Extreme Saving When You Are Young: How Much Is Too Much?

Is it possible to save too much money, particularly when you are young? After all, aren’t these the years when you should be filling your time with life experiences that you will never have the opportunity to repeat? There’s college, and trips with friends and the freedom from an 8-5 grind that you’ll never get to experience again.¬†However, your 20s are also an excellent time to lay a foundation for wealth building that can give you a great head-start on financial freedom.

I recently received an email from a concerned Frugal Dad reader we’ll call “Brian.” Here’s the relevant portion of his message to me:

I’m 22, employed, making “OK,” but not “great” money, live at home but have several monthly expenses beyond the standard cost of living. I’ve managed to save $26,000 over the last year and a half after paying off almost $6k in credit card debt. I’m currently in the process of attempting to save $750-1,000/month.

Being tight with my money in order to meet my savings goals sounds like sound advice on the surface, but im begining to question if all this attention to saving is worth the heache. I’ve spent the last hour going over my finances to try to justify the additional monthly cost of the new iPhone…and while I clearly “could” afford it, I’m finding my lust for saving money to be much stronger than my attraction to the iPhone.

So my question is. How can I enjoy these years of financial freedom guilt free while saving for my future?

Well Brian, you’ve certainly impressed me with your savings intensity. It’s hard for an old frugal dad like me to find fault with your plan, but because you took the time to put what you’re feeing into words, I suspect you are slightly resenting your financial plan.

When I was your age, I was on a fairly similar path. I married young (when I was 20), and instantly wanted to learn, and do, everyone “grown ups” did with their money. I began learning about Roth IRAs and 401(k)s and starting dabbling with single stock investing. I was a savings madman.

Sensing my over-exhuberance for all things finance, my grandfather wrote me a letter on my 20th birthday, and one line in particular really stood out. He told me to slow down, enjoy life, to stop and smell the roses. Life is meant to be enjoyed. It had a profound effect on me because I realized then that even smart things done to a point of obssessing over them didn’t make them any smarter. In fact, it hurt you in the long run.

So, while I salute your ability to pay down debts, and save $26,000 at such a young age, I would also advise you to live a little. If you want that iPhone, can afford to pay cash, have researched and thought long and hard about the purchase, and still decided you want it – then I say go for it! By allowing yourself a few rewards you will be less likely to grow resentful of your plan.

On the other hand, your penchant for saving money and living frugal may mean that you decide a new cell phone will do, or a cheaper version BlackBerry may meet your needs. Think more in terms of what the device will cost each month to operate rather than the initial cash outlay, because it is those monthly bills that will get you in the long-run.

One word of caution. It’s a slippery slope. Today’s iPhone might be a new entertainment system tomorrow, and then a new car, and then a bigger house, etc. You see where I’m headed. Continue to approach things from a frugal perspective, separating true needs from true wants, only occasionally allowing yourself some of those wants.

I fully expect you to be a millionaire one day because you have such a great foundation. Keep up the great work!

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