But while it’s good to be mindful of these “low hanging fruit,” it’s the big-ticket items that do far more harm in a much shorter period of time.

Forming good habits is one thing. But swearing off a $2 coffee only to drop $1000 on plane tickets or $200 on a weekend in the city kind of defeats the purpose.

In many cases, the thinking that the talk show host was portraying is why it is sometimes difficult to achieve large-scale change in society. Just take CFLs for example – yes, changing one light bulb doesn’t seem to make much difference, but when every household in the nation does so, then that’s a major difference!

“But just because you take the big steps, why ignore the little steps? ”

The question becomes: how “little” of a little step is still worth it? Is it worth it to wash and re-use baggies? For some people maybe, for others not so much.

Trent’s article the other day hit on this same point (see The End Is The Beginning).

Yes, little things add up. But the question is to how much and is it worth the effort. $27,000.00 of today’s dollars will be worth just shy of $10,000 in 35 years. Is it worth giving up 35 years of lattes for an extra $10,000.00 when you retire? To some, yes. To others, maybe not. That’s not a bad decision, its just a personal preference (assuming you’re otherwise financially solvent).

“But just because you take the big steps, why ignore the little steps? ”

The question becomes: how “little” of a little step is still worth it? Is it worth it to wash and re-use baggies? For some people maybe, for others not so much.

Trent’s article the other day hit on this same point (http://www.thesimpledollar.com/2009/02/06/the-end-is-the-beginning/).

Yes, little things add up. But the question is to how much and is it worth the effort. $27,000.00 of today’s dollars will be worth just shy of $10,000 in 35 years. Is it worth giving up 35 years of lattes for an extra $10,000.00 when you retire? To some, yes. To others, maybe not. That’s not a bad decision, its just a personal preference (assuming you’re otherwise financially solvent).

1) I live in north central Kansas. Everything is cheap here, although people are paid less, too.

2) I’ve never been to Seattle.

3) But I have been to Toronto and I had the best latte of my life there. A little place that specialized in lattes with nice wooden benches outside just down the hill a bit from the gay neighborhood. God, it was worth it.

Moral of the story: Live in Kansas, but vacation in Toronto (or NYC or maybe Seattle next).

In life we could use a hatchet or we could use a scalpel. I like the scalpel for almost everything.

But even drinking a $3.50 coffee a day adds up!

My conclusion is that, while these “little steps” will not see a big instantaneous return on our daily frugal investments, they do certainly add up.

When trying to save, consider the big steps and little steps.

As far as the big steps – if you can save on your mortgage, your interest payments, your insurance, if you can get a raise, get a higher paying job, cut costs on your car, your home or your bills – do it.

But just because you take the big steps, why ignore the little steps? They do add up. Like todo es bien says – we’re really talking about $27,000 – and that’s just for coffee! What if you were also frugal with your lunch, your grocery bill, your electric bill, your spending habits on clothes, books, electronics and toys? We’re talking about big numbers. In fact, if someone were to compare the difference between investing the price of a coffee every day into a savings account, vs selling that jet ski and investing the profits, the non-coffee drinker would be financially ahead – AND he’d still get to enjoy his jet ski.

I opt for the company coffee myself.

In Manhattan, lattes are about $4.30, plus tax. Throw the change into the tip jar for the barrista (you do tip, don’t you?), and it’s $5. I know plenty of folks who do this at least daily, some more than once a day.

Prices and expenditures are relative. Here are some examples from my neighborhood, a decent area, not some high-priced trendy area… Movies: $13 or $13.50. Rent on a studio apt: $2200. Buying a studio apt co-op: $400,000. Almost no one owns a car, it’s unnecessary in a city with great 24-hour public transportation and expensive parking ($400-$800/month).

I changed my mindfulness of these purchases when I calculated how much I would have to invest and save to equal a post-tax return equal to the expense vs. simply not spending this money in the first place.

Let’s take the $30/month, $360/year coffee habit as an example.

If I could get a one-year CD at 4% interest, how much would I have to invest to come home with $360 after taxes?

If this were a tax-free return, I would need to invest $9000 in a one-year CD paying 4% to get $360 at the end of the year.

But this is real-world, I have to pay taxes on the interest earned by that CD. I live in NYC, there’s a state and local income tax, in addition to federal income tax.

Based on my marginal tax rates, I get to keep about 67% of the interest earned after paying taxes. That means I would need to receive interest of $537.31 before taxes to come home with $360 after taxes ($537.31 * 0.67 = $360). To receive $537.31 in interest, I would need to invest $13432.84 in a one-year CD paying 4% ($13432.84 * 0.04 = $537.31).

So you tell me, which is easier? Cutting out a few coffees, or saving up over $13000 and losing use of it for one year to come home with $360?

Nevermind that it’s practically impossible to find a one-year CD paying 4%.

Once I started evaluating my discretionary purchases this way, it became really easy to cut out the fluff.

When I do spend money on purely discretionary expenses (night out with friends at the local sports pub, a new computer doodad, etc.) it’s made with full knowledge and mindfulness, and most importantly, WITH LIMITS. I allocate $X in my budget for this, and if I decide I want to spend the money, I do. If I decide I’d rather invest it, or save it for something else, that’s also an option. I have CONTROL. What I no longer have are mystery shortfalls in my budget (“Gee, I took $200 out of the ATM last week, how come I have no money in my pocket?”).