The Hidden Cost of Saving Money Nobody Warns You About — Transcript

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1. 0:00Imagine having more than a million
2. 0:01dollars invested and still standing in a
3. 0:03supermarket comparing two cans of
4. 0:05tomatoes because one costs 11 cents
5. 0:07more. That sounds ridiculous until you
6. 0:10realize millions of financially
7. 0:11responsible people do a version of this
8. 0:14every day. Meet Martin. He drives an old
9. 0:16car that still works. He keeps the
10. 0:18heating low. He rarely eats out. He
11. 0:20researches every purchase. His
12. 0:22investment accounts have grown to
13. 0:23roughly $1.4 million. On paper, Martin
14. 0:27won. But there's something strange about
15. 0:29his life. His wife recently flew across
16. 0:31the country for a family wedding. Martin
17. 0:33stayed home because the ticket felt too
18. 0:35expensive. He could afford it hundreds
19. 0:37of times over. He just couldn't bring
20. 0:39himself to press buy. And that reveals
21. 0:41something uncomfortable about personal
22. 0:43finance. Saving money has a cost, too.
23. 0:45It simply doesn't appear on your bank
24. 0:47statement. Most financial advice focuses
25. 0:49heavily on cutting expenses. Cancel
26. 0:51subscriptions. Stop buying coffee. Cook
27. 0:53at home. Use coupons. Drive the old car
28. 0:55another year. And when you're struggling
29. 0:57with debt or living paycheck to
30. 0:58paycheck, that advice can be extremely
31. 1:00useful. But eventually you hit a
32. 1:02mathematical problem. Expenses have a
33. 1:04floor. Income doesn't have the same
34. 1:06ceiling. Suppose someone eliminates a $5
35. 1:08daily purchase and invest that money for
36. 1:10decades. They could build a meaningful
37. 1:12amount of wealth. But one career
38. 1:13decision, a promotion, a new skill,
39. 1:16changing employers can sometimes improve
40. 1:18lifetime wealth by much more without
41. 1:20requiring thousands of individual acts
42. 1:22of restraint. Yet psychologically,
43. 1:24cutting feels easier. You can control
44. 1:26the coffee today. You cannot guarantee
45. 1:28the promotion tomorrow. So people obsess
46. 1:30over the variable they can see. Martin
47. 1:32does exactly that. He'll drive across
48. 1:34town because another petrol station is
49. 1:36slightly cheaper. But once fuel, vehicle
50. 1:38wear, and his time are considered, the
51. 1:40journey may save almost nothing. This is
52. 1:42where frugality quietly changes form.
53. 1:44Saving stops being a strategy and
54. 1:46becomes a reflex. The same thing can
55. 1:48happen with health. A person skips a
56. 1:50routine dental appointment because
57. 1:51spending the money feels unnecessary.
58. 1:53Months later, a minor problem becomes an
59. 1:55expensive procedure. The original
60. 1:57decision looked economical. The eventual
61. 1:59result was anything but. Cheap decisions
62. 2:01are often evaluated by the price. Today,
63. 2:03good financial decisions should be
64. 2:04evaluated by the total cost over time.
65. 2:07There is also another resource
66. 2:08spreadsheets routinely undervalue. Time.
67. 2:11You can earn more money. You can recover
68. 2:13investment losses. You cannot deposit
69. 2:15another Saturday into your life.
70. 2:17Research on happiness has repeatedly
71. 2:18suggested that using money to remove
72. 2:20unpleasant tasks or reclaim time can
73. 2:23improve life satisfaction. Yet, some
74. 2:24wealthy people remain uncomfortable
75. 2:26paying someone else to do, something
76. 2:28they could technically do themselves.
77. 2:30They've trained themselves to protect
78. 2:31every dollar while treating every hour
79. 2:33as free. And beneath all of this is
80. 2:35psychology. For some people, spending
81. 2:38genuinely hurts. Researchers studying
82. 2:40consumer behavior have identified people
83. 2:42who experience an unusually strong pain
84. 2:44of paying. Their problem isn't
85. 2:46necessarily insufficient money. The
86. 2:49discomfort appears even when the
87. 2:50purchase is planned, useful, and
88. 2:52completely affordable. Think about
89. 2:54someone who reads a restaurant menu by
90. 2:56checking prices before looking at the
91. 2:57food. Or someone who keeps a gift card
92. 3:00for years because no occasion ever feels
93. 3:02worthy enough. Or someone who needs
94. 3:04something costing $30, puts it back on
95. 3:07the shelf, and spends the next week
96. 3:08thinking about it. That isn't always
97. 3:10discipline. Sometimes it's anxiety
98. 3:12wearing the clothes of discipline. And
99. 3:14eventually money begins affecting
100. 3:16relationships, too. Imagine a family
101. 3:18photograph from that wedding Martin
102. 3:19skipped. His wife is there. His
103. 3:21relatives are there. There's simply an
104. 3:23empty space where he could have been. 20
105. 3:25years later, nobody looking at that
106. 3:27picture will care what airfare cost.
107. 3:29They will remember who showed up. That
108. 3:31doesn't mean you should spend recklessly
109. 3:32to maintain friendships. It means every
110. 3:34financial decision has two columns. What
111. 3:36you saved and what you gave up. The
112. 3:39second column is much harder to measure.
113. 3:41And retirement exposes the problem even
114. 3:43more clearly. Many people spend 40 years
115. 3:45training themselves to accumulate, save,
116. 3:48invest, delay gratification. Watch the
117. 3:51balance rise. Then retirement arrives
118. 3:53and suddenly the financial plan asks
119. 3:55them to reverse decades of conditioning.
120. 3:57Now they're supposed to spend. Many
121. 3:59struggle to do it. Research on retirees
122. 4:01has shown that some households preserve
123. 4:03surprisingly large portions of their
124. 4:05wealth deep into retirement. Their
125. 4:07portfolios may have been designed to
126. 4:09fund a comfortable life. Instead,
127. 4:11maintaining the balance itself becomes
128. 4:13emotionally satisfying. At that point,
129. 4:15an interesting reversal happens. You no
130. 4:17longer own your money. You're guarding
131. 4:19it. But extreme saving does have a
132. 4:21powerful defense. Savings rate matters
133. 4:23enormously. A household saving half of
134. 4:25its income can potentially reach
135. 4:27financial independence dramatically
136. 4:28earlier than a household saving 10 or
137. 4:3120%. That could mean years, even decades
138. 4:34of freedom from mandatory work. That
139. 4:36matters. Frugality is not the enemy. The
140. 4:39problem is failing to recognize when the
141. 4:40job has changed. If you have expensive
142. 4:42credit card debt, little emergency cash,
143. 4:45and no investment plan, aggressive
144. 4:47saving can protect you. Cutting
145. 4:49unnecessary spending may be exactly what
146. 4:51you need. But once the emergency fund
147. 4:53exists, highinterest debt is gone and
148. 4:55long-term investing is working. The
149. 4:57purpose of money changes. It stops being
150. 4:59only protection from tomorrow. It
151. 5:01becomes a tool for today as well. That
152. 5:03distinction is the difference between
153. 5:04being frugal and simply being cheap.
154. 5:06Frugal people spend less on things they
155. 5:08don't value so they can spend more on
156. 5:10things they do. Cheap people react
157. 5:12negatively to almost every price. Martin
158. 5:14doesn't need a luxury car. If his old
159. 5:16car works and he doesn't care about
160. 5:18cars, keeping it is perfectly rational.
161. 5:20But perhaps he should turn the heating
162. 5:22up. Perhaps he should book the dental
163. 5:24appointment. Perhaps he should buy the
164. 5:25plane ticket and attend the wedding. And
165. 5:27perhaps next time he stands in the
166. 5:28supermarket comparing two nearly
167. 5:30identical cans for several minutes, he
168. 5:32should recognize something important.
169. 5:34His time is worth more than 11 cents.
170. 5:36The objective of personal finance was
171. 5:38never to finish life with the largest
172. 5:40possible number on a screen. The
173. 5:42emergency fund had a purpose. The
174. 5:44investing had a purpose. The sacrifices
175. 5:46had a purpose. They were supposed to
176. 5:47create options, security, time, freedom,
177. 5:50and eventually a life you could afford
178. 5:52to actually live. Saving money is an
179. 5:55extraordinary tool, but every tool needs
180. 5:57an off switch because wealth that you
181. 5:58are permanently afraid to use can slowly
182. 6:00become another form of poverty.
183. 6:03Thanks for watching Investing Flicks,
184. 6:05where smart [music] money makes smarter
185. 6:07moves.