Budgeting Trade-Offs And Spending

J.D. Roth over at Get Rich Slowly recently pointed out that every financial decision we make is a trade-off. While this may seem self-evident enough--i.e. if I spend $1000 on a vacation, then I can't spend that $1000 on a  brand new television. Usually, this relationship is most evident when we are dealing with large expenses. That is, we recognize that by choosing to spend five hundred dollars on one item, then we cannot spend that kind of money on another item. That's Budgeting 101. But it is with smaller purchases that it is easier to forget this truism. If you regularly go to McDonalds for lunch, you might think of it as a meaningless $4 purchase that won't affect your finances much. However, if you go to McDonalds three times per week, then you are spending about $12 per week, or $48 per month at McDonalds. Annualized, this comes out to a little less than $600 per year. This is neither a good nor a bad thing. All I want to point out is that it is important to remember that small, frictional expenses can add up over time, depleting your money gradually and relentlessly without you even realizing it. If you want to read a great article that points out how this applies to all areas of our life, be sure to visit Mr. Roth's article at Get Rich Slowly by clicking here: http://www.getrichslowly.org/blog/2011/07/05/every-purchase-is-a-trade-off/ .