Hack Your Personal Finances: Why Small Tweaks Can Make a LIFE CHANGING Difference

Daniel King
6 min readJan 3, 2017

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Be not afraid of gowing slowly, be afraid only of standing still.

Happy 2017! What’s your new year’s resolution? If you’re like many people, you might have set up a resolution for this year, like “I’m going to lose weight!”, or “I’m going to enjoy life to the fullest!”, whatever that means.

And, if you’re like many people, you have probably made some new year’s resolutions in the past, and then failed to meet them. Too often, we set out to achieve some huge goal that we think will make huge difference in our lives. In the early days, we are motivated by that goal. As time goes on, though, the goal by itself isn’t enough to sustain us. We are putting in lots of hours at the gym, but we don’t see our progress day-by-day, and so we get discouraged, and we stop being so dedicated to the mission, and we eventually give up entirely.

It is much easier to make changes in our lives if the changes are small. It is easier to commit to walking up the stairs instead of taking the elevator, rather than committing to spending 2 hours in the gym daily. But, make no mistake: These small changes, when they become habits, can add up to LIFE CHANGING results.

I realize that you’ve probably heard all of this before, and you’d rather read about practical things that you can do. Today, I would like to make one suggestion as to a small change that we can all make to our habits this year. This particular change has to do with money, and how we can make choices that will improve our financial situation. However, the concepts we’ll talk about here can be applied to almost any aspect of your life to make small changes that will create HUGE benefits.

Every Financial Decision is a Long-Term Decision

To truly understand how to make small changes to our habits that will add up in a BIG way, it is important to change the way we look at the small purchases that we make on a day-to-day basis. I’m going to use a classic example to illustrate this principle: A habit of going out for coffee every morning.

There are a lot of people who stop in at Starbucks every morning on their way to work to pick up a coffee. About 5 years ago, I was one of them.

“A coffee is $5,” I would think to myself. “That’s not bad at all. Why not throw in a pastry or two while I’m at it?” All in all, it is easy to spend around $10 a day on your morning coffee.

This doesn’t sound like much…until you look at the long-term consequences.

There is a great rule of thumb that I recently learned from Mr. Money Mustache: For a weekly expense, multiply the amount by 752 in order to estimate the cost after 10 years. For a monthly expense, multiply the amount by 173 (see A Note on the Math at the end of this post if you’re curious about how these numbers are determined).

Applying this rule of thumb to my morning coffee, I find that after 10 years, I will have given up $10 * 7 days per week * 752 = $52,640.

WHAAAAAAT????!!!!!

FIFTY-TWO-THOUSAND DOLLARS, FOR COFFEE AND PASTRIES?

I don’t know about you, but I sure wish that I had made a decision 10 years ago that would have resulted in me having FIFTY-TWO-THOUSAND DOLLARS MORE in savings right now. Once I saw that, the decision would be pretty damn easy to make coffee at home from now on.

That is the power of small habits: They accumulate over surprisingly short times to yield enormous results.

Don’t make the mistake of thinking that this is about coffee — if you focus on that example, you’re missing the point. The point is, it is easy to fall into the trap of believing that a small habit like going out for coffee every morning won’t have much of an effect on your overall financial picture. But, when you take into consideration that 63% of Americans would have trouble pulling together one-thousand dollars to handle a surprise expense, it becomes clear that for most people, it is insane to spend over fifty-thousand dollars on coffee when you could have made coffee just as well at home.

Life Changing Results

If you look in the mainstream media, it is easy to find headlines like this one about how you just can’t get by on $100,000 a year anymore. Given this, some people might look at the $52,640 figure from above and think, “yeah, that’s a nice chunk of change, but it’s small potatoes compared to what you really need in today’s world.”

NONSENSE.

$52,640 is LIFE CHANGING money. To see why, it is important to think about it not in terms of what you can buy with it, but in terms of the freedom that it can give you.

$52,640 is enough money that you could live comfortably in any city in the United States for months, without needing anything extra.

It’s enough money that you could quit your job, devote some time to learning or going back to school, and reinvent yourself in a new career that you’re more passionate about (incidentally, I myself did this in 2016, and I am so thankful that I didn’t have to worry about how I was going to put food on the table during that transition).

It’s enough money that you don’t have to worry about losing your current job, because you would be able to survive comfortably for a little while as you put some effort into finding your next opportunity.

It’s enouh money that you could escape an abusve relationship, help out a family member in dire need, or move to a new place to seek new opportunities.

All of these LIFE CHANGING possibilities…from a small decision to make coffee at home instead of going out.

So, here’s my challenge for 2017: Choose some relatively small aspect of your financial situation, apply the rule of thumb above to estimate how much you could save over 10 years if you made a change, and then…make the change. Some things to consider:

  • Going out to eat for lunch or dinner a lot? Try cooking at home more regularly (my favorite strategy is to spend a couple of hours on Sunday cooking for the entire week).
  • Spending a lot of time commuting to work? Think about if it would be worth it to move closer to cut down your commute time.
  • Driving a new car? Consider trading it in and getting a good used car on Craigslist (see here for some good suggestions, although the list is a little out of date)
  • Using an expensive cell phone plan from a major provider? Consider switching to one of the excellent alternatives like Republic Wireless (I literally cut my phone spending down by 75% by doing this, which will save me over $10,000 after 10 years)

Whatever changes you decide to make, I’d love it if you would let us know about it in the comments below. Let’s support each other in making our lives a little better this year.

Once again, happy 2017!

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(A Note on the Math: These numbers are based on the assumption that if you hadn’t spent that money, you would have put it into a productive investment paying about 7% per year. This is a very reasonable assumption on average, provided that you own, for example, shares of a low-cost stock index fund. If you’re not very confident about investing in the stock market or have some anxiety over the risks involved, I highly recommend reading the Stock Series, by Jim Collins.)

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Daniel King

Professional Software Engineer and Educator, amateur Musician, armchair Personal Finance Expert