5 Things Every Over-Saver Should Do Now

ILLUSTRATED BY ISABEL CASTILLO GUIJARRO.
You took our quiz and realized that it’s possible you’re overcautious with your money. Your reluctance to spend may mean that you’ve put off having home repairs done, wear clothes until they literally fall apart, and feel immense guilt at the mere thought of “frivolous” spending. You’ve worked so hard to save, and the thought of losing everything in a stock-market crash or poor investment is too scary to think about. You stick with what you think is the safest option, but it’s definitely time to branch out. First, take a closer look at your short-term savings and then you can explore some long-term investment options.
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Figure out if you’re oversaving.
Yes, there is such a thing. Use a calculator like this one to figure out how much money you’ll need in retirement. It turns out you might need to adjust your 401(k) contribution...downward. If you’re saving too much, chances are you are sacrificing your quality of life now to squirrel away money you will not end up needing. And some retirement calculators don’t take into account how much you’ll really need to spend.
One rule of thumb is to plan on needing 80% of your current annual income for each year of retirement, but it's hard to say for sure because everyone has different financial goals. For more advice on determining what's right for you, read here.
Make your money make money.
If you have a savings account at a brick-and-mortar bank, do some research to find the best interest rate. The average interest rate on a savings account at a brick-and-mortar bank is currently around 0.01%, while some online banks offer 1.10% (yep, that’s over 100 times more). So for every $10,000 you’re keeping in the bank, you could earn an additional $110 each year just by looking for a different interest rate. It can also make a difference is the interest is compounded annually, quarterly, or monthly. This calculator can help you see the difference in the returns.
Make tax-advantaged accounts your friend.
Look into other tax-advantaged account options and see if they make sense for you. Maybe you can open a 529 for a future child in your own name, and change the beneficiary when your little bundle of joy eventually arrives. Or you can set up an HSA, setting aside pre-tax dollars in a dedicated account and then making tax-free withdrawals to cover qualified medical expenses as needed. If you don’t already have an IRA or Roth IRA, investigate those options, as well. You can read more about retirement accounts here.
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Dip your toes into the world of investing.
Yeah, the idea is scary. But in reality, there are some very secure ways to invest your money. Do your research and make sure you’re okay with the risks versus the benefits, then invest a small amount into stable index funds and see how you do. Chances are, you’ll become much more comfortable investing and willing to put more cash into the stock market. Make a plan for how much you want to keep in cash versus invested, and gradually get yourself to that point.
Have some fun.
No, seriously. Let yourself do just one thing you’ve been secretly dying to do but have stopped yourself from spending the money on. Buy the concert tickets. Try the four-star restaurant. Bite the bullet and go skydiving. You won’t regret the amazing experience, and, come on, you’ve got to live a little.
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