Did I Save Too Much?

This is a guest post by Robert, who lives in Calgary and works as a financial adviser. He is married, has three kids and plans to retire at age 35.ย  Robert and his wife then plan to return to school and become teachers, eventually living and working overseas.

I was flipping through a back issue of MoneySense magazine at the library. It was interesting, because it presented a viewpoint so different from this blog. It presented stories of people who were more or less successful in saving for their retirement. It seems like for so many people, saving is a huge sacrifice. Even the editorial weighed in, suggesting that there’s an optimal saving amount. Saving too little would lead to hardship in retirement, having to scale back from the lifestyle the person was used to. I can agree with this. Saving too much was presented as unhealthy, unnecessarily penalizing the current self for the benefit of the future self. “Save just enough to be able to maintain your lifestyle at age 65 when you give up full-time work,” seemed to be the message.

The funny thing, to me at least, is the idea that a person should spend all of their income, except the amount that’s needed for debt repayment and savings. I guess for most people, this is no trouble. In fact, if it weren’t for mandatory debt repayment, such as mortgage payments, most people would probably spend it all. But I started with a very modest salary and, as I earned more, I only allowed my month-to-month spending to increase by relatively small increments. I put all the rest of the money toward debt repayment and savings. It seems that isn’t normal.

According to one of the MoneySense articles, it may not be healthy either. They shared the story of a couple who had managed to accumulate $2 million, but wouldn’t allow themselves to spend on a cup of Tim Hortons coffee. My first response was that they probably bought the expensive stuff and brewed it themselves, but it turns out they went into counseling for their “problem.” I don’t think that citing an extreme example proves the point, but I have advised people to try and find a balance so they won’t have much more to spend now compared to later, or much more to spend later compared to now.

Did I deprive my current self in contrast to my future self? I don’t feel that I did, because my purpose was clear. I spent far less than I was able, but I owe nothing on my house and my lifestyle is sustainable, whether I’m working or not. What’s more important to me and my family is that we’re not sacrificing. We’re spending more than when I first started working (about 50% more). And I doubt that we’re spending much less than most people our age. We have everything we need, and on top of that, I have the time and energy to spend with my kids while they still appreciate it.

Over-saving is better than overspending. But the optimal amount of saving depends on your goals. If you plan to work until 65, you may as well spend everything besides debt repayment and savings. But if you want to retire earlier, saving well over 10% of your income will be very helpful.

After saving large amounts, is it hard to bring yourself to spend? Would you consider that a problem?


9 thoughts on “Did I Save Too Much?”

  1. It most certainly can be a challenge to spend once you’ve retired – humans work by habit, and people who practice the savings habit over a period of decades have difficulty letting that habit go. If you always spend less than you earn, and drill that into your brain while you’re working, it can become very difficult to realize that once you retire and live off of your investments, you will be spending MORE than you earn. That’s counterintuitive and causes some retirees to spend nothing more than the bare minimum even though they have a very high probability of not running out of money, ever.

    The problem isn’t saving too much – it’s the unwillingness to spend. As we save toward early retirement, we need to practice our ‘spending habit’ in addition to our ‘saving habit’. We need to keep spending once in a while on targeted things that bring us happiness.

  2. I agree with George – I’ve seen loads of older close family members end up very very wealthy – and just leave a big estate – most of them didn’t even have any children to leave it to! It was just a habit of (not) spending it seems.
    For myself, I’m trying to figure out how to die as broke as possible but still be okay while I’m alive. ๐Ÿ™‚

  3. I think like with everything else, the secret is finding a balance that works. I have struggled with feelings of guilt over spending money I can well afford on an item for myself (rather than saving it or spending it on the kids) and I think that is fairly typical of those of us focused on financial discipline. Truth be told, there is very little that could derail our finances at this point in our lives (save a major health crisis, I suppose, though that is what insurance is for)–no debt, kids educations provided for, healthy retirement accounts. Learning to spend more in the here and now and to *enjoy* it, is a worthwhile exercise, I think!

  4. For me, saving a lot made it easier to spend when I really needed to buy something. This is because I did not fear whether I could afford it or not.

    For example, when my old air conditioner (a large, expensive wall unit) died in 2000, I went out and bought a new one. Same for a new refrigerator the following year. It was very easy do make these buying decisions because I had the money from having saved up so much of it over the years. Same for when my old car was dying 4 years ago. I did not have to worry about being able to afford it, or how to finance it, or if it could fit into my budget. I had the money and went out and bought one with cash. I did some research on it, of course, so that I would not overspend on it.

  5. i think this just speaks to keeping a wise balance between saving/living. Just like all of the discussion these days surrounding work/life balance. Saving for the future at the complete expense of the present may not be healthy.

    Saving is good, but so is living right now…balance…

  6. I don’t know. I make a lot more money than I did when I was younger but somehow I’m not bitten by the spending bug. I don’t buy lots of new clothes or go on expensive cruises, etc. I don’t need much money for the lifestyle I lead, and I suspect you’re the same — yet you’re as happy as anyone who spends double.

  7. I recently redeemed a fine fund that we’ve had for a zillion years. It was for a very good reason, but it felt like I was saying goodbye to a good friend.

  8. As a natural born spendthrift, a savings mentality came hard for me. I was always good about saving something for retirement only because it went into the 401K rathole where I had no access to it and I was afraid of being homeless and eating cat food when I was 65, but I saved nothing else above and beyond that. Finally a few years ago the lightbulb went on that I could stop working sooner if I stopped spending all my money, and that more Stuff was not making me any happier. My main worry has always been how to rein in my spending rather than how to get myself to spend.

  9. We are in the process of a downsize. Most of the “stuff” we are gifting, tossing, etc. we spent money for this and yet, I can’t recall that much of it created happiness. We do have financial independence so the “stuff” has not interfered with our freedom but it sure has created a lot of stuff to deal with on this end of life. We have not deprived ourselves harshly to get to FI but we could have done with less stuff and been just fine.

    What we enjoy now is travel and plan to continue that in retirement. Experience rather than stuff is what I won’t deprive myself of in retirement.

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