Are you very frugal when it comes to spending? These signs could mean you're over-saving but under-living your life

Economic Times

2 days ago

iStock To avoid oversaving, run a check on your spending habits to know if you are in balance. Last week, I met the widow of a 75-yearold man who had no idea about the household income or savings. Her husband managed all the money matters. Following his demise, she discovered Rs.3 crore in bonds and bank deposits, and another Rs.2 crore in investments.
She is shocked at how wealthy she truly is, but at 68, she is resentful and upset about the acute frugality imposed by the husband that denied them even the simplest comforts.
Why do some people find it so difficult to spend money? Chrometophobia is an extreme case of fear, anxiety and panic at the thought of spending money. A small fraction of people suffers from this irrational affliction. It's not a very well-understood or diagnosed condition, but in milder formats, it does exist around us. Some of us are able, but not willing to spend. Rooted in trauma Some people withdraw from social activities. They won't eat out, travel, or spend time with friends and family in activities that involve spending. Some constantly check their bank accounts, statements and summaries, working themselves up over the smallest charge or withdrawal that they are unable to recollect or reconcile. Some just refuse to own debit or credit cards, fearing these may lead to excessive spending. They also almost never borrow any money and keep accounts with even their spouses, siblings and parents.Negative emotions related to money are more common than we believe. Many psychologists associate fear of spending with childhood trauma. Suffering from severe debt, hunger and poverty, seeing parents frequently quarrel over finances, witnessing or experiencing violence and abuse with respect to money, living through shocks and life events that diminish one's monetary status in a sudden turn of events can all stoke the fear of spending. Sudden loss of job, painful marital separation, and losses from gambling or speculation can also trigger negative response towards money.Many find themselves unable to spend even if their circumstances are not severe. A cultural propensity to save, as well as the ingrained idea of saving as a righteous and moral choice, might also leave people who have enough to choose saving over spending. When people have lived through cycles of scarcity and plenty, they hold the memories of scarcity so dear that during times of plenty, they feel it's wiser to save than to spend. Relationship with money Sometimes, popular choices can influence spending and saving habits. Minimalism is now a fad, as is the preference for experiences over objects. Many who think of spending as wasteful or superfluous may choose to limit their expenditure or be conscientious about how much they spend, and on what. They may also associate spending with a weaker psychological response to stress and depression, and prefer to pursue other dopamine-inducing activities over mindless spending or shopping to address boredom or stress.How do we know whether our relationship with spending is healthy and positive? We can examine how we make expenditure decisions and become aware of our attitude towards spending. Then it may be possible to align it with our income and wealth, and see if we are overdoing it or grossly underspending and living in uncalled-for misery. Change your perspective First, identify whether the absolute amount is the deterrent. Stopping ourselves every time we look at the price label; scrolling through discount deals, but emptying the cart after hours of careful selection because we dislike the total; making multiple trips to buy a simple object that we may finally not buy at all—such habits indicate we are, perhaps, too price-sensitive. We may be put off by spending because the money involved seems too much. Anchoring the spending to another number— income, wealth or savings—may offer perspective. If we allocate a small fraction of the value of our house to its annual upkeep and maintenance, spending on repairs, painting, and replacement might become easier.Second, check if the opportunity cost comparison is realistic and true. We may have the following rationales operating in our mind: Instead of spending on eating out, we can make the same thing at home. Why go on a foreign holiday when our own villages are so charming? Every expenditure has an alternative. Make a reality check whether you really went to a village or perfected a replicating recipe at home. If these alternatives are fictional, you are only making excuses.Third, identify whether your forced frugality invokes shame and guilt. You may be making a lifestyle compromise by trying to be someone you are not happy being. Does your attire dissuade you from talking to others at a social gathering? Are you conscious about taking calls in public on your second-hand phone? Do you choose not to drive because you are ashamed of your old car? These are evidences of imposed frugality that you are not comfortable with. You may have a spending problem that needs correction. Induce self-awareness Fourth, do your friends and relatives regularly leave you out when they make plans? Do you find yourself holding forth that these plans are all extravagant and a waste of money? You may be denying and coping while dealing with exclusion from fun social activities. These instances may signal that others are uncomfortable with your unwillingness to spend and choose to avoid. Take these social signals on board and see if participating in a smaller event that you may plan, spending some money on it makes you feel happier than being left out.
Fifth, do you find yourself hoarding needlessly? Do you find it difficult to resist a freebie? Do you plan to hitchhike with others more often than not? Do you hesitate to return dinner invitations to those who invited you? Do you jump in at any chance that doesn't require spending? You may be indulging in clever ploys to not spend, oblivious that others are noticing and have already figured out that you don't like to spend. It takes a close friend or relative to tell you this, if at all. Self-awareness is even tougher. Money wisdom requires awareness of your money personality. Run a check on your spending habits to know if you are in balance.
The author is CHAIRPERSON, CENTRE FOR INVESTMENT EDUCATION AND LEARNING
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)