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I have this problem where I’m always counting pennies in my head. Not literally, but rather that I’m always conscientious of all our spending… to a fault.
Don’t get me wrong, being mindful of what you’re spending is a good thing. If you don’t know what you’re spending, it can become very difficult to get ahead.
The problem, however, is that counting pennies isn’t as important as focusing on the bigger money. In other words, saving a few extra dollars with some coupons might make you feel great, but if you then go out and buy a brand new luxury car, did it make much of a difference?
The habit of staying focused on what we’re spending permeated my soul while on the path to financial independence. I wanted to get there faster and, in my mind, every penny counted. And although you can argue that that’s technically true, it’s really not that relevant in the grand scheme of things.
Counting pennies is something that will serve to make you more miserable and likely won’t help you in your financial goals over the long term.
Counting pennies in my life caused a little confusion
I wrote a post about 6 months ago titled, We Don’t Need More Money… But I Want It!. In it, I talked about exactly that – we’re good with where we’re at money-wise and can live happily ever after. However, having more money would allow me to loosen the reins a little.
The post was later syndicated by my friend Leif from Physician on Fire, which was extremely nice of him to do. But then it was discussed in the White Coat Investor forums and several folks didn’t understand the point I was trying to convey. Quite a number of the posters felt that we just retired before we had enough money. Granted, these are much higher income earners who are generally on a different playing field when it comes to money.
So I realized maybe I didn’t make my point clear in that initial post. So I’ll say it now – we don’t have a problem with money. We have enough to live our normal lives, travel, and do the fun things we want to do.
The issue is me.
I’m still stuck in my old ways of counting pennies when I don’t need to be doing that. Spending an extra dollar here or there isn’t going to blow our retirement plans. We have enough money. I just struggle to let go of the old habit of being too conscientious about every nickel that’s being spent.
Ensure your finances are in check first
Look, everyone’s saving and spending habits are different. However, if you’re careful with your spending and you’re doing all the right stuff, a few extra dollars here and there aren’t going to crush you.
Let’s start with the most important piece of the equation… the saving and investing side.
While on the path to financial independence, I eventually got everything put on autopilot:
- My 401(k) contributions were taken out of my paycheck before I even saw them. That was set up so I would contribute the federal max every year and automatically be invested in a low-cost target-date retirement fund (one of my only suitable low-cost options available).
- My HSA contributions were also taken out of my paycheck before I even saw them. This was being maxed out for the last few years of my employment as well. The money was automatically invested in the Fidelity ZEROSM Total Market Index Fund, which I was lucky to have available during the end of my career.
- A day or two after my paycheck would be deposited, my bank would automatically transfer some of it over to my online savings account at a different bank.
- A day or two after my paycheck would be deposited, Vanguard would also pull money out of my account, put in my Roth IRA, and invest it in Vanguard Total Stock Market ETF (VTI). This was set up to ensure I maxed this account out each year as well.
- All my credit card balances were (and still are) configured to automatically pay off my balance each month.
This is the true meaning of paying yourself first, friends!
Life wasn’t always this way (far from it) and we were very lucky to be able to do this. The way we got to this point was by slowly upping each contribution and savings transfer once or twice a year. It’s hard to miss the money that way and before you know it, you’ve built up a sizable nest egg.
Empower (formerly Personal Capital) is the free tool I use to instantly see my net worth, track my spending, and manage my investments. The built-in retirement calculator, fee analyzer, and other tools make this awesome software even better! If you’re looking for a good way to manage your finances, check it out!
But the point is that I had everything automated. We had a personal savings rate of an impressive 60% shortly before I retired at the end of 2018.
At this point, we were doing things right financially. We had our savings and investments on autopilot and had our spending in check on the big three… the second part of the equation.
The big three expenses in life are generally housing, transportation, and food. If you’re already living in a modest home, driving your car for 7 or more years, and doing your grocery shopping at a place like Aldi, you’re positioning yourself much better than the rest. Give yourself a high five!
So having your saving and investing along with your big expenses in check is critical… as is being able to pay off your credit cards every month. Credit cards are awesome if you capitalize on the rewards, but you still need to pay them off each month for the benefits to be meaningful. I have a list of our favorite credit cards that we like on my Recommended Credit Cards page.
Why counting pennies is silly
Ok, so we established that you’re on track for your financial goals. And depending on what you have leftover as well as your mindset in general, you may or may not be a frugal person with the remainder. I’m in the camp of being a frugal person.
But it’s time to not let frugality on the little stuff overpower you.
Let’s say you need a jar of peanut butter and see it at a grocery store where it’s $2 more expensive than you’re used to paying at Aldi. If you need it and don’t plan to be at Aldi anytime soon, put the damn thing in your cart and buy it.
This is the type of thing I struggle with all the time. I know it’s only a $2 difference in this example, but my brain goes crazy knowing that it’s cheaper elsewhere. Why not just go to the other store and get it cheaper there? Because it’s unnecessary to waste time in your days counting pennies when you’re already plowing ahead on track financially.
Take a step back and think about it. How often does this stuff seriously happen? If you’re already smart with your money, it’s probably not that often. Hell, let’s say it happened 100 times in the year. Yes, you’d be wrestling with caving in and spending the extra money “unnecessarily” but is it a big deal in the scheme of things?
Not really. If this happened 100 times in a year, that comes out to a measly $200! That’s it! It’s not worth the mental heartache.
This, of course, doesn’t just apply to overpriced peanut butter or other groceries. Let’s say your dining out is already in check and you don’t do it too often. When you do go out to a nice dinner, don’t spend your time comparing two items and then choosing the one with the cheaper cost just because of that.
It’s ok to splurge a little and choose the entree that you really want. Live a little and give yourself that bit of happiness. It’s not going to crush your retirement plans.
I’m giving examples like these because these are areas I have a hard time with. I know that a few dollars here or there isn’t going to make a difference, but my brain still can’t process that very well. Yes, you might find that a little crazy, but I figure if I fight with this, others might as well.
Being content with the idea that spending unnecessarily on the small things is my biggest hurdle financially. Counting pennies truly is a little silly if you’re already on track with your financial goals.
An extra dollar here and there ain’t gonna hurt you!
This might be blasphemous to say in the personal finance community, but spending money even a little needlessly ain’t gonna kill you.
Obviously, you need to have some rules in place. As I said, the biggest of these is ensuring your finances are already putting you in the position you want to be in. If the spending is going to hinder your financial plans, then you might want to think twice about it.
But counting the pennies isn’t as important as counting the dollars. The big dollars are what truly matter. Those are what need to be kept in check unless you’re rolling in the dough.
Once you’re in the position that your money is doing the work for you, it’s ok to relax a little bit.
Buying some “street meat” from the local street vendor… not a big deal. Getting a coffee while out and about… not a problem. Paying a buck or two extra while already at one store so you don’t need to waste time going to another… a-ok.
As early retirees of over three years now, I can tell you that we’re in good shape with our finances. We have more than enough money for our day-to-day expenses and to include plenty of fun like vacations and travel. We plan well and live a fun life.
And we’re already enjoying that stuff so it’s time that I stop worrying about the little expenses that don’t really matter. Even if caving in and letting all those little things happen would somehow cost us even another $1,500 over the course of a year, it’s not going to crush us financially.
Again, this can’t be everything and it doesn’t mean going overboard. But for already frugal people who are good-to-go financially, loosening up the reins should be just fine.
It’s time to take a stand and know that counting pennies isn’t what makes the wealth, the big decisions on saving and spending are!
Am I alone in being someone who thinks too much about spending an extra dollar here and there?
Plan well, take action, and live your best life!
Thanks for reading!!