Are You Too Frugal?

I work with people who either have money or like to save money. Many times my clients have good incomes. Sometimes money arrives by gifts or inheritance. But sometimes, people focus on being frugal so that they can save more (and this is OK too!). These people tend to revolve their lives around saving because of this frugality.

Let’s start with a definition

Definition of frugality: the quality or state of being frugal: careful management of material resources and especially money

At a high level, there is nothing wrong with being frugal. But what happens when someone spends the bulk of their life being frugal and then goes into retirement? Are they expected to keep that same lifestyle? Or is it time they start spending some of what was saved?

Some people call it frugality syndrome. It’s basically a way of life, centered around consistent non-spending of your money. One might have a goal of saving, but they also tend to keep moving the goal along. Because of the ongoing momentum, this is also a very hard habit to break.

Others refer to a condition of frugal fatigue. The essence of frugality fatigue is a feeling when one gets worn down from being frugal for too long. You might even dislike yourself because you think that behaving in that manner just stinks!

Healthy versus Unhealthy

I will point out that there is a fine line between healthy and unhealthy levels of being frugal.  For example, budgeting so you have funds saved for emergencies = healthy. The same goes for earmarking funds for most other savings goals.

On the flip side, hoarding money because you are excessively worried about being broke = not healthy. This reaches unhealthy levels are when it negatively affects relationships or quality of life. Skipping your annual physical or dental cleanings? Cutting corners on some of these things could end up costing a lot more later.

Along the same lines, it may be unhealthy when you restrict spending on the fun and relaxing things in life. Your happiness may be compromised – think of not spending money to take a vacation or celebrate an anniversary. You may not want to miss out on some of those opportunities, right?

Some people say “what’s the point in making money if you are not going to spend it”, or use it for a specific purpose? Very valid point.

Pre-Retirement

If you are younger and still in the ACCUMULATION stage of your life (working and saving), here are some things you can try to get out of the frugality funk:

• Set reasonable goals. You might have debt, and you might have savings goals. But make sure they are realistic and not some far-fetched dream. Break down long-term goals into more achievable short-term goals. You’ll be less inclined to feel hopeless.
• Celebrate achievements. If and when you obtain certain goals, spend a few dollars and celebrate reasonably. This could be something like a nice meal or a small gift to reward yourself.
• Get off of social media! I think this is HUGE, and a big reason why people get discouraged. By looking at everyone’s best <vacations, clothes, physical possessions>, you feel less content in your own skin, and self-confidence lowers.
• Give yourself permission to spend a little here and there. Realize that you only live once, and if you can’t enjoy the journey – will it be worth it? Find happiness in everyday life!

Retirement

When it comes to retirement, it may be hard to pivot from ACCUMULATING and SAVING to suddenly… SPENDING. Think about it. You may go 20, 30, 50 years of working and saving aggressively. How do you just turn the switch and suddenly stop saving, and start spending? Your brain is going to have to have an about-face. Long-term habits are hard to break!

What are some things you can do to prepare you for this change in lifestyle in retirement? Here are a few ideas, and I am sure there are more:

• First, realize that this syndrome (or condition, situation, etc.) is normal! And that there is hope! After all, you are not alone. Many a person has made lifelong decisions and sacrifices to put their retirement nest egg in place. Once you come to grips that this is common, pat yourself on the back for accomplishing it.
• Prepare to exchange your “savings plan” for a newly devised “spending plan”. If you did financial planning previously, you probably have an idea of what income you will need to live on in retirement. If you did it correctly, then feel free to spend within the limits. For example, if you know that you can live on $60,000 a year in retirement, you’d better make full use of the $5k monthly and not worry about trying to live on less than that. Try not to have spending guilt.
• Consider therapy. The American Psychiatric Association says that frugality is a symptom of obsessive-compulsive personality disorder (OCPD). People with OCPD tend to view money as something that is hoarded for future catastrophes so they may adopt miserly spending styles. Things like cognitive behavioral therapy may be in order, where you can learn to identify negative behaviors and replace them with better options.
• Talk to a family member or trusted friend. Find out their thoughts on their money decisions, as well as if they have been affected by the decisions that you have made with money. By getting perspective from someone you know well, you may find this to be an easier conversation.

To Sum it Up

At the end of the day, my general guidance is to find balance. Don’t feel the need to keep up with the Joneses. Do feel it’s OK to upgrade the slow computer that you’ve been hanging on to for 10 years. Everyone’s monetary situation is unique, and that’s what I love about all my financial discussions with people over the years.

Finally, do know that you have options. No need to feel lost. Reach out and talk to someone. As someone who has personally been frugal all his life, I will certainly be sharing things that I have learned (and will continue to learn). In that way, we’re in this together!

Brandon