Oversaving does not lead to happiness

I love frugality. Frugality helped me to dig out of debt, begin to build wealth, and find more meaning in the things I already own. But at some point I crossed the line from frugal to cheap. I've spent the past few months seeking balance: allowing myself permission to spend on a few indulgences while choosing to cut back in other areas.

There's new research that indicates this sort of conscious spending really does make us happier. This morning, Jeff V. pointed me to a New York Times article from John Tierney that explores this research. Tierney says that oversaving is a burden for our times.

Unlike some others who have complained about savers recently, Tierney does not argue that we should all rush out to spend in order to support the economy. He merely warns that oversaving does not lead to happiness:

“People feel guilty about hedonism right afterwards, but as time passes the guilt dissipates,” said Dr. Kivetz, a professor of marketing at the Columbia Business School. “At some point there's a reversal, and what builds up is this wistful feeling of missing out on life's pleasures.”

[…]

During the current recession, hyperopic Ants are presumably having a harder time than ever parting with their own cash, no matter how often President Obama and his economists urge them to do some stimulative shopping. But would these Ants — and the economy — be better off if they relaxed a little? I asked Dr. Kivetz for his advice to shoppers.

“Don't be too hard on yourself,” he said. “Obviously you need to be responsible and conserve your savings. But it's been a depressing winter, and there's nothing wrong with indulging yourself a little. This is a chance to reassess the quality and the balance of your life and to think how you'll feel in the future. As long as you can afford it, it's not a bad thing to be enjoying yourself.”

Now obviously nobody is encouraging you to live beyond your means. Frugality is an important part of personal finance, and we all should certainly do what we can to curb costs. Instead, this is a reminder that money is a tool. If you're meeting your goals for saving, it's okay to spend some on the things that make you happy.

[The New York Times: Oversaving, a burdern for our times, via Jeff V.]
More about...Frugality, Psychology

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UnderstatementJones
UnderstatementJones
11 years ago

Give to charity!

Nothing wrong with a little indulgence, but frugality frees up money you can use to make a difference in other people’s lives. Why spend on your own diminishing marginal returns when spending on someone else could really use a sandwich?

Added bonus – it can make you feel happier way more effectively than a new kitchen.

Susanna
Susanna
7 years ago

I wish people would stop this charity nonsense. Charity only makes sense in a free Market system where the government does not confiscate Money in order to fund social programs. Once the government already seizes Money to allegedly help all the people they think are in need of help, giving even more Money away is just not logical. I anyone Reading this thinks I am heartless or whatever… please do the math. There are not that many poor people to justify all the Money that is seized in order to “help” them. Itps just good business for the government. Stop… Read more »

ABCs of Investing
ABCs of Investing
11 years ago

I have to add that this rule doesn’t apply to everyone. If you have a really bad financial situation then you might not be able to spend anything on yourself until you get control of your finances.

That said, I need to loosen up the purse strings a bit.

Howard Bannister
Howard Bannister
11 years ago

I just got myself to a point where I’ve eliminated all of my consumer debt entirely, and I’m now preparing to begin building my savings. But before I get too far down that, I’ve decided that it’s okay for me to “practice” spending money on fun things without blowing my budget. So far, this has included buying a couple of “toys” (Kindle 2, Roku Box) at full price, but mostly, my post-debt-elimination purchases have only been things that I’ve found for super duper cheap prices (either on dealnews.com, woot, etc.). And I’m really forcing myself to think about my impulse… Read more »

Albert
Albert
11 years ago
Unfortunately, the problem is simply a matter of the audience. The vast majority of Americans do not need to hear “oversaving does not lead to happiness” in the NYTimes. We need to hear “deficit spending does not lead to happiness” in the NYTimes. And we need to hear it over and over again because advertising is constantly telling us not to worry about saving.
J.D.
J.D.
11 years ago

@Albert (#4)
Great comment. I think you’re absolutely correct. But I also think it’s interesting that the research reveals what I have been learning experientially (and that others have been telling me). The relationship between money and happiness constantly fascinates me.

Shara
Shara
11 years ago

DH and I are considering this spring a tremendous buying opportunity. We are evaluating our savings and our plans to buy things and moving up the schedule. Work on our house, a new PC, clothes, we have the money sitting there and if we act soon we can get some really great deals.

Once your savings cover your “sleep at night factor” and you are meeting your ongoing saving goals, the rest is for living your life.

Roger - A Content Life
Roger - A Content Life
11 years ago

Actually, money has little to do with happiness unless you spend your extra money to help others or you’re really poor. I recently wrote a post called “Can More Money Make You Happier?” that goes into more detail.

Jeff
Jeff
11 years ago

I agree with this post. If you adhere to a budget, a certain amount (25% for me) should go toward “guilt-free spending”. Do just that. Spend it on things that make you happy.

Doug
Doug
11 years ago

Here’s to hedonism!

Michelle
Michelle
11 years ago

I have recently been practicing this. I just moved into a new place and find enjoyment in “sprucing” the place up. This past weekend I spent a little money on some bulbs, dirt and mulch for the flower bed out front (not a need, but great satisfaction after the fact) and am planning on buying new curtains for the dining room soon. I don’t need any of this stuff, but it gives me satisfaction spending the money I have on things that enhance my life personally. As long as I’m still meeting my savings goals and stay out of debt,… Read more »

Steve in Montreal
Steve in Montreal
11 years ago

At work we were told last October that a “restructuring” would occur in Q1. Since then I have been spending considerably less and focused on saving. Well today was the day, I was “restructured”. My emergency fund is ready and I must admit, I’m not as stressed as I would have been if I didn’t save beforehand.
I didn’t want people to say “Nice kitchen” but not be able to eat.

kick_push
kick_push
11 years ago

is this a sign telling me i should get my HDTV now? =D

Chris
Chris
11 years ago

I come from very frugal people and I had to learn that not only is it ok to occasionally spend on something frivolous, sometimes it makes sense. I get stressed a little easier than most and allowing myself an occasional treat that relieves the stress – a dinner out rather than cooking, even a housekeeping service for awhile – meant that I could focus better on my job and earn more in the long run. which means more money in retirement savings, higher social security, no expensive counseling costs… I’ve never suffered from the debt problems that many of you… Read more »

Nancy L.
Nancy L.
11 years ago

As I said to you on your earlier posts, I’m glad you’ve added joy back into your budgeting system. I truly believe that one can be fiscally responsible and still occasionally blow money on frivolous things. The trick is in scaling the frivolousness to what your budget can safely withstand.

Aryn
Aryn
11 years ago

I really think that frugality is both a lifelong practice, and a cycle throughout life. There will be cycles when people are more spendy and less frugal, and others when they’ll tuck money away like squirrels preparing for winter. Right now, my husband and I are penny-pinching because we’re getting ready to buy a house and trying to bulk up for the associated expenses. Then there will be a bit of a buying spree for things like appliances, a few pieces of furniture, then we’ll start saving again. I think as long as people practice good financial balance and let… Read more »

Steve
Steve
11 years ago

Oversaving may not lead to happiness, but overspending will lead to unhappiness sooner or later. Regarding the former, the article and the studies it quotes do not do a very good job of proving the point. Who commissioned the study, the consumer marketing industry? Sheesh!

Ruth
Ruth
11 years ago

I agree with the first comment here, and I would add that our spending affects many more people than ourselves. Every dollar we spend is a vote for the kind of world we want–what kind of environment, what kind of labor practices, etc. There’s more to personal finance than save vs. indulge, and that’s the area of ethical spending.

Meaghan
Meaghan
11 years ago

Balance is absolutely key! You will just be miserable is you obsess over every penny and don’t allow yourself the occasional (and I stress occasional) indulgence.

Dana
Dana
11 years ago

It’s interesting that they pull the regret over guilt idea over spending. Obviously, this can be conjured as another tactic for people to open up their purse strings and “stimulate” the economy. But the point is worth thinking over nevertheless. Life is unpredictable, so frugality should be practiced with some room for indulgences if finances allow.

Sandy E.
Sandy E.
11 years ago

I think when we become reponsible with our finances, for example, like Nancy L. and Aryn – couldn’t have said it better myself — then money ceases to be an issue. When we get out of debt and learn how to live below our means, then we get off of a financial roller coaster and stay on level ground. I know that splurges from time to time, so long as they are within my budget, do make me happy, which include things I buy for myself as well as for others. The key though is “within my budget.” I don’t… Read more »

TosaJen
TosaJen
11 years ago

Albert said it. 🙂

When DH and I had our first episode of austerity (DH went back to college FT, and I went back PT/worked PT), we learned a lot about what is important to our quality of life.

Certain expenditures are non-negotiable, and others will be cut only when we’re in really bad shape, financially.

When you’re deciding where to draw the frugal/cheap line, you have to stick with your values. But first, you need to know what they are.

Rick Francis
Rick Francis
11 years ago

>But would these Ants – and the >economy – be better off if they >relaxed a little? As long as you save in a bank rather than putting cash in your mattress that cash is available to lend to another person or company that will spend it. So individuals saving in the banking system should NOT pose a problem for the economy! If you have a reasonable amount saved for emergencies, have tamed your debt, and have invested sufficiently for the future then spending a reasonable amount on something you value really should make you happier. If responsible spending doesn’t… Read more »

Steve @ Freedom Education
Steve @ Freedom Education
11 years ago

Hey JD,

My wife and I have “play” money. This is money that we both receive at the beginning of the month to “play with”

I’ve spent the money on hockey gear, a couple of beers now and again or just a weekend with friends at the cottage.

The best part is that my wife and I have an agreement; we don’t ask each other what we spend our play money on; and since we receive a fixed amount of “play” every month we don’t overspend either….

I love my play money 🙂

chacha1
chacha1
11 years ago

I have a rule that I’ve been using for a year and trying to get my DH to accept … I don’t really buy anything that isn’t a necessity unless a) it will definitely improve our quality of life in the here and now (e.g., upgrading items in daily use) OR b) it will definitely improve our relationship in the here and now (e.g., tickets to an event, or an overnight trip out of town), AND c) we can pay cash.

I Was Broke. Now I'm Not.
I Was Broke. Now I'm Not.
11 years ago

I couldn’t agree more with keeping the balance in your life. But I regret making unnecessary purchases way more often than I feel deprived because of the ongoing savings effort…

Jorge
Jorge
11 years ago

What’s interesting about this article is that it is all about perception. For some folks, going out to dinner once a week is an extravagence, but to someone else, it is cutting way back.

If someone feels like they are cutting back for too long, they start to get whistful about what they are missing, but if they don’t feel like they are missing anything, they won’t!

So the trick is to spend well below your means but to feel like you are living large! Good luck.

Moneymonk
Moneymonk
11 years ago

I kinda of touch this in my blog, everthing must have a balance, always have a percentage going to fun.

If not, you will go crazy

SeekingLemonade
SeekingLemonade
11 years ago

As usual, the right answer is: It Depends.

If you have a job and income, then ok do something nice for yourself periodically.

If you are being foreclosed next week with no prospects and no income and no place to go, I doubt that buying an IPod is appropriate at this point.

Charlotte
Charlotte
11 years ago

This is what works for us: We set aside a fixed amount for entertainment even though very small, it keeps us from feeling too deprived. This in turn makes us more successful in paying off debt. On another note, it is a good time to spend (as long as you are responsibly doing it). I took a trip recently and my airfare only cost me $215, instead of $400. I was able to shop during that vacation and eat out a few times. Total cost of the 5-day vacation: $350. I stayed with family and did not rent a car.… Read more »

Frugal Bachelor
Frugal Bachelor
11 years ago

There are plenty of people on the blogs who give frugality a bad name, and think you’re wasting your money if you ever step foot outside the housing development you live in, our throw out a pair of socks unless they have at least five holes. I’m as guilty of this as anybody else. But I’ve learned my lesson and now my new mission is to prove you can live a good life on just a little bit of money. My indulgence is going to Mexico. For years, I went every weekend; this was unsustainable. Then I stopped going completely.… Read more »

Do You Dave Ramsey?
Do You Dave Ramsey?
11 years ago

Interesting that this was even a news event… but I say that a lot. This guys simply has a new spin on an old saw and he’s the new story de jour. Spending money and material things don’t bring happiness. If that is true then the converse has to be true too – over saving doesn’t drive happiness either. Happiness is largely independent of money on both sides of the equation. … but I doubt this even just a little, I’d err on the side more money in savings because the security it affords… besides while you CAN over spend… Read more »

Chett
Chett
11 years ago

J.D. Here is an excerpt from the ebook I’ve been working on that cites another study on the very same topic. Please excuse any editing issues, this is a work in progress. “In many situations we initiate our own poor spending by allowing emotions to control our wallets. A study conducted by Carnegie Mellon University in Pittsburgh explored the issue of psychology and emotion in spending with a simple experiment. Participants were asked to participate in a study in which they would be divided into two separate groups and shown film clips. This first group was shown a scene from… Read more »

Gia
Gia
11 years ago

Excellent points #4 and #16. The commercial media loves to point out the disadvantages of saving and/or living a frugal life. They always seem to be producing articles that leave the reader feeling as if they are doing a disservice to themselves by choosing to live below their means. Invariably, I always feel to need to spend more and “indulge a little” (which is a relative concept) after reading those articles. Similar to the way I always feel a need to lose weight after browsing fashion magazines despite being tall and slim. Suffice to say, those articles are in the… Read more »

Sarah
Sarah
11 years ago

Note that Dr. Kivetz is a professor of MARKETING. What the heck does he know?

Ann
Ann
11 years ago

He…warns that oversaving does not lead to happiness

Really? Then why do I get a little thrill when I see my retirement accounts increase or my mortgage principle decrease?

J.D.
J.D.
11 years ago

@Ann (#35)
I get the same thrill. No question. But I think the point of the article isn’t “saving does not lead to happiness” but that over-saving does not lead to happiness. The argument being made (and it matches up with my own life) is that when we save too much we risk losing our financial balance.

Ann
Ann
11 years ago

@JD (#36) – I understand the point of the article, but, for me, there is no such thing as over-saving. I’m one of those weirdos who is addicted to saving.

Ken
Ken
11 years ago

Money may not buy happiness… but poverty sure buys a LOAD of misery.

D. L.
D. L.
11 years ago

J.D. – Another great post, as usual. Getting out of debt can be a such a long, frustrating process that I’d suggest that people should build this idea into their debt-elimination strategy. Set small, easily-attainable goals that you can reach within at least a few months and that are steps towards your long-term goals. When you achieve a small goal, reward yourself with a fixed amount of extra “play” money to spend on whatever makes you happy. This will do a few things for you, psychologically: First, it will keep you from over-indulging yourself by spending too much or too… Read more »

Michael
Michael
11 years ago

Ken(#38) sums it up quite well, and having money saved brings a great sense of security. I will say that if you are inclined to not just frugality but being cheap and miserly, try giving to charity. I think that is a great way to help keep you cognizant of what you have been blessed with and should be thankful for, while helping others. I think it can help you avoid the feeling that you are missing out on something, because you recognize how much you have. It also feels makes you feel good, because that’s what happens when you… Read more »

StackingCash
StackingCash
11 years ago

J.D.

I can’t wait for you to tell us all how you feel when you buy that Mini Cooper. I’ve been feeling a bit deprived lately because I’m locked into the saving mode even though my wife and I doing fairly well with our finances. I need to vicariously share your joy when you buy your new Mini Cooper 🙂

DDFD at DivorcedDadFrugalDad
DDFD at DivorcedDadFrugalDad
11 years ago

Simply put, it’s about balance and moderation . . .

Ann
Ann
11 years ago

I will say that if you are inclined to not just frugality but being cheap and miserly, try giving to charity.

I give money to charity, but I’m always suspicious of what they do with it. Go a step further and give time. One of the greatest feelings is teaching school kids about finance and having them “get it.”

jeffeb3
jeffeb3
11 years ago

This is where budgeting is so important.

If you have savings goals, and you are keeping track, then you know how much you can spend on frivolous things. For me, I get much more joy saving my fun money for a few months and buying something I’ve been researching for a while.

Just keep in mind, just because the gas is cheap, global warming has not gone away. Buy responsibly, which includes buying something which you actually want and will use. And buy the most robust, something that will last a while.

reallysparkle
reallysparkle
11 years ago

I agree that it’s important to spend *some* money on things you really enjoy. It’s really striking a balance between doing the right thing for yourself in the long run vs. being content in the present, and both are important. Because I’m in the paying off debt and saving an emergency fund stage, I am learning how to be frugal, and actually enjoying it. I do feel guilty when I spend on pretty much anything. I know that the not too distant future is looking pretty bright for me, and I’m able to delay gratification, but I also sometimes get… Read more »

John Steed
John Steed
11 years ago

Wasn’t it an excess of “grasshopper” behaviour that caused the problem in the first place? The last thing we need is to turn the “ants” into “grasshoppers.” There will be a painful adjustment period (there always is after a bubble), and it may last longer than normal, but economic equilibrium will be restored without urging “ants” to abandon their sensible ways and “shop ‘til they drop.” However, if an “ant” has been planning a significant purchase and has saved for it, now may be a great time to proceed, as prices are falling and there are deals to be had.… Read more »

Slinky
Slinky
11 years ago

The only money that should be saved, is the money you save for a purpose. There’s no point to saving up money for no reason. Money is a means, not an end. Saving money for no reason is very similar to buying things you never use, in my opinion.

Bob the fish
Bob the fish
9 months ago
Reply to  Slinky

What if that purpose is a feeling of security? What if you know that the fear of loss of security is illogical but you can’t emotionally separate from the fear no matter how convincing the numbers are?

mwarden
mwarden
11 years ago

This is the problem with budgeting. Budgeting is a tool. It is not reality. $20 earmarked for movies does not make that $20 any less valuable, so you should NOT be making any purchasing behavior changes.

This is the problem. Budgeting has become a way of life and it has changed the discourse. Should you buy that item? Well, is the item more valuable than the money you’re paying for it?

That’s the real question. There is not a need for a “balance”. That word only has meaning in budgeting.

Aperson
Aperson
11 years ago

This was true for me – over saving didn’t make me happy. I put away over 10K to spend while I was on maternity leave last year. But I was so frugal with my spending that when I came back to work, I still had 6K left over. Starting back at work made me realize that I should have loosened the purse strings a little and enjoyed my time away from work instead of huddling in the house afraid of outside expenditures.

Lily
Lily
11 years ago

I noticed that people who save on virtually -anything- often are nasty and judgemental toward people who occasionally spend money on fun activities, dvds, a good purse… you name it.
I found examples of that in a certain big frugal community on-line…

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