Why Every Financial Decision Matters

Here are three ways of thinking about money that are very common.  They're certainly how my husband and I used to make money decisions.

  • We think we can "afford" something if we can acquire it in a socially acceptable way.  As long as we don't steal it or run up debt we have no intention of repaying, we can "afford" it. If the monthly payment can be made to fit into our budget, borrowing money rather than saving for what we want is how we manage. 
  • We tend to make financial decisions based on what the people around us decide.  We buy clothes, vacations, cars, even houses based on what our friends – or the people we want to hang around with – choose.  
  • We don't give a lot of thought to long-term financial freedom or happiness.  We forget that all of our decisions add up to something bigger.

Smarter thinking

David Cain, author and creator of raptitude.com, has a job in construction.  He has noticed that most of his colleagues drive full-size pickup trucks because "it's just altogether more manly and awesome to be able to drive over curbs onto muddy new developments" than it is to park your small sedan on the street and walk to your work site.

The other benefits of driving a full-size truck (having a big engine and big tires, sitting up high, hauling your expensive toys out to the lake, etc.) seem frivolous to him, but he realizes they may be more valuable to others.

But how much more valuable are they, really?  The extra monetary cost is huge.  Not only does the truck cost $30,000 to $40,000 more to purchase than, say, a 3- to 5-year-old Toyota sedan, but it also costs more to finance, insure, and repair.  Tires and oil changes cost more.  And every single week, you're going to use a lot more gasoline to go the same number of miles (and gasoline keeps getting more expensive).

If all of that additional money was invested instead, over the next six years or so (the life of a typical auto loan) it could amount to $60,000 or $70,000.  That's quite a chunk.  It could go a long way toward getting out of debt, providing a down payment on a house, financing a college education, adding a goodly amount to retirement savings, or something else that could bring long-term value and peace of mind.  It could even pay for a full-size pickup truck.

And that's just one financial decision.  Imagine if you applied this type of awareness and rationality toward every area of spending.

The impact of one small habit

iced latte
I pass no judgments on anyone else, because I've made plenty of stupid money decisions in my life, and I don't always make the smartest decisions now.

But consider a $20 per week Starbucks habit, or book-buying habit, or tee-shirt buying habit, or junky-snack-food habit.  I know from experience that it's quite easy to waste this much money every week (or even more).

That $20 per week comes to $1,040 per year.  Saving and investing that amount at a 7% annual return (pretty realistic, historically speaking, on the U. S. stock market) for six years amounts to $8,111.  Over 20 years, it grows to $46,007.  (I used the investment calculator at nerdwallet.com.)

And that's just one small habit.

So – do we have to live like Scrooge?

I realize that there are many levels of income out there, and that some of us have more means than others.  But all of us, whether high- or low-income, debt-free or underwater, still make decisions every day about how to use our money.  The financial philosophy that allows some people to be able to retire early is the same one that leads others out of consumer debt and toward a more secure financial situation.

I can hear some of you saying, "But I want to enjoy my life!  I don't want to deny myself every pleasure and become a miser!"

There's a fallacy in our culture that in order to be happy we need to spend as much or more than we currently do.  We fear that giving up even a small part of our luxuries will make our lives barren.

Why not test that assumption?

  • Give up expensive lattes and switch to coffee with a little milk.  Are you really less happy?  Or do you get all the benefits of caffeine and maybe even lose a few pounds?
  • Limit yourself to one drink when you go out with friends.  Are you less happy, or do you enjoy no taxis and no hangovers?  Maybe you even learn how overrated alcohol is as a fun-maker.
  • Stop buying new clothes every week or month and see how creative you can be with what you already own.  Are you really less happy without something new, or do you feel greater confidence as you figure out what you like wearing and what looks good on you?
  • Sell your boat or your RV, get an immediate windfall, and maybe even lose a load of invisible stress.  See if simply walking along the beach or hiking through a forest gives you just as much pleasure as using those vehicles.

We need to redefine what we mean by sacrifice and deprivation and think instead about what we might be gaining.  Every financial decision matters because they all add up to something much bigger.

Like this post?  You'll appreciate my book Simple Money: Achieve Financial Peace and Abundance with Minimalism.*

Minimalism doesn't mean lack and deprivation.  Minimalism is a tool that can help us find happiness by steering us in the direction of what we truly desire.  As we let go of financial clutter, we have more resources to accomplish the things we really care about.

Simple Money can help you:

  • discover your money beliefs and how they influence your financial decisions
  • buy less and demolish debt
  • make a budget that lets you focus on your needs and find a way to afford your desires
  • feel empowered, not poor, as you control your spending
  • increase enjoyment and satisfaction without spending money
  • and more!

* This blog is reader-supported.  If you buy through my links, I may earn a small commission.

Updated August 2023


  1. The pandemic and resulting two years of telework really brought this point home to me. I had the same job and the same fixed expenses -- rent, utilities, insurance, groceries -- and had always used public transportation, so that didn't change either way. However, suddenly I had far more money left at the end of each month. What was going on? I suddenly realized it was lunches out. Every day, I'd forked over (no pun intended!) $10-15 for a delicious lunch at a fast casual place, plus a pick-me-up coffee in the afternoons. Yum. But, this was over $400/month that I hadn't even stopped to add up. Eye opening!

    1. Bette, you've described the exact behavior that so many of us have. It's the unconsidered habits that can catch us every time, whether it's lunches out and coffee pick-me-ups, or the stop by Marshall's after a hard day at work, or the toy or candy we buy for our kids because they are prominently displayed in the checkout line. And it's not only our budgets that feel the impact, but also our waistlines! Good for you, noticing your habit. Now you have the opportunity to do something about it. Best wishes!

  2. This is all so true... A month ago I was looking for a new car, and daughter asked why we don't buy a bigger one than the one we chose. Husband and I replied that we could afford a bigger car, but we prefer to use the money we are saving to go on vacation all together for more days. She was so happy after this explanation!

    1. Exactly! And look what your daughter was able to learn from you and your husband!


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