We’ve all heard the advice: Small, everyday purchases add up quickly and can derail your savings plans. This guidance often names your daily cup of nice coffee as the most obvious culprit.
But is switching from a barista-crafted flat white to a home-brewed cup of joe really going to help you save? And what about the hit your happiness will take? Let’s explore how you can spend your money wisely without depriving yourself.
Think About the Purchase-Pleasure Connection
One popular approach to saving money is to cut out as many discretionary purchases as possible. That kind of self-denial can be difficult to keep up. Instead, make an inventory of all your non-essential purchases and evaluate how much happiness each one brings you.
While you’re drawing up your list, remember that research shows that paying for experiences, such as vacations, tends to make people happier than buying material goods. If your commute is long, for example, purchases that make it more enjoyable may have a bigger pleasure payoff than a new big-screen TV.
Once you have your list, identify the purchases that bring you little or no joy. Cut those to save money with less pain.
Offset Your Purchases with Automated Savings
Save and spend at the same time. You can offset your purchases with automatic transfers to your savings account. Let’s say you spend $25 a week at your favorite coffee shop; set up a weekly transfer of $30 to savings and come out $260 ahead at the end of the year, not including interest.
New apps can help by making saving more of a game. Set a specific goal, such as $1,000 for a vacation, and use the app to transfer money based on rules that you create. Round up purchases to the nearest dollar amount and have the extra money go towards that trip you want to take. Set a weekly budget for groceries, and if you spend less than that amount, then have the difference transferred.
If you prefer to be more hands on with your money, make it a habit to add up your discretionary purchases each week and transfer at least that amount to savings.
Outsmart Adaptation
Do you find that you’re never satisfied for long? You’re not alone. Turns out we’re all on a hedonic treadmill, also known as the adaptation phenomenon. Put simply, we get used to our salary, home and our favorite coffee drink and eventually feel dissatisfied with them. To lift our spirits, we then need more, or to try something new.
There is good news, though: smaller, more frequent splurges can bring you more joy than larger, less frequent ones. And enjoying a small pleasure that improves your mood often leads to more positive feelings and greater resilience to stress. In other words, treating yourself to a delicious coffee might be the perfect way to spend your money and increase your happiness. Just be sure to try a new drink occasionally and take the time to enjoy every detail.
Make the Most of Your Spending with Money Mindfulness
You get more pleasure out of any purchase, be it a coffee or a car, when you savor it. So, if you love your latte and everything that comes with it—the friendly barista, the quaint coffee shop décor and, of course, the caffeine surge—it’s probably the perfect way to spend a few dollars.
On the other hand, if you don’t even notice the aroma and down the coffee as quickly as possible so you can get on with your day, making your own drip coffee is a great way to spend less.
While it’s important to stay on track for your savings goals, from retirement to homeownership, research shows that saving too much today could lead to saver’s remorse—a feeling you missed out on opportunities to enjoy your life. So, as with all things in life, try to find the balance.
Elizabeth Whalen is a freelance writer based in Seattle. She loves writing about business, financial services and sustainability.
Enjoy your latte, but what spending habits should you break right now? Find out.