8/31/11

Saving and Spending: Confessions of a Chronic Underspender



Downsizing, going frugal, cutting spending – everyone’s doing it these days. It’s part of a huge wave of consumer empowerment that the mainstream media seems incapable of grasping, instead simply complaining that ‘retail spending is down’.


Partly as a response to the GFC, the frugal movement ties in beautifully with another trend – people who, empowered by social media, are trying to reduce their carbon footprint and the amount of goods going to landfill while ceasing to purchase goods that exploit others.

Many of the frugal are reformed overspenders and shopping addicts who took control and are now paying back debt and learning to live richly on a much smaller (and saner) budget.

But I’m not one of those people. It took me ages to figure out that in fact I have the opposite problem. I’m not a reformed overspender. I’m a reformed underspender.

Before I became an underspender I was a spendthrift. For most of my twenties I simply spent everything I earned. But even then I wasn’t extravagant; I didn’t even have a credit card (come to think of it, I’ve never had a credit card, apart from a temporary one for an overseas trip; I now have a debit card). Nor was I particularly into shopping, or good at it. I just never saved anything because I didn’t realise I could.

When I started stingeing, I overdid it. It was a correction that went too far. I couldn’t tell the difference between necessary and unnecessary spending. For example, for about four years I went without a car; yet during that time I wouldn’t spend money on taxis to get home from a party, even though I was saving hundreds of dollars a year in car expenses.

I wrote my book, The Inspired Shopper, as an attempt to work out how to spend money wisely and how to buy the things I really needed.

The book has helped me to do those things, and most of things I buy these days are right for me. I imagine it would also be of use to reformed overspenders who want to spend in moderation.

But it doesn’t entirely take away the anxiety about spending. It just means that most of the time I don’t have to act on it (or fail to act because of it). Fear of spending money runs deep. It’s a basic distrust in the process of life. Giving money away to get something in return requires a degree of trust – that the object is not faulty, that it will work for a reasonable amount of time, that you’re not just throwing money away.

Usually I think I’ve worked through this. And then one bad buy and bang! I’m back to underspending hell again.

The lure of underspending 

The extreme end of the frugal movement is compacting. Compacters commit to buying no new non-perishable goods, apart from necessities such as underwear and health and safety items, for a year. They can buy secondhand goods, barter, and receive gifts. Compacting seems to be less popular now, but the Fashion Challenge has taken over where compacting left off.

In some ways the Fashion Challenge is more extreme than compacting. For a year you commit to not buying any clothes at all, including underwear, socks, material for making things, or secondhand goods. You can swap clothes with others but you can’t receive clothes or undies as gifts. When I’m in underspending mode, the Fashion Challenge actually sounds quite tempting. No difficult decisions to make!

It’s not that I don’t enjoy shopping these days. I love it. I just don’t love spending. They’re not the same thing.

Underspending is actually quite painful. It can lead to compulsive buying because you end up holding out too long for something you really need. You may hurriedly buy something without checking that it has all the features that you require because you’re so desperate to purchase a necessity.

Neuroscientist Gregory Berns has found that when we have money in our bank accounts (or pockets) it means more to us because it offers unlimited possibilities. We don’t have to commit to spending it on one thing. Twenty thousand dollars could fund an indulgent trip to Paris that includes sampling a series of five-star Michelin restaurants, go towards a down payment on an apartment, or pay for one year of a law course.

When you spend that money, it’s gone. Committing to one or more things means that all the other possibilities fall away. If you’ve been saving for a while, it may become difficult to let a large slice of money go.

Frugality doesn’t mean a miserly approach to life. Most people who write about budgeting recommend building small treats into the process. And many frugal people make it their policy to buy quality goods when they do buy. Ethical purchases make even more sense in this context. Of course, for many people frugality isn’t a choice, it’s a necessity.

The habit of saving

Even if you don’t come from a history of underspending (and I understand that in our consumer society most of us don’t), is it possible to become addicted to frugality so that we become afraid to spend? Could too much compacting be bad for you? Or, once you’ve curbed the overspending, is it relatively simple to get the balance right without too much pain?

I would love to hear from readers about this. How do you know when to save and when to spend? How do you treat yourself? Is it possible to get addicted to saving? Is it hard to spend money when you’ve been saving too long? How do you get the balance right?

Until next time!

If you enjoyed this post, you might also like In with the Old and Out with the New - Shopping and the Search for Perfection.
                                                                                                                                                               

7 comments :

Anonymous said...

Great article! I related to your self-description. In my early twenties, I too ran through my money--the very little amount that I had when I was attending college. However, once I became a mother in my mid-twenties and decided to stay at home full-time, a huge change occurred regarding my attitude towards finances. Since I wasn't making money, I felt it was my job to make sure we saved as much as possible. When I was very young, there were times my family had to hunt in order for us to have anything to eat for dinner. My parents climbed their way up to middle class when I reached junior high but still were not able to provide for my college education, which I found is a lot to put on a young person's shoulders. I didn't want my children to feel that burden for themselves. My husband came from a well-to-do family but did not feel much love/acceptance and when I met him, he was a huge fan of Thoreau, very much a minimalist. We currently live in a smaller-than-average house. Our previous goal was to pay it off as soon as possible. We got there a couple of years ago and it was great to see a goal realized. But now I am having great anxiety about investing money. I guess you could say I am that we are under-investors. We have been setting aside money in mutual funds for retirement (401k) and college (529's) for years, but instead of simply adding more for a cushion, currently we keep the amount that used to go into a house payment in our checking account. Well, I recently opened an IRA for myself, but that's it. What if the markets fail and we can't build up enough by the time our kids reach college, if they want to go to college that is--we're open to them finding their own way and want to support them whichever route they take. It makes me kind of frustrated that I can't put the money in a secure account (savings, CD) that would offer us a decent return--that's what my grandpa did and it worked well for him. And I am a little worried to put more into accounts that we're not allowed to touch for a long time. I am not a big fan of the stock market, and as your researcher stated in the article, it really cuts down on options. As far as shopping goes, I am alright with spending an amount that is already outlined in our budget. But I feel kind of sick in my stomach when I need to purchase anything that is not. For example, my husband just bought a piano. We had not specifically set up a category for it this year, though we have plenty in savings to cover it--after several years of hard work and saving, he deserves it, definitely. But when he suggested the idea, I just froze--it takes a little time to make me flexible when an alternative to 'the plan' is made. We do try to purchase organic food, but other than that, I think we keep the costs pretty low. The fashion challenge would really not be much of a challenge for me or my husband--maybe for my kids, though, since they are growing. Thanks again for the article and your thoughts. I need to find your book!

Inspired Shopper said...

Hi there,

I can really sympathise with you! Where the under-investment is concerned, the way the economy is at the moment, it's enough to rattle the calmest investor. I don't know anything about the US financial system, but I remember before the GFC/recession that I was planning to put most of my savings into managed funds - high-interest accounts that are mainly made up of shares - and my gut feeling said not to. The stockmarket crash would have halved my savings almost! They're now in a high-interest deposit account and I haven't been tempted to buy shares. So whatever your gut feeling says, go with it!

I feel for your anxiety about the piano, and buying in general. I know that feeling so well. I think it's great that you both bought the piano. Sounds like a really good thing to spend your money on.

The thing with buying intuitively is that it's like a muscle, it needs to be exercised. After writing the book I went through a period of buying few non-necessities for a while -- I didn't really need anything -- and when it came time to buy a doona cover, my intuitive choice was clear, but I found it hard to act on, and ended up buying the wrong doona cover. (Luckily I was able to return it!) Sometimes following intuition is a bit scary.

A good thing to do if you want to experiment with intuition is to start by buying really small things intuitively. (The supermarket's a great place to start.) As you grow in confidence, you can start to buy bigger things using your gut feeling.

Nothing wrong with a budget - it gives you structure - but, hey, budgets can change with circumstances!

Anyway, I'm currently updating the book so if you're interested I'll be posting a blog entry when I upload the new version to Amazon.

Anonymous said...

Great to know! I'll check back with your blog to see when the new version is ready. :)

Anonymous said...

OMG, this is me! I am going thru hell with this problem right now. I need to buy a newer car and I can't seem to do it. I find issues with all of them and I'm simply not motivated. And, I have wanted to buy a place for years, and my parents wanted to help me out finacially, yet, I can't seem to make myself do it. I say it's becasue I don't have steady employment, but it's not just that. When I went out with realtors I would have anxiety attacks, so I stopped. I won't even look online.
Helpless

Anonymous said...

I save and save but have a really hard time spending. I feel it is my security blanket and every time I've invested, I lost my money, my intution does not seem to work for me when it comes to investing, that is why I am so afraid to make any investment even a home.
helpless

Inspired said...

Hi Anonymous,

I can relate to your plight. Big decisions like cars, investments and buying a home are really difficult for anyone, but even more so if you're an underspender.

One suggestion is to rope in friends to help give you feedback if you like a particular house or car but aren't sure if it would be the right choice.

Practising buying smaller things first before gradually building up to larger things might also help.

I guess it is a matter of combining practical knowledge (is the car, house or investment safe and sound? Is it what you want? Can you afford it?) with gut feeling. But if this is really difficult for you, it might be worth seeing a therapist about it.

These are just suggestions - I know how hard it can be to make these decisions, hope you can get a handle on it.

Unknown said...

Just bumped into this article, and it sounds like the financial story of my life. Profligate 20s, followed by an over correction in attitude that left me with holey shoes and paralyzed with fear over big purchases, until forced to jump. Ordering cheap items off a menu I don't really want, thinking I could be eating soup, boosting my automatic savings anytime I do spend. Eventually realized all saving is deffered expenditure, and should be with goals in mind. I wasn't going to wake up bankrupt. Found I quite like cars, and buying them by negotiating deals. Parting with money for a hard fought for deal is quite pleasurable. 20s profligate, 30s miserly, 40s so far balanced.