Small Purchases Add Up

Spending is a choice, and it’s easier to understand if you frame it correctly. Small expenditures are often overlooked.

According to Statista, if I wanted to buy a small pack of cigarettes in Ontario, I would pay, on average, $12.26. That is more than 60 cents for a single cigarette. Even if I ignore the health risks, that qualifies as insane.

People have trouble making small expenditures make sense.

Whether it is a Starbucks Caffe Americano five days a week at $3.95 plus tax and tip, likely $5.00, or the cigarettes, neither $12 nor $5 seems to be a budget breaker. They are, though.

To make it meaningful, you must reframe the expense. A pack-a-day smoker spends $360 per month or $4,320 a year. Morning coffee is $25 a week or $1,300 for a total of $5,600 after tax dollars each year. If a taxpayer in the 35% bracket puts the pretax equivalent in an RRSP, $8,600 per year, investing at 7% for 30 years yields capital of $295,000.

Assuming inflation for the 30 years at 4%,  the capital amount becomes $1,340,000. Cigarettes and coffee for 30 years for 1.3 million dollars? Now it looks expensive.

What if?

There is always a judge. This person’s girlfriend points out that if he saved the money, instead of spending it stupidly, in 15 years, he would have enough to buy a Porsche. The cynical boyfriend says, “You don’t smoke or buy $5 coffee; where’s your Porsche?”

Everyone has things they spend money on because the amount seems small and inconsequential. If it is a one-off, it likely is inconsequential, but if it repeats regularly, reframe the expenditure. Watch your credit card for autorenewing subscriptions.

For irregular purchases, think a little differently. Would you spend eight hours of work after taxes and deductions for a pair of designer jeans? Maybe, but looking at it that way, I’ll bet it wouldn’t be an impulse purchase.

We all do it, and some of it is necessary to enjoy life. But not all.

The keys

  1. Understand habitual, small spending on non-essentials.
  2. Notice larger impulse purchases.

You do that by reframing their cost. Reframing the price helps you understand the context.

I build strategic, fact-based estate and income plans. The plans identify alternate and effective ways to achieve spending and estate distribution goals.

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

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