Could You Be Over-Saving?

Train to achieve peak performance. If athletes train too little, they may not have the skills and fitness to reach their full potential. If they train too much, however, they will risk injury and fatigue. To be successful, athletes must find a balance.

Saving more money is the goal of most people when they think about finances and money. Savings is about sacrificing today’s spending for future benefits. While keeping, to some extent, is wise, there is a danger of overspending, which can lead to a life with more wealth than necessary.

I remember talking to a man many years ago who was so frugal that it caused his marriage to break down. His wife no longer wanted to live a life of blandness in anticipation of Nirvana.

This week, I’d like to talk about overspending. What is over-saving, how can you tell if this is the case, and what are some ways to find a balance between saving and spending?

Over-saving: What is it?

Let’s start by defining the term “over-saving.” We do not know how much time we will live and what our health might be like in the future. Therefore, we cannot predict what kind of care costs we may need. Most people would like to know, in light of these factors, that they won’t run out of money before reaching 100. In addition to our savings, most people own their homes. This provides an additional form of financial stability, especially if they need to enter aged care.

If you are projected to have significant wealth at 100 years old, that is over and above the value of your home.

If you want to leave a legacy to your children, then it’s likely that you will expect to have significant assets left at the end. If you’re going to help future generations, you should consider funding education costs, helping with a deposit for a house, or giving gifts rather than waiting until you die.


Do you save too much?

You can test whether you’re over saving by running projections using your current savings level. This will show you if you’re on the right track to accumulate an excessive amount of wealth.

When we work with our clients, it’s not unusual to find that the superannuation contribution, combined with their existing assets and their compounding effect, is enough to help them achieve their goals.

To begin, you should crunch the numbers.

Next, you should examine whether your goals are logical.

Recently, I worked with a couple whose goal was to earn $100,000 in passive income per year. That’s an ambitious goal. Most workers would need to save for many years before they could accumulate enough assets to earn $100,000 per year. They also had to pay a mortgage.

We found out that the goal was too high for them. We found that the current expenditure would be reduced if their mortgage was paid off. The mortgage was paid off, so they were able to reach their goal of financial independence with much less income.

I’ve seen cases of people overspending because they felt the need to conform or meet expectations. Sometimes, these expectations come from your family and sometimes from the social group you interact with. Consider whether this is what drives you. Do your goals reflect what you want and what makes you happy? Have you set goals to please someone else?


The following are some strategies to help you.

Saving enough money to achieve financial security throughout our lifetimes and to reach our goals is important. How can we find a balance between our spending and savings?

Begin by examining your goals to ensure they reflect what you truly want to achieve. Sometimes, people’s goals seem to be determined by what they believe they should strive for rather than what makes sense to them.

Next, crunch your numbers. What is your long-term outlook? You can get an approximation if you are good with spreadsheets and your situation seems simple. You can always ask for help if you need to fine-tune your calculations or want a second set of eyes to test your reasoning.

Reflect on the sacrifices you make today in order to maintain your current savings regime. If, for example, saving 50% of your salary means you can’t socialize on weekends with friends, you might want to consider reducing your savings rate to one that allows you to enjoy life still while being financially responsible.



Money is a facilitator. Our goal is happiness. Spending a few months traveling around Australia with your children, backpacking through Europe in your 20s, or hiring a cleaner or childcare to relieve stress are all ways to achieve happiness. All of these will eat into your savings. Their value cannot be measured in dollars.

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