How Saving Money Cost Me Money
I used to have a savings problem. But not in the way that one might think.
For years, when payday would come, I would budget a ridiculously large percentage of my paycheck for savings. I left myself very little for bills and practically nothing for shopping, eating, entertainment — the things I vaguely dubbed “nonessentials.” I was determined not to live beyond this budget.
Well, I sorely underestimated my love of “nonessentials.” And it cost me, because I would inevitably overspend, even as little as $10. Which doesn't sound so bad, except that, after saving all of my money, I had nothing left in my checking account and would thus incur overdraft fees. At one point, a $2 purchase spiraled into $300 dollars of overdraft fees.
My reasoning was this. My savings account was with a different bank that offered a higher interest rate. Yes, it occurred to me that the $2 in interest was ruled out by my $35 overdraft fee. But I kept convincing myself that the fee was only that month. I wouldn't let it happen again. But of course, it did happen again. And again. It wasn't just overdraft fees. There were other financial decisions I made — in the spirit of saving money — that ultimately cost me.
I was so obsessed with saving, I was making unreasonable goals and ultimately setting myself up for failure. I desperately wanted to see all of my money in one place. Having $1,500 in checking and $5,000 in savings wasn't enough. I wanted the instant gratification of seeing $6,5000. I would leave myself nothing just so I could see that number. Like I said, it was an obsession. I admit: I also wanted to get rich slowly as quickly as possible.
Here's the history of my savings problem. I love to shop. Always have. While I've learned to curb it, it's a struggle. My solution was to replace shopping with another activity that gave me a sense of self-worth. That activity was saving money. I figured using the antidote would solve the problem, but I was merely putting a band-aid on it. I had to learn the first tenet of the Get Rich Slowly philosophy: Money is more about mind than it is about math.
Recently, I talked to my mom about this. She mentioned that my father had been on a money-saving kick, putting nearly everything into his savings, much like I'd been doing. My father had become increasingly depressed, and having never suffered from depression, he had no idea why. Eventually, it came to him. He had zero in his checking account, intentionally. He was scrambling to outrun overdraft fees and also make sure he had just enough to pay the bills. Maintaining a zero balance is not just stressful, it's bleak. My mom, in her infinite simplistic wisdom, asked: If your money is costing you peace of mind, why are you saving it?
Simply put, saving money is great. But like any obsession, it can sometimes end up costing you. Here are a few specific lessons I learned from my money-saving sprees.
- Cell phone bill : When I was in college and signed up for my first cell phone plan, I had the cheapest, most utilitarian plan possible. Something like 100 minutes a month for $19.99. Yes, it did occur to me that I talked on the phone probably in excess of 1,000 minutes a month. No problem, I thought. I'll use it for emergencies only. Ha. Needless to say, over the months, I ended up paying more in over-usage fees than if I had just upgraded my plan.
- New checking accounts: On the advice of a friend, I once got sucked into a “new checking account” offer that had an awesome points program for travel. I signed up and could already see myself sipping a 2 oz. bottle of wine at 40,000 feet. But the switch threw off all of my auto-pay bills, making it a huge headache, and the points program ended before I even had a chance to redeem any of them, making it a complete waste of time. Add that to the fact that this particular bank had the worst customer service I've ever experienced, and it cost me not just money but hours on the phone. There are reasons for switching checking accounts. A possible free flight isn't one of them.
- Bank fees: When I went back to my old bank, they did something that was very unlike them. They started charging me a monthly maintenance fee! They told me there was nothing they could do about it, unless I kept $1,500 in my account each month. It's like they were holding my checking account for ransom! But I did have $1,500?in my beloved savings. I hate taking money out of my savings, but it only made logical, financial sense to do it. There was no point in having a separate savings if I was spending $12 each month and only making $2 in interest. A no-brainier for most, but for compulsive savers, it's a very conscious decision, and seeing your savings account less $1,500 hurts a little.
I'm not suggesting living beyond your means or giving in to overindulgence. But it's also important not to go to the other extreme and save beyond your means. The lesson I learned: it's nice to have the instant gratification of seeing a big number in your savings account, but slow and steady always wins the race.