Financial Death By A Thousand Swipes

You get it. Live within your means and avoid debt like COVID-19.

But as you avoid those large purchases and credit cards, are you still doing financial harm by other means?

From 10 to 14 August, we conducted our first spending challenge where we pushed everyone to not spend money on two things: your morning fancy coffee and your work lunch. The intent of this was to help everyone understand the impact of small spending. In doing the math, the figures came out to about $60 a week on morning coffee and work lunches.

Think about how many other small purchases you make on a daily basis. They are not a big deal are they? It’s just a stop here and a stop there. A soft drink at the corner store, renting a movie on Amazon Prime, some ice cream on a super hot summer day.

When is the last time you compiled your small spending? For you organized budgeters, this may be done for you on a phone-based banking app. For everyone else; however, you probably have to make a mental note of how many times you see purchases in your checking account for less than $10.

In the game of financial chess, do you expect your opponent to stop you from making a mistake?

“Never interfere with an enemy while he’s in the process of destroying himself.”

- Napoleon Bonaparte

From a financial standpoint, if you paid a financial advisor to help you with budgeting and financial planning and they told you, “Don’t buy a new car every year,“ you would probably say, “no duh,” and walk out the door. This is a flash of the blinding obvious, right?

But what if they said, “You may not understand it, but those small purchases add up and are equal to making a sizable debt payment or a car loan payment every month.”

Now you are listening.

On the extreme side, maybe you are addicted to your fancy Starbucks coffee. The one with half soy milk, half almond milk, light sugar, with two pumps of vanilla, and nutmeg sprinkled on top. This particular coffee is just shy of $5 a cup… and you MUST have it every day or the sky will literally fall. You also have a workout recovery routine that calls for an amazing Chipotle burrito bowl on Wednesday and Friday, each cost you around $8. You are smart and avoid the nightlife scene because you know it can quickly eat away are your bank account, so your Friday evenings are in home movie night. You splurge on a good movie from Amazon Prime and make yourself some popcorn. All told, it’s just a few bucks for the movie and you get to chill out in PJs on your couch!

Let’s take a look at that math.

For the month of August, 31 days, your coffee is costing you $155 per month. Chipotle, which we LOVE, is costing you $64. And movie night is just under $20.

August spending total is roughly $240. This is just coffee, Chipotle, and Friday movies.

We are not saying that we should become non-spending robots that just work, save every single penny, and stay in our homes. That’s ridiculous and unrealistic. However, we are saying that if you become comfortable swiping your card for the little stuff, you are potentially doing the same amount of financial damage as a large purchase, just spread out over time.

In the 1800s, China’s military is said to have used what we now call ‘Chinese Water Torture.’ This was the process of allowing drops of water to fall on a person’s head over a specified period of time. This torture did not kill the prisoner, but it was said to drive them insane.

On the face of it, it sounds harmless right? It’s just water dripping on you. However, studies of the torture technique prove that it mentally broke the individual and made them more willing to provide the Chinese military the information they desired.

What is the point of this?

The enemy of the individual was actually the thought that they could handle this torture over time. As stated above… it’s just water drops. It wasn’t boiling, it wasn’t freezing cold. This, however, induced a false sense of security. The initial thought was that these insignificant water drops could not hurt them. And they were right! It didn’t hurt them, but it caused a discomfort that they could not escape and they could not explain.

No gimmicks with us. Free means free. We want to help you achieve financial independence.

Like our well-intentioned spender above, they are making sound financial decisions. And they believe that these little swipes of the card cannot hurt them. Over time, however, they can’t understand why it is their financial house is out of order. This financial false sense of security is induced by $2 here, $7 there, another $11 over there… on a daily basis. Small insignificant purchases that can’t hurt you, right?

They double check their budget, ensure they are not in debt, they have no accounts they are not aware of, and no one has stolen their identity. What is going on?

It’s those pesky card swipes. It’s the water drops.

The difference between the Chinese Water Torture and your spending is that the spending is self-induced.

When you take the time to run your own numbers and add up the spending, ask yourself what you could do with that money. Is there a goal that you have that you can’t seem to find the money for? Does it seem like you just can’t get to that savings goal fast enough?

Our humble recommendation: turn off the water drops.