Avoiding Financial Hyperopia

Recently, Frank Curmudgeon of Bad Money Advice posted (or rather, reposted) an article in which he discussed hyperopia, or excessive far-sightedness.  The basics of this condition involve regretting excessive caution taken in the present to avoid a hypothetical negative outcome at some point in the future.  The study he cited included, as an illustrative example, students who increasingly regretted the decision to study rather than party during their college years.  Over time, more and more students came to regret having too much self-control, versus not enough.  (I feel their pain; I wish I had done a bit more socializing and a bit less studying during my college days.)

When it comes to your finances, hyperopia can hurt you, just as can myopia (excessive short-sightedness).  You might find, years or decades down the road, that you feel you’ve gone through life without having any fun, instead saving and scrimping during your best years.  At best, this point of view can taint the otherwise grand event of saving enough to retire, or even retire early.  At worst, in an attempt to make up for lost time in the wild and crazy department, you might end up spending a great deal of money when you’re older (and have less time to make it back) than you would have during your younger days.  (Think of the guys who go through a mid-life crisis and buy a car with a six-figure price tag.)

How Do I Avoid Financial Hyperopia?

There’s no certain way to avoid being too farsighted and frugal with your money.  Each person is different, and what I might consider an excessive amount of saving, you may feel is just right.  If you do too much spending in an attempt to capture all the joys that life has to offer (and to live with no regrets), you will likely end up with not enough in savings when it comes time to retire, and end up with a heap of regrets anyway.

If there’s no way for me to tell you how much to save and how much to spend to make you happy, what advice CAN I provide?  In a nutshell, know yourself, and adjust your spending to meet your own needs and desires, now and in the future.  For a bit more advice on avoiding hyperopia, consider the following tips:

1) Splurge on Events, Not Things – Probably my strongest belief related to financial hyperopia: events are more memorable than physical objects, and you shouldn’t skimp on them if you hope to live a life relatively regret free.  Just about all the really good memories I have are from things I did, usually with friends or family, rather than things I bought.  If you want to avoid feeling like you missed out when you retire, be sure to do plenty of new and interesting things with your loved ones throughout your life.

2) Don’t Make Spending a Routine – No matter how interesting and memorable something is the first time you experience it, if you do it repeatedly, it’ll become boring and routine.  Even the most exciting and interesting vacations will become boring and start to blend together in your mind if you take the same ones every single year.  Make sure to vary your spending, in order to capture different experiences throughout your life and avoid feeling like you’ve seen it all.

3) Don’t Try to Make Big Changes All At Once – If you feel like your frugality has caused you to miss out on some great experiences in life, you might be tempted to make up for lost time by becoming very loose with your money.  In a word, don’t; going on a spending spree is unlikely to make you feel more satisfied with your spending decisions in life, and is likely to leave you significantly poorer in a short period of time.  Instead, plan out some events (or things, if you prefer) that you feel will make your saver’s regret decrease, and slowly start to integrate them into your spending plans.

4) Try to Start Young When Saving – You might wonder why a tip saying to save is included in a list of solutions to excessive saving.  The answer is simple: thanks to the power of compound interest, each dollar you save and invest while you are young has time to grow into much, much more money in several decades time.  As a result, saving a little bit (more) while you are young will enable you to spend more as you get older, without having to worry that you won’t have enough money to retire.

That’s all I have on financial hyperopia and how to avoid it.  As money problems go, it’s hard to think of a better one to have; still, if you are preventing yourself from having interesting and memorable experiences in order to save more money, you may feel as if your life has passed you by when you finally get to enjoy your spoils, and that’s something we want to avoid.  Make sure you accrue good memories as well as money during your life, and you should end up fine.

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