Elizabeth Kerr is sweating over the apathy toward small change

By Elizabeth Kerr

I’m seriously worried about a disturbing trend that I am seeing more and more lately.

I hear it in our conversations and I even see it in some of the comments that appear on this site and on my columns.

It’s apathy toward the small savings we might be able to make in our everyday lives.

"Why bother it’s only $12, it hardly seems worth the effort". Or: "I earn a good wicket - why should I mow my own lawns?"

It seems as though unless you can generate hundreds or thousands of dollars in a single savings transaction then it’s just not worth the bother.

News flash everyone – it IS worth the bother!

Don’t you all know that small savings add up to big savings overtime?

The $9 savings that bringing your own lunch each day makes, or the $4 you might get at the petrol station with your grocery docket are as worthy of your effort as the big savings you might be able to make.

All $1s are created equal and they will all work as hard as you ask them to, regardless of how much company they keep.

If you’re still convinced that small change doesn’t afford you much these days then have a look at some of NZ’s top listed companies on the share market.

The sum of $0.50 can buy you a share in A2 Milk, $2.86 The Warehouse and $6.50 Fisher & Paykel Healthcare.

So the next time that you pick up some milk at the red shed and put it in your fridge you may be reminded of the power of your small change.

Apathy works both ways

It’s this same apathy toward small change that gets people suckered into buying stuff as well.

The cheap little knick-knacks at the counter, the cashier suggesting we donate $3 to charity with our purchase, the gym membership for just $7.50 per week...yes, yes these amounts might sound small at the time of the transaction, but if you were to add them all up and save them instead, it would amount to a lot more.

One reader commented that it’s all very good and well to save on the small stuff but that’s not really going to get anyone to financial independence. Where are the real circus tricks for achieving early retirement? they challenge.

Here I’ll tell you. Lean in really close now...Spending less is the trick!!!

Your investment decisions make up the other half of course.

But if your expectations are for more and you don’t have an income that supports more, then you are going to be miserable eventually when you come crashing down to your own reality that you either need to earn more money or need to spend less. As they say, the easiest dollar earned is the one you can save.

Cheap versus Frugal

If you’ve decided from now on to start collecting as many dollars as you can, you might be tempted to cross the invisible line from Frugal to Cheap.

The difference is ill-defined but I liken it to going to a fast-food outlet, say McDonald's, for dinner. You can eat a Big Mac Combo, which is cheap, but 10 minutes later still be hungry. It would have been frugal to have used that money and bought some eggs and tomatoes/onions/salad and made a huge omelette at home (and your waistband will thank you as well).

♦ Cheap people really focus on the price of something. They are often spotted bragging about the savings they made on a purchase. "It was $50, reduced to $5. It would be a crime not to buy it." Or something to that effect.

♦ Whereas frugal people focus on buying only the things that are parts of their lifestyle design at the best value.

Funny story: Does everyone remember when Dr Martens shoes emerged as the "must have" school shoes in the 80s?

There was no way I could afford a pair.

But one day family friends boasted that they knew a shoe maker who could make replica ones at a fraction of the price.

Naively I agreed, and when they arrived they were the ugliest imitation Dr Martens shoes I have ever seen.

The sole was a lard-like rubber substance and the stitching the wrong colour yellow!

Worse still they had no grip at all on the bottom and I was forever sliding over when it was wet.

It was obvious I had tried hard and failed and for that I was teased mercilessly. Cheap karma sucks.

♦ Cheap people will say no to spending money whereas frugal people will say yes but keep within their budget.

Take eating out for instance: Cheap people will go to the cheapest place to eat or decline your invitation to join you every time you ask, whereas frugal people will go anywhere but order within their means.

I knew a couple once who were always buying from the $2 and $5 shops.

Their house was like a treasure trove of broken plastic toys and useless bits and bobs that they really didn’t need - think cheap doilies for the couches, shampoo rings for washing the kids’ hair, plastic foot wrappers for slipping over their slippers when going outside and my all time favourite a solar powered hand held fan that ran off batteries.

The truth is they didn’t need all that stuff and it added no value to their lives, but because it was cheap they still brought it because in their mind a few dollars here and there didn’t matter to them.

♦ Cheap people can ostracise themselves.

For example, no one appreciates their lawyer wearing a tracksuit to the office when they’re paying a handsome hourly rate for their service.

People expect their lawyer to wear a modern suit and by not conforming to that behaviour the lawyer could undermine their career and be unconsciously selling themselves short.

If you are in an environment that calls for a certain standard then you need to consider how frugality can apply and watch that you don’t cross that line. (If you’re not sure email me).

Collecting extra packets of sauce from McDonald's, stealing the toilet paper and coffee sachets from hotels, paying for two plates at a buffet to feed 4 people and lying about their kids age to get cheaper entry to Tony-Town are all embarrassing and slightly immoral ways of saving money. Frugality does not break the rules or the law.

As a final note...

One person’s cheap is another person’s splurge. So, keep this in mind if you find you’re under the spotlight from well meaning friends.

When someone tells you to "live a little – you only live once" that doesn’t mean spend up large. It’s an invitation to let them know your goals and how that runs counter to where you want to be.  Tell them you have a plan, and if they can't support you, find more supportive friends.

Next time you have the opportunity to make a small saving, I want you to celebrate and covet it the same way you would a larger saving.

Make a tally of all the little dollars over a week and put it to work by transferring that money into your money machine.

Saving small amounts of money is really the easiest to save so go on embrace those small dollars and send them to work for you like happy little minions :).