Downside of Being an Extreme Saver and Financial Hoarder: Deprivation
~ Saturday, October 28, 2023 Blog Post ~
Being an extreme saver and financial hoarder, the important lessons I learned are these extreme cases’ disadvantages. One of them is the feeling of deprivation.
Extreme frugality and money hoarding made me feel deprived. I have written an article about myself being an aggressive and diligent saver, super investor, super saver, miser, cost-cutter, penny-pincher, thrifty, Scrooge, cheapskate, and so on. I find myself funny, but I really cut back wherever money is spent. I even unplug all my home appliances and switch off all lighting when I’m not using them.
Additionally, I focus on getting rid of the payments that I want to go away. Yes, I have followed Ms. Suze Orman’s personal finance golden nuggets. Moreover, I’m a millennial who is neither into YOLO nor FOMO. I’m very far from being a free-spending consumer or an impulse buyer.
I don’t really mind or pay attention to the latest trends that are going on around me since I’d rather save and invest my money. I consider all of these money-saving practices as a fun personal finance experiment. Nonetheless, I realized I need to live a little. And sure, nobody is guaranteed tomorrow, and affluent people cannot bring their wealth to the other side. Of course.
Another lesson I learned from being a financial hoarder and extreme saver is that, once I already have my savings and investments in place, it is just right that I enjoy my disposable income or “fun money.” I realized that money should be spent and enjoyed when some or a considerable amount of it has already been put away and invested for the future. Money should also be shared and donated to charity or given to people in need, although these virtuous financial practices certainly do not appeal to me. Haha.
I decided to become an extreme saver and financial hoarder because I’m afraid of living hand-to-mouth and going bankrupt. I absolutely do not want a hand-to-mouth existence or finding myself in survival mode. Well, who does, right? Moreover, I worry about my financial future a lot.
After all, economic downturns are inevitable. Plus, other unexpected and unfortunate events can happen such as an epidemic, pandemic, recession, unavoidable and sudden illnesses, high inflation, frauds or scams, and all these unwelcome happenings that adversely impact people’s financial situation.
Hence, I thought it is for my best interest to minimize spending and use my money on cost-effective things only. I have also had persisting value-consciousness which enables me to deal with the increasing costs of services and products. I think being a financial hoarder and extreme saver is effective in preventing bankruptcy and helps me maintain my financial security for the long-term. Yet, of course, I need to live a little and enjoy my life.
My parents, particularly my Dad, has frowned on my being an extreme saver and financial hoarder. He advised me that the purpose of money is for people to enjoy it and make their lives better.
My Dad emphasized that saving all of one’s hard-earned funds for the future is absolutely not right and pointless since it is like a dying person. Maybe I’m just moved by all the CNBC, Wall Street Journal, and MarketWatch personal finance articles I have read on creating generational wealth which applies to billionaires. Haha.
In one of my blog entries, I wrote that my Dad had advised me that since we are alive, we need to spend our hard-earned money, regardless of the high inflation.
Anyhow, I found this enlightening article about financial hoarding. I am including it in this blog entry since I like the professional financial advisor’s prudent insights:
Are you a financial hoarder? (From Des Moines Register)
By Jim Sandager, May 10, 2017
Are you a financial hoarder? That may sound like a strange question to ask. After all, it’s a good thing to be a diligent saver, right?
While it’s good to be a saver, it’s also true that a healthy saving mentality can transform into more of a hoarding mentality if taken too far. Having this sort of mindset can weigh on you, both financially as well as emotionally.
Here are three characteristics that financial hoarders tend to possess.
1. You refuse to use your emergency fund during an emergency.
Almost any financial planner will tell you that you should have an emergency fund that you can use to pay for unexpected expenses. Typically, it’s advised to have about six months of living expenses in a safe, liquid account such as a savings or checking account in the event of an emergency. There are some people who are so hesitant to spend down their emergency fund that they instead put debt on a credit card and pay a high interest rate.
When those financial emergencies occur, remember that it’s okay to spend your emergency fund. After all, that’s the reason you have the emergency fund in the first place. Just make sure to have the goal to rebuild your emergency fund back to the original amount if you do need to use it.
2. You have more in cash than you need.
An emergency fund is great to have, but you can reach a point where you have too much in cash. Over the past 10 years, cash has returned 0.7% annually. The S&P 500, an unmanaged index of large cap U.S. stocks, returned 7.0% annually. $100,000 in cash would have grown to $107,225 over 10 years while that same $100,000 invested in the S&P 500 would have grown to $196,715. In other words, when investing for the long term, keeping too much money in cash hinders your potential for future growth.
3. You feel guilty about spending.
Why do you save money? It may be for greater security or it may be for future legacy planning, but the foundational reason people save money is to be able spend it in the future when expenses exceed income. Spending money from your savings shouldn’t be an inherently guilt-producing activity. If you’ve saved diligently, have a long-term spending plan and the spending is reflected in your core values, then you should feel okay about spending some of the savings that you’ve worked so hard to accumulate.
On its face, it may not seem like being a “financial hoarder” is necessarily a bad thing. Indeed, it’s a sign that you’ve been a diligent saver, and it can give you security against a job loss or an economic downturn. But like so many other things, you can have too much of a good thing. Remember that if you’ve adequately saved for your future, spending money from your savings is okay to do when the moment is right.
Jim Sandager, MBA, CFP®, is Senior Vice President-Financial Advisor atWealth Enhancement Group.
Sources and references:
https://www.cnbc.com/2014/04/24/want-companies-to-stop-hoarding-cash-heres-how.html
https://www.linkedin.com/school/college-for-financial-planning/?trk=public_profile_topcard-school
