I sometimes worry that I’m not saving enough money. It’s a silly obsession, given that we don’t have any consumer debt, we save more than one-third of our income, and I have a defined benefit pension plan at work. I try to strike a balance between saving and spending money, but I’ll admit that I mostly prefer not to spend. Boiling every decision down to a purely monetary one isn’t healthy, but try telling someone who suffers from anxiety not to worry. It’s hard to ignore that instinct.
Is there such thing as an unhealthy obsession with saving money? I asked myself this after reading one of those listicle posts – 12 ways to know you worry too much about retirement savings – and slowly nodding along with most of the points. Here are a few of them that hit home for me and my money saving obsession.
You have a double-digit savings rate but find it difficult to make ends meet
It’s not that we find it difficult to make ends meet, but I believe in giving a job to every single dollar that comes into our account each month and that can sometimes leave just a small buffer in case something comes up.
For example, I get paid once a month and as soon as that paycheque hits my bank account I pay off last month’s credit card balance in full, set aside my RRSP, TFSA, and RESP contributions, and then make sure there’s enough to cover any automatic bill payments. I want to be efficient with every dollar – and it doesn’t seem very efficient to have a bunch of dollars sitting in a chequing account and not earning any interest.
But once in a while, “something” comes up and we go over budget. I have to move money around between accounts to cover the extra expenses. It’s not ideal, and I know this, so it would make more sense to park $1,500 or so into my chequing account to cover any budget shortfalls.
You put off replacing or repairing important things in your home so you can save more money
I do budget for home maintenance and repair, plus set aside money for new clothes every month. Still, I find myself getting annoyed at discretionary purchases or things I think we can live without.
We have a decent sized list of items that need to be fixed or replaced. Usually the first thing that comes to mind is, “how much is that going to cost?” Too often, the purchase gets deferred until the item becomes unusable and has to be replaced.
Part of this thinking is because of the way I budget. I use a zero-based budget to plan our spending and saving for an entire calendar year. Some months have irregular expenses, such as house insurance premiums or Christmas presents. The zero-based budget allows me to smooth out our expenses so that we don’t have any major surpluses or shortfalls in a given month.
This is great if every single expense is accounted for, but of course life happens and we need to make adjustments. I’m not sure if I’m more annoyed by the unanticipated spending or the fact that I’ll have to move some numbers around on a spreadsheet to accommodate the spending.
You visit your budget daily trying to find ways to trim expenses so you can save more
There’s an incredible level of detail to be gleaned from a zero-based budget approach, especially when you have years of historical data from previous budgets.
As I input weekly expenses into my spreadsheet I’ll often look for ways to save in certain categories. The problem is, the savings in one category can easily be offset by going over budget in another category. Or, more specifically, spending just half of your clothing budget one month doesn’t necessarily mean you can squirrel that money away for good – you might as well add it to next month’s clothing budget.
You have a defined benefit plan or your employer contributes substantially to your pension
My defined benefit pension plan is designed to replace about 60 percent of my final salary in retirement. That’s a lot of money and something that, when combined with CPP and OAS, can provide a very comfortable retirement.
I save outside of my workplace pension. It might be overkill, but I think options equal freedom when it comes to retirement. I hope to max out my RRSP, my wife’s RRSP, and both of our TFSAs, in addition to what I get from my workplace pension and government benefits.
You like the idea of having an ambitious retirement nest egg and you are striving to reach that goal, but can’t explain what you will use that money for when you retire
Along the same lines, I have this ambitious goal to become financially free at 45 and to explore early retirement in my 50s. I obsess over saving money today so that my future self will have the flexibility and freedom to retire early, change careers, travel the world, give generously to charity, etc.
The problem is, I have no idea what my life will look like in 20 years and whether all the money we end up saving will be enough, too much, or too little for whatever life has in store. So I err on the side of, more money = better.
I’ve decided that I do have a bit of an unhealthy obsession with saving money. I am a personal finance blogger, after all.
It’s true that more money will give us more options in the future, however the trick is to not just enrich your future self at the expense of your present self. Smooth out your income and expenses throughout your life so that at any stage you’re never depriving yourself nor living in excess.
Readers: Do you have an irrational obsession with saving money? Can you save too much?
Welcome to another edition of weekend reading and I hope you’re all having a terrific May long weekend. Grab a coffee or tea and take some time to enjoy the finest hand-curated selection of Canadian personal finance and investing articles from around the web this week.
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Scotiabank Gold American Express Card offer
My go-to travel rewards credit card is Capital One’s Aspire Travel World Elite MasterCard, but I’m always on the lookout for a secondary card to take advantage of generous sign-up bonuses. My criteria is simple: the new card must offer at least $250 upon approval (or else through an easy-to-earn early spend bonus), and waive the annual fee in the first year.
I haven’t applied for a new credit card in a while but a recent promotion from Scotiabank, via RateSupermarket, fit the bill perfectly.
The Scotiabank Gold American Express Card gives you 4x Scotia Rewards points on grocery, gas, dining, and entertainment spending. The welcome bonus pays a whopping 30,000 points (worth $300 in travel) when you spend a reasonable $750 within the first three months. The $99 annual fee is waived in the first year (sweet!), AND, to top it off, Rate Supermarket will throw in a $75 e-gift card to Amazon, Star Bucks, Best Buy, or The Ultimate Dining Card.
Earn $375 without paying an annual fee for a year? Done! You can sign up for this offer here.
OhmConnect (for Toronto readers)
OhmConnect is a free platform for Toronto Hydro customers which rewards them for saving energy during at specific times. Rewards can be converted into cash, donations, or energy-efficient products.
- Users can earn up to $100-$300 per year
- They earn by saving energy when power plants are at their worst
- Simple sign up process by connecting their Toronto Hydro account
- Sign up here and start saving today!
This Week’s Recap:
Many thanks for Melissa Leong for including me in her Financial Post article on how to get the best deal from your bank.
On Monday I wrote about investing for income in your accumulation years and offered an alternative for young dividend investors.
And on Wednesday Marie explained the five C’s of creditworthiness to help borrowers understand what lenders are looking for.
Canada’s middle-class is on the brink of ruin, according to this article in The Walrus, which looks at why we’d rather binge on cheap credit than live within our means.
An out-of-touch Australian millionaire made headlines this week when he said in an interview that the reason millennials can’t afford to buy houses is because they’re wasting money on $19 smashed avocado toast and $4 coffees.
Millennials like Desirae Odjick gave a giant eye-roll to the idea that avocado toast has anything to do buying houses and that the real reason keeping millennials from buying houses is stagnant wages and rising home prices.
The real answer lies somewhere in between these two viewpoints. The author of the She Picks Up Pennies blog looks at the problem with avocado toast in much the same way I looked at the latte factor – it’s not the odd indulgence that prevents you from reaching your goals, it’s when this type of spending becomes habit or a new normal. Yeah, maybe avocado toast is amazing. So is having your house professionally cleaned. Flying first class is probably amazing, too. The problem is when we feel like we deserve all of these things without first having earned it.
Off topic: Who owns the space between reclining airline seats? Some thoughts on conflict resolution from economists.
An interesting look at why retirees cut back on spending as they age. It seems they lose confidence in markets and their own finances.
Saving isn’t an option, it’s a must-do, says retired personal finance expert Gail Vaz-Oxlade, who makes a guest appearance in The Star to discuss retirement savings.
How do your financial plans get thrown out the window? Have twins! Congrats to A Wealth of Common Sense blogger Ben Carlson on his new arrivals and subsequent journey to buy a mini-van and a bigger house.
This blogger retired at 52 with $3 million in the bank. Here he shares the 10 worst money mistakes anyone can make.
Age 52 apparently isn’t early enough for some extreme savers and here is a look at how to retire on $1 million or less at age 35!
Ben Rabidoux takes a drive in Brampton, Ontario and shows off the astounding number of pay day loan shops on one street. Sad!
Rob Carrick on how dividends came to dominate our investment portfolios since the global financial crisis in 2008.
Hot stocks can make you rich but they probably won’t:
“A mere 4 percent of the stocks in the entire market — headed by Exxon Mobil and followed by Apple, General Electric, Microsoft and IBM — accounted for all of the net market returns from 1926 through 2015. By contrast, the most common single result for an individual stock over that period was a return of nearly negative 100 percent — almost a total loss.”
MoneySense’s David Aston with 4 things to get right when tapping RESP savings. This decision is about a decade away for us, but one that I’m keenly interested in getting right.
Jason Heath on whether you can have RRSPs and RRIFs at the same time, and more importantly, should you?
On the Canadian Couch Potato podcast, Dan Bortolotti interviews a financial planner and expert in socially responsible investing.
Finally, Tim Cestnick says to follow these steps if you get an ‘education letter’ from CRA this tax season.
Have a great May long weekend, everyone!