Home Personal Finance How Your “Little Treats” Affect Your Financial Goals

How Your “Little Treats” Affect Your Financial Goals

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Those who know me know that I love nothing more than a little luxury. I work hard so that I can have a wonderful time every day. It justifies a Starbucks after a bad day, an impromptu manicure after a great day (to keep you in a good mood), and a nice glass of wine just because it’s Wednesday. can. I’m a gal who loves to treat myself and accept every excuse I can.

Actually, it’s not just me. “Reward yourself” quickly became an anthem for many, with the hashtag on TikTok now boasting 2.8 billion views. Even by my standards, that’s a lot of treats. It also means a lot of money is spent on these little luxuries. @moon_katie A recent Instagram post made me pause and consider how my “little treats” were impacting my savings goals. In her post, she suggests that increasing the savings rate slightly (for example, from saving 10% of your income to 12% or 15%) will help you achieve long-term goals such as buying a home or retiring. It shows how the years can get closer. Wow, what an eye-opening story.

But her post didn’t end there. It shows that when the savings rate is high, tightening the belt to save more has less dramatic effect. That means you probably have a sweet spot where you can maximize both long-term goals and small rewards (her husband will be listening to this logic later). Take the time to dig deeper into this idea and leave the treats alone to get to the bottom of things.

How ‘Small Rewards’ Affect Your Savings Goals

Small cost increases over time

As we all know, (sadly) small costs can add up over time and have a big impact on your goals. This is a fact many financial experts have shared before. This is where the idea of ​​the “latte element” comes from. Skipping lattes (and other treats) can help you save money to buy a home, retire, or achieve any goals you’re working on faster. The idea of ​​avoiding spending small amounts may seem logical enough, but it can be hard to remember quickly, especially if you have a “reward yourself” mentality (guilt). there is. If he pays $5 for coffee every day and $30 for drinks with friends a few times a week, it can add up to hundreds of dollars a month without you realizing it. This is money that can be deposited in a high-yield savings account or invested (depending on your schedule) to get you much closer to your goals.

That being said, who wants to be someone who never eats out or buys lipstick at Sephora? It can be difficult for everyone to know when to prioritize savings for the future at the expense of today’s happiness. At this point we are leveraging the concept of delayed gratification. It seems obvious, but the more time you have on your side, especially now, and the more you save (or rather invest), the more you will be set up for success later (thanks to compound interest! ). With this logic, you can eliminate all unnecessary expenses and reach your goals faster. Katie’s post has a nice graph showing that if she saves 40% to her 10% of her income, she will be able to retire in almost half the time. But giving up all pleasures in the name of saving for the future is not sustainable for most people. So does a happy medium exist? Now, the magic of diminishing returns.

Declining profits mean you don’t have to give up cold turkey for ‘little snacks’

Diminishing returns is the general idea that after a certain point is reached, doing the same thing over and over again no longer yields the same results. This can be applied to many things, like going to the gym, watering your plants, or in this case the economy. To simplify the math, let’s say you are currently saving 10% of your $100,000 pre-tax salary, or $10,000 annually. If you assess your non-essential spending and decide to cut some (more on that later!), you could increase your savings rate to 20% and eventually reach retirement age about 7 years earlier. there is. That’s a pretty big number. Because the more money you invest up front, the longer you can stay in the market and earn compound interest. As a note, this makes some important assumptions. Mainly because my income is increasing slightly each year (usually through pay raises), I’m putting my savings into the stock market and getting regular returns, and inflation and tax rates are historically consistent. . Year.

However, the relationship between savings and earnings is not linear and reaches a point of diminishing returns. If you’re already starting with a pretty high savings rate, you’re already benefiting from a lot of compounding, so raising your savings rate won’t have much of an impact. This time, he’s saving 45% of his income (that’s a lot. Good luck!), and has since decided to give up his favorite haircut and manicure in order to hit the 50% savings rate. To do. Unlike the 10% to 20% example above, this time the increase in savings only reduces his target schedule by two years. Of course it’s up to you, but I’d rather leave my haircut and manicure alone.

Important points: If you’re currently prioritizing buying a lot of “snacks” at the expense of your savings, it makes sense to evaluate your spending to see where you can cut back, giving your money more time to generate compound interest. It may be suitable. If you’ve already saved a significant amount of your income, it may not be worth cutting even more.

How to get the best of both worlds

Once you’ve figured out where the right savings and spending rates fit for you, there are a few tips you can follow to make sure you’re on track.

stay mindful

I’ll be the first to admit that I’m not going to give up small treats anytime soon. However, not all luxuries are the same. I don’t see much value in store-bought coffee, so it’s not on my spending budget. But I love getting beauty treatments like manicures and pedicures, so the bulk of my snack budget goes for them. By being intentional, it’s easy to see where to cut and save money. Take time to think about what makes you truly happy—convenience, day trips to the countryside, nice restaurants—and slowly cut back on anything else that doesn’t bring you much enjoyment. Rewarding yourself should be applied to a few key categories from time to time, not all areas of your life (or every day!).

Use a budgeting app or spreadsheet

Is it possible to publish a financial article that doesn’t mention budgeting? I know nobody likes to talk about it, but keep an eye on where they want to spend their money and where it actually goes is important. For a long time, I spent $400 a month on “fun” money, treat myself. But when I checked my budget every other week, I often found myself well over my snack budget because I wasn’t keeping track of all my little weekly purchases, and they piled up quickly. I started using a budget app and it has made a huge difference, allowing me to see how much I’m spending each time. If you’ve always wondered where your money is going, try this tip.

Set up call forwarding

Once you’ve done the hard work of figuring out how much you want to save, the best way to actually make it happen is to set up an automatic transfer so that money is taken out of your account without a second thought to save or invest. is to be transferred to about it. A common pitfall when saving money is waiting until the end of the week or month to move your savings. This means that you’re not actually saving as much as you thought you would because of incidental expenses (oh, see the tip above). If you want to save 20% of your income, decide on a per-salary amount and set up automatic transfers so you can withdraw your paycheck as soon as it arrives. That way, you can only spend the remaining amount.

Review your snacking habits regularly

Life really is like a box of chocolates and you never know what you’ll get. There are times in life when you need to allocate more of your “reward” budget (perhaps you’ve recently experienced a heartbreak or lost your job and just want to feel better). Also, certain rewards may be missing. You won’t get the same level of pleasure as before, so you’d better put that money into savings. By regularly reviewing what you spend your money on and whether you actually enjoy doing it, you will find opportunities to review your spending to help you now and in the future.


After all, saving is important, but living is just as important. If not, what are you saving for? Some people find great happiness in saving 50% of their income to reach their financial goals faster, and are willing to endure instant flowers, post-workout smoothies, and impulse clothing purchases to reach their goals. There may be However, as research shows, that approach is not the only way to reach your goals. Taking care of yourself and intentionally setting a budget for fun shopping can help you reach your goals without burning out, and help you look to your future self. Need a celebratory drink for happy hour?

SOS! I have zero savings, where do I start?

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