Are Your Penny-Pinching Habits Hurting You?

Advertising & Editorial DisclosureLast Updated: 12/7/2022
By     |  
Edited by     |  
Alt Text

We’re always being told to save money, and while some of us are better at it than others, is it possible to be too good at it? In other words, are there ever times in your life when you feel like all you do is save money? Like, you never enjoy today because you’re always worrying about tomorrow? If that’s the case, you may actually have the opposite problem of the many people who don’t save enough — you may be saving too much.

Or you may know how to save money just fine, but you’re saving it in a way that is making the process harder than it should be.

So if you’re wondering if you are saving too much, or just saving money badly, you should ask yourself a few questions first.

How Old Am I?

This is an important question because if you’re in your 20s and paying off a ton of student debt, you may need to reduce the amount that you save to repay your student debt first. Just don’t ignore saving money. Most financial pros will tell you that if you’re always prioritizing your debt over your savings, you may never save money. After all, you’re going to have a lot of debt in your life. Between student loans, mortgages, car payments, credit card debt or personal loans, if you wait to put away money until everything is paid off, you may never build a savings.

If you find yourself struggling to have a good life right now, because you’re always putting money away for the future, and meanwhile, you’re constantly spending money to repay debt, like paying down student loans or credit card debt, maybe you should give yourself a break and actually save a little less.

Alt Text

How Much Am I Saving?

This is a very important question. Many financial advisors suggest trying to put as much as 15% of your salary to your retirement accounts and adhere to the 50/30/20 rule. What’s the 50/30/20 rule? That’s when, after taxes are accounted for, 50% of your paycheck goes to your needs, 30% to your wants and 20% to your savings and debt payments.

lightbulb icon
LET’S BREAK DOWN WHAT THAT MEANS:
  • Needs. Expenses like rent, groceries, utilities, car payments, etc.
  • Wants. Your streaming subscriptions, the vacation you plan on taking soon, the books you buy at the bookstore, and more.
  • Debts and savings. Credit card debt, student debt, your retirement accounts.

Of course, it can be difficult to define your needs, wants and debts in a way that keeps your budget adhering to the 50/30/20 rule. You might feel like you need to pay your student loans and credit card debts down every month, and so you mentally put those payments in the needs, when really you need to eat but you don’t need to pay off that credit card debt.

But in general, if you’re concerned that you save too much or too little, reviewing your budget today to see if it’s anywhere close to 50/30/20 is a good place to start.

If you constantly feel deprived and you realize that only 10% or less of your budget is reserved for “wants,” and if more than 20% of your salary is going into savings, then you should probably readjust your budget. If you’re putting away more than 20% towards savings and are happy with how things are going, obviously, for now, don’t change a thing.

What Am I Saving My Money For?

Saving money can be extremely challenging, and while it’s very important, learning to balance your spending and saving may help you get more enjoyment out of life. If you only save for tomorrow and spend nothing today, you may miss out on opportunities or experiences.

Likewise, if you save too little, you may seriously regret it during your retirement years. If you aren’t sure if you’re saving the right amount, it’s best to reflect on your financial goals for saving.

Assuming your financial situation is stable, you should be putting your money towards several funds:

  • seniors icon

    Retirement

    One day, you’ll be old, but if you’ve saved enough during your youth, you’ll be able to live out your golden years comfortably.

  • house2 icon

    House or Other Permanent Residence

    Of course, you may not be interested in a house or a condo. But plenty of people are, and while a house is a home first, it is also an investment, one that can grow in value over time. If you’re buying a home for the first time, you’re going to want to save for a down payment. And unlike retirement, this is a goal you’ll likely want to achieve several years from now, instead of several decades from now.

  • highschoolStudent icon

    Your Kids’ College

    Setting money aside for your kids’ higher education can help set them up for success.

  • travel icon

    Vacations

    We all need to take a break once in a while, and saving for something that will come sooner rather than later is far more fun.

  • fireworks icon

    Holidays

    Yes, this is a long savings list. But you spend a lot of money during the holidays every year, right? Maybe it would help to continually save money for the holidays and have a holiday budget plan.

  • injury icon

    Emergencies

    This is your rainy day fund. Accidents and emergencies happen, so we can’t stress enough the importance of building an emergency fund.

This is a lot, but if you can split up your savings into various funds, saving money might feel less overwhelming or depressing. After all, some of the money will be going into accounts, like retirement, that you won’t touch for years, while other funds, like a holiday savings account, you’ll spend every year. Knowing that you’re constantly protecting yourself from cash flow and shortage problems might make it easier to save.

Alt Text

Am I Making It Easy for Me To Save?

The reason you may feel like you spend all of your time saving money and not living your life could be due to how you save money. Hopefully, you participate in all three of these money-saving techniques, but if you don’t, you may want to consider adopting at least one or two:

  • autopay icon

    Automatic withdrawal

    If you have money automatically withdrawn from your paycheck into a retirement account, it will be easier to save for retirement. You can automate it so that every month, or more frequently, some money is going into an emergency account or a vacation fund or whatever you want to save money for.

  • rewards icon

    Utilizing your credit card rewards

    If you’re paying your credit cards off in full every month, you could strategically use credit cards with rewards, constantly getting anywhere from 1% to 5% off of everything you buy. Some credit cards have even been inching up to 6% cash back rewards. If you’re constantly saving money on everything you buy, you’ll have more money to spend or save.

  • wallet icon

    Budgeting regularly

    Creating a budget is extremely important. Everyone’s budget will be different, but you should review yours regularly, at least once per month, since our spending habits are always evolving. You may realize that you’re saving too much, or, if you’re like most people, not enough.

Am I Thanking Myself for Saving Money?

If you aren’t, you should start. Look, it isn’t easy to save money, and quite honestly, there’s a decent chance that however you’re saving money, you’re doing it wrong. Maybe you aren’t saving enough, or maybe you’re saving too much. Or maybe you’re doing it just right, but sometimes you go off the rails a little and do some impulse shopping, and then you beat yourself up, which would be wrong. You’re human, and there are all sorts of obstacles in our path every day that can cause us to spend too much and save too little.

Regardless of your current spending and saving habits, what really counts is that you’re out there, trying. However, carefully evaluating your budget, modifying your spending habits as necessary and using money-saving tools will allow you to save for the future, without depriving yourself in the present.

About the Author


Geoff Williams headshot

Geoff Williams has been a personal finance journalist since around the time of the Great Recession of 2008. He's been writing professionally since the 1990s about a variety of topics, including personal finance, credit cards and loans.

Williams is also the author of several books, including "Washed Away: How the Great Flood of 1913, America's Most Widespread Natural Disaster, Terrorized a Nation and Changed It Forever" and "C.C. Pyle's Amazing Foot Race: The True Story of the 1928 Coast-to-Coast Run Across America."

Born in Columbus, Williams now lives in Loveland, Ohio, with his two teenage daughters.