Is it Smarter to Pinch Pennies or Dollars?

MSNBC recently compared the benefits of sweating the small financial stuff versus the big stuff.  Their conclusion?  Both ways work.

Penny pinching – clipping coupons, buying store brands, etc. – helped one couple profiled in the story knock out $50,000 of non-mortgage debt and build a healthy emergency fund in less than three years.  It’s also what a $37,000-a-year teacher credits for enabling him to provide for his family of four on his salary alone.

But another person quoted in the story said penny pinching is “the most emotionally draining way to save.”  What works better, she said, is to downsize the big stuff — trade the McMansion for a more affordable home and sell the second car.  Another advocate of focusing on bigger ticket ways to save recommended capping your lifestyle.  Instead of using raises to trade up to better restaurants and vacations, use the money to pay off debt and build savings.

I don’t think this is really an either-or situation.  To free up money for generosity, savings, investing, and overall financial breathing space, it’s important to get the big stuff right, like keeping housing costs (mortgage, taxes, and insurance) to 25 percent of monthly gross income.  But it’s also important to proactively manage day-to-day expenses.  Doing both is the route to a financial life that works.

What works best for you – focusing on the big stuff, sweating the small stuff, or a little of both?

4 Responses to Is it Smarter to Pinch Pennies or Dollars?

  1. Matt Bell October 26, 2010 at 4:25 PM #

    Miriam – I’ve heard nothing but good things about car sharing services like the ones you mentioned. Since we don’t live right in Chicago anymore, when I need a car I usually use Enterprise since they’ll come and get me. They often have deals on the weekends, which is when I do most of my workshops, where you can rent a car from Fri – Mon for about $35 total.

  2. Miriam Kearny October 26, 2010 at 12:02 PM #

    One way to keep car cost down is – if you live in a major city – to evaluate if you even need one and use an outfit like Zipcar or Autoshare to rent cars (there is probably one parked a block or so away from your home) by the hour. the cost is reasonable – they’re not set up for weekend rentals, they’re intended for errand running in town. Have your car and drive it too!

  3. Matt Bell October 26, 2010 at 9:27 AM #

    I’m with you, Andy. I’m more motivated by a big win, which then seems to trickle down to lots of additional little wins. But clearly it can work either way. I guess the key is to discover what works best for you. Also, I like your focus on momentum, which I know you’ve written about before on your blog. That’s such an important concept. Lots of people start and stop with their goals. Finding ways to gather and maintain momentum is so important.

  4. Andrew Jacobson October 25, 2010 at 10:19 PM #

    Hey Matt! I like to start with the big stuff and work down to smaller savings. You would have to pinch an awful lot of pennies to make up for a big win, like saving a few hundred bucks by switching insurance carriers. Also, I worry that people run the risk of pinching so diligently that they get burned out and decide they deserve a reward… something expensive that probably wipes out all of their hard work saving. Start with the big wins and gather momentum toward the smaller stuff, because I agree that doing both is the best route.

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