One of the most simple, but most important financial disciplines you can begin is to track every expense for 90 days. We used the Daily Spend sheet for 90 days and it radically impacted our spending. I realized I was frittering away $1500 a year in work pocket change--lunches, vending machines, etc. That daily change could have paid off 4 of our credit cards immediately! It was a real wake-up call. You will find the "power of the little" adds up:
Example 1: A smoker quits his habit
2 packs a day: $2000/year or $20,000 over 10 years or $80,000 over 40 years.
Potential impact: Could purchase 4 to 5 vehicles with CASH! Could build 20 churches in Asia
Example 2: Start taking your lunch to work
20-25 lunches a month: $1300/year or $13,000 over 10 years or $52,000 over 40 years
Potential impact : could pay for kid's college education, could increase giving or pay-off debt quickly!
We save more than $1000 a year by using the entertainment book for 50% off dinners, groceries, fast food, recreation, movies, dry cleaning, sporting events, hotels, and many other things. We rarely pay full price for anything, and we don't go anywhere without it. It pays back 20 to 30 times our investment every year. The power of the little! A little discipline--A lot of savings! Your city may offer other budget books as well.
The power of the little can also work against us if we are merely paying the minimum on our credit cards:
Example 1: Credit card balance- $2000, Interest rate- 12%, Monthly payment- $20
Impact: Credit card NEVER gets paid off
Example 2: Credit card balance- $2000, Interest rate- 10%, Monthly payment- $20
Impact: Credit card is paid off in 18 years, and interest paid is $2318
Example 3: Credit card balance- $5000, Interest rate- 18%, Monthly payment- $100
Impact: Credit card is paid off in 7 years, 10 months and interest paid is $4311
The power of the little and the power of compound interest can work for your or against you. Many more examples are cited in Ease the Squeeze. Are credit cards bad in themselves? No. Only when they get a grip on you. If you knew you did not have a credit card to lean on, only cash, how would you change your spending patterns?