Author Topic: Could it be bad to save too much?  (Read 14156 times)

COguy

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Could it be bad to save too much?
« on: December 11, 2012, 10:19:18 AM »
What do all of you mustachians think of this?

http://badmoneyadvice.com/2009/12/a-rational-limit-to-saving.html

If you read around his blog, this guy is into questioning conventional wisdom and I like what he writes. 

But, here he states that saving too much causes you to not enjoy life which as it turns out is also conventional wisdom.  So, despite everyone on the PF blogosphere telling you to save "more" it may not be the best idea in his opinion.   

I sort of agree with him.  Personally, I have found that riding my bike all the time, cooking for friends instead of going out, and all around trying to not use money as much has made life more enjoyable for me.  If I didn't approach it like this and instead focused on being a total cheapass and actually deprivingn myself, I think it would be a bad idea to save so much.  So, I think it should be more like "saving a ton of money for age 60 and not striving to change your life by learning new skills and practicing badassity is probably a very bad idea"

What do you all think?  Is there anyone out there who regrets saving too much?  Specifically those of you who are over 40?

KGZotU

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Re: Could it be bad to save too much?
« Reply #1 on: December 11, 2012, 11:06:38 AM »
I think that MMM does distinguish between being a cheapass and being frugal.

For example, with a very little working the system my parents can go on a week long Hawaiian vacation at a nice coastal resort for $700 in lodging and $800 airfare. That's for both of them, not per person. They even have a spare bedroom to offer to me and my girlfriend, or to friends of their own. That's a good use of money.

To me, MMM is about enjoying life as much as possible by reducing wasted money. That can involve periods of intense work and intense savings. It can also involve periods of no-work and measured spending.

The only real tragedy I see is people working jobs that they don't enjoy, and not saving. Spending all of your income locks you into your job, forever.

bo_knows

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Re: Could it be bad to save too much?
« Reply #2 on: December 11, 2012, 11:11:45 AM »

For example, with a very little working the system my parents can go on a week long Hawaiian vacation at a nice coastal resort for $700 in lodging and $800 airfare. That's for both of them, not per person. They even have a spare bedroom to offer to me and my girlfriend, or to friends of their own. That's a good use of money.


Do explain what your parents did to "work the system".  I was last in Hawaii 5 years ago on my honeymoon and remember how much it cost in my pre-mustachian days.  I long to return, but I remember the flights alone being something like $1000/each.

KGZotU

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Re: Could it be bad to save too much?
« Reply #3 on: December 11, 2012, 11:29:37 AM »
Do explain what your parents did to "work the system".  I was last in Hawaii 5 years ago on my honeymoon and remember how much it cost in my pre-mustachian days.  I long to return, but I remember the flights alone being something like $1000/each.

It helps that we're on the west coast. Alaska Airlines has periodic sales. Right now you can buy tickets out of Portland or Seattle for ~$750 round trip. The Alaska Airlines credit card gives you one "companion ticket" per year for $100 plus tax. So, two people fly for around $900. I should also include the yearly fee in there.

For lodging, they have a timeshare week that they trade in. Maintenance on their week is around $700/year.
« Last Edit: December 11, 2012, 01:35:06 PM by KGZotU »

Jamesqf

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Re: Could it be bad to save too much?
« Reply #4 on: December 11, 2012, 11:33:40 AM »
A lot of this hinges on exactly what constitutes depriving yourself.  I don't, for instance, feel the least bit deprived when I don't spend a bunch of money flying to some tourist destination - say Hawai'i - and spending a couple of weeks at an expensive resort hotel, because I dislike hotels and detest commercial air travel.  If I did that, I'd be depriving myself of the opportunity to spend those weeks backpacking, bike touring, or doing other things that I find far more enjoyable and far less expensive.

chucklesmcgee

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Re: Could it be bad to save too much?
« Reply #5 on: December 11, 2012, 11:48:53 AM »
I think that MMM does distinguish between being a cheapass and being frugal.

To me, MMM is about enjoying life as much as possible by reducing wasted money. That can involve periods of intense work and intense savings. It can also involve periods of no-work and measured spending.

Ditto on this. As my income has risen I've taken on more luxuries, but always luxuries which actually do something for me and help make me a better person- provide me with more free time, let me travel places, learn new things from top instructors and the like. I'm not going to blow $1000 on a first class ticket to sit in slightly nicer seats for a 5 hour flight, but I will spend that to get my apartment cleaned every week for three months. Likewise, I don't find it so cost effective anymore to spend hours hunting through ads to determine which place has slightly vegetables this this week, but I will avoid going to fancy stores for identical items just because "I can afford it".

sheepstache

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Re: Could it be bad to save too much?
« Reply #6 on: December 11, 2012, 12:21:21 PM »
The funny thing is as soon as I read the thread title I thought, I should comment on this and link to the bad money advice guy's post.

One thing I really like about him is his ability to actually understand studies.  For example he points out the problem with the "saver's remorse" studies is the subject pools are self-selecting.  Obviously people doing well in life are going to look back on things and see times when they could have cut themselves some slack.  People eating catfood when they're 70 are probably going to think, huh, maybe I should have saved more.

tooqk4u22

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Re: Could it be bad to save too much?
« Reply #7 on: December 11, 2012, 12:56:51 PM »
The funny thing is as soon as I read the thread title I thought, I should comment on this and link to the bad money advice guy's post.

One thing I really like about him is his ability to actually understand studies.  For example he points out the problem with the "saver's remorse" studies is the subject pools are self-selecting.  Obviously people doing well in life are going to look back on things and see times when they could have cut themselves some slack.  People eating catfood when they're 70 are probably going to think, huh, maybe I should have saved more.

I look back and say I could have saved more than I did, now I am trying to save more than I am, and only time will tell as to what I will say in the future looking back - hopefully I will be saying damn I saved too much because that is better than eating cat food (never had the stuff, but I am assuming its not good ;))

DocCyane

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Re: Could it be bad to save too much?
« Reply #8 on: December 11, 2012, 01:35:12 PM »
My parents saved a great deal for retirement, only to have Mom end up in a nursing home at a relatively young age and end their dreams of travel. However, they didn't exactly live in a miserly fashion. They certainly lived a much nicer life than I have now.

Yet I often believe the reason they put off things is because they were rather afraid of them. It's one thing to say you're going to sail the seas and quite another to go do it.

I no longer feel sorry for anyone People get the life they want, whether they'll admit it or not.

The person who reaches the end of life with no money would likely do the same again if given the chance. They would spend it all. Just like my parents, if they could relive their lives knowing Mom would be incapacitated early, would just find another reason not to travel.

sherr

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Re: Could it be bad to save too much?
« Reply #9 on: December 14, 2012, 08:02:30 AM »
I agree with everyone saying that depriving yourself and living frugally are not the same. One is bad and the other is good. However I think everyone is missing an enormous assumption that those articles are based off of.

Both the BadMoneyAdvice guy and the PunchDebtInTheFace guy are assuming that they will "retire" at "retirement age", 60 or so. For people on this blog that is a huge assumption that probably disqualifies the entire article. Yes, if you are going to be working 40+ years then saving 50% of your salary each year is overkill. You'll end up with so much money you won't know what to do with it, you would probably have been much better off using more of your money along the way instead of ending up with a huge useless stockpile.

But if you save 50% of your salary and then retire after 17 years of working, that is another case altogether. This time you have just the right amount to maintain your frugal lifestyle for forever. You can choose to work extra if you have an expensive goal that you want to meet or you want to increase the general amount of money you spend, but you don't have to.

The authors are correct, if you are going to work your entire life then there is definitely such a thing as saving too much. However if your goals are early retirement / financial independence, then the only time you can save "too much" is if you are becoming cheap or depriving yourself.

mugwump

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Re: Could it be bad to save too much?
« Reply #10 on: December 14, 2012, 11:02:26 AM »
I agree that it is possible to save too much.  That is why I focused on finding a frugal lifestyle with enough small luxuries that I could be happy with it indefinitely, and used that level of spending to determine the size of the stash I needed.  I did work a couple extra years to get a pension at 55. (I started investing late and had a spotty work history.) When I realized I might be able to retire early, I used the strategy of putting money into the 401k to bring our income down to the top of the 15% bracket, then invested the rest in after-tax investments.

I see no point in depriving oneself to guarantee an early retirement that perpetuates the level of deprivation forever. The idea of being FI, however, is very liberating.  It's a question of balance.

Jamesqf

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Re: Could it be bad to save too much?
« Reply #11 on: December 14, 2012, 11:36:16 AM »
I see no point in depriving oneself to guarantee an early retirement that perpetuates the level of deprivation forever.

Still, you seem to be hung up on the idea that not spending equals deprivation.  It doesn't seem to occur to you that there is a whole range of things which "normal" Americans spend money on that I just don't want.  No, it's more emphatic than that: I positively do not want such things in my life, and if necessary will go to some trouble and expense to remove them.  (And isn't it curious how difficult it is to express this idea in English?)  And since I have (to some extent) managed to arrange my life in this fashion, the saving becomes automatic, because I want not to have what other people spend to get.

Ozstache

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Re: Could it be bad to save too much?
« Reply #12 on: December 14, 2012, 01:52:44 PM »
I agree with everyone saying that depriving yourself and living frugally are not the same. One is bad and the other is good. However I think everyone is missing an enormous assumption that those articles are based off of.

Both the BadMoneyAdvice guy and the PunchDebtInTheFace guy are assuming that they will "retire" at "retirement age", 60 or so. For people on this blog that is a huge assumption that probably disqualifies the entire article. Yes, if you are going to be working 40+ years then saving 50% of your salary each year is overkill. You'll end up with so much money you won't know what to do with it, you would probably have been much better off using more of your money along the way instead of ending up with a huge useless stockpile.

But if you save 50% of your salary and then retire after 17 years of working, that is another case altogether. This time you have just the right amount to maintain your frugal lifestyle for forever. You can choose to work extra if you have an expensive goal that you want to meet or you want to increase the general amount of money you spend, but you don't have to.

The authors are correct, if you are going to work your entire life then there is definitely such a thing as saving too much. However if your goals are early retirement / financial independence, then the only time you can save "too much" is if you are becoming cheap or depriving yourself.

To a large extent, what you speak of above is why ER has sought me out, not the other way around.  ie. it is my natural frugality, which has allowed me to accumulate a sizable nest egg nearly by accident, and my belief in economy of effort, which means I only like to put on my plate what I am reasonably going to consume, that have led me towards considering ER. Why keep working and continue to make money when I already have enough amassed to support my desired lifestyle for the rest of my life?

EngGirl

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Re: Could it be bad to save too much?
« Reply #13 on: December 17, 2012, 08:56:31 AM »
Still, you seem to be hung up on the idea that not spending equals deprivation.  It doesn't seem to occur to you that there is a whole range of things which "normal" Americans spend money on that I just don't want.  No, it's more emphatic than that: I positively do not want such things in my life, and if necessary will go to some trouble and expense to remove them.  (And isn't it curious how difficult it is to express this idea in English?)

Too true! When I look at things like designer clothes or big screen TV's, I am so repulsed by these items that I wouldn't want them even if someone were giving it to me for free. I have no worries that later in life I will regret not having these items because I inherently like reading library books more than watching TV, taking a bath more than clothes shopping, or biking to work rather than driving.

This lifestyle becomes a blessing, because the less that you want, the more that you feel that you already have. I enjoy the small things so much more, and realize that they are the big things. And that's a feeling that I want to carry around until the end of my days.

mugwump

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Re: Could it be bad to save too much?
« Reply #14 on: December 17, 2012, 09:26:56 AM »
I see no point in depriving oneself to guarantee an early retirement that perpetuates the level of deprivation forever.

Still, you seem to be hung up on the idea that not spending equals deprivation.  It doesn't seem to occur to you that there is a whole range of things which "normal" Americans spend money on that I just don't want.  No, it's more emphatic than that: I positively do not want such things in my life, and if necessary will go to some trouble and expense to remove them. 

I have no trouble understanding that, believe me.  But people change.  What they don't want at one stage of life they may need desperately at another stage.  TV, for instance.  It's all very well to say you don't want TV, but what if you become housebound?  Thirty years ago, no-one needed internet service, and now we all can't live without it.  Right now my mom needs $5,000 a month for assisted living.  All I'm saying is, don't assume that your level of wants and needs will always be the same.  After all, MMM himself has something like four layers of safety and redundancy built into his financial plan.

To get back on topic, what I am trying to say is that it is possible to save too much if you are cutting too deep to the bone, and setting yourself up for a cycle of deprivation and indulgence that is the opposite of Mustachian. Or perhaps not saving enough if you think your current lifestyle is sustainable indefinitely, but life happens, and all of a sudden your needs have changed.

Jamesqf

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Re: Could it be bad to save too much?
« Reply #15 on: December 17, 2012, 04:16:15 PM »
To get back on topic, what I am trying to say is that it is possible to save too much if you are cutting too deep to the bone, and setting yourself up for a cycle of deprivation and indulgence that is the opposite of Mustachian.

The problem there, though, is not saving too much, it's that you've turned from frugality to miserlyness.  That is, say you can live comfortably on $30K per year, and that's all you want to spend.  Now if you make $100K (after taxes), you are obviously going to be able to save a lot more than if you make $35K, but how is that extra saving a problem?  In either case, you have a comfortable life with a bit left over.

Now you might run into one of two problems.  You could make $35K and figure you need to save more, so you look for more ways to spend less that might decrease your quality of life.  Carry that to extremes, and you've become a miser.  On the other hand, if you're making $100K and so have accumulated a large stash, you might decide to blow a large chunk on extravagances that you don't really want, just because you have the money.  But in either case, it's not the saving that's the problem.

mugwump

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Re: Could it be bad to save too much?
« Reply #16 on: December 18, 2012, 12:44:02 PM »

The problem there, though, is not saving too much, it's that you've turned from frugality to miserlyness. 

I would have thought 'saving too much' would be a good definition of 'miserliness'.

Jamesqf

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Re: Could it be bad to save too much?
« Reply #17 on: December 18, 2012, 12:53:13 PM »
No, because if you can & do live comfortably on that $30K per year, it's pretty much irrelevant how much extra income you have to save.  If you make $100K, spending most or all of the excess $70K on stuff that you don't really want does not measurably increase your happiness/enjoyment of life.  So why not save it?

mugwump

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Re: Could it be bad to save too much?
« Reply #18 on: December 18, 2012, 04:18:44 PM »
No, because if you can & do live comfortably on that $30K per year, it's pretty much irrelevant how much extra income you have to save.  If you make $100K, spending most or all of the excess $70K on stuff that you don't really want does not measurably increase your happiness/enjoyment of life.  So why not save it?

Then it's not saving too much.

ShavinItForLater

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Re: Could it be bad to save too much?
« Reply #19 on: December 18, 2012, 06:33:19 PM »
Seems to me all the article is saying is that late-life retirement isn't the only thing to save for, and thus you shouldn't necessarily put all your savings into retirement accounts.  Not exactly emperor-has-no-clothes-worthy advice.

We save for my kids college in 529 accounts.  We saved up our down payment for our house, and reduced the balance a couple of times with refis.  We have an emergency fund in a savings account.  This is counter to mainstream advice?

Jamesqf

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Re: Could it be bad to save too much?
« Reply #20 on: December 18, 2012, 08:18:16 PM »
Seems to me all the article is saying is that late-life retirement isn't the only thing to save for...

Ah, but the point I've been trying to make is that I (and I suppose others who aren't enamored with the notion of retirement, early or late) am not saving FOR anything.  Saving (& investing) is just what happens when I have more income than I need to live comfortably - as opposed to the consumer types who, when their income increases, automatically go out and find things to spend it on.

c

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Re: Could it be bad to save too much?
« Reply #21 on: December 18, 2012, 09:17:12 PM »


Ah, but the point I've been trying to make is that I (and I suppose others who aren't enamored with the notion of retirement, early or late) am not saving FOR anything.  Saving (& investing) is just what happens when I have more income than I need to live comfortably - as opposed to the consumer types who, when their income increases, automatically go out and find things to spend it on.

This is what I always battled with. "They" say you have to save for something, that you have to have a goal. I don't have a goal other than  to spend less than I earn so that I have a large cushion. For what? Who knows, I just don't want to have to worry. I feel I fall between all the sites and usual advice. I'm not saving up for a car or paying off student loans or cc debt (none of which I have), but I'm comfortable spending money on something that technically I could do without, like "a pony". I have one, but I don't have seven.

Ideally we would all live our lives the way we want and then die with a $0 balance at the end. When people tell me that I should "live a little" (and I live a lot in my opinion) I think about how I live with less stress than they probably do. Yes,  I might get hit by a bus tomorrow, but if I don't, I don't have to worry that I have to come up with the $$$ to pay for another day of not being hit by a bus.
« Last Edit: December 18, 2012, 09:19:12 PM by c »

Phemur

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Re: Could it be bad to save too much?
« Reply #22 on: December 20, 2012, 01:44:31 PM »
The only way I can see that it would be "bad" to save too much is in situations where the money saved is taken away from immediate survival needs. For example, if you choose to save money rather than pay for heating or food, then you're probably saving too much.

Other than that, I don't think it's possible. The article's premise is that there is an optimal balance to saving and spending, and if you're too far on the savings side of that scale, then you're depriving yourself and saving too much. The problem with that argument is that optimal balance is subjective: one's person's needs is another person's luxury.

To answer the OP's questions directly:

Quote
Is there anyone out there who regrets saving too much?  Specifically those of you who are over 40?

No. I just turned 40 two days ago, and I've never regretted saving too much. In fact, the opposite is true, I regret not saving more and not finding FI/ERE sooner. I've spent a lot of money on "stuff" in the past, and almost none of it has brought me any happiness or fulfillment. It might sound cliche, but my favorite things in life are eating, drinking and playing cards with friends, or "making things", whether it be software, scale models, home improvements, etc. Because I haven't saved enough, I still have to work a job I don't absolutely love, which takes time away from these things. Today, the more I save, the happier I am, because it brings me that much closer to freeing up my time for things I want to do.


CookerS101

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Re: Could it be bad to save too much?
« Reply #23 on: January 09, 2013, 02:22:23 AM »
I think that MMM does distinguish between being a cheapass and being frugal.

For example, with a very little working the system my parents can go on a week long Hawaiian vacation at a nice coastal resort for $700 in lodging and $800 airfare. That's for both of them, not per person. They even have a spare bedroom to offer to me and my girlfriend, or to friends of their own. That's a good use of money.

To me, MMM is about enjoying life as much as possible by reducing wasted money. That can involve periods of intense work and intense savings. It can also involve periods of no-work and measured spending.

The only real tragedy I see is people working jobs that they don't enjoy, and not saving. Spending all of your income locks you into your job, forever.

Being frugal is very much different being cheapskate. And I totally agree with these statements. You can enjoy life without wasting money.

Mike

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Re: Could it be bad to save too much?
« Reply #24 on: January 09, 2013, 08:31:45 AM »
Save too much?  Is this some kind of joke? 

The solution is simple: charitable giving.  If you have an extra million or two that you don't need, fund cancer research.  Feed the homeless.  Help provide basic medicine to third world countries.  Create a scholarship fund.  Really, the options are damn near limitless. 

Skyn_Flynt

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Re: Could it be bad to save too much?
« Reply #25 on: January 09, 2013, 05:58:06 PM »
If I take this question in a literal, logical way - I suppose you can save too much because it draws attention from the bad elements of society. People who would take your relatives hostage and ransom them. This really happens in parts of the world.

Maybe you save too much to manage it well. Buffet has confronted this, he has so much wealth in his funds that he runs out of places to diversity, and cannot "sell at the top" without impacting the market itself.

You could save so much that you lose track of all the accounts, some of your savings is wasted through the inattention of your accountants and advisors, or through graft.

Another possibility is that your savings affects your ability to trust other people. You begin to think anyone that takes an interest in you is really sucking up for a business angle or a handout.


frugalman

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Re: Could it be bad to save too much?
« Reply #26 on: January 10, 2013, 09:37:28 AM »
Dear Wife makes SURE I don't save too much, so no problems!

NumberJohnny5

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Re: Could it be bad to save too much?
« Reply #27 on: January 14, 2013, 08:43:07 PM »
No, because if you can & do live comfortably on that $30K per year, it's pretty much irrelevant how much extra income you have to save.  If you make $100K, spending most or all of the excess $70K on stuff that you don't really want does not measurably increase your happiness/enjoyment of life.  So why not save it?

Why not save it?  Easy: stop making that much money.

So you're making $100k a year, and don't need the money.  Sure, it may be fine to keep earning $100k a year.  It also may be fine to change to a job making $35k a year instead.  Explore your options.  Maybe you'd like to spend a bit more time with your kids while they're still living at home (unless you plan on having them live with you into your old age...but better check with them as they may have different plans!).  Perhaps your current job, while not awful, isn't that fulfilling; you might prefer working at a non-profit that has a much lower pay rate.

It's nice to re-evaluate your options every so often, whether we're talking about whether you really need the top cable tv program package, or if you should keep working at your high paying job and saving over 50% of your salary.

Jamesqf

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Re: Could it be bad to save too much?
« Reply #28 on: January 14, 2013, 08:50:15 PM »
Sure, but suppose that $100K/year job is something you really enjoy doing, and all the $35K jobs going are not nearly as much fun.  And maybe you only like kids (yours or loaners) in strictly limited doses. 

NumberJohnny5

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Re: Could it be bad to save too much?
« Reply #29 on: January 14, 2013, 09:06:10 PM »
Sure, but suppose that $100K/year job is something you really enjoy doing, and all the $35K jobs going are not nearly as much fun.  And maybe you only like kids (yours or loaners) in strictly limited doses.

Easy.  After you've re-evaluated your options, you choose to stick with the $100k/yr job.

I don't like doing things just because it's what everyone else is doing, or because it's what we're already doing.  For one thing...maybe I was wrong when I started doing X.  For another thing...maybe X was the right thing a year (or ten) ago, but isn't the best choice anymore.

I like to re-evaluate things on an almost yearly basis.  When we had DirecTV, once a year I'd print out a list of all the channels they had (grouped by package).  Marked the channels we actually watched, and marked how important they were (gotta have, really want, or just kinda want).  If there were a lot of channels in a particular package, we'd probably keep that.  But if there's just one "kinda want" channel that's making us keep the ultra-high-super-premium package?  Buh-bye.  Then there's a handful of channels making us keep the kinda-high-sub-premium package, and we could substitute netflix/hulu in place of those channels?  Buh-bye.  Eventually, we ditched satellite altogether.

So you're making $100k/yr and saving $70k/yr.  Don't keep doing it just because it's working.  Do it because you've sat down, looked at all the options, and it's the best thing for you to be doing right now.  Regardless, good job on only needing $30k/yr, because if you needed $95k/yr (or perhaps, $110k/yr), your options would be severely limited.

mugwump

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Re: Could it be bad to save too much?
« Reply #30 on: January 15, 2013, 08:29:26 AM »
Sure, but suppose that $100K/year job is something you really enjoy doing, and all the $35K jobs going are not nearly as much fun.  And maybe you only like kids (yours or loaners) in strictly limited doses.

Then you're not working for the money, but for something else.  And you need to make very sure that by saving money, you are not damaging the social fabric in any way, such as undertipping or buying products that support causes that you don't support.