The Year of Small Things

I declare a “Year of Small Things.”

The quest for more, bigger, and better things is a never-ending path that ultimately leads to having less. Striving to have the biggest and best leads to overspending on luxuries and undervaluing the little things that matter most. This same quest caused the global financial crisis. We can’t fix the economy, but we can make small changes in habits that transform personal finances.

Over-spending has gotten my family into trouble many times, each worse than before. Facing a mountain of debt and creditors’ calls, I was afraid to answer the phone. Then our phone service was cut, my husband’s wages were garnished, and a lien was posted on our house.

Dead broke, you pray for a windfall: land a new high-paying job, win the lottery, sell the house, qualify for a second mortgage, or worse…consolidate your debts. But even if your prayers come true, your habits put you back in a much deeper hole.

Helpless, you cut your budget to the bone. Scrimping, tracking every penny, depriving yourself; you tough it out as long as you can. Tempers flare; you fight with your spouse and snap at the kids. Worse, the luster is gone from those things you couldn’t do without. It is a cycle that leaves you depleted, feeling stuck, and grasping at straws.

Radical spending changes are like a starvation diet. You’re prone to binges. Feeling deprived, you’re convinced you NEED that no-money-down big-screen TV! The cycle has come full-circle. It’s financial suicide, and you know it. I’ve been there, and it needn’t end that way. So before you end up in a financial body bag, consider a new approach.

Choose one thing.

Small steps in the right direction yield better results than big impractical plans. Choose one thing. David Bach, an expert in personal finances, calls it the “latte factor,” that thing that you’re spending money on unnecessarily. My reaction? “We need every penny to make the minimum payments!” It began to pay off.

This time, forget big; think small.

I started thinking small. I couldn’t find $50 or $100 to put against my debt, but I could find a dollar or two, and so can you. Switch to regular coffee instead of a latte. Forego the muffin for breakfast at home. Small changes you hardly notice can make a big difference over time.

Keep the change.

Calculate your latte and muffin savings per pay period. Take that amount from your next paycheck and put it in a separate bank account, ideally in a separate (and inconvenient) bank. Making the money difficult to get to keeps it there longer. If your employer offers the service, have that amount deducted from each pay. If not, arrange an automatic transfer with the bank to move that amount from your regular account to your savings when your pay arrives.

Begin again.

This rewarding habit is the first important step on the path to financial freedom. You’ll be astounded how quickly (and painlessly) you’ll adapt to the change. Then, it’s time to make another change and add those savings to your separate account. Take public transportation one day a week instead of driving, check out movies from the library instead of paying to rent, eat at home one extra night a week. One thing at a time; it pays dividends.

Small steps make a big difference. At the risk of putting that Disney song in your head, “It’s a small world after all!”