On the surface, under-spending may seem more a virtue than a vice. After all, one of the necessary ingredients of building wealth is living on less than you make. So, what could be the harm in holding onto as much of your hard-earned cash as you can?
There’s a crucial difference between being frugal and being a chronic under-spender. A frugal person consciously aligns their spending with their broader financial goals; a chronic under-spender is so afraid of spending money, they’ll avoid spending any even at the cost of personal and financial harm.
Here’s how to tell if you’re an under-spender, and how it could actually be hurting your finances – and your happiness.
The Problem With Under-Spending
Under-spending is frugality taken to extremes, and at the root of it is fear. That fear is born of a scarcity mindset, or the belief that money is a limited resource and there’s not enough to go around. This results in extremely risk-averse financial behavior. And while certain risks are worth avoiding, a financial life with no risk at all can keep a person from maximizing their earning potential and cause them to miss out on opportunities to build long-term wealth.
Despite its focus on hoarding money and pinching every penny, chronic under-spending can also cost money over the long run. Failure to spend on preventive maintenance can result in catastrophic expenditures down the road.
Even basic spending choices – like opting for the so-called bargain option over the pricier, higher-quality item – can end up costing far more money than it saves over the long run.
But even more than dollars and cents, perhaps the most significant impact of chronic under-spending is on the under-spender’s happiness. We all feel financial anxiety from time to time, but for most of us, money worries are directly related to some immediate distress, such as an expensive car repair we don’t have the money to cover. This kind of anxiety has a direct cause and a specific fix.
When you’re focused on scarcity, however, and always fear you will never have enough money, there’s no immediate cause with a corresponding fix. This kind of anxiety causes continual distress, no matter your current financial situation. Further, scarcity fears aren’t limited to those who have no money; they can plague even the extremely wealthy, causing them to miss out on enjoying their wealth and prosperity.
Ways Under-Spending Can Do More Harm Than Good
Here are eight specific ways under-spending can cause problems.
1. You’re Not Investing in Quality
Under-spenders focus more on cost than value. They’ll plunk down $100 on a bargain sofa that sags as soon as they sit on it, but they wouldn’t dream of spending $1,000 on something of higher quality. However, the higher-priced item could end up saving more in the long run.
Before my son was born, my husband and I discovered my childhood furniture still in my parents’ basement. The pieces were a bit beat-up, but nothing a fresh coat of paint couldn’t fix. Together, we painted and re-glazed them and swapped out the girly drawer pulls on the dresser and nightstand for something a bit more boy-like. For nothing more than the cost of some spray paint and drawer knobs, we had “new” furniture for our son.
This was all because my grandfather had decided to invest in something of quality. Yes, that’s right: my grandfather. That set of bedroom furniture had not only survived my childhood, but it had also survived my mother’s. My son is using third-generation furniture. That’s what you get when you invest in quality.
Contrast that to a TV cabinet we bought from a big box store. It was one of those self-assemble, particle board pieces of furniture, and we thought we were saving money by only spending $100 on it. It didn’t even make it through a year before it started collapsing and needed to be replaced. If we had spent just a little bit more money on a TV cabinet at the outset, we might still have it and not have needed to replace it.
Quality products are built to last. Though they may cost more upfront, you save big in the long run because you don’t have to replace them continually. Because my grandfather bought quality, my mom didn’t have to buy me bedroom furniture when I was a kid and, decades later, I didn’t have to buy new furniture for my son. That’s a savings of thousands of dollars.
When you focus exclusively on the here-and-now sticker price and decide to go for the “bargain” option, you often end up paying more in the long run. Remember that cost isn’t the same as value. Cost is what you pay now; value is what you get out of something over time.
That doesn’t mean you should always buy the pricier item. Something can cost more but not be built to last. It’s important to consider the quality of what you’re buying, especially when it’s a big purchase like furniture.
That also doesn’t mean there won’t be occasions when a lower-quality item will do. For example, in the first couple years of my son’s life, his feet grew faster than he was able to wear out shoes. I quickly learned there was no point in buying higher-quality footwear and bought all his shoes at a discount store. Now that he’s older, however, he wears his shoes out faster than he outgrows them. So we invest in higher-quality shoes because we know we’ll have to buy far fewer of them than with discount shoes, thereby saving us money over the long term.
How you weigh cost versus value can vary from purchase to purchase. Just make sure you’re thinking about what kind of use you’d like to get out of something over the long term before you decide to “save” a few bucks on the lower-quality version.
2. You’re Not Spending on Prevention
You know the saying “An ounce of prevention is worth a pound of cure”? It’s true. When under-spenders don’t spend money on preventive maintenance – for their houses, cars, or bodies – it can end up costing them big.
I knew a man who never visited the dentist for a cleaning because he didn’t want to spend the money. He ended up losing several of his teeth. Failing to visit the dentist on a regular schedule can also lead to other types of expensive dental work, including intensive deep cleaning, root canals, crowns, bridges, dentures, and implants.
Under-spenders might also fail to visit the doctor for routine checkups. They rationalize this by saying that they’re healthy, so why spend the money? The problem is that there are all kinds of health issues that don’t necessarily manifest symptoms. These include high blood pressure, diabetes, and even the beginning stages of cancer. A little bit of preventive medicine could not only save you money; it could also save your life.
Other preventive spending that might fall by the wayside in the name of saving money could include failing to make basic home repairs or get regular maintenance on your car. I knew someone who had to buy a whole new engine for his vehicle because he failed to spend $30 on an oil change.
Most under-spenders don’t fail to spend money because they don’t have it. They typically have more than enough, but they experience so much anxiety at the thought of spending money that they rationalize their decision to save and even applaud their frugality. Unfortunately, no money is saved if this decision ends up costing more in the long run.
3. You’re Continuing to Use Broken or Worn-Out Items
Sometimes, broken things can be turned into beautiful new things. This is often done in art, such as when broken glass is used in a mosaic or shards of pottery are used in a sculpture. Worn or broken things can also be made new by giving them new purpose, such as turning a pair of jeans with a hole in them into shorts or using scraps of old clothes to make a quilt.
But under-spenders don’t hang onto worn or broken items to repurpose them; they keep them because they can’t part with the “lost money” represented by throwing them away or the new money needed to buy a replacement. This can result in hoarding behavior, in which an under-spender simply can’t dispose of something and is determined to find a use for it no matter how broken it is. My mother, for example, used to have an entire room in her home full of broken things that were unlikely to be useful ever again, such as a broken recliner, a broken bed, broken figurines, and old, expired medical supplies.
Other times, under-spenders continue using an item, determined to make do with it. “It still works” or “It’ll do for now” are easy justifications. However, sometimes reusing things that are legitimately broken can be dangerous. Broken or cracked dishware, for example, can harbor germs and potentially expose you to lead, and cracked glass has the potential to break further and cause injury.
You should also never reuse things that aren’t intended for that purpose, such as washing and reusing plastic bags or reusing plastic takeout containers. These plastics aren’t designed for this kind of reuse, and reusing them can potentially expose you to harmful chemicals. A better frugal, and also green, option is to purchase cloth sandwich bags or food storage containers specifically designed for reuse.
4. You’re Avoiding Investments
Some people view the stock market as a form of gambling. And while there’s always some risk involved in making investments, the degree of risk varies depending on the investment.
Venture capitalism may not be your thing, but there isn’t much need to fear an index fund. As long as you continue to invest in the market over the long term, history has shown continual rates of return in the American stock market. Sometimes the market goes up, and sometimes the market goes down, but as long as you keep riding the ups and downs, in the end, you’ll likely come out with far more than you originally put in.
Under-spenders, however, avoid even a small amount of risk, and that could end up costing them huge in the long run. For most of us, to reach a state of financial independence – in which we have enough money to live off without having to work, such as in retirement – we must put our money to work for us by investing it. To not do so is a far bigger risk, one that involves potentially gigantic loses in income and likely removes the possibility of ever being able to retire.
Pro tip: If you don’t currently have an investment account, open one today through companies like SoFi Invest or M1 Finance.
5. You’re Not Investing in Yourself
Even more important than investing your money is investing in yourself. No matter your career, investing in training, courses, and coaching can help you get ahead, yet under-spenders are afraid of making this investment.
Anxiety can make under-spenders feel like they’re risking money by putting it out up front, even if there’s a likely return on their investment. However, failing to invest in yourself can end up costing big if it means not getting ahead in your career. Holding back on spending a little bit of money up front can result in tens of thousands of dollars, or more, of lost income potential over a lifetime if it means you fail to advance in your career.
Taking a career risk may also mean moving from a job that’s a known reality into a new and unknown one. That kind of risk can feel as scary as spending money on education and training to develop new skills. There can be a fear that the new position might not work out. But while it’s always possible that could happen, if you never take the leap, you may lose out not only on greater earning potential but also on the potential for greater job satisfaction.
A great career and a meaningful life are all about growth, and growth can only happen when you invest in yourself.
6. You’re DIYing the Wrong Things
Sometimes doing it yourself, or DIYing, makes sense. If a project is relatively easy to do on your own, doesn’t require a lot of tools you don’t have, and can be completed in a decent amount of time, why not go for it?
A good example is painting a room. For a day or two of your labor and the cost of some paint, tape, and rollers, you can change the look of a room without a ton of time or money.
On the other hand, if what you’re considering DIYing involves a technical skill you don’t have, such as plumbing; power tools you would have to buy, such as a nail gun; or time you don’t have, such as the time needed to paint an entire house on your own; then you should reconsider doing it yourself.
Sometimes DIYing simply isn’t worth it. I once spent an entire summer painting the interior of my house. After meticulously taping off molding, removing old wallpaper, and painting walls in more than six different rooms, I swore I’d never paint again. I was, frankly, exhausted, and I’m not sure it would be worth it to me to ever do that again.
In addition to burnout, another consideration is the opportunity cost. In my situation, I didn’t end up losing any real money, only saving it compared to hiring a professional. At the time, I was making my living exclusively through teaching, so I had the summer off. But I now make my living through both teaching and freelance writing. So, if I were ever to take that much time to paint again, it would mean days of lost writing time and, therefore, days of lost income.
If you make your living in a similar way, and hours spent on a DIY project mean hours not spent earning money, consider the money lost into the math of how much your DIY project actually “saves” you. In such circumstances, doing it yourself might actually cost you more money than hiring a professional would.
And if it’s a project you’re not qualified to do yourself, always hire a professional. An under-spender might convince themselves all they need to do is look something up and follow the directions, but it’s almost never that simple, and it could end up costing you dearly if you have to call in a professional to fix your mistakes. For example, plumbers and electricians go through extensive training to do what they do, so let them handle those kinds of repairs.
7. You’re Focusing More on Saving Money Than on Earning It
Adopting some frugal habits can be a crucial part of a balanced financial plan. But a focus on conserving as much as possible to the exclusion of all else is based on a scarcity mindset. It’s rooted in the idea that your income is fixed and, therefore, to maximize what you have, you must focus to the point of obsession on every conceivable way you can save.
The problem is that, while saving is crucial to your overall financial health, you can only cut so many corners. What is never limited, however, is your earning potential.
There are always more ways to earn, from switching careers to taking on a side job, and that’s how real wealth grows. If you stay hyper-focused only on saving, you could miss out on all the potential income you might make by getting creative about new ways to earn.
I, for example, know a woman who had a terrific idea for an online business. It was easily something she could start in her spare time with very little monetary investment – just the cost of a website name and hosting. But her fear of risk made her quickly dismiss the idea. Instead, she just keeps clipping coupons to save a few cents at the grocery store.
8. You’re Making Yourself Miserable
Chronic under-spenders fear loss. They fear the money won’t be there when they need it, so they relentlessly sock it away for a rainy day.
Having an emergency fund is crucial for everyone. It can mean the difference between being able to cover an unexpected expense or becoming mired in debt. However, if you have an emergency fund, are saving regularly, are investing in retirement, and are actively paying off or are out of debt – in other words, if you’re doing all the right things – you can afford to splurge a little.
Money is a tool. It has no more or less importance than that. It can be a tool for security, a tool for independence, or even a tool for happiness. Chronic under-spenders become so obsessed with saving money that they forget to enjoy the lives they’re saving for. Money becomes an end itself and no longer a means.
Again, many chronic under-spenders aren’t broke or even over-stretched. They’re often doing all the right things and are in a good place with their money. They’ve worked hard and saved hard. Despite this, they’re still so filled with money worry that they aren’t able to enjoy their positive financial position.
Enjoying your money doesn’t mean swinging to the other extreme and becoming an over-spender, but when you’re in a good place with your money, it’s perfectly OK to splurge a little. As long as you live within your means, spending on things like fun experiences and hobbies can be a crucial component of actually enjoying life.
How to Let Go of Your Fear of Spending Money
If you recognize yourself in any of the above, it’s important to work to create a healthier, more balanced relationship with your money. Under-spending can lead to financial behaviors that end up costing you more money in the long run, but perhaps the most significant reason to tackle chronic under-spending is to lessen your anxiety and discover some peace with money. Here’s how to do this.
1. Understand the Source of Your Fear
Chronic under-spending is far more than being frugal or even an extreme cheapskate. At the root of it all is fear – specifically, fear that there will never be enough.
It’s crucial to understand that under-spenders aren’t frugal by conscious choice; they experience intense anxiety at the thought of spending money. Chronic under-spending is a deep-rooted psychological condition. So, in order to deal with your fear, you first need to get to the root of it.
Many who are afraid to spend money have this fear because they experienced a very real situation of lack in their lives. They may have lived through a job loss, homelessness, or grown up with a parent who gave them messages about scarcity or lack.
To get to the root of your fears about money, think back over all of your memories and experiences with money. Did you experience a real situation of scarcity? Are you terrified of going through it again? What are the messages you received from your parents or others about money? Do you recognize any of those messages in your current financial behavior?
Once you understand your “money story,” you can start to rewrite it. If you experienced a real scarcity, it’s important to recognize everything you’re doing now to prevent it from happening again. Remind yourself that you’re taking all the right financial steps. It’s also helpful to keep in mind that you pulled through a tough situation once; if it ever happens again, you can pull through it again.
If your scarcity mindset comes from messages you received from your parents or others, recognize that these beliefs belong to them; they aren’t yours to own. Again, keep reminding yourself of all the positive steps you’re currently taking with money. The idea is to move from believing there’s not enough to knowing there is enough.
2. Understand the Nature of Risk
Chronic under-spenders are naturally risk-averse. In order to build a healthier relationship with money, they need to learn to become friendlier with risk. That doesn’t mean becoming friends with it, as it’s possible to swing too far in the other direction, but some risk is necessary for a healthy relationship with money.
One way to lessen the emotional impact of risk is to embrace a “no-lose” model. In her bestselling book “Feel the Fear and Do It Anyway,” Susan Jeffers suggests there’s no such thing as a bad decision: “There is really nothing to lose, only something to gain, whatever the choices you make or actions you take in life.”
Jeffers describes the fear-of-loss mindset as a “no-win” model, wherein you’re paralyzed by indecision because you’re afraid of making the “wrong” choice. Even if your decision doesn’t turn out poorly, you’re often still gripped by fear because you continue to worry about whether the other choice was actually the “right” one.
Instead, Jeffers suggests a no-lose model in which you take the perspective that any decision you make is the right one. No matter the outcome, the knowledge and experience you gain from either decision becomes the reward, which means there is no wrong decision. Any choice you make will give you a new perspective that will carry you forward in life.
It also helps to understand that no matter what happens, you have the tools and resources to make everything OK. Although having an extensive financial safety net may make you feel secure, the truth is that anything could happen. As long as you’re attached to money, and not yourself, as the source of your security, you’ll always fear its loss.
Geneen Roth, bestselling author of “Lost and Found: One Woman’s Story of Losing Her Money and Finding Her Life,” tells of how she lost her entire life savings to Bernie Madoff. Understandably, she was in extreme panic after the discovery and wondered how she would survive the loss. But then, even though she had lost everything, she had the insight, “Nothing of value has been lost.” What Roth realized was that she still had all the things that truly mattered: her family, her friends, and her ability to make more money, which she did.
You can certainly use money as a tool for security, and building savings is unquestionably important. But you won’t be able to stop worrying about losing your money until you realize the real source of your security is you.
3. Make a Budget, Set Goals, & Have a Plan for Your Money
Many of us, not just chronic under-spenders, often feel guilty about spending money, as though we’re cheating on a diet. But there’s no need to feel guilty or afraid if you’ve planned and budgeted well.
Fear and guilt often come into play when we don’t know where our money needs to be, so we worry we may not have the money available to pay a bill or feel guilty that we should have used the funds for something else. But as long as you’ve made a budget and know what money you need to go where, you’ll know if you have $100 to spend on a pair of shoes or if it needs to be set aside for groceries.
So, make sure you have a plan for every dollar in your paycheck, including savings, unexpected expenses, and some fun money. Every budget should have a little room in it for the occasional splurge, and as long as you’re not taking money away from somewhere else it’s needed, there’s no need to feel fear or guilt about this.
Pro tip: If you don’t have a budget set up, getting started is simple and quick. Services like Tiller or MoneyPatrol allow you to connect your financial accounts, and everything will be pulled into an easy-to-understand dashboard.
4. Diversify Your Income
If your fear of spending money exists alongside a fear of losing your current income or job, taking on a side hustle can help alleviate some of that fear. That could mean doing small tasks like decluttering your home and selling items on eBay or starting a side business like freelance writing.
While there may be a finite amount of money you can save to put away for a potential job loss, your ability to earn more money is theoretically infinite. A side hustle can help lessen feelings of scarcity by giving you more money toward your financial goals and diversifying your income. That way, if you were to lose your main source of income, you’d still have another source to help get you through a tough time.
What’s more, when you start working on a side business, you gain the additional benefit of knowing that whatever money you’re able to earn is something that you made happen. That reinforces the knowledge that you’re in charge of creating your own security. Though there are unquestionably things that happen in our lives over which we have no control, such as a job loss due to downsizing, knowing that you have the tools and resources to weather any storm will make all the difference in helping alleviate money anxiety.
5. Understand Money as a Tool for Living Your Best Life
Making and sticking to a budget is key in successfully managing your personal finances, but it can be just as beneficial to look at your money on a more macro level. To create a healthy relationship with money, don’t focus on seeking money for its own sake, but for what it can do for you. And that all starts with asking yourself: What is my money for?
In other words, what is it that you want from your life? What does your “best life” look like to you? Spending time with family? Traveling? Financial independence, where you don’t have to work if you don’t want to?
Once you have an idea about what you want for your life, then you’ll know what all your money is for, because money is a tool for creating that vision.
Start thinking of your money as a tool to maximize your happiness, and ask yourself how you can use it as such. For example, research consistently shows that people are happier when they spend money on experiences rather than things. What those experiences are for you depends entirely on what you want from your life and what would make it both meaningful and enjoyable for you.
It’s also worth noting that there’s a crucial difference between hoarding every dime against the possibility of something bad happening and saving so that something good might happen. Ask yourself what kind of life you want to create. That will tell you everything about how to spend your money.
To some degree, fear can serve a purpose. It can light a fire within you to help you reach financial goals. But, after a certain point, fear can hinder more than help. Likewise, being frugal and finding ways to save can be a great way to manage your money, but it can go too far when your fear of spending ends up costing you money in the long run and keeps you from achieving true wealth and financial prosperity.
Good financial health isn’t only about having money. It’s about how you use this money to achieve your best life, including feeling financially secure, independent, and, most of all, happy. For this to happen, your money needs to flow; it needs to come in, but also go out in strategic and intentional ways.
If you have money but you can’t bring yourself to spend it, even in careful ways, then your enjoyment of life will be greatly hindered. You can, instead, choose to maximize both your financial security and your happiness by finding a healthy balance between spending and saving.
Are you an under-spender? What holds you back from spending money in financially positive ways?
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