Is Saving Money Your Lifestyle Or A Task?
To get to financial independence, you have to save money. There’s no way around it. Even if you become famous and wind up having money pouring out your kitchen faucets, if you don’t save you’re not going to make it to FI. History is littered with stories of rich people who ended up in more debt than the GDP of a small country.
The question then becomes, is saving money a part of who you are, or is it something you have to concentrate on and focus on doing? Research shows that the answer to this question is a leading determination in how successful you will be financially speaking.
Attempting to measure if saving money is “who you are” is of course wrought with subjectivity, but I stumbled across some fascinating research which does just that.
Four behavioral scientists conducted research and have concluded that saving is a personality characteristic. They call this characteristic “Personal Saving Orientation” and define it thusly:
It is an individual difference supporting a constellation of activities to save money, some of which are habitual and routinized, while others are opportunistic and intentional, that the individual performs on a consistent basis and incorporates into his or her lifestyle.
That’s some syrupy language there. Basically they’re saying that people who have this Personal Saving Orientation characteristic save as a consistent habit, and that it’s intentional and a part of their lifestyle.
The full paper is here but you’ll need an .edu email address to get it.
Who even knew there was a professional journal called the “Journal of Consumer Research”?
Test Time
The cool thing about the research and article is that you can take a simple test to see where you fall on the Personal Saving Orientation scale.
Here is the test:
Indicate your agreement with each statement on a 7-point scale where 1 = “I disagree completely” and 7 = “I agree completely”:
- I keep a careful watch over my spending on a daily basis.
- I do not spend money thoughtlessly, I would rather save it for a rainy day.
- Putting money into personal savings is a habit for me.
- I actively consider the steps I need to take to achieve my personal savings goals.
- I like to discuss the topic of saving money with my family and friends
- I usually save money without having a specific goal in mind.
- The goal of saving money is always at the back of my mind.
- Saving money on a regular basis should be an important part of one’s life.
- Saving money is like a lifestyle, you have to keep at it.
High scores are 50 points or more (you would be in the top 25% of respondents in most of our studies with this score), while low scores are those below 35 (the bottom 25%).
So how did you do?
I got a 58.
The only two questions that I didn’t answer with an “I agree completely” were question #1 and question #4.
For question #1, I scored it a 6 out of 7. I don’t feel I keep a careful watch all the time, every day. But I do most of the time. I have no problem spending on the right thing at the right time. And usually that right thing will be an experience and not an object.
For question #4 I scored myself a 3 out of 7. I don’t really like the question too much either as I feel there aren’t that many steps involved in saving. You make money, you don’t spend it – that’s saving. Now where you put the money or how you invest it can have many steps of course. Maybe I’m reading into this too much 🙂
Regardless, I scored myself a 3 out of 7 mainly because I don’t really have savings goals. I just save. At the beginning of every year I recalibrate my TSP (401k) and make sure I’m maxing out. That’s probably my only real goal. And every once in a while when I notice a bit of excess money in my checking account I toss it in VTSAX.
It All Comes Back To Health
I’ve blogged about stress before. Stress is a silent killer. According to this article 30% of Americans are stressed out about money constantly. If your PSO score was low, you should look to increase it. According to the research:
…..high-PSO consumers possess greater financial well-being, the equivalent of “money happiness.” They experience lower levels of stress about finances, they report being more satisfied with their current financial situation, and they make their decisions about whether to buy or experience something based on whether they want it rather than whether they can afford to.
Now that last sentence has dangerous wording for us responsible financial warriors. Did you catch it?
“and they make their decisions about whether to buy or experience something based on whether they want it rather than whether they can afford to.”
I would change that to:
“and they make their decisions about whether to buy or experience something based on whether they need it or if it adds value to their life, rather than whether they can afford to.”
Just plain wanting something doesn’t mean you should buy it. That’s a surefire way to financial ruin, unless you’re this guy.
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Your turn AF Readers – How did you score on the PSO test? Do you feel that “you are a saver” as a person, or that you “have to save” as an activity and task?
Ditto – 58.
Being an earner and saver is definitely a big part of my lifestyle. It seems so second nature that most days I don’t even think about it. To compound things, consuming all these F.I. blogs and podcasts only further normalizes the super saving.
It’s only when I talk Finance with my non-money nerd friends that I remember that most people don’t feel the same way.
Yep, 5 minutes of hanging out with “normal” people reminds us how different we are
I scored a 55. I’ve always been a natural saver, but I also had a spending characteristic to me, and sometimes I didn’t think too much about wasting money on things. Thankfully, my wife beat that tendency out of me over the years. I completely agree with the “value added” aspect of spending.
That’s still a great score!
My score was 56. Thinking about the active steps of savings got me and I interpreted the question similar to you.
Great score!
55 here, my conviction for saving (vs spending) is not as strong as others. I am not naturally frugal, unlike some of the hardcore savers.
Still very high score!
I was totally torn on #6 (“I usually save money without having a specific goal in mind.”). In a sense I score a 1 on that, because although we do have automated savings happening into multiple accounts (savings, retirement, wife’s retirement, tuition), I also have that all spreadsheeted out, so when $X gets put aside from each check, I know how that breaks down into goals. Also, everything that’s “extra” savings – the leftovers after utility bills etc. are paid – is then moved to a retirement account, so I can’t really say I’ve saved a penny in the past 10 years without knowing what it was for.
One thing where I get confused in my spreadsheeting is when I’m “saving” money automatically from each check (probably not using that word “saving” correctly there) for a set of known, specific, upcoming expenses. One example is college tuition. I’m “saving” money for that, but in a sense it is as good as spent, because it will be spent. It won’t be part of my retirement plan. I haven’t “saved” it, I’ve…delayed spending it, I guess.
For instance I save automatically from each paycheck so that about a month before my semi-annual car insurance bill is due, I can pay it in full without feeling it. I do that for car insurance, flood insurance, the purchase of my next car, birthday gifts, and so on.
I really don’t know where to put that kind of so-called “savings” in my financial planning. It’s not what most planning tools would deem “expenses” because I still have the money and may hang on to it for a year or more. And I don’t think it can properly be called “savings” either because within 12 to 15 months after I “save,” it, my intention is to spend it. Is there some basic financial term I’m missing here? Maybe you could give us an article on not fooling ourselves into thinking we having “savings” when what we have is “delayed expenses” or whatever that is called?
That gets down to semantics about the word ‘saving’. If you eventually intend to spend all of your money before you die, are you saving or deferring? I would still call it saving but I see what you’re saying. You are planning for known college expenses. So yes, much of our “saving” is deferring. But that complicates EVERYTHING!!!
I got a 53. I was 6 or 7 on almost everything. I will spend a few bucks fairly thoughtlessly once in a while.
The real low number for me was number 5. I really don’t like talking finance with friends an family. I feel that’s fairly common in my area, but maybe it should not be. I wonder if more folks talked about it, then more folks would be more likely to reign in their uncontrolled spending. I know that would have been true for me during my phase in life where I was uncontrolled with my spending.
I had to give myself a 5 for number 6 as well. I do tend to save with a goal in mind. This goes back to how my father tried to teach us how to save. One example was when I was like 9 or so, I really wanted the $100 (this is 1985) GI Joe aircraft carrier. I did a lot of extra chores for money, and low and behold, I got that toy. My parents continued to support such ideas as time went on. Now, for me as an adult, I often want to save for retirement. That’s a big thing for me.
Your main point about the whole experience thing is big for me. For this past Christmas, I bought my wife a new camera; one that is rugged so we can take it hiking without fear of breaking it; its a 7″ drop protection and 50″ waterproof with it’s own flotation device. For me, I asked her for a few board games for us and friends to play together. Those are memories and experiences.
I only like talking about it with friends if they initiate and are willing to not look at me like I’m crazy 🙂
My score was lower than it would have been if we weren’t retired and in the drawdown phase. Questions 3 and 4 took me out! But even with 1’s for those, I scored 42. I rated myself a 4 on question 6, because “saving” money might mean something like buying an item on deep discount, even though I will live on the saved money and not draw as much out as a result.
I love the Onion article on Warren Buffett. Good one.
Yes, you’re retired. But I bet when you were still working you were a much higher score!
Interesting question. After some thought, I think saving is both part of who we are AND a task we have to concentrate on and perform. At first, that task might have been necessary for some reason, but it can become habit. The process of performing that task eventually becomes rote — we’ve done it long enough that it’s easily done without thinking or working hard at it.
For example, when I go to the grocery store I don’t just buy random things to eat, I go with a specific list and limit my purchases to those items. I’ve done this for a very long time, and it doesn’t seem like extra work to plan meals and maintain a shopping list. But it does help keep our food expenses low.
At one time I probably decided I needed to be more careful about my grocery shopping, or I started keeping lists so I wouldn’t forget what groceries to buy for a meal. Now, it’s just habit. Easy peesy.
I agree that it’s both part of who I am and something I have to work at. I’ve always been naturally very cautious about money, but I did let lifestyle inflation get the better of me the last few years. Since discovering the FI movement, I’ve been on a mission to reign it in and have freedom.
As for grocery stores, well, I still haven’t managed to stick to a list and usually walk out with more than I planned to buy. There’s always a nice looking apple or some perfectly ripe bananas that catch my attention. Or my favorite ChocoLove chocolate bars are on sale. I try, though!
I mostly save for goals and have multiple savings accounts connected to my checking account. I have a fear that if I don’t “get rid” of the money in my checking account, I’ll spend it. If it’s tucked away in a specific savings account, I can only use it for that thing, like vacation or Christmas presents or my emergency fund. Saving is definitely habitual for me, but it’s also a learned habit. I listened to my parents and grandparents about saving. Good life lessons!
To me buying extra food in any one trip is no big deal, it’ll just extend the time needed till my next grocery store trip. I can only eat so many calories, so the more I have at home the longer it will be till I need to go to the store.
Thanks for stopping by Katie!
Great comment Tako, you clearly think things through. I bet your score is a perfect 63!
54! I know for a fact that’s way higher now than it would’ve been a few years ago. Agreed that #4 was the worst question–I gave myself a 3 on that because honestly after my 401(k) contributions I can’t make huge savings progress at the moment anyway. So I save what I can and decide how to use that money later.
That’s a great score and I’m still amazed at your savings rate. You’re killing it!
I scored a 54. But the flaw of ratings is that it is subjective. Somebody’s 7 could be my 5. It’s like pain scores… some people are always at a 10 out of 10 in pain without grimacing 😉
I didn’t score 7 on statements #1, #4, #5, and #7. In the case of #5, sure I like to talk about saving money with friends and family… but there are so many other fun things to talk about. And in statement #7, I consider it a bit obsessive if saving money is always in the back of your mind.
Just like you mentioned, my wife and I have a system in place so that we consciously spend on only the things we need or truly add value to our lives. Having these systems in place and developing healthy spending/saving habits is key so that you don’t have to think about it so much to the point it’s always in the back of your mind. Like the statement #9 says… saving money is a lifestyle, it should be automatic so you don’t have to think about it 🙂
Great point, and only a Doc could point that out about the pain scale. One person’s “6” might be another’s “10”, especially if the former has a higher than average pain tolerance.
Thanks for the great comment Doc!
i scored in the 50’s but i don’t think i have the saver’s gene or i would have started much earlier in life than i did. i think it was related to just being me to worry about for a long time and not caring much due to that. now it has become automatic but i don’t agonize over anything under 10 or 20 bucks. i also rarely find myself in a retail establishment of temptation that isn’t a wine store. i heard a bunch of money stuff from friends over the holidays that made me just want to slap myself on the forehead or slap them on the forehead. i ended up just silently judging and minding my own business.
Not going into stores is a HUGE one Freddy, yes indeed. Same for me. I did a post about that a while back, if I’m not around all that crap I won’t get tempted. It works for me.
Double Nickels (55).
Speaking of Nickels – Question #5 was a challenge. I do have some family that is willing to talk in general about investments, savings, etc. Nothing specific though. The rest of family and friends – it is like a taboo thing that is never to be discussed. Unfortunate since I think we can all learn from each other when we discuss things.
Agree, I only discuss if they initiate. But when they do I enjoy it and stay non-judgmental of their decisions
Nice quiz! I score in the high 50’s. It’s #1 and #5 which let me down. I don’t look at my budget and spending daily, although I know mentally a rough guide on how much I can spend at any given time.
And number #5 is hard- Just like other com mentors I have family and friends I can talk to about money, but others who are struggling and are not receptive to advice. It’s very taboo for some. And so I would rather keep my relationship than talk about a subject that makes them uneasy.
It’s soooo taboo, which is weird in a culture where so many folks share everything else online.
57 here. I gave myself 7s across the board except for a 1 on #6. I didn’t save a dime until I found my FI goal a couple years ago. Now that I have a big goal saving is always on my mind!
Nice – good luck in your journey!
Money attitude and saving all were a result of building new habits. I didn’t start out with those good decision making habits but rather through consistent effort as well as screwing up a lot with bad debt and dumb purchases did I learn the way.
The hardest thing I deal with now after leaving work is fighting urges of wanting things. I would love a motorcycle, I would love get some new lenses for the camera and I would love to do a few other things but I can’t because I jumped on the FI train and left work. Without that income I have no choice but to constantly flex the frugal muscles and that is my only “stress”.
Maybe get an older used motorcycle, something under a grand. There’s always a way 🙂
I was thinking one of the 70s 100cc enduro Street legal bikes, dirt cheap and cheap insurance as well
I scored the same as you. 🙂
I was always a good saver, though when I was young I usually had to have a goal in mind. After I got divorced and had to bring up my boys on my own, saving became a survival tool. It’s engrained into me now!
“Engrained” is a good thing!
I scored 46 and not so proud of it. I don’t like #5 and gave it a 1. We usually talk about making money as opposed to saving money. Saving money should be a habit, and just like any habits, it should start with a proper mindset.
That’s still likely a better score than the average John Q. Public. You’ll get there, you’re reading and commenting on blogs about money, that’s initiative right there
Good questions. I got a 7 for each of them. I guess that’s what lead me to be able to retire from medicine at age 54. Saving is like a muscle, it gets stronger with use.
Dr. Cory S. Fawcett
Prescription for Financial Success
Perfect score, you’re crushing it doc! And if we keep working out those muscles they’ll get bigger.
I’m too lazy to score myself but I think I was born a saver. I think most are.
I give you a 56 😉
I enjoy maxing things out. HSA, 529, SEP IRA, and new this year Solo 401K. My goal each year is to hit the max just before the end of the year. When available I have the payroll company take them out pre tax creating net zero paychecks. Fun.
You’re clearly winning!
If I am being completely honest, Ill only lose about 2 points. Based on my Background, being frugal and minimalism come natural. I am not sure if it is the survival instinct or something else, when i get money, the thought of not always having money preoccupies my mind. The best thing to do for me then is to save as much as possible. Every paycheck is a blessing in my eye and i never take all the opportunities i have for granted ever.
Awesome post, very engaging.
Man you’re winning at this game, thanks for the kudos!
55 here, my conviction for saving (vs spending) is not as strong as others. I am not naturally frugal, unlike some of the hardcore savers.
That’s okay, we all have something to work on!
I scored 54.
Contrary to you I scored a 7 on question #1 – I keep very good track of my spending. I’ve been doing it for years and have a very simple way to do it which has become second nature.
The lowest I scored was on question #7: saving money is not always at the back of my mind. I think it’s actually important to spend on (true) passions!
Great score, and I agree about spending on passions, but when I do it it’s after some analyzing