Are your small spending habits sending you broke?

At the risk of sounding like a broken record, the past two years really have not been financially bountiful for the vast majority of working Australians. The cost of living skyrocketed, wage growth continued to stagnate and then before we knew it, staying afloat quickly became the new getting ahead.

While the pain is still far from over, recent inflation figures from the ABS suggest that the worst of what we’ve experienced is slowly but surely easing. And with millions of Australians now finding themselves with some extra cash in their pay packets thanks to the government’s stage 3 tax cuts, it could be said that things are starting to look a little brighter.

A treat here and there won’t break the bank, but being more mindful about it could leave you with more cash to save.Credit: Dionne Gain

Which brings me to this week’s tough love topic: small spending habits, and why yours might be sending you broke (or, at the very least, holding you back).

For me, small spending habits include many things – takeaway coffees and food deliveries, taking an Uber over public transport, being tempted by the travel-sized minis on your way through the checkout in Mecca and Sephora, and so on.

But there are things that are distinctly excluded from small spending, too, and that’s anything that would be considered an essential – utility bills, car insurance, healthcare, etc. While there are often savings that can be made in these areas, in this instance, I’m talking specifically about money that’s in your discretionary budget.

This is the money that’s left over once the bills have been paid and savings set aside, and it’s the money that adds colour to our lives.

It’s less about what your small spending is on, and more about how small spending habits subconsciously impact your mentality towards saving.

In some ways, our discretionary spending money feels the most real to us. It’s what we use when we catch up with friends, buy gifts for loved ones, take lunch breaks from our desks, unwind after a long day with some takeaway and a new TV series, and buy some new clothes for the weekend.

Because this money has the power to make us feel so good, and validates the hard work we go through to earn it, to my mind, that makes it all the more important that every cent is well spent. And yet, through small spending, you could end up seeing the opposite happen.

According to the most recent Commbank iQ Cost of Living Insights Report, the average Australian adult had discretionary spending of $1379 per month – a change from 0.5 per cent in the period July to September 2023, to 1.3 per cent in July to September 2024.

Within this, the amount of discretionary spending going towards travel increased by 22 per cent, while retail spending grew by 20 per cent, streaming service spending grew by 13 per cent, and a further 6 per cent increase went towards food delivery services.

None of these spending figures are inherently right or wrong, good or bad. When it comes to discretionary spending, as the name suggests, it’s all about how someone finds enjoyment and what brings them satisfaction or fulfilment.

One person’s $34.99 book may be another’s $28 movie ticket or $89 video game, for example. In that sense, it’s less about what your small spending is on, and much more about how small spending habits subconsciously impact your mentality towards saving.

Say, for example, you’ve just been paid for the week. You put aside money for bills, and are left with a discretionary spending budget of $344.75. You’ve got a friend’s birthday dinner coming up, and after a long week of work, you decide to have some drinks with colleagues after work and catch an Uber home because it’s late.

The next day you feel a little dusty, so you order some takeaway and enjoy a morning on the couch watching TV before going to find a present before the party.

On the one hand, you could stay only for half-priced happy-hour drinks, catch public transport home, make breakfast for yourself, organise a group gift with other friends, and order the cheapest item on the restaurant’s menu. In this scenario, you’d probably save between $100 to $200, which is certainly nothing to sneeze at – it’s around half a week’s discretionary budget!

On the other hand, you could say “what the hell?” and enjoy the weekend outlined above, reasonably justifying to yourself that with the cost of living being what it is, having an extra $150 a week really doesn’t mean what it used to, so why not have a fun weekend?

The third option, though, is to find a halfway point. Say you manage to save $75 by using public transport to get home and skipping the Saturday-morning food delivery.

In that scenario, you haven’t lost any of the socialising opportunities, but you’ve still prioritised the habit of saving and acknowledged that in future you would no doubt love an extra $75. It’s the modern-day equivalent of finding $50 you’d forgotten about in an old winter coat.

Option three is all about moderation. It’s like eating one or two Tim Tams, rather than the entire packet at one end of the extreme, or refusing to have biscuits in the house at the other end.

Just like any other healthy habit in our life, when financial moderation is applied to small spending over a long period of time, those small changes eventually add up. That $75, for example, becomes almost $4000 over the course of a year.

Considering around 3.4 million Australians admitted to having less than $1000 in savings last year, an extra $4000 in your pocket is nothing to sniff at.

What’s more, when these savings are found from your discretionary budget, it feels good because it’s still a gift from yourself to yourself. And at the end of the day, that’s what the pool of money specifically tasked with sparking joy in your day-to-day life should be doing.

Victoria Devine is an award-winning retired financial adviser, bestselling author and host of Australia’s No.1 finance podcast, She’s on the Money. She is also the founder and co-director of Zella Money.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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