate subscriptions you do not use and see if online options cost less.

Identifying low-value expenses can help you reach financial goals faster.