As Seen On Desmoines Register
"Are you a financial hoarder? That may sound like a strange question to ask. After all, it’s a good thing to be a diligent saver, right?
While it’s good to be a saver, it’s also true that a healthy saving mentality can transform into more of a hoarding mentality if taken too far. Having this sort of mindset can weigh on you, both financially as well as emotionally.
Here are three characteristics that financial hoarders tend to possess.
You refuse to use your emergency fund during an emergency
Almost any financial planner will tell you that you should have an emergency fund that you can use to pay for unexpected expenses. Typically, it’s advised to have about six months of living expenses in a safe, liquid account such as a savings or checking account in the event of an emergency. There are some people who are so hesitant to spend down their emergency fund that they instead put debt on a credit card and pay a high interest rate.
When those financial emergencies occur, remember that it’s okay to spend your emergency fund. After all, that’s the reason you have the emergency fund in the first place. Just make sure to have the goal to rebuild your emergency fund back to the original amount if you do need to use it.
You have more in cash than you need
An emergency fund is great to have, but you can reach a point where you have too much in cash. Over the past 10 years, cash has returned 0.7% annually. The S&P 500, an unmanaged index of large cap U.S. stocks, returned 7.0% annually. $100,000 in cash would have grown to $107,225 over 10 years while that same $100,000 invested in the S&P 500 would have grown to $196,715. In other words, when investing for the long term, keeping too much money in cash hinders your potential for future growth.
You feel guilty about spending
Why do you save money? It may be for greater security or it may be for future legacy planning, but the foundational reason people save money is to be able spend it in the future when expenses exceed income. Spending money from your savings shouldn’t be an inherently guilt-producing activity. If you’ve saved diligently, have a long-term spending plan and the spending is reflected in your core values, then you should feel okay about spending some of the savings that you’ve worked so hard to accumulate.
On its face, it may not seem like being a “financial hoarder” is necessarily a bad thing. Indeed, it’s a sign that you’ve been a diligent saver, and it can give you security against a job loss or an economic downturn. But like so many other things, you can have too much of a good thing. Remember that if you’ve adequately saved for your future, spending money from your savings is okay to do when the moment is right."