Extreme frugality is a personal finance problem no one talks about—but it can be bad to save too much – Yahoo Finance

There is a lot of personal finance advice out there that focuses on budgeting and not overspending. The value of that advice is pretty clear: Living beyond your means can have costly financial consequences, especially when you find yourself without the savings you need to pay for an unexpected expense.

While there is value and peace of mind in saving and investing for the future and being prepared for potential emergencies, it is also possible to take it too far. On the opposite end of the financial spectrum is the issue of extreme frugality. Advice for overly frugal people who don’t know how to spend money, sometimes at their own expense, is harder to find.

The American Psychiatric Association defines frugality as a symptom of obsessive-compulsive personality disorder (OCPD) when someone “adopts a miserly spending style toward both self and others.” Extreme frugality is an amplified version of that, and it often involves viewing spending as a bad thing no matter how much money you have. Examples of extreme frugality include always choosing the cheaper option even when you can afford and benefit from the higher quality one or focusing on saving money at all costs no matter how much time you must sacrifice.

The issue with extreme frugality

There’s a difference between saving and investing money for the future and hoarding money with no goal in mind.

People who struggle with extreme frugality see money as a finite resource that they must hold on to at all costs. But when you are excessively frugal, you miss out on one of the critical things money can do for you: simplify some aspects of your life and give you access to things and experiences you care about.

Bill Perkins, a hedge fund manager and author of Die with Zero, found himself falling into extreme frugality after reading Your Money or Your Life by Vicki Robin and Joe Dominguez. The book, which describes money as a resource we trade our life energy for, helped him gain more clarity on the things he valued and how he wanted to spend his time.

But Perkins became so conscious about not wasting his money that he stopped spending altogether. Then, one day, as he proudly shared how much of his expenses he had cut to maximize his savings, his boss made him realize that the point of life wasn’t to save as much as possible to survive but to also live.

How does one stop squandering money without going extreme and starting oversaving? You don’t have to live at either end of …….

Source: https://finance.yahoo.com/news/extreme-frugality-personal-finance-problem-130000040.html

Leave a Reply

Your email address will not be published. Required fields are marked *