Saving too much money

Steven here from munny.club, a weekly newsletter where I share a different perspective on personal finance concepts. If this doesn't interest you or you don't find it valuable, you can unsubscribe at the bottom of this email. If you have feedback, just shoot me a reply!


This sounds a bit like a ridiculous problem, but I believe it’s possible to be saving too much money each month. How do you know if you’re saving too much?

I have read a few different perspectives on this and recall some citing around 30% of your income as a good target to aim for. Exceeding this amount is often the result of depriving yourself for the sake of future savings. Elsewhere, I’ve written that hitting a 50% savings rate is a magical threshold for rapidly building wealth. I think there is a less-objective heuristic we can use that may still prove valuable. It requires a bit of introspection.

Saving money is important. Few people will disagree with that. Savings give us security (financially and mentally) in the event of unexpected events, changes in life scenarios (death, illness, retirement, pandemics), or act as a way to purchase larger things. For most of us, saving money is a bit of a sacrifice. You must forgo something you want to spend your money on today in order to be prepared for the future. Like all things (health, fitness, good habits), you must make a trade-off for your long term wellbeing.

But at some point, you start living your life for the future instead of the present. Something few financial books ever talk about is when you’re supposed to spend all this money you are saving. What’s the point of having it all? Is it sustainable to constantly forego what you want now in the hopes of having a better life in the future?

Not to me.

As with all things, there is a balance between what you’re saving for now and what you’re spending money on. To get super cliché, life is for living now, not for saving for tomorrow. Ask yourself: what you are giving up to save for the future? Are you missing out on great outings with friends? (or were you pre-COVID, since we all are now) Are you travelling to places you’ve always wanted only to scrimp on food and a hostel? And is all of that worth it? Is your plan to afford those things in the future.

Set a goal for yourself for a meaningful savings rate that will let you hit your desired future state, and then stick to that. If you’re exceeding it, live a little! Don’t feel bad for spending money. Not every dollar not used for survival needs to be squirrelled away. You (probably) work hard and deserve to spend.

Thanks for reading,

Steven