Look After the Pennies and the Pounds Will Look After Themselves?

George C Scott as Scrooge

I remember hearing this phrase as a kid and never really understood it, surely if you want to look after the big things in life then look after the big things right?  Ok so this is not the place to launch an attack on the penny pinching brigade, for some it’s necessary and yes a lot of small frivolous spending will add up to, well a lot. However, if there’s a choice between tackling the mortgage or the morning cappuccino, go for the mortgage.

Why Focusing on Big Ticket Items Pays Dividends

If you’re really looking to save money the best place to start is the big ticket items, consider what do you spend the bulk of your money on, home mortgage, car finance, utilities?  These are the items which you are most likely to be able to save the most money on and there probably the items in all reality that can be fixed relatively quickly.  A single switch of the mortgage could save you thousands or years off your payment schedule and changes in insurance and utility providers can often save hundreds in a few phone calls.

The other great thing about switching big ticket items is that you often won’t suffer from any downside other than the hassle of switching.  I promise your house will not bear a grudge if you switch mortgages and your lights will be as bright with NPower or Eon.

The other great thing about big ticket savings is they often come in lump sums, if you save £100 on your annual insurance premiums that's a £100 saving today, not spread over a year in a way that is neither here nor there.

The Problem With Saving the Pennies

On the other hand, you could focus on saving the pennies, cutting out all the small and unnecessary things in life over a year saving quite a bit of money.  The problem however is that small savings take a long time to add up, yes cutting out a coffee three times a week will save you £300 a year, but that’s taken you a whole year to achieve what you might of done in a few hours working on the big ticket items.  In addition, would you have really put that £2 a time in jar and then spent it at the end of the year or would you have just spent it on something else and not really have saved anything?

The other problem with small savings is that they often have a noticeable impact on one’s lifestyle, you won’t notice the difference between one company’s gas and another but switch from a decent set of coffee beans to the cheapest instant stuff, sure you’ll save a little money but you’ll also have bad tasting coffee.

As such, there’s nothing wrong with saving money and trying not to waste your resources.  However, to reap the maximum benefits, focus on big ticket items and items were there is truly no difference between alternatives.  If you want to save big, think big.