Sunday, January 23, 2011

Saving too much - over thrifty

During my informal chats with people, I realized there are various groups that define savings differently. Perhaps it may be due to individual circumstances, mentality, personal challenges and the income streams. Some save 10%, some 15%, some 30%. For me, I save 40% of my net earned salary (minus away CPF). To me, it's sufficient upon my calculation at the current moment. Yet, I understand there are others whom is able to save 90-95% (exclude CPF) by squeezing every dollar.

Initially, I was amazed! Slowly, I figure that there is always a price to pay, the price to sacrifice to make this work. Maybe I am right or maybe I am wrong. Anyway, the price to pay can be discounting off expenses which are deemed unnecessary to the individual but may add value to one's life. Of course, the word "value" is subjective. For instance, the "value" can be overseas trips with your loved ones. Intangible. Unforgettable. On the contrary, to some, it's a waste of money. They prefer "value" by spending money on a one-night stay at a local budget hotel although they can well afford to travel to nearby Bintan. And that's why the "value" is the mindset as perceived by different people. Still, if the "value" gives good ROI (return of investment) back, it's money well spent. Individual choices :)

The problem is, over-saving too much, such that spending on a little something which may add "value" is like a personal crime. A crime that should NOT be committed.


Even if the individual admits that money need to be spent, he will hold on tight. His little voice will start to tell him not to spend. The cash at hand (i.e. savings) makes him feel secure, looking at the dollars in his savings account. Taking off any medical condition, should this be a good or bad situation?

Consider this - a married couple. The couple has a savings plan together, contributing a certain % monthly. However the guy, like a typical CFO (Chief Financial Officer) directs the saving ratio for his wife. It comes to an extent that they try to spend as little as possible and the husband dictates the wife spending habits. There is a ceiling on monthly expenditure. It's not like they can't make ends meet - they do not see the need to spend despite having decent monthly income.

Therefore, for the past years, the wife has been spending time with the husband at home, downloading free movies on the net to watch or she will just be doing normal household chores while the husband lazes at home. Gradually, the wife is bored with her life and starts to compare with her peers during her workplace. Her peers have husbands whom WOW them with exciting things. The sparks that creates romance.

One fine day, the wife knows a guy called ABC through a mutual friend. ABC is flamboyant and brought the wife (without the husband knowledge) to romantic places, such as high-end restaurants which the wife has never been to. By the way, we shall call the wife G. True indeed, ABC likes G and sweeps her off the feet. G feels like a frog in the well. Why am I, at this age, did not experience such a feat before?

For a moment, G starts to think - why did my husband scrimp and save and not pampering me? ABC is willing to open up his wallet. ABC is not a person whom spends a lot but he VALUES the $$$ spent with me although ABC profession is a just a typical "Shenton Way" dude, drawing a four-figure income (assume all factors remain constant). All this while. her husband is still in the dark. G questions him and the same answer remains - "Honey, we should save till we are old. The main reason why we save is because saving is a habit. And when we are old, we can count the dollars"

Fast forward, G becomes sick of her mundane life and seeks a divorce. Seems rash and knee-jerk reaction; still G makes up her mind and cannot foresee any reconciliation. She regrets money habits are not discussed in the beginning. She regrets on the marriage due to the fact that, she thought the husband is a good thrifty person. During the courtship days, the husband does not spring any surprises at all - normal daily fare of hawker food, public transport, get home and sleep.

The husband is shell-shocked. He advocates savings so much till the extent that he has lost something VERY valuable. Valuable that money cannot buy.

What does this mean to me?

I am not sure about you. To me, I believe saving is important. I advocate myself 40% after considering the scenario I am in. But to over-save and not willing to open up your wallet may be over the fence. For me, I spend on dine-outs with my wife, travel trips together, buying Prada-related products (we love Prada!) once in a while and yes, treats to my close buddies and friends. I find this "value". The value derived is memories built together with my wife. For friends, its the long-lasting relationship. Money can be earned back, not experiences.

Don't get me wrong, we are not materialistic (if you catch me on the statement on Prada). Just that, we spend things that make us happy, like a bonus. We get bonus during our line of work, don't we? We do not want to discount ourselves. Therefore during our honeymoon trip, we bought Prada products in Europe, so much so people around us gasp in horror. Still, there are some whom appreciate the beauty because of the word "value" in spending on a certain item like Prada that I mention. Same concept - for guys, we never know why women spend so much on shoes either. We guys on the other hand, spend a sum of money on gadgets, so women may be thinking likewise too. This explains why advertising campaigns differ for different gender.

Another thing to note is time. Each day, our time passes quickly. You may not know what happens the day after. If I did not buy a certain Prada design, when will I have the chance to do so in Europe again? God knows what happen?

Nike - Just Do It! Do it while you can. Yes, saving is VERY important. Define how much you want to save monthly to reach your target FIRST, be it retirement or future purchase plans but assess your overall life. Over thrifty can lead to a price to pay. The price to pay over "value" to spend may not be worth the returns back. Not everyone thinks the same around you on saving too much - consider the couple case. (if yes, that's good)

If someone can save 90%, it does not mean you should do the same. Save something within your preference. Try not to envy but envy yourself to be able to spend should you have a war chest now :)

Go on, spend a little and keep within your saving budget.

On myself, I am thinking to spend my next Europe trip with my wife. This time, we target other places in Europe and my beloved Prada!

Cheers~~~

6 comments:

  1. Great Post!

    I will go out and buy that Porsche now!

    ReplyDelete
  2. This type of woman better kick her away. No matter much her husband pampered her there will always be another man richer than her husband who can pamper her even more. LOL

    ReplyDelete
  3. lol...that's true. btw, you ok to do a blog link exchange? :)

    ReplyDelete
  4. Read..? http://personalfinancemaster-guru.blogspot.com/2011/11/girlfriends-liability-good-wife.html
    Cheers

    ReplyDelete
  5. Being frugal and thrifty is an advantage even if you think you are being left out. Because if you have those value instilled on you then you can save a lot of money and could be able to make an investment. If you need some guidelines on investment with the money you saved you can check www.ouroptionfairreview.com optionfair broker review sites to give you some handy advice on how to make a successful small deal investment.

    ReplyDelete

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