Watching how life's little luxuries add up

Most of us don't see our daily treats as proper spending, but bringing back the pocket budget book might make us think differently, writes FIONOLA MEREDITH

THE MORNING cappuccino on the way to work – it’s a comforting daily ritual for many of us. But added up over the course of the year, that little caffeine habit is eating up hundreds of euro. Factor in magazines, smoothies, downloaded songs from iTunes and all the other sundry vices, treats and fripperies we use to sweeten the daily grind and we’re throwing away thousands, without even realising it.

Boozy nights out, the kind where your purse, well-loaded with notes at the start of the evening, is suddenly surprisingly empty, only add to the enormous running total.

A new international survey from Visa Europe puts the average overspend on small everyday purchases at £2,000, or more than €2,200 each year, with one-third of people admitting to losing track of how much they spend on small stuff. That’s the trouble: you just don’t feel like you’re spending hard cash. It’s a form of wilful financial amnesia, a kind of “don’t ask, don’t tell” game we play with ourselves.

Of course, “mystery spending” isn’t a new idea, and credit and debit card companies such as Visa have a vested interest in drawing our attention to it. Visa, for example, is keen for us to embrace “contactless card technology”, whereby shoppers pay for low-value items by holding a card over a reader at the till. These items then show up on the cardholder’s statement.

The traditional solution, as recommended by the Money Advice and Budgeting Service (Mabs), is to keep a pocket budget book, where you record the minutiae of the weekly spend. It can give you quite a nasty jolt. Michael Culloty, of Mabs, says one woman found she was spending more than €100 on lattes every week. But it’s one thing to play fast and loose with pocket money when times are good. Perhaps the real mystery is why, even in these recessionary days, we’re still splashing the cash as though there’s no tomorrow.

Why, given that we currently owe €2.9 billion on 2.17 million personal credit cards, are we still heedlessly frittering money away? In fact, the Visa survey found that some people (one in 10 men, and one in five 18- to 24-year-olds) are literally binning their loose change because they find it irritatingly heavy or bulky to carry around in pockets or purses. And 40 per cent of 18- to 24-year-olds say they deliberately buy things they don’t normally want, just to get rid of that pesky change.

It’s careless, profligate attitudes like this that get financial adviser Juliana Sloan holding her head in despair. “Because they’re not properly educated about finance in schools, young people have no idea of value,” she says. “Everything is for today, everything is ‘to go’. We’re still a spend-today-worry-tomorrow nation. Cash is a disposable commodity and much less painful to part with. We may be aware of how much we withdraw from the ATM, but how many of us note down what we actually do with that cash? And yet both my grandmothers made a note of all their spending, right down to the smallest groceries.”

We may be cutting down in general, adds Sloan, “but coffee, papers, sandwiches, sweets and so on are not considered luxuries, more like necessities or even our entitlement”. She too recommends the ‘little black book’ approach. “If we have a medical complaint requiring our diet to be analysed, we are asked to note every single item consumed, perhaps over a three-month period. Would this not be a wise practice to employ in assessing one’s cash disposals? Historically, this has been an area rarely examined by those offering financial advice, but in light of these painful financial times, it might be more sensible to look at financial planning through more prudent glasses.”

From a purely economic point of view, it makes sense to get a grip on our runaway small-scale finances. But measured in a more holistic way, daily treats may be more than just self-indulgent excesses to be ruthlessly curbed. “Little purchases lift us, raise our self-esteem, make us feel better,” says psychologist Roger Bailey. “That’s why we buy flowers for the house, even though we can’t afford to fix the broken shower.”

Bailey thinks there could even be a deep-rooted dimension to our behaviour. “Human beings, from an evolutionary standpoint, have always loved to graze, snacking on bits of fruit, enjoying different flavours and tastes. It’s quite a deep need, and responding to it makes us feel less anxious.”

So – to spend, or not to spend? “It depends on how financially strapped you are or, more simply, how much willpower you possess,” says Sloan. “But I, for one, won’t be giving up the Americanos or the glass of red.”