The Snowball Effect

I often write about how a person can save a few dollars here and a few dollars there by making a few little changes in their life. For some of my readers, this seems pointless, and they’re quite happy to tell me so. “Why bother saving $3?” they’ll ask.

Over the last month or two, I’ve really begun to understand the reasons for frugality: those little choices snowball into something big over time. Let me show you exactly how it works.

An Example of the Snowball Effect

Make your own laundry detergent

Let’s say I decide to try out being frugal by doing something that’s quite fun (at least for me): making a big bucket of homemade laundry detergent. Each load done with the homemade detergent described in that recipe versus the cost of Tide with Bleach Alternative saves me seventeen and a half cents. We do a load of laundry each day, so that adds up to $5.25 a month in savings.

Use that savings to buy a big pile of CFLs

You save that $5.25 every month and after three months, you have $15.75 saved up. You take that $15.75 and use it to buy a set of four 100 watt equivalent CFL bulbs and replace the 75 watt bulbs in the light fixtures in the room you spend a lot of time in – say, four hours a day. Since the bulbs are then free, you can rack up the savings. Each bulb is now savings 52 watts, or a total of 208 watts every hour they’re on – plus, they have the lifetime of five incandescent bulbs. So, over the course of the next year, you’ll save 208 watts over four hours each day for 365 days, plus the cost of three incandescent bulbs (roughly the number that will burn out over that year). If your electric company charges a dime per kilowatt hour, that means you’ll save $30.36 on your electric bill over the next year, plus you save on the cost of three incandescent bulbs, which cost $2.36 each, you save $37.44 over the course of the year, or $3.12 per month.

Use that savings to buy a big pile of cloth diapers

Now, from the CFLs and the detergent, you’re saving $7.98 per month. Now you find out you’re pregnant, so you save up that $7.98 per month for seven months, giving you $55.86. You use that money to buy three bumGenius 4.0 One-Size Stay-Dry Cloth Diaper (bumGenius are what we’re using). These diapers save you $0.26 per diaper change over disposable diapers and you’re able to run a load each day. That’s $23.40 for the first month, and then after two months, you’re able to order another batch of three, and after the third month, another batch – all paid for by frugal savings. After that, you’re saving $0.26 per change on an average of five changes per day – a savings of $39 per month. When the child grows out of diapers, you just keep saving that money anyway.

Use that savings to buy all of your nonperishables in bulk

Now that your savings all around is $46.98 per month, you are able to start buying things in bulk at the store. Instead of having to cut corners, you can buy things like rice, beans, dishwashing soap, garbage bags, bar soap, shampoo, conditioner, toothpaste, fabric softener, deodorant, and so on in bulk. You use one month’s worth of savings to get a membership at Costco and thereafter cut about $25 per month off of your spending because you’re buying many items in large quantities, storing them, and using them as you need them.

Use that savings to buy a deep freezer and start buying food in bulk to freeze

Your savings is now $70 per month with basically no lifestyle change at all. At this point, you set up an automatic deposit into an online savings account – $70 each month goes into that account, which earns 3% interest. After five months, you have $352 in the account, so you use it to buy a deep freezer for the frugal benefits. You then start buying items like bread and milk in bulk and freezing them, saving you another $5 a month. After two months, you’re able to afford buying a portion of a cow in bulk from a local farmer, already cut up and processed for you, substantially cheaper than at the store. You store this in the freezer, too, and all told, you wind up saving about $20 more a month on food costs.

Use that savings to buy a used, fuel-efficient economy car

You’re now socking away $90 a month into that savings account. Nine years later, the kid is old enough to be involved in a pile of youth activities, so you start looking for a more fuel-efficient and reliable car. You look in that account and magically there’s $10,971 in there ($90 a month, compounded at 3% annually). You trade in your current vehicle and pay for the rest of that late model fuel efficient car in cash. Your monthly gas bill drops by $60 and on average you’re saving $20 on repairs, too, with this new, efficient car, and that doesn’t even include the savings from not having to make a “normal” car purchase with payments and such.

Use that savings to pay for college

Now you’re socking $170 a month into the account. Nine years after that, your child is ready to go to college. You peek into that account. $20,724.57

And it all started twenty years before by making a batch of homemade laundry detergent.

That, my friends, is what frugality gets you. One little change, conserved over time, can snowball into something amazing. Why not get started today by finding a little change you can make in your life and putting away that difference?

Trent Hamm

Founder of The Simple Dollar

Trent Hamm founded The Simple Dollar in 2006 after developing innovative financial strategies to get out of debt. Since then, he’s written three books (published by Simon & Schuster and Financial Times Press), contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.