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Toxic frugality

IntelligentFire999 isn’t alone in this situation. Popular personal finance personality, Ramit Sethi, touched on money hoarding and the FIRE Movement in an episode of his podcast, I Will Teach You to Be Rich.

He calls the restraint that comes with the movement as “toxic.” During the episode, Carl and Mindy, a married couple in their 50s, made a fortune flipping real estate — $4.3 million to be exact. However, both are reluctant to spend their money.

“I feel security in [our] investments, but I don't want to touch them,” Mindy said. “They're for the future.”

Sethi’s response: “Not to be too blunt, but when’s the future?” He added, “There’s no magical amount of money where you will suddenly feel safe.”

Keeping all your money close to your chest, and never enjoying the fruits of your labor, can be detrimental to your quality of life. Compulsive penny-pinching, hoarding and an overall fear of spending money are some of the ways toxic frugality can manifest in your everyday life.

“At their core, you’ll find a pattern with cheap people, and even ultra frugal people,” Sethi said. “This is how their thought process goes: ‘if I go to that restaurant [and] I spend money on it, I might actually like it and then I have to eat out at those restaurants for the rest of my life.’”

Hanging onto millions with a death grip, so to speak, may not be a life-threatening decision, but Reddit user IntelligentFire and the couple featured on Sethi’s podcast have one thing in common: their devotion to the FIRE movement.

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From toxic frugality to healthy spending habits

But how, after years keeping a tight grip on their wallets, do people like IntelligentFire999, and Carl and Mindy, loosen up and enjoy the money they’ve accumulated?

Sethi, who grew up in a frugal middle-class family and now has a reported net worth of $25 million, recommends a couple smart strategies.

For starters, he suggests people focus on buying experiences, not things. This advice echoes that of Thomas Gilovich, a psychology professor at Cornell University, who, at the conclusion of a 20-year study, confirmed that many people prefer accumulating meaningful experiences — travel or live concerts, for example — to purchasing “things” that don’t necessarily enrich their lives.

Setting a realistic budget can help you retain control over your spending habits. Create a spreadsheet that breaks down how much you spend a month, on average, taking into account everything from housing and utilities to groceries and social outings.

This will paint a clearer picture of how much you’re spending — and perhaps further illustrate how frugal you’ve been up to that point.

There’s also the cautionary side of the equation. On Reddit, one poignant observation sent to IntelligentFire999 came from user dbcooper4, who, in essence, noted that even the best-laid nest eggs can spoil.

“As someone who also struggles to spend money,” they wrote, “I have started to look forward into my 70s and think about what I’m going to regret not doing [when] I was younger and still had my health and energy.”

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Lou Carlozo Freelance writer

Lou Carlozo is a freelance contributor to Moneywise.

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