UPDATE: Spending too much money (or too little) can cause different kinds of emotional pain

11/12/17 03:39 PM EST

By Alessandra Malito, MarketWatch

'Tightwadism' can lead people to neglect their health, and avoid paying for groceries or a doctor's visit

Saving money is often necessary to balance financial obligations and goals, but obsessing over saving could become dangerous and detrimental to a person's health and well-being.

Some people are born to be frugal, while others develop the habits over time after watching their parents or witnessing a traumatic experience like the 2007-09 recession. There's a difference, however, between wanting to save money and feeling pain from spending any money, also known as being a "tightwad," said Scott Rick, associate professor of marketing at the Ross School of Business at the University of Michigan.

In extreme cases, "tightwadism" means people neglect their health, and avoid paying for what they need, such as groceries and doctor's visits. Tightwadism is the fear of going broke, Rick said. "Frugality is about taking the joy in spending conservatively. Tightwads save money because they can't get themselves to spend it -- it is not a process of joy getting them there. It was all these episodes of pain and anxiety when they were contemplating spending."

Also see:The frugal mentality that helps you save can end up sabotaging your retirement (http://www.marketwatch.com/story/how-your-frugality-can-sabotage-your-retirement-2017-05-09)

A survey by insurance company MetLife earlier this year found almost half of employees were "concerned, anxious or fearful about their current financial well-being." And the high cost of living makes saving difficult (http://www.marketwatch.com/story/americans-are-more-confident-in-their-savings-for-the-first-time-in-six-years-2017-03-21) for millions of people. Of course, there are other times it is in their control, but they don't think their salary is good enough or they simply haven't "gotten around to it," a survey from personal finance site Bankrate.com found.

It makes sense that some people might be afraid of going broke. Half of American families are living paycheck to paycheck (http://www.marketwatch.com/story/half-of-americans-are-desperately-living-paycheck-to-paycheck-2017-04-04), and one emergency could push them (http://www.marketwatch.com/story/most-americans-are-one-medical-emergency-away-from-financial-disaster-2017-01-12) over the edge financially.

The emotional spending scale

Rick, along with George Loewenstein, a professor at Carnegie Mellon, and Cynthia Cryder, a doctoral student at the same school, developed a spending scale, based on a few key questions. The questions came from a survey in which a group of researchers, which included Loewenstein, asked 13,000 people to rate their responses to the following statements on a scale of one to five: "Spending money is painful to me" and "Saving money is pleasurable for me." They then asked each participant approximately how much credit-card debt he or she had in one of nine categories, between $1 and over $50,000. Participants could also indicate if they paid their balance off in full each month, or if they didn't use credit cards at all.

Here's what they found:

A quarter of people are considered "tightwads" on the scale and a quarter are "spendthrifts." Half of people fall squarely into the middle about their spending and saving habits.

People in the middle "are spending more or less what they'd like to spend, and they're happier than tightwads and spendthrifts, the people on the extremes," Rick said.

They also found that women are about as likely to be tightwads as they are spendthrifts; about 20% of women are tightwads and 20% are spendthrifts, and the rest fall into the "unconflicted" category. But men are more than two-and-a-half times more likely to be tightwads than spendthrifts.

Tightwads were also 9% more likely to have more than a bachelor's degree (such as a master's or a phD) than spendthrifts were.

Don't miss:How to be frugal without being a cheapskate jerk (http://www.marketwatch.com/story/when-being-cheap-costs-you-big-2016-05-26)

Spendthrifts feel indifferent, while tightwads feel anxiety

Tightwads actually feel a "pain of paying" (http://knowledge.wharton.upenn.edu/article/are-you-a-tightwad-or-a-spendthrift-and-what-does-this-mean-for-retailers/) and experience feelings like anxiety and distress when they make purchases. That unease "doesn't seem to be something that goes away once they do get money," he said. Alternatively, spendthrifts don't feel much pain at the idea of spending, and therefore tend to spend more than they'd like.

In follow-up research, Rick also found that tightwads and spendthrifts tend to marry people who have opposite spending behavior to them. That dynamic is present in Rick's marriage; he is a spendthrift, he says, and his wife is a tightwad. She sometimes goes shopping and comes home with what Rick calls "a tightwad report" -- almost symptoms of buyer's remorse, but in reverse, regretting that she couldn't bring herself to buy all of the things she wanted. "That is a classic characteristic," Rick said. "It's knowing you should or want to buy something, having the money to do it, and you just can't do it." It's hard to break "tightwad" behavior, he said.

'The Ebenezer Scrooge' effect

For some frugal people, it is not a matter of a high enough income. It's simply a desire to stash away as much money as they possibly can. "It is the Ebenezer Scrooge sort of dynamic," said Brad Klontz, an associate professor of practice at the Financial Psychology Institute at Creighton University Heider College of Business in Omaha, Neb.

"People create a life of poverty even though they have plenty of money. They may deny themselves simple pleasures (http://www.marketwatch.com/story/55-of-american-workers-dont-take-all-their-paid-vacation-2016-06-15); they may neglect their health care. They may not have taken time off of work for years even though they have days set aside. They can't bring themselves to enjoy their financial resources."

But it isn't because they're mean. Guilt could also stop people from spending on non-essentials, because they think they're using a valuable resource that could save their lives in the future, said Maggie Baker, a clinical psychologist and financial therapist and author of "Crazy About Money (http://www.maggiebakerphd.com/the-book/): How emotions confuse our money choices and what to do about it."

See also:How to raise your kids to be frugal (but not too frugal) (http://www.marketwatch.com/story/how-to-teach-your-kids-to-be-better-with-money-than-you-are-2017-07-26)

What to do if spending causes you pain

"Most of us were not taught how to have a relationship with money," said Bari Tessler, a financial therapist and author of "The Art of Money (http://baritessler.com/art-of-money-book-2/)." People need to understand what values are important to them, but also how those values coincide with income and financial responsibilities, she said. Be self-aware rather than fearful. "The goal is to have money harmony," she said. "You live within your means and you enjoy what it brings you."

The upsides to being frugal

Of course, the action and desire to save money itself is good for everyone, especially for those nearing retirement (and many Americans are vastly undersaved for retirement (http://www.marketwatch.com/story/the-amount-of-americans-not-saving-for-retirement-is-even-worse-than-you-thought-2017-02-21) as it is). Having an emergency fund keeps people out of debt (http://www.marketwatch.com/story/how-much-do-i-really-need-in-my-emergency-fund-2016-04-27), especially after a job loss.

Saving, and having a budget or a financial plan (http://www.marketwatch.com/story/how-to-create-your-own-financial-plan-in-18-easy-steps-2016-01-05), allows people to reach goals, such as buying a home, having a family, starting a business or being comfortable in retirement. Being frugal may even help save the planet (http://www.marketwatch.com/story/if-you-care-about-the-planet-dont-buy-so-much-2017-07-21), because it would lessen the amount of waste and energy used in nonessential travel and electricity consumption.

Maria LaMagna contributed reporting.

-Alessandra Malito; 415-439-6400; AskNewswires@dowjones.com

RELATED: 5 unpretentious ways to be an ethical traveler this holiday season (http://www.marketwatch.com/story/5-ways-to-make-the-world-a-better-place-while-you-travel-2017-06-09)

RELATED: My sister took care of our mother for 10 years -- shouldn't she be entitled to her house? (http://www.marketwatch.com/story/my-sister-took-care-of-our-mother-for-10-years-shouldnt-she-be-entitled-to-her-house-2017-11-09)

RELATED: Budweiser looks back to the future (http://www.marketwatch.com/story/budweiser-looks-back-to-the-future-2017-11-10)

 

(END) Dow Jones Newswires

11-12-17 1539ET

Copyright (c) 2017 Dow Jones & Company, Inc.