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Don’t Get Distracted by Misguided Money Advice

by Shawanda Greene

Regular readers of You Have More Than You Think know my opinion of the “I deserve it” mentality. A few days ago, I was reminded of another line of reasoning that caused my neck muscles to tense up. While reading the Wall Street Journal article “Saving Again? Here’s a Way to Do It Right,” I experienced an involuntary spasm when Harvard economist, David Laibson, cited a startling statistic. Approximately 10% of Americans save too much.

Wow! Ten percent, huh?

The patriotism of the 10% who refuse to adequately participate in our consumer driven economy isn’t the issue here. The problem is one-tenth of my fellow Americans are at risk of *gasp* leaving an inheritance to their children (or their favorite charity or whoever).

Now, I don’t know how Mr. Laibson arrived at this figure, but let’s assume his methods are reliable. When I came across his claim, I had to stop reading the article immediately and take a deep breath. I was overcome with flashbacks of previous warnings from concerned loved ones, colleagues, and random people I meet on the street to be careful not to be too frugal. As Mr. Laibson suggests, an epidemic is under way.

There’s a segment of the population that’s all too eager to worry about an affliction of absolutely no threat to their financial well being. If you’re 30 years old with $60,000 of student loan debt, $22,000 of car loan debt, $7,293 of credit card debt, and zero savings, then don’t you worry about a looming case of obsessive frugality. Clearly, you’re not predisposed to cash hoarding.

It’s like when you’re trying to lose weight. Happily out of shape people love to bring up the risks of developing a food related obsessive compulsive disorder. Not that these sorts of things can’t happen, but how many people do you know are at a serious risk of not eating enough or exercising too much? Personally, I like food too much, and I’m too lazy to hit the gym more than 3 to 5 times a week to worry about such things.

Even if your memory banks can produce someone who’s suffered from over occupation with their weight, I’ll bet you can think of 100 times as many people who are under occupied with it. Do you know anyone whose overdosed on a medley of broccoli, squash, zucchini, and carrots? I don’t. I have, however, almost eaten myself into a cupcake coma. On more than one occasion.

My point is excessive consumption of vegetables isn’t a real threat to my health. Likewise, I’m not the least bit concerned I’ll fool around and amass too much wealth.┬áThose of us made in America, constantly have to stay on our toes so we don’t succumb to the deep seated desire that lies within all of us: consumption.

Too often, I stumble upon articles warning of the perils of extreme frugality. But I don’t know anyone who saves too much. You? Please let me know if you’ve ever been pulled aside by a concerned and destitute loved one who cautioned you against stacking up too many millions. I couldn’t possibly be the only one who’s suffered the misguided pity of broke people.

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{ 7 comments… read them below or add one }

Tina October 3, 2009 at 11:20 AM

And just how does this nutjob define “too much” saving? Guess he’s not too worried about spiraling inflation to the cost of living or college or maybe having to support aging family members. I had to read that sentence twice, then shared your involuntary spasm. Here’s hoping that a large number of people who need real advice totally missed his article.

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Ashley October 5, 2009 at 1:21 PM

I can understand how this might be feasible if people are saving so much that they are not paying down debt, purchasing insurance, or going to the doctor because they’d rather have that money for a rainy day. Otherwise I too would like to know what equation was used to define “saving too much”. I can’t imagine going out and purchasing something because I wanted to make sure I didn’t have too much of a financial cushion incase of an emergency…. even typing that makes me laugh out loud!

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Doug October 11, 2009 at 8:11 PM

Funny stuff. It never ceases to amaze me the dumb things that get said by supposedly smart people. I myself have a serious case of over-saving. If only I can someday overcome this “problem” and start throwing more money away…

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Kim January 5, 2010 at 10:09 PM

Oh Gawd, that is funny! As if those 10% are crippling the economy? I wonder how he got to those numbers. It is reminiscent of when the total U.S. credit card debt dropped (Sep '09?), and the economists said "people are saving!" Ah, no, paying credit card bills does not quite equal saving.

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Shawanda Greene January 11, 2010 at 7:38 PM

That Harvard economist guy seems to be popping up every where now. I think the U.S. savings rate peaked at under 6% during the recession (I’m guessing it’s over). Radio show hosts and news reporters were so proud. Granted, a 5 point somethin’ savings rate is better than zero, but it’s not enough. Let’s see where that savings rate goes now. (Still guessing the recession is over.) I hope it goes up, but we’ll see.

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JoeTaxpayer August 30, 2012 at 5:05 PM

The Economist is quoted as “10% saving too much” but there’s no discussion of how he determined this.
You know what? There are too many variables. The market return over 10 years can be the loss of 10% the ’00s gave us or the +400% the 90′s blessed us with. How does Harvard man account for this?
There’s no consensus on port retirement spending as a function of preretirement. Some say same, some 20% lower, others, as much as 40% higher.
Last, at withdrawal time. 4% safe rate? Lower, after the shock the ’00s gave us.
As long as I’m not living like a miser, I’d rather err on the side of caution, better to reach the back nine and realize you can do some wonderful gifting and charity work than to find I’m 65 and have to work for another dozen years.

Last, when the WSJ article was published in 2009, I tried to contact David Laibson to track down his original work referencing the over-savings. Never heard back.
JoeTaxpayer recently posted..5 Ways You Can Spend Money To Save MoneyMy Profile

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Edward September 24, 2012 at 4:10 PM

OK, now I’m really worried… What happens if I hit retirement and have too much money?! Man, I’ll be royally screwed! All full of regret that I didn’t buy enough stuff in my lifetime… All the techno-fads I avoided, the fastfood lunches I decided to skip, the granite countertop I missed out on. I’ll look like such a fool!

The hilarious thing about this argument, is even if it was an extreme, if having too much money saved for retirement was a cyanide poison that could physically kill you, couldn’t you give it all away the very day before you left the workplace? To charity? Or just take it downtown and throw it in the air? Hire a zeppelin for a private party for you and your closest to be held over the Holly wood sign?

Just discovered this blog–love your writing Shawanda!

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