The road to poverty is paved with lots of little expenses that don’t seem too significant, but which add up to a lot.
At the same time we are not used to seeing the yearly totals of what we spend, so quite resonable spending can be perceived differently when looked at that way. Your brain is anchored to around $5 being a reasonable price for coffee, seeing $1K attached to the spending just feels wrong.
Sometimes going further and looking at the amount over years can have the opposite effect as you start comparing it to other big things - cut out coffee for 10 years and you could save $10K . So cutting coffee is not going to get you a house deposit, or a new car - it might get you one holiday, which you will deperately need after 10 years without coffee.
There are, and once you start adding in the calculations of compounding interest and comparing your daily coffee to number of years earlier you will be able to retire it all starts looking different again!
That’s probably the main complexity of trying to make good financial plans, comparing and weighing all the different short term and long term priorities. Our brains tend to be wired to prioritise short-term interests, until we look back on our lives with hindsight and wish we had made other choices. I think my financial management was dramatically improved when I started budgeting for my full lifespan instead of just focusing on fairly short term spending - everything is about balancing costs and opportunities and picking which are the most important to you.
The road to poverty is paved with lots of little expenses that don’t seem too significant, but which add up to a lot.
At the same time we are not used to seeing the yearly totals of what we spend, so quite resonable spending can be perceived differently when looked at that way. Your brain is anchored to around $5 being a reasonable price for coffee, seeing $1K attached to the spending just feels wrong.
Sometimes going further and looking at the amount over years can have the opposite effect as you start comparing it to other big things - cut out coffee for 10 years and you could save $10K . So cutting coffee is not going to get you a house deposit, or a new car - it might get you one holiday, which you will deperately need after 10 years without coffee.
there are other things to buy than houses and holidays, like long term investment in a mixed asset or managed fund or tbills
There are, and once you start adding in the calculations of compounding interest and comparing your daily coffee to number of years earlier you will be able to retire it all starts looking different again!
That’s probably the main complexity of trying to make good financial plans, comparing and weighing all the different short term and long term priorities. Our brains tend to be wired to prioritise short-term interests, until we look back on our lives with hindsight and wish we had made other choices. I think my financial management was dramatically improved when I started budgeting for my full lifespan instead of just focusing on fairly short term spending - everything is about balancing costs and opportunities and picking which are the most important to you.