Most people who share personal finance advice tend to agree on a lot of the core principles. Spend less than you earn. Save for the future. Shop around. Learn before you invest. Those things are just good ideas, and if everyone did them, there would be a lot less personal finance struggle in the world.
Even with all of the agreement on the big principles, though, you’re bound to find a lot of disagreement when you start digging down into the specifics. Different people have different ideas when it comes to financial risk, when it comes to goal setting, when it comes to who you should get advice from, and so on.
One consistent area of dispute is the “little versus big” dichotomy. Is it better to make a handful of little changes in your life or is it better to make just one or two big changes? It’s something that you’ll find endless disagreement on if you read lots of personal finance books and articles and blogs.
The argument for big changes is clear: If a big change can make a tremendous financial difference in your life, it requires only a few changes to completely transform your life. For example, moving to a new place or altering your daily modes of transportation can produce a significant financial change all by itself.
On the other hand, the argument for little changes is that little changes are far easier to implement, the opportunities for them are all over the place, and that the savings are surprisingly big due to repetition. For example, a little change like replacing a light bulb with a more energy efficient one might seem small, but you can repeat it across all of the light bulbs in your home and you also gain benefit from it every single time you flip on the lights in your home after that.
So, which is better? Should you worry most about the big stuff? Or should you look for financial rescue in the little things first?
Let’s take a look at some specific examples of big changes and little changes that people might take on during their financial journey.
Five Big Changes
These five big changes are examples of single changes that can save hundreds or even thousands of dollars per year. They generally only require one life change of some kind to net those savings.
Getting a Roommate
Let’s say you live in a one-bedroom apartment. The cost of rent and utilities is bearing down on you, so in an effort to cut costs, you’re considering moving to a two-bedroom apartment and adding a roommate to split the costs.
According to Apartment Guide, the cost of a two-bedroom apartment varies from 12% to 34% more than a one-bedroom, depending on your specific locale. So, let’s say the price is 25% higher for all of the things that might be included – electricity, rent, parking, water, sewer, garbage, and so on.
If you’re looking at a 25% increase, that means that the cost of the larger apartment would be 125% of your current cost. If you have a roommate to split that, that means you’d only be paying 62.5% of your current monthly cost for rent and the other included bills. Not bad, huh?
What does that look like in dollars and cents? Let’s say you live in an area where a typical one-bedroom apartment rents for $1,000. That would mean, on average, that a two-bedroom apartment would go for $1,250, and that when you split the cost with someone else, your half would be $625, saving you $375 per month. That adds up to north of $4,000 a year – pretty sweet.
What’s the drawback? Well, the obvious drawback is having a roommate, which comes with some lifestyle changes, and you’ll usually have to move to a new location, which means a number of life changes such as a change in commute.
Eliminating a Car
The choice to switch from owning a car to relying on mass transit and occasional use of services like Uber or rental cars to get around and to travel is a shift that many who live in cities consider.
No matter how you slice it, a car is expensive. Once you get past the payments themselves, you still have the registration costs, the insurance, the parking costs, fuel, maintenance, the cost of traffic tickets… it seems endless at times. The AAA estimates that the average annual cost to own and operate an automobile is $8,698. Ouch.
What if you ditch that car entirely, though? Most cities have a mass transit system that offers monthly passes that range widely depending how far you are from the city center, though most monthly passes come in around the $80 to $100 mark. If you’re able to take care of all of your travel needs via the mass transit system, you’re dropping your annual cost from $8,700 to about $1,000, which is a huge savings.
Naturally, there will be situations where additional transportation services are needed, such as car rentals and Uber or taxi use, which will add to that somewhat. But in most cases the cost is still a huge savings – thousands of dollars annually – in favor of dropping the car.
Cutting the Cord
The average American cable bill is $99 per month. It’s a bill that many people would be happy to do without, and for many customers, dropping the cable bill is something that’s quite doable.
If you drop your cable bill in favor of using over-the-air television signals (which are free) and a single streaming service (like Netflix, which is $9 a month or $108 a year), you’re going to be saving more than $1,000 a year by making that switch.
Of course, making that switch usually requires fairly speedy home internet, but if you already have that in place, there’s no additional cost beyond the Netflix membership in the above scenario.
Even if you decide that you want multiple streaming services – say, HBO Now and Hulu Plus in addition to Netflix – you’re still paying around $30 a month rather than $100 a month, which adds up to an annual savings of around $800.
Dropping Gym Membership
The average gym membership costs somewhere between $40 and $60 per month, depending on the source. Let’s say it’s $50 per month on average, just for ease of calculations. Cutting out your $50 a month gym membership results in $600 in annual savings.
Now, cutting out your gym membership doesn’t mean eliminating exercise from your life. You’ll have to come up with your own exercise routines at home. There may be equipment costs, depending on what you decide to do.
A best-case scenario, for example, involves someone who does running, short exercise routines, and exercise videos that can be checked out from the library, which maintains that zero cost. That’s a $600 annual savings.
On the other hand, a person may be into weightlifting and buying the appropriate weights and equipment might cost well above $1,000 (along with the space needed to do this at home), but after that initial cost, there’s still a $600 annual savings.
(Regardless of which avenue you choose, it’s worth noting that regular exercise has a great positive impact on long-term health costs.)
Downsizing a Home
One change that can save an incredible amount of money annually is downsizing your home if you’re a homeowner. Rather than living in a home that has excess space, a person might consider moving to a smaller home.
Doing so comes with a ton of financial advantages. The smaller home comes with lower utilities, (usually) lower property taxes, lower maintenance costs, (usually) lower insurance costs, (usually) lower association fees, and so on and so forth.
The exact dollar amount of the savings varies widely here, but it’s largely a given that a significant downsizing will save you thousands of dollars a year while freeing up some of that home equity you built in your larger home.
Of course, there are costs associated with moving and with closing the purchase of a new home and the sale of your current home, and there may be costs involved with your new location (such as costs associated with change in commute). Still, downsizing one’s home can easily generate thousands in annual savings with a single move.
Five Small Changes
As you can see, single big moves can generate large savings all at once, but what about little moves? How can a little change possibly stack up?
Buying LED Bulbs for Your Home
If you’re in the situation that many American families find themselves in, you’re in the process of slowly migrating away from incandescent bulbs to other forms of lighting in your home. LED bulbs are probably the most cost-effective over the long term, as they sport a very long lifespan and a much reduced energy use; however, they have a much higher up-front cost.
Holly Johnson wrote a great article on incandescent bulbs versus CFLs versus LEDs last year for Money360, and she concluded that over a 23-year lifespan, using LED bulbs in a single socket in your home would cost $38, while an incandescent bulb would cost $201. That’s a savings of $163, but it’s spread out over 23 years, meaning that your average annual savings is $7.09.
$7.09 doesn’t seem like much, but it’s a starting point. You can multiply that amount times the number of light sockets in your home. In our home, for instance, I can quickly count 35 sockets and I’m sure I’m missing some, which brings the annual savings to $248.15.
In other words, replacing one LED bulb is a pretty small impact change, but replacing all of them throughout your home adds up to a pretty big change.
Cutting One Restaurant Meal Per Week
The national average for a meal eaten at a restaurant is $32.60, according to the most recent data I could find, whereas a meal eaten at home costs around $4. In other words, simply eating one more meal at home instead of eating out in a given week is going to save you $28.60 per week.
Now, it’s worth noting that many people would not move the average meal from a restaurant to their home. Instead, they’re much more likely to replace one of their less expensive meals, such as a fast food meal. My rough estimate of the savings from such a shift would be around $8 per meal.
Still, even if you go with the savings of $8 per week, over the course of a year, that change adds up to $416. That’s a pretty significant savings over the long haul.
The biggest disadvantage here is obviously the effort of prepping a meal at home, but even that can be mitigated by intentionally choosing a very simple easy-to-prep meal for your “replacement” meal, like a simple pasta meal that can go from idea to table in 15 minutes (much less than the typical wait at a restaurant).
Buying Five Store-Brand Items Per Week Instead of Name Brands
Most of the items I purchase at the store are store-branded items, sold at a significantly lower price than the equivalent name brand. I rarely deal with coupons or any other “tricks” for saving money; I just go for the store brand instead of the name brand.
That simple choice saves me about $1 per purchase, on average. So, if I simply choose to buy five store-brand items – hand soap, garbage bags, laundry soap, canned beans, etc. – instead of name-brand versions of the same item in a shopping trip, then I’ll save $5, right?
What happens over time is that you eventually realize that most of the store-brand items are perfectly fine and that change to the store-brand version becomes permanent, which means that your grocery bill permanently drops by a few dollars thereafter.
However, we’re going to assume that you’re just buying five store-brand items a week instead of the name-brand items. If you do that each week, that adds up to a savings of $260 per year, just from buying store-brand salad dressing or other such items.
Giving Up Soda
The average American consumes 44 gallons of soda per year. That’s a lot of soda. Simply replacing that with water would not only have some great health outcomes, it’d directly save a lot of money as well.
You can often find a 12-pack of 12-ounce cans of soda for $2.50 – that’s 144 ounces. There are 128 fluid ounces per gallon, so for $2.50, you can buy 1.125 gallons of soda. You’d have to buy 39 12-packs of soda to reach the average annual consumption of soda, so the total cost of soda for the average person for a year is $97.78 – let’s round that to $100.
So, yes, the average American spends $100 a year on soda (without even factoring in that some soda purchases – at restaurants and vending machines – will likely be more expensive). If you reduce that immediately to zero by drinking tap water instead of soda, that’s $100 in annual savings directly from making the switch to water instead of soda (assuming you’re an average drinker).
Beyond that, though, there will be health benefits from making this switch. Eliminating soda usually results in lower weight, lower obesity rates, and lower risk of illnesses like diabetes, all of which will save you additional money.
Staying at Home One More Night Per Week
According to Eventbrite, the average event goer spends $81 on a night out on the town and goes out twice a week. That seems a little high to me, but I’ll go with their numbers since I don’t exactly go out on the town too often these days (having three kids will do that to you).
So, let’s assume you cut out one night on the town – $81 – and replace it with a night at home, perhaps doing something with friends, and give that a cost of $10 (maybe you buy a bottle of wine or have a meal together or something). That means you save $71 per week. Multiply that by 52 and you get $3,692 per year.
Even if you were to subscribe to a lower price for a night out – say, $40, which seems more reasonable to me – you’d still save $30 per week by spending one night “in” rather than “out.” $30 times 52 weeks is $1,560 in savings per year.
That’s a lot of savings. It also doesn’t mean a night at home alone, since I’m assuming that you’re still spending $10 on entertaining guests in some fashion. Maybe you’ll spend some nights at home reading a book or binge-watching a show on Netflix, but other nights might involve a dinner party or something else that’s social.
Looking at the Patterns
So, what patterns can we see here?
First of all, big things represent more dramatic life changes. You’re going to have to make major changes to your life rhythms to net some of those big savings. You’ll have to move. You’ll have to ditch a car. You’ll have to get a roommate. You’ll have to ditch cable television (remember, the average American watches about five hours of television a day, so that’s a pretty big shift in time use).
Of course, over time, you’ll adopt new rhythms as you settle into your changed life, but the change is steep and the impact will be pretty strong. Of course, once you do switch, there will be very strong resistance to switching back – you’ve found a new path, after all.
On the other hand, little changes are much easier to implement. They involve things like buying something different at the grocery store or eating a meal at home. They’re very subtle in terms of life changes.
Of course, at the same time, it’s easy to relapse on the more subtle changes (for better or worse).
Big changes often result in huge savings from one change. That one decision will save you a ton of money – usually thousands per year.
On the other hand, little changes represent small savings, but that change is repeated over and over again. Saving $1 doesn’t seem like a big deal, but if you do it every day as part of a minor change in your life patterns, that’s $365 a year.
The little changes, repeated over and over again, tend to add up to a similar large financial benefit as a big change.
What can you conclude from all of this? Both big changes and little changes are useful in terms of improving your financial life! You want to look at a mix of big and little changes as you consider what changes to make in your life to reach a healthy financial state.
How do you decide what to change? Change the things that seem the least painful first! So many people associate financial change with misery, and that’s because they look at a list of 100 financial changes and focus on the five that seem the most painful. That’s the wrong approach. Instead, look at a list of 100 financial changes and focus on the five that seem the least painful.
Perhaps moving doesn’t seem like a big deal, but giving up your car does. Don’t associate saving money with giving up your car – associate it with the move that isn’t a big deal.
Perhaps giving up soda doesn’t seem like a big deal, but giving up a night out on the town each week sounds like a complete downer. Then give up the soda and keep the night out on the town.
The point is simple: both big and small changes can really help your financial life, and there are changes of both sizes that seem easy and seem hard. Take on the easy ones first, regardless of size. You’ll find that financial change really isn’t as hard as you think, regardless of whether you choose big changes like moving or little changes like buying store-brand pasta.
– Both are worthwhile! Don’t exclude either!