When you take a binary view on money habits in life, you can either be a saver or a spender. In reality, we are something in between. It is often thought that being a saver is the better of the two. I disagree…!
What are savers?
Savers are people that naturally put their money away to save and invest for later. Later, the money will be used for a big emergency, to life from. In summary, a stash of money makes them feel safe, it brings security. And often, they will never feel they have enough.
And spenders?
Spenders think that money needs to roll. Money is there for fun, enjoyment, buying stuff, parties. Maybe they assume money will always be there, so, why worry for later. Let it roll baby!
I am a saver
My natural behaviour with money is to spend as less as possible. The be frugal, to put it away for later. Later, it will be used, it will be put to a good cause.
Where does it come from?
When a kid, at home, it was not always easy. There was money, not plenty of money. Choices had to be made. Luckily, not for the basic items like food. It was more for the luxury items: there was budget for cloths, not for A brands. My parents paid for my first degree, I graduated debt free. Other expenses like holidays during studies were our own responsibility. Summer jobs, weekend jobs. And occasionally, there was a welcome support.
The pitfall!
The danger of being a saver is that you have a hard time to spend money on anything. The risk is that you go from frugal to cheap, that you feel bad when you spend money on items that make you happy!
Over time, I have learned that this is wrong and I have developed a mechanisms against this.
The buckets
Also known as mental accounting: you put money away for certain purchase, you tag your money for a goal. When the time is there, you can spend guilt free. Being a saver, it takes some time to adapt to the idea. Once done, it helps tremendously.
An example: Over time, I have found out that travel is very important for me. Yet, being a saver, spending money from my savings account is difficult, even for a fun thing like travel.
We now set aside a certain part of our income and tag this for travel. When we book our yearly holiday, I feel no pain at all to transfer from the savings account. And that is great!
Does that mean that we now travel first class, with champagne and lobster? Not quite. We still travel frugal, we compare prices and look for deals. Once we have found a trip that pleases us, we book. Guilt free. And that feels good
As second example: fun money. It is also important to me to have social interactions with friends and colleagues. For that, we have a monthly fun money allowance. When a good accasion pops up, it is easy to make the call: Will it make me happy? Is there fun money available? Then GO FOR IT!
Are you a saver? Or a spender?
amber tree leaves 
After paying ourselves first towards our investment portfolio, we put also money aside for travel. Travel can be a day trip with the kids, a city break or a summer vacation.
As savings don’t generate any cash flow on a savingsaccount, it doesn’t serve anything. The rest of the (fun) spending on clothing, restaurants or anything else is on a need basis. The money we don’t need, goes into the investment portfolio to grow the cash flow tree faster.
We don’t like spending on luxury goods or restaurants with stars or anything else that costs a lot of money.
So I guess our family has a somewhat similar profile as yours 🙂
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I think there are two types of savers. Those who save for emergency and goals (for example I do it and I have goals and emergencies set, such as have cash for life insurance premium I pay twice a year, new tires for car for every three years, home owners insurance, etc.) but then I use the rest to create more income (invest in business, portfolio, trading, etc.).
Then there is the other group who save a large stake of cash, live ultra frugal and do not live their life because they are scared that if they spend a few pennies they will not have enough.
I want to live and enjoy my life, so i am a saver too, but I have a set of goals and I “invest” (save for) in those goals. The rest I invest in the business or spend for traveling and vacation.
For example, I know I need to have $800 for my car tires for every three years, then that means I need to be saving approx. $25 monthly for the new tires. Or I need to pay $360 annually for my life insurance, then that’s $30 monthly, etc. I have an automatic saving and it is all done without me.
I love it that way and I also have money for fun and leisure.
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I’d like to think I’m a net saver, but I enjoy spending on things that bring me happiness. An example is a low-end Swiss watch I bought for my 30th birthday, with some money from my parents, brother and sister-in-law and my own savings. In that sense, it has a little bit of my family in it and I hope to pass it to my kids one day. I also love exploring and travelling with people I love, and don’t think I’ll ever stop that, something I’ll happily spend on. At the same time, I enjoy saving and investing, because it means less stress and more pleasure in my future life and a legacy for my future family. Sometimes though, it is good to remember that there is no guarantee of a life to 80 + years and so creating precious memories now is an excellent position. They need not be expensive.
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Given the rates of interest on savings accounts and the increase in inflation today, many of the “bucket strategies” seem to make little sense.
I am revisiting this whole area given income streams, spending patterns and investment horizons.
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The animated GIFs are awesome!
You sound a lot like me on this. We’re also pretty frugal, but enjoy travelling. We book some great vacations to great, but we’re savvy about our booking and don’t blow money frivolously while on the trips. At the same time, we always have a blast.
It’s definitely a balance between saving and living for the moment. 🙂
— Jim
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It sounds like a lot of us are in this “camp” where we value travel and have great (but reasonably priced) fun! I think we’ll need to look at the bucket/line item for travel next year though. I can see us getting carried away pretty quickly 😉
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I know the problem. Me too, I love to travel. Unfortunately it can cost pretty much, even when going frugal. I try to use my holiday bonus for travel purposes. This way it really is holiday money. At the other hand I don’t have a big drop in savings when I pay for my travels because the monthly wages are unaffected.
Another thing I do, mostly when going out: I empty my wallet and only take the money I want to spend. I leave my credit card at home because no good things happen after 2am and it wouldn’t be the first time I lose it. This way I have no surprises when I wake up the next day and my budget is still under control.
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I’m a saver by nature. When I was younger I often saved as much as possible from my allowance or income from weekend jobs I had. Now it has become more in balance. We autosave quite a bit of money, are able to do all the things we want, and still have some left over every month. We invest most of our savings, and keep some in cash for maintenance or unexpected expenses.
We do the things we want, or love, but also keep in mind that we don’t overspend. For example, our vacation (2 weeks driving around in the West of the US), only cost us around 3500 euro…. Still, we had the most amazing time ever.
I believe a lot of people are on the same page as how you describe above. You can save to such an extend you won’t be happy anymore, or won’t do the things you saved for in the first place. Great topic to think about and keep in mind when working towards FI…
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By the looks of things, you are not the only one with this problem of becoming borderline frugal, with the risk of becoming cheap. Think most of us in the FIRE community struggle with the same problem and we all deal with it one way or the other. The bucket idea is good, gives some peace of mind.
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Ha, travel is important to me as well. Just recently posted about how we travelled low budget (not cheap) to the south of Italy.
But indeed, it is a small border between frugal and cheap…
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Hi, my name is DD. I’m an addictive saver. Borderline frugality is a thin line for me. I’ve seen both sides. My limit’s changed over time. I think if you take this FIRE thing seriously, it’s a never ending ‘struggle’ with up and downs.
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It all comes down to budget. You want to have a good balance between frugality and fun. Without entertainment, there are no stories to tell the kids, family, or friends as you get older. But you said it, just have to be smart about what you do and how much your spend on it. Add those expenses to the budget to justify spending them. As long as you are still saving and investing, you are on the right track for the long term.
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agreed…being frugal with no fun leads to an unhappy life. We just need to avoid spending all with investing for later.
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At first thought I would be mad at your article (How dare you say there is anything bad about being a saver!!!!), but I agree that there are times when I wasn’t so stingy – from buying new clothes for myself to being more generous towards others.
I’m interested in frugality because I like the idea of consuming less, especially in such a consumerist culture. I’m attracted to the idea of minimalism, probably because it goes against my impulse to save and acquire. Also, being a dedicated budgeters has made it possible for me to afford to travel more (even without a huge income). You definitely need to set priorities in your budget so you still spend, but don’t spend mindlessly on things that don’t add much value to your life.
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Great to read you are not mad in the end…! The key message is indeed that you need to balance saving with enjoying the now.
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