44% of Americans Think Small Purchases Hurt Their Finances. Are They Right?

Should you be sweating the small stuff?

You'll often hear that if you were to give up your daily latte at your local coffee shop, you'd save up enough money to retire a millionaire. Well, that's unlikely to be true. 

Saving $3 or $4 a day could definitely have a big impact on your finances, but the reality is that you can't un-latte your way into a millionaire retirement. Rather, you have to save significant sums of money on a consistent basis and then grow that money by investing it.

But while a single indulgence like a daily latte may not be harming your finances and preventing you from meeting goals, a series of small purchases could have more of an impact. And that's something a lot of people recognize.

According to Northwestern Mutual's 2022 Planning & Progress Study, 44% of Americans believe that small purchases (like a cup of daily coffee) could impact their long-term financial security. But does that mean it's time to cut out all indulgences? Not necessarily.

It's all about priorities and balance

If you've been struggling to max out your IRA or boost your 401(k) savings rate, then it's easy to point a finger at small purchases that undoubtedly add up over time. But remember, life can't just be about saving toward future goals. It's both reasonable and important to spend some of your money on things that make you happy in the near term. And if one of those things is a modest daily coffee purchase, so be it.

But say you also tend to spend $9 a day on a lunchtime sandwich you could make at home for under $1 and $30 on weekly takeout meals that would cost you half that to cook yourself. In that case, it might be worth thinking about these expenses. Similarly, if you've been spending more on conveniences like rideshares when there's a good public transportation network where you live, it may be time to reconsider some of those habits -- not all, but some.

In fact, a good bet is to think about the small purchases that collectively eat up a lot of your income and order them by priority. If you're not happy with the progress you're making toward bigger goals, whether it's building an emergency fund, socking money away for a down payment on a home, or amassing a nice retirement nest egg, then do yourself a favor and start cutting out some of those purchases that mean less to you.

Going back to our example, your daily coffee might be a source of joy and energy, whereas you may decide you can do without your store-bought lunch. If coffee trumps lunch in your book, keep buying those lattes and make your own sandwiches. 

Similarly, if the convenience of being able to get home quickly on a late or rainy night improves your quality of life, keep paying for rideshares -- even if that means having to wait six more months to buy a home. But then consider cutting back on takeout so as to not have to delay that goal by a year. 

Make the choices that are right for you

Small purchases won't necessarily doom you to a lifetime of financial failure. Many people retire with plenty of savings after spending money daily at their local coffee shop for decades. 

But if you're not happy with the progress you're making toward your goals, cut out small purchases that mean less to you, and keep the ones that mean more. Doing so could help you maintain a great quality of life without having to worry about coming up short later on.