Oversaving: What it is and What to do About It

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Many people are oversaving for retirement and don’t even know it. They are saving and investing 50%+ of their income for multiple decades without thinking of what the invested amount could turn into by retirement time. There is such a thing as too much of a good thing.

Currently, my retirement account balances total $250,000. That means if I do not contribute any more money to my 401k for the rest of my life, it would grow into $5.4M in 40 years at an 8% growth rate. That is a phenomenal amount of money at retirement.

Sure, $5.4M won’t be worth that much in 40 years, but I suspect it will still be more than 95% of Americans. This is if I do NOT contribute a single dollar more to the accounts. Knowing me, I know that I’ll be contributing more and more each and every year.

This is a classic case of oversaving. If I spend 100% of my paychecks and do nothing with my investments, I will retire a multimillionaire by the end of it all. That means a lot and that’s also a good case for why I shouldn’t be saving more money and instead enjoy it.

Although it is a difficult habit for me to change by now, I want others to learn from my possible mistake so that they don’t make the same mistakes themselves. Too many people deprive themselves of enjoyment in order to have one extra million by retirement.

Which would not have changed their quality of life in any way whatsoever.

What is Oversaving?

Oversaving is when some saves money to a fault. Saving money is a good thing but saving too much money is a bad thing. Oversaving is saving money for the sake of saving and it’s in line with the frugality disease that people might not know they have.

It’s a disorder that makes the person save more money even if they don’t need to save more money in the first place. We can’t take our money with us to the grave. There are certain times when we need to spend money to move forward and level up our lives.

When you make $200,000, you shouldn’t feel guilty about a $10 upgrade in your meal. It’s trying to save too much that you end up saving money at the detriment of your happiness. Whether we like it or not, we enjoy spending money and it becomes a source of our happiness.

Spending money is when we enjoy the fruits of our labor. That all our hard work wasn’t for nothing. Our hard work was for us to increase the quality of life for ourselves and family. However, when you don’t spend money at all costs even if you can afford to is when it’s a problem.

Oversaving is a genuine problem. I would be the last one to say that saving is a problem. However, I recognize that over saving is a problem because it brings us misery when we don’t spend any of the money that we earn. It’s our hard earned money. When we need to spend, we should spend.

We only live once.

Is Oversaving Possible?

After reading the many financial independence blogs and YouTube videos, you may be wondering if oversaving is even possible in the first place. The answer is a resounding yes, without a doubt. There are people who hoard every cent they earn.

Too many people see saving as the holy grail and do not know when they can afford to spend money. I’m currently in the building phase right now and I would like to be a millionaire as quickly as I possibly can. Therefore, I am still saving money and I know I’m doing it to good use.

However, I know that there will come a point where I am oversaving and it is not a good decision to make. When I become a millionaire or come close to becoming a millionaire is when I’m going to let loose with my wallet. I know that I can enjoy my money then.

Money is a tool to allow you to live a better life. There truly is no point in having millions and millions of dollars if you don’t even know what to do with them. Bill Gates famously said he couldn’t spend the money he has, even if he tried to. That is oversaving at its finest.

He can’t take it with him to the grave. Wanting to be rich is definitely a noble and a great goal. However, it shouldn’t consume you so much that it is your only goal. Money isn’t everything. There are many more important things in life than money.

Saving too much money is definitely something that needs to be addressed. You don’t want to sacrifice everything just to have a little more money.

What to do About Oversaving

So then here are the 7 things you can do if you are oversaving.

1) Contribute Less to Your 401k

401k money is NOT liquid. You can’t spend it freely without incurring a tax penalty. Not until you are of retirement age. Yes, there are ways you can bypass this with an SEPP plan. However, it’s still complicated and has a lot of restrictions on top.

Therefore, a way to bypass oversaving is to contribute less to your 401k. Even if you have the income to. These days, people are preferring to save all their money in liquid brokerages instead of investing their money in a 401k. 401ks are wonderful retirement vehicles.

However, the liquidity is the biggest drawback to contributing to a 401k. There’s no point in having $4M in your 401k by your 40s if it means you can’t even a penny of that money in the first place. There has to be a way to access your money free and clear without scrutiny from the government.

2) Designate a Fun Budget

The way to combat oversaving is to designate a fun budget that you’re not allowed to feel guilty for using. One of my friends wanted to purchase a $7,000 antique Mustang car and asked me if it was financially prudent to do so.

I replied that as long as it’s within his fun budget, he’s not allowed to feel guilty. He went through with the purchase with that mindset. He and his wife make a combined $325k+ so I have no doubt he’s doing just fine. The antidote to the oversaving mindset is to spend money on fun.

We need to have a little bit of fun in our life. It’s a necessity and it can’t be neglected. We can’t mindlessly spew out output like we’re a bunch of machines and robots. A fun budget will do wonders for your life and mindset as you navigate through the journey of being a millionaire.

It’s time to reward yourself from time to time.

3) Review Your Spending

Oversaving means you should review your spending.
Reviewing your spending is a good thing to do.

After you review your spending, you might realize that you don’t need to save as much money as you think you do. You may realize you’re saving too much money and you need to cut back a little bit! This is why tracking where your dollar goes is crucial.

You just never know how much money you’re not spending until you run the numbers and see it with your own eyes. This year, I spent the most money I’ve ever spent. Mostly because I had to buy a new $14k car due to a car accident.

However, in any case, I have zero regrets with the amount of money I spent.

Even though it’s the most money I’ve ever spent in one year, I’m still OK, mentally and physically. Review your spending to properly and objectively assess whether you’re saving too much money. If you allotted it in your budget, there’s no need to feel bad about spending the funds.

As long as you work more to replenish the funds and then some, everything will be OK.

4) Shift Your Mindset from the Frugality Disease

Oversaving means a need to shift the mindset.
Shifting the mindset is sometimes necessary.

The frugality disease is not the best mindset and headspace to be in. Saving is a good thing but saving too much money is a bad thing. Not only can being cheap in the short term cost you in the long term, people don’t want to hang out with miserly people.

Oversaving is connected to the frugality disease mindset because not spending any amount of money at all isn’t healthy. Sacrificing present happiness for future money is a good idea, to a point. However, there’s a tipping point where that no longer makes sense.

Especially also if you’re not the only person who the decision is affecting. If you have a family and you are also forcing them to adopt your frugality disease ways, that’s no way to live. That’s not the way to enjoy life and move forward with life. Life is more than dollars in a bank account.

There are multimillionaires out there who harp on their wives for spending an extra $100. That’s saving too much money.

5) Spend Money for Health

If it’s for health, it’s money well spent. Period, end of story. I have bad digestion issues. Therefore, I spent whatever money I needed to help ease my digestion problems. I did things such as go to the PCP and GI. I even bought probiotics and Omeprazole to see if that’d help.

Even though they did help, what really helped was taking care of my diet. I cannot eat foods and drink liquids past a certain time and/or during a certain time of day. There’s not a condition named with mine but it has to do with my digestion system not working as efficiently as others’.

Other people have no problem falling asleep right after they eat. I cannot fall asleep after I eat as easily as others. Sometimes, it takes me hours of tossing and turning before I fully fall asleep after eating. I gladly spent money when it came to that health because ever since my sleep improved, my life improved.

When it comes to health, oversaving should be thrown out the window. It’s money very well spent.

6) Increase Your Quality of Living

Oversaving means making sure quality of life isn't diminished.
Quality of life is important.

Life is all about improving your quality of living as time passes. When I first graduated from college, I lived in a cockroach infested place in Birmingham, Alabama for $640 per month. It wasn’t the best living conditions. However, every year, I moved up from that standard of living.

I slowly moved to an apartment that has no cockroach problems. Then I moved into an apartment that’s 20% bigger. Then I moved into an apartment 20% bigger than that. My quality and standard of living improved every year. You are combatting oversaving if the quality of life improves every year.

One day, I will move into a house and I will live very well. However, until then, I know I have to put in a lot of legwork in order to get there. This is how you make sure you’re not saving too much. It’s when your quality of life increases every year even while your net worth increases every year as well.

You don’t want to live poorly just to save an extra dollar. At a certain point, you become frustrated that you’re living poorly.

7) Realize You Have a Problem

You don’t want to be the richest person in the grave. Oversaving IS a problem. Having too much is better than having too little. However, having too much is still a bad thing. You can’t even enjoy any of your hard work. it’s a good goal to be rich for your future family.

However, that doesn’t mean that you’re not important either. You have needs and wants that should be fulfilled as well. There’s no need to bear the entirety of your family’s burden all by yourself. You have your own wants and needs and they deserve to be taken care of.

It’s a noble goal to protect and ensure your family’s financial wellbeing. However, not when it comes to the detriment of your own sanity. We can’t help someone else with their floatation devices if our own floatation devices aren’t taken care of as well.

Spending money is not the enemy. It’s spending money on things that don’t give you value that’s the enemy.

Oversaving is a Real Thing

Too many people don’t understand the effects that oversaving can have on one’s psyche. It’s an actual real thing that has to be addressed. Luckily, it can easily be tended to. It’s harder to save money than it is to spend it. Spending money is easier than saving as much money as you can.

Therefore, all you have to do is get out the credit card and start spending money on things that add value to you and your family’s life. I’m currently in the saving phase. However, once I have a million dollars, I don’t have to save as much money as I’m doing right now.

I can turn on the brakes a little bit to saving money. The reason why I save so much in my 20s is because a dollar in my 20s is worth $10 in my 60s. That’s too much of a spread for me to NOT save money. And I enjoy saving money, which is the good thing.

Once I start a family, then I know that it’s not just my decision anymore. It will be the decision of the family and what’s in their best interests. Therefore, I will turn on the brakes after I start a family. Before I do, I’m working my butt off to get my finances in order.

Too many financial independence, retire early folks don’t understand the perils of oversaving. It’s high time to be aware of the problems of going too far on one side or the other. We don’t want to be biased, we want to live a balanced life so we don’t go too far off the deep end, one way or another.

Otherwise, we get miserable.

Oversaving: What to do About it Shortlist

  • Contribute less to your 401k
  • Designate a fun budget
  • Review your spending
  • Shift your mindset from the frugality disease
  • Spend money for health
  • Increase your quality of living
  • Realize you have a problem

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