I Saved $200K in 5 Years — 3 Hidden Perils of Frugal Living

At the age of 27, Gwen Merz managed to save up $200,000 in just five years. Her goal was financial independence and retiring early — but now, at 33, Merz says it affected her happiness and mental health.

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Merz managed to save 78% of her income with a starting salary of $65,000 as an IT worker. After several years of saving using the FIRE — financial independence, retire early — movement from 2014 to 2018, Merz said it affected her quality of life and career.

“I also didn’t really realize the cost that I was incurring in my career, as I was not wanting to go out and do happy hour or go do lunch with my coworkers,” Merz told Business Insider. “That kind of off-site networking really is where a lot of connections get made.”

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FIRE Saving Means Lifestyle Sacrifices

Although Merz was able to spend time with friends doing “low-barrier-to-entry” activities, such as bonfires in the backyard or playing frisbee golf, her dating life suffered. She never found a partner who had the same mindset about saving, and it came off as cheap and controlling, Merz wrote.

But while she made sacrifices in many parts of her life, Merz also had non-negotiables that she would splurge on, like visiting her sister for three weeks in Australia and spending $3,800 on a sewing machine. She also has as a buffer if her income takes a hit and it allows her to take more chances on her career.

Now, Merz only saves 10% of her paycheck for her 401(k), under the Coast FIRE method, and she prioritizes housing where she has enough space for hobbies. Previously, Merz bought a single-family home and converted it into a triplex. She lived in a tiny studio and rented out the other two, but didn’t have enough space to get out her sewing machine or do other activities she enjoyed.

Too Much Focus on FIRE-Style Saving Can Hurt Happiness, Mental Health

Merz says she has no regrets about her excessive saving, but finance experts say simply saving money isn’t the best way to build wealth and happiness.

Jeff Rose, certified financial planner and founder of GoodFinancialCents.com, suggested investing to boost your money’s value over time. “Think of it like this: If you only save, you’re missing out on growth opportunities. In 2023, the S&P 500 went up by 24%, way more than what you’d get from a high-yield savings account at 4-5%, especially with inflation at 3.4%.”

Concerning happiness, Rose said it’s about how you use your wealth — and diversifying your approach in how you grow your money and how you spend it.

“While saving money is a literal way to build wealth, it is certainly not the only way,” said Julie Beckham, financial education development and strategy officer at Rockland Trust. “A holistic wealth strategy can include buying property, starting a business and investing. But wealth and health don’t go hand in hand unless you invest in yourself and the things that give you purpose.” Beckham recommended taking a class, giving back to your community and spending your time with the people you love to improve your quality of life.

“Oftentimes, talking to a financial advisor about your financial and life goals can help you plan out a strategy that best meets your needs and values,” Beckham added.

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