Secret millionaires: Addicted to saving

Being able to sock away cash can have a dark side. Some compulsive savers experience so much pleasure from watching money grow -- and anxiety when account balances fall -- that they cannot enjoy spending or giving money away.

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By Brent Kessel, MSN Money

Sue Ganz Schmitt lives in a coastal canyon in Southern California with her husband, two daughters and an Irish setter named Everest. She and her husband, Martin, drive a 2006 Honda minivan and an old Volkswagen van, and have historically been hard-working, frugal savers. About three years ago, they sold interests in their two companies in the same week.

The payoff for their years of discipline, mixed in with a little bit of good luck? More than $10 million.

Meet the millionaires

More intriguing than their good fortune, however, is what the Schmitts chose to do with their newfound wealth. They continued to drive the same old cars, live in the same 2,000-square-foot house and eat at the same restaurants. They had no interest in bling or in flaunting their considerable means. So they set up a small family foundation to fund charitable activities and invested the rest.

Tell us: How would your life change as a millionaire?

Sue and Martin are predominantly driven by the money archetype that I call the "Saver." As I explain in my book, "It's Not About the Money," Savers are the kind of people who tend to buy used cars or purchase products only when they go on sale.

But their cautious habits sometimes come with a negative emotional side: These Savers recoil when others flaunt their wealth -- or waste it on luxury purchases -- and derive great pain from watching hard-earned savings decline in a bad stock market.

Whether consciously or not, Savers are almost always afraid that their money might run out one day and leave them poor, alone or dependent on others. They deal with this profound anxiety by saving, which serves to temporarily dull the intensity of their worry.

Quiz: What's your money personality?

You're probably a Saver if you:

Save more than 20% of your earned income each year.

Spend and give away less than 3% of your total net worth each year.

Increase your net worth by more than 5% from year to year.

"I grew up in postwar Germany, where you never let anything go to waste," Martin Schmitt told me. "I'm probably the one who gets most upset if the girls leave food on their plates or something goes rotten in the refrigerator."

From living in a van to millionaire

The Depression and World War II created an entire generation of Savers, who had seen very hard times and knew that if you squandered food, money or other precious resources, you could end up losing everything. "I grew up in a Depression-era family, and my mother was the queen of garage sales," says Sue Ganz Schmitt.

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Garage sales, secondhand cars and discount shopping appeal to Savers because they derive great relief from saving -- it is the experience that their minds associate with security. Savers also experience a rush of good feelings -- happiness, relief or optimism -- right after they make a bank deposit, reduce their spending or make a long-term investment. This is often when they feel most vital and most pleased with themselves and are most able to relax and enjoy the other aspects of their lives.

Such fiscal habits are often widely admired -- indeed, famously frugal executives such as Warren Buffett and Ikea founder Ingvar Kamprad have turned their prudent sensibilities into astonishing business success.

Guess these strangers' money personality

But for Saver types, there's still a downside --- because this financially derived happiness is only temporary. The part of our mind that can never have enough soon realizes that survival is still far from ensured, and it wants another pleasurable experience -- more security, more abundance, more happiness -- so it looks for a way to save even more.

This is why there are so many people who, from the outside, seem to have more than enough money for their needs but who continue to sock money away in ever-increasing amounts. As a financial planner, I have worked with dozens of clients who are addicted to saving -- even once they have enough money to sustain their lifestyle for the rest of their and their children's lives.

It can be quite an unfortunate prison.

So what's the antidote? The easiest way for Savers to feel good about parting with money is to use their wealth to support good causes. "Money gives me the opportunity to give other people a hand up," Sue Ganz Schmitt says.

Should millionaires always pick up the tab?

Like good Savers, she and her husband have channeled their emotion in a way that can inspire others -- and, in time, create a high return on investment. Take Martin Schmitt's newest project: a Web site called We Can Build an Orphanage. As a former software developer, he and a colleague built the site so that donors could literally pick and choose which parts of the orphanage they want to pay for: a window, a crib, a week's worth of medicine or Sunday morning's breakfast. This giving sends a message to our subconscious that we do have enough, countering the usual chorus of "I'll never have enough."

Other Savers can try the following steps to gain more financial freedom and emotional satisfaction:

Reward yourself. Set aside some amount of money -- $1 a day, $100 a month or whatever feels right to you -- and spend half of it on material objects or experiences that bring you immediate pleasure and fulfillment. (Remember, the Saver loves to delay gratification.) Then use the other half to be generous,

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whatever that means to you. Ideally, pick causes that touch your heart.

Turn over the most troubling tasks. Some Savers I've worked with have found the most relief by turning over bill paying to a trusted spouse or bookkeeper. Sometimes all you need to get some breathing space is simply to separate yourself from dealing with each and every expense. Similarly, if you find yourself making too many changes to your investments or constantly second-guessing yourself, I recommend empowering a trusted fee-only financial adviser or family member to handle the investment decision-making process for you. Or invest in a strategy or mutual fund that does not drift from sector to sector, rebalances automatically and otherwise takes all the guesswork out for you. And don't check your accounts online every day -- the less often, the better.

Figure out how much is enough. It's very natural for all of us to wonder if we have enough -- especially when the media and our investment statements are all in panic mode. Though having a trained certified financial planner crunch the numbers for you is still the best alternative, another option is this simple formula: You'll need 20 times your annual spending to avoid running out of money once you stop earning an income. Invest 50% to 60% in low-cost stock index funds, and stay focused -- don't pull out to wait out a storm on the sidelines.

Published Nov. 6, 2008