Do You Actually Need to Stop Minor Luxuries When Trying to Save Money When First Building Wealth? Or Are Major Items What Count?
When starting your journey to build wealth, the question often arises: should you cut out small luxuries like your daily coffee, streaming subscriptions, or occasional dinners out? At Cool Wealth Management in Phoenix, Arizona, we help clients navigate these financial decisions to achieve their goals. Saving money is critical when building wealth, but does it mean sacrificing every minor indulgence? Or do major financial choices—like housing, cars, or investments—have a bigger impact? In this article, we’ll explore whether skipping small luxuries is necessary or if focusing on big-ticket items is the key to financial success.
The Latte Factor: Do Small Luxuries Add Up?
The idea of cutting small luxuries stems from the “Latte Factor,” a concept popularized by financial author David Bach. It suggests that small, recurring expenses—like a $5 daily coffee—can add up significantly over time. For example, $5 per day over 30 years, assuming a 7% annual return if invested, could grow to over $170,000. That’s a compelling argument for skipping the coffee shop.
However, the reality is more nuanced. While small expenses can accumulate, they often pale in comparison to major financial decisions. For many, the emotional toll of depriving themselves of small joys can outweigh the financial benefits, especially if those luxuries provide motivation or stress relief during the wealth-building process.
Major Expenses: The Real Wealth-Building Levers
When building wealth, major expenses and financial decisions typically have a far greater impact than minor luxuries. Here are the big-ticket items that deserve your attention:
Housing Costs: Your mortgage or rent is likely your largest monthly expense. Choosing a home within your means—rather than stretching for a dream house—can free up thousands of dollars annually for savings or investments. In Phoenix’s competitive housing market, this decision is critical.
Transportation: Cars are another wealth-draining expense. Opting for a reliable used vehicle instead of a luxury car with high monthly payments can save you tens of thousands over time. Maintenance and fuel costs also add up, so factor those in.
Debt Management: High-interest debt, like credit card balances or student loans, can cripple your ability to save. Prioritizing debt repayment, especially on cards with 15-20% interest rates, is often more impactful than cutting out subscriptions.
Investment Strategy: Failing to invest early or choosing poorly diversified portfolios can cost you significantly in missed compound growth. Working with a financial advisor, like those at Cool Wealth Management, ensures your money is working hard for you.
Balancing Small Luxuries and Big Wins
So, do you need to ditch every small luxury? Not necessarily. The key is balance and intentionality. Here’s how to approach it:
Budget for Joy: Use a budgeting method like the 50/30/20 rule (50% needs, 30% wants, 20% savings/debt repayment). This allows room for small luxuries while prioritizing savings. If your daily coffee brings joy, keep it—but maybe limit it to a few times a week.
Automate Savings: Set up automatic transfers to savings or investment accounts. This ensures you’re building wealth consistently, regardless of minor spending habits. Treating savings like a non-negotiable bill makes it easier to enjoy small treats guilt-free.
Audit Major Expenses First: Before slashing subscriptions, review your housing, transportation, and debt. Downsizing your home or refinancing a high-interest loan often yields bigger savings than cutting out Netflix.
Track Spending: Use apps or spreadsheets to monitor where your money goes. You might find that small luxuries aren’t the problem—it could be unplanned impulse buys or oversized fixed costs.
The Psychological Side of Saving
Depriving yourself of every small pleasure can lead to burnout, making it harder to stick to your financial plan. Behavioral finance shows that people are more likely to stay disciplined when they feel rewarded. A $10 monthly subscription that keeps you sane might be worth more than the $120 annual savings from cutting it.
Conversely, overspending on major items—like a too-expensive car—can lock you into years of financial stress. The goal is to make intentional choices that align with your long-term vision while allowing room for life’s little joys.
Phoenix-Specific Considerations
In Phoenix, Arizona, where the cost of living has risen with the city’s growth, major expenses like housing and transportation are especially critical. The median home price in Phoenix is around $450,000 (as of 2025), and car dependency adds to transportation costs. Focusing on affordable housing options and fuel-efficient vehicles can make a bigger difference than skipping your weekend brunch.
At Cool Wealth Management, we work with Phoenix residents to create personalized plans that balance lifestyle and wealth-building. Whether you’re a young professional or nearing retirement, we help you prioritize the financial decisions that matter most.
Key Takeaway
Building wealth doesn’t mean giving up every small luxury. While cutting minor expenses like coffee or subscriptions can help, major financial decisions—housing, transportation, debt, and investments—have a far greater impact. By focusing on these big-ticket items, budgeting intentionally, and allowing room for small joys, you can save money effectively without feeling deprived. At Cool Wealth Management in Phoenix, Arizona, we’re here to guide you through these choices, ensuring your financial plan supports both your goals and your lifestyle.
Ready to start building wealth without sacrificing what you love? Contact Cool Wealth Management today for a personalized consultation!
