Comments on: Is there such a thing as too high of a savings rate? http://www.thickenmywallet.com/blog/wp/2008/09/03/is-there-such-a-thing-as-too-high-of-a-savings-rate/ Everything to do with thickening your wallet Wed, 01 Feb 2012 15:44:00 +0000 hourly 1 http://wordpress.org/?v=3.3 By: Ray http://www.thickenmywallet.com/blog/wp/2008/09/03/is-there-such-a-thing-as-too-high-of-a-savings-rate/comment-page-1/#comment-16974 Ray Tue, 16 Sep 2008 23:40:07 +0000 http://www.thickenmywallet.com/blog/wp/?p=384#comment-16974 We consistently save above 60%-70% of my income. I'd say we live quite well though. We travel twice a year, staying in reasonably nice hotels, we eat out every weekend, etc. I think it boils down to two things: 1. Apart from food and travel, my passion is to build my net worth through investing--so that kinda helps a lot since I put money into that hobby and it helps my net worth! I don't really care about iPod, iPhone, Xbox, and those stuff. 2. Our focus has always been on the "increasing income" bit instead of "spend less and less" bit. We increase our income so we can spend more AND save more. Despite being frugal (we always try to get the most value out of our money), we're not interested in going the extreme frugal way. Rather than halving our expenses, our focus would be to *double our income*, so we can spend more, and at the same time save more too! We consistently save above 60%-70% of my income. I’d say we live quite well though. We travel twice a year, staying in reasonably nice hotels, we eat out every weekend, etc.

I think it boils down to two things:

1. Apart from food and travel, my passion is to build my net worth through investing–so that kinda helps a lot since I put money into that hobby and it helps my net worth! I don’t really care about iPod, iPhone, Xbox, and those stuff.

2. Our focus has always been on the “increasing income” bit instead of “spend less and less” bit. We increase our income so we can spend more AND save more. Despite being frugal (we always try to get the most value out of our money), we’re not interested in going the extreme frugal way.

Rather than halving our expenses, our focus would be to *double our income*, so we can spend more, and at the same time save more too!

]]> By: Canadian Dream http://www.thickenmywallet.com/blog/wp/2008/09/03/is-there-such-a-thing-as-too-high-of-a-savings-rate/comment-page-1/#comment-16666 Canadian Dream Fri, 05 Sep 2008 18:28:32 +0000 http://www.thickenmywallet.com/blog/wp/?p=384#comment-16666 Excellent post! I agree with Patrick about the amount you make changes what % is realistic. For example, my basic spending is about $35K/year. So as our household income goes up there is a greater % that we can save without living out lives any differently. This is just one of those sliding scale type of things. Tim Excellent post! I agree with Patrick about the amount you make changes what % is realistic. For example, my basic spending is about $35K/year. So as our household income goes up there is a greater % that we can save without living out lives any differently.

This is just one of those sliding scale type of things.

Tim

]]> By: Cyllya http://www.thickenmywallet.com/blog/wp/2008/09/03/is-there-such-a-thing-as-too-high-of-a-savings-rate/comment-page-1/#comment-16664 Cyllya Fri, 05 Sep 2008 15:19:02 +0000 http://www.thickenmywallet.com/blog/wp/?p=384#comment-16664 Expenses like an iPhone and Xbox are one time things (hopefully). You can buy an Xbox with half your paycheck one week and then go back to saving 50%. Or if you make enough, you can put 50% away, pay your bills, and still have enough for an Xbox. And I don't think I'd get any use out of an iPhone if someone gave me one for free. ^_^ Expenses like an iPhone and Xbox are one time things (hopefully). You can buy an Xbox with half your paycheck one week and then go back to saving 50%.

Or if you make enough, you can put 50% away, pay your bills, and still have enough for an Xbox.

And I don’t think I’d get any use out of an iPhone if someone gave me one for free. ^_^

]]> By: Patrick http://www.thickenmywallet.com/blog/wp/2008/09/03/is-there-such-a-thing-as-too-high-of-a-savings-rate/comment-page-1/#comment-16653 Patrick Thu, 04 Sep 2008 14:37:51 +0000 http://www.thickenmywallet.com/blog/wp/?p=384#comment-16653 You seem to have the notion that your home equity is relevant to your asset allocation. It's not. Your entire home is an asset, not just your equity. If you have a $180,000 home and $20,000 in other investments, then then you have 90% of your assets allocated to your home, regardless of your outstanding mortgage balance. Your equity doesn't enter into it. Hence, paying down the mortgage is not bad asset allocation; in fact, it has nothing to do with asset allocation at all. You seem to have the notion that your home equity is relevant to your asset allocation. It’s not. Your entire home is an asset, not just your equity. If you have a $180,000 home and $20,000 in other investments, then then you have 90% of your assets allocated to your home, regardless of your outstanding mortgage balance. Your equity doesn’t enter into it.

Hence, paying down the mortgage is not bad asset allocation; in fact, it has nothing to do with asset allocation at all.

]]> By: Berchta dale http://www.thickenmywallet.com/blog/wp/2008/09/03/is-there-such-a-thing-as-too-high-of-a-savings-rate/comment-page-1/#comment-16649 Berchta dale Thu, 04 Sep 2008 12:32:16 +0000 http://www.thickenmywallet.com/blog/wp/?p=384#comment-16649 Before you invest in any type of bond, it is important to know <a href="http://www.corporate-bonds.info" rel="nofollow">how bonds work</a>. Bonds can be complicated to understand at first since there are many types of bonds and therefore many rules. It is also more important to understand how bonds work when you invest in bonds because people usually invest in bonds for the interest payments as well as redemption value which are something in the future. While when a stock goes down in value you know you are losing money, when a bond goes down in value, you may not be losing money but if you understand perfectly how your bonds work. Before you invest in any type of bond, it is important to know how bonds work. Bonds can be complicated to understand at first since there are many types of bonds and therefore many rules. It is also more important to understand how bonds work when you invest in bonds because people usually invest in bonds for the interest payments as well as redemption value which are something in the future. While when a stock goes down in value you know you are losing money, when a bond goes down in value, you may not be losing money but if you understand perfectly how your bonds work.

]]> By: Brian http://www.thickenmywallet.com/blog/wp/2008/09/03/is-there-such-a-thing-as-too-high-of-a-savings-rate/comment-page-1/#comment-16643 Brian Wed, 03 Sep 2008 23:58:09 +0000 http://www.thickenmywallet.com/blog/wp/?p=384#comment-16643 Interesting question. I went back and figured that my wife and I (late 40's, early 50's) are saving at an average of 47%. A large part of that is going towards paying off old consumer debt. Once that is cleared up we will be redirecting that money towards buying a house and our retirement. Having not been careful with our money earlier on, we need to work harder now to be ready for our retirement. I agree that lifestyle and income are two important factors in determining if your savings rate is realistic. Many might consider our lifestyle unsatisfactory, but we are happy with it, and the amount of saving that we are putting towards our goals. Thanks for your posts! Interesting question. I went back and figured that my wife and I (late 40′s, early 50′s) are saving at an average of 47%. A large part of that is going towards paying off old consumer debt. Once that is cleared up we will be redirecting that money towards buying a house and our retirement.

Having not been careful with our money earlier on, we need to work harder now to be ready for our retirement.

I agree that lifestyle and income are two important factors in determining if your savings rate is realistic. Many might consider our lifestyle unsatisfactory, but we are happy with it, and the amount of saving that we are putting towards our goals.

Thanks for your posts!

]]> By: David Lai http://www.thickenmywallet.com/blog/wp/2008/09/03/is-there-such-a-thing-as-too-high-of-a-savings-rate/comment-page-1/#comment-16640 David Lai Wed, 03 Sep 2008 22:30:09 +0000 http://www.thickenmywallet.com/blog/wp/?p=384#comment-16640 Excellent post! 3 different ways to think of savings: current, future and past consumption. People often think of savings only as the flipside of spending/consumption, which is true in the short term [current]. In the long term however, savings is simply deferred [future] consumption, unless you're looking to pass on all the money or be buried with it. Meanwhile, servicing debt can be thought of as paying for [past] consumption for which you have not yet paid. If your problem is only on how to allocate your earnings between current and future consumption, then that's not too bad a problem to have. If this is the problem, then whether or not you are saving too much depends on the utility you get from spending it now or in the future. One major factor to consider is the time risks in deferring consumption. For many people, saving money for the future provides a sense of security, but the paradox is that the future itself holds no promise that you will be able to spend what you have saved. Excellent post!

3 different ways to think of savings: current, future and past consumption.

People often think of savings only as the flipside of spending/consumption, which is true in the short term [current].

In the long term however, savings is simply deferred [future] consumption, unless you’re looking to pass on all the money or be buried with it.

Meanwhile, servicing debt can be thought of as paying for [past] consumption for which you have not yet paid.

If your problem is only on how to allocate your earnings between current and future consumption, then that’s not too bad a problem to have.

If this is the problem, then whether or not you are saving too much depends on the utility you get from spending it now or in the future.

One major factor to consider is the time risks in deferring consumption. For many people, saving money for the future provides a sense of security, but the paradox is that the future itself holds no promise that you will be able to spend what you have saved.

]]> By: Get Rich Or Die Trying | » Posts of Interest http://www.thickenmywallet.com/blog/wp/2008/09/03/is-there-such-a-thing-as-too-high-of-a-savings-rate/comment-page-1/#comment-16638 Get Rich Or Die Trying | » Posts of Interest Wed, 03 Sep 2008 17:30:58 +0000 http://www.thickenmywallet.com/blog/wp/?p=384#comment-16638 [...] Is There Such a Thing as Too High of a Savings Rate? @ Thicken My Wallet - I wish I had the problem of saving too much! [...] [...] Is There Such a Thing as Too High of a Savings Rate? @ Thicken My Wallet – I wish I had the problem of saving too much! [...]

]]> By: Gene http://www.thickenmywallet.com/blog/wp/2008/09/03/is-there-such-a-thing-as-too-high-of-a-savings-rate/comment-page-1/#comment-16637 Gene Wed, 03 Sep 2008 17:27:51 +0000 http://www.thickenmywallet.com/blog/wp/?p=384#comment-16637 It's a thought-provoking post. I would guess each case is different. It depends a large part on salary as well. A pediatrician should be able to save more than a retail worker, of course, but may not if the doctor aspires to an expected life style. Some are able to save a large percentage of money without feeling deprived. Good on them, if they prefer bike rides to xbox. Personally, I have a hard time finding something worthwhile to spend money on. I consider most things clutter, and I have a tough time replacing things that still (kind of) work. I have an old ugly car and an old temperamental dishwasher. Considering my net worth, they should both be replaced, but hey, I'm cheap! Great post. Very interesting. It’s a thought-provoking post. I would guess each case is different. It depends a large part on salary as well. A pediatrician should be able to save more than a retail worker, of course, but may not if the doctor aspires to an expected life style.

Some are able to save a large percentage of money without feeling deprived. Good on them, if they prefer bike rides to xbox. Personally, I have a hard time finding something worthwhile to spend money on. I consider most things clutter, and I have a tough time replacing things that still (kind of) work. I have an old ugly car and an old temperamental dishwasher. Considering my net worth, they should both be replaced, but hey, I’m cheap!

Great post. Very interesting.

]]> By: Patrick http://www.thickenmywallet.com/blog/wp/2008/09/03/is-there-such-a-thing-as-too-high-of-a-savings-rate/comment-page-1/#comment-16636 Patrick Wed, 03 Sep 2008 16:37:39 +0000 http://www.thickenmywallet.com/blog/wp/?p=384#comment-16636 "What kind of life are you living if 60-70% of your pay cheque is not going towards consumption?" Depends how much you make. If you make $1M per year, I don't think this is an unreasonable savings rate, do you? The savings rate is too high when the person doing the saving crosses the line between frugal and cheap; ie. when their money hoarding starts to affect the lives of others. My opinion? You pulled these percentage numbers out of your ass. I don't think there's any reason to criticize someone leading an acetic lifestyle and saving diligently unless they are harming someone. “What kind of life are you living if 60-70% of your pay cheque is not going towards consumption?”

Depends how much you make. If you make $1M per year, I don’t think this is an unreasonable savings rate, do you?

The savings rate is too high when the person doing the saving crosses the line between frugal and cheap; ie. when their money hoarding starts to affect the lives of others.

My opinion? You pulled these percentage numbers out of your ass. I don’t think there’s any reason to criticize someone leading an acetic lifestyle and saving diligently unless they are harming someone.

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