Are You Saving Too Much?
The current economy has taught a lot of us that we're not saving enough money for that proverbial (and inevitable) rainy day. Still, there are folks who could easily retire at 40 and never look back. These so-called "super savers" have been saving their milk money since they started kindergarten.
While we are all envying them now, I often wonder what kind of sacrifices they've been making in order to ensure they have the money in the bank to become financially independent. The thing is though, many people who don't possess this same mindset are often not sure about how to go about saving for the long term or how to deal with an investment broker. (See also: Living Cheaply for the Long Term)
I started learning that there are two types of people in this world: savers and spenders. Yours truly happens to be a saver at heart, and saving comes quite naturally to me. For other people I know, they've had to learn through many trials and tribulations that saving money is a habit that needs to be developed so that they can become financially successful. It's a tough lesson for some who've had to struggle daily with combating their shopping impulses or their spending addiction and who've had to control the use of their favorite American Express credit card.
But let's take a closer look at those folks who tend to squirrel away their savings with ease. They carry their tidbits of cash back to the bank as industriously as possible, storing away those little nuggets to be used in leaner times. Some of these people are actually super savers. These savers manage to sock away 50% or more of their weekly paychecks each and every paycheck, without fail, come hell or high water, no matter what.
Of course, they tell us the things we already know. They don't buy fancy new cars. They don't need big houses. They don't overuse their hotel credit cards to go on expensive vacations, they don't eat or dress extravagantly, and they most certainly don't buy anything "just because." They don't go to movies when they can buy the DVD. They don't buy the DVD if they can rent it for less, and they don't rent the DVD if they can simply borrow it from someone else. Rarely will you find a super saver at the table of your local Texas Roadhouse unless it is a very special occasion.
So, what are they planning to do with all of that dough? Some will tell you that they want to retire early. Wow! You say. What a great idea. But is it possible that we can actually save too much? For instance, what happens when a super saver finally decides to actually cut back on work hours? Could the drive to save increase two fold in these households when there isn't a regular income coming in each month?
Unfortunately, I've seen this type of behavior actually happen. What certain savers denied themselves during their working years suddenly becomes completely taboo during retirement. Sure, they might be able to afford to send their kids to the best schools, but how many of them actually do? For these people, it simply doesn't make good financial sense to spend hundreds of thousands of dollars on a Yale or Harvard education if a local university degree will suffice.
I want to emphasize that I am all in favor of saving — but it's also important to find balance in the way we manage our finances. Certainly, people should buy less and save more. We really don't need $100,000 cars if we can't afford to pay cash. 7,000 square feet is a bit much when it comes to putting a roof over our heads, especially if the payments are at the very top of our income allowance. Also, having dinner at home with the family is a great way to save some cash as well as to reconnect with our loved ones on a regular basis.
But, I firmly believe that money is a vehicle. A way to enjoy life to the fullest. You have to be able to find a balance between having money in the bank, squirreled away for a rainy day, and having the money you are willing to spend to enrich your life and the lives of your loved ones. Those new video game consoles are really cool. Going to the movies (especially the 3D ones!) is fun, and taking a vacation every now and again is just what the doctor ordered.
Extreme savers take heed. It is OK to spend some of our hard-earned cash on ourselves. Take a break! You deserve it.