Yes, You Can Save Too Much Money. Here's Why


It’s a rare and privileged problem to have, but it really is possible: sometimes, people save too much money. There’s no easy answer for what “too much savings” means, and most Americans might love to try it; after all, the typical American savings account only has $1,200.

But some people are so frugal, so hyper-committed to saving money and not spending it, that it holds them back from experiencing joy in life and feeling good about their personal finances. Even extremely wealthy people can still live in fear of not having enough money.

Let’s look at a few reasons why it’s possible to save too much money.

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1. Saving for the future shouldn’t make you suffer today

One of the best pieces of advice I’ve ever heard about personal finance and investing was this: “Saving money is sending money to your future self, and borrowing money is taking money from your future self. Try to make sure that your present-day self and future self are both happy with the deal.”

Saving money requires you to sacrifice today. Yes, it’s healthy to feel like the future is worth planning for and saving for. But sometimes people go so far in saving money that they sacrifice too much of their present-day self’s happiness for the uncertain life of their future self.

When I was in my early 20s, I was frugal and responsible. I worked long hours, I drove a sensible Volvo station wagon and lived in a studio apartment, and I didn’t go out for dinner with friends as often as I could have, because I wanted to save money. But now that I’m in my 40s, I wish my younger self would’ve gone out for dinner more often. I have plenty of money now, compared to when I was 23 years old. My “future self” didn’t need that money as much as my younger self thought.

And it’s OK. I don’t have regrets; I suppose it’s better to be slightly too frugal than to blow all your money and have nothing saved for retirement. But the future is unwritten, no one is guaranteed to live to age 90, and we all need to have some fun along the way. Over the course of your working life, you’re probably going to be fine.

2. Do you really want to retire early, or do work that you enjoy?

In the past few years there’s been a big trend in personal finance and investing called FIRE (Financial Independence, Retire Early), where people achieve a super-high savings rate and live a low-cost lifestyle that lets them retire in their 30s. I don’t want to rain on anyone’s FIRE parade; if people want to be extreme savers and live off their nest egg for the next 50 years, good for them.

But I don’t see how FIRE investing can possibly work for most people. Most people don’t earn enough income to amass hundreds of thousands of dollars by the time they’re 30. I don’t even know how I could reduce my family’s monthly spending enough to retire. We own two vehicles so we can drive our kids to three different school facilities. I’m self-employed, so I have to pay a lot of money for healthcare. My family just got a $1,500 medical bill that we have to pay for out of pocket.

And I don’t mean to complain! I love my family and our expensive lifestyle, and I make a good living. I don’t want to retire anytime soon, because I’m doing work that I enjoy. I like the feeling of converting my time into money, and spending my money on a comfortable home, delicious restaurant meals, fun vacations, and happy memories.

I’d rather figure out how to make more money than how to live with less. I’d rather spend my time working on my own small business than retire early and putter around the house and live off my investments. Being retired at such a young age sounds kind of lonely, sad, and empty. I want to be active and connected to the world. I want to be “out there,” where the action is (even though I mostly work from home).

3. You can’t take it with you

Sometimes people die without a lot of close friends and family, and without a lot to show for their lives but a big number in their brokerage account. There’s a saying that “time is money,” but sometimes “money is time.” Money can buy you happier times, and help you make memories and build relationships with other people.

I was listening to a podcast by financial advisors who said that one of their biggest challenges is getting their wealthy clients to spend money. Their clients are in their 60s and 70s and have $10 million or more, but they’ve been so focused on investing for tomorrow that they never learned how to enjoy the money today.

A few years ago, I took my family to Europe, two summers in a row, for five weeks at a time. I was a digital nomad and the kids were in heaven. We rode trains and hiked and went to museums and ate gelato everywhere. I probably couldn’t “afford” those trips at the time, but they were the best money I’ve ever spent. The memories are priceless. And I’m still on track to retire.

Bottom line

Investing for the future requires you to spend less on your present-day self. Will “future you” be happy with that deal? Try to strike a balance between investing for retirement and having fun today, while you’re (hopefully) healthy, young at heart, and fully, brilliantly alive.

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