Context is one of the key factors in financial planning. If you overlook the meaning of what you do within your own circumstances, it usually works out poorly.

Small purchases add up. Be careful.

In 2012 The Bank of Montreal reported that Canadians spend $3,720 per year on impulse purchases. That’s about $4,500 today.

That’s not so good for the savings plan, but possibly there are mental health benefits. Buying something just because you want it cheers up an otherwise bad day. Impulse buying individually may be among the least of the self-sabotaging financial behaviours, but that’s on a day-by-day basis. Over a year, it’s more serious. It adds up. A $600 a month raise would produce $4,500.

Which would be easier? Get a raise or reduce the spending.

Big once or small many times?

A 100-foot fall will kill me, but a 1-foot step repeated 100 times will have no noticeable effect. It’s the same with spending.

If I had to buy a Starbucks or Timmy card once a year, I would relate to coffee shops differently. When I spend $4.00 per day, I pay $1,460 per year. The money drifts away without much conscious thought or effort.

If I were required to spend $1,460 in a single transaction (the 100-foot fall), I would do without coffee shops.

It’s harder to see that context when all you see is the $4.00 bill.

The same thing happens with lottery tickets, cigarettes, magazines, movie downloads, chocolate bars, etc. Marketers have learned that people will spend a bit of money many times, far more easily than they will spend a large sum once.

Assess the opportunity

With respect to small repeated purchases, how much do you spend annually? The threshold for meaning is having decidable information.? It is different for each of us. Some of us don’t like to break a hundred-dollar bill. Others among us don’t want to break a quarter. Establishing your threshold of meaning and deciding what to do about it is essential to financial maturity. Spend some time and negotiate it with yourself.

People do not lose their money in a rush like water through a broken dam; they lose it like a leaky tap.

“How did you go bankrupt?”
Two ways. Gradually, then suddenly.” ― Ernest Hemingway, The Sun Also Rises

Rewards for behaviour

Maybe you need an incentive. Would it matter if you spend $4,500 a year now but decided to save it instead? Maybe. If we assume investment in tax-free savings account at 5% and further assume inflation at 2% annually, after 35 years, you get a surprising answer. $561,000! To be fair, it is only about $275,000 of today’s money. That’s more than enough today to buy a comfortable 2-bedroom condo in some parts of Florida. If you shop, there might be enough left over to buy a Lincoln to get back and forth

Economics and finance always involve tradeoffs. Coffee and other stuff traded for a winter vacation property at retirement. How hard is the choice?

Looking for leaks

It doesn’t take much effort to find the leaks. Once you know what they are, you can decide if you want to make a change.

  • What is a little thing, is (just) a little thing.
  • But to be faithful in a little thing
  • is a great thing.

Augustine of Hippo.

Not every little thing is obvious.

Check your life insurance and disability insurance premiums. (Except Universal Life.) If you “conveniently” pay them monthly, the insurer charges you a service fee and interest for that convenience. It is almost a month’s premium per year. Call your agent and pay annually.

How much credit card interest do you pay? Get a cheaper loan and be more careful with credit card purchases.

Easy money.

I build strategic, fact-based estate and income plans. The plans identify alternate ways to achieve spending and estate distribution goals. In the past, I have been a planner with a large insurance, employee benefits, and investment agency, a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business. I have appeared on more than 100 television shows on financial planning. I have presented to organizations as varied as the Canadian Bar Association, The Ontario Institute of Chartered Accountants, The Ontario Ministry of Agriculture and Food, and Banks – from CIBC to the Business Development Bank.

Be in touch at 705-927-4770 or by email at

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