The Navigoe Blog

Saving Money: not the same as losing weight

April has arrived, and with it we say goodbye to the frigid 65 degree winter days that we experienced here in Redondo Beach. It’s time for me to plant my vegetable garden, and reflect on the close of the first quarter. In fact, I like to look at the first of April, not as a day of foolin’, but a spring renewal. A time to review those New Year resolutions that you made, not to beat yourself up because you didn’t keep all of them (and let’s face it, you probably didn’t), but to start anew.

Of course, losing weight and saving money are two of the most common resolutions. In a previous post, I noted some of the ways in which the two goals are similar. Both can be broken down to the simple math of less food/more activity and spend less/earn more. Both require discipline, good habits and occasional willpower to consistently make good choices. However, despite the similarities, there are some notable differences.

The results of losing weight are visible
Success in losing weight is often visibly evident. It’s not uncommon to hear, “have you been losing weight? You look fabulous!” But saving money is absent any visible evidence. In fact, it’s quite the opposite. Spending, not saving, money is visible. A nicer house, a new car, jewelry, clothes, gadgets. We don’t see each other’s bank statements or investment portfolios, so we make assumptions about the financial well-being of others from external clues. Namely, how we spend money. It’s ironic, because a person driving a new luxury car is often perceived as well off, but a person eating a deep dish pizza isn’t viewed as healthy. Yet, isn’t it basically the same thing? Consumption.

An interesting side effect of weight loss is that it becomes an instant conversation starter, especially with acquaintances whom you haven’t seen in a while. People think little of asking, “how much have you lost? How did you do it?” There is no socially acceptable equivalent for inquiring about other’s financial condition.

Getting your financial life in order might take longer
Have you seen the TV show The Biggest Loser? The contestants arrive on the show morbidly obese. In most cases, a healthy weight requires losing 20-50% of their body weight. It’s the equivalent of someone with credit card debt exceeding their annual salary. Plus student loans and car loans, and no emergency savings or retirement savings.

The show is an extreme example, but through a process of intense supervised exercise, dietary changes and introspection to understand why they got to where they are, a majority of the contestants arrive at the show’s finale just a few months later at or near a healthy weight.

If you find yourself in a dire financial situation, no matter how dramatically you change your spending habits, and even find a way to make some extra income, it’s probably not realistic to expect your finances to make the same dramatic turnaround in a matter of a few months.

Weight tends to find an equilibrium
Through most of human history, you were more likely to suffer from starvation than overeating. However, modern conveniences have flipped the script and for most, the problem today is too much food.

In this tremendous TED Talk, Why Dieting Doesn’t Usually Work, Sandra Aamodt explains that the human body tends to seek an equilibrium. After losing weight, the body’s metabolism slows. This means that given the same level of activity, you will burn fewer calories at a lower body weight than at a higher body weight. In other words, as you approach your goal weight it becomes progressively more difficult to lose those final few pounds.

Saving money works differently. If you are starting in the hole (with debt), you not only have to spend less than you make, but you have to overcome interest expense. As you pay off debt, or build savings, you reduce and eventually eliminate interest costs and begin to build earnings on your savings and investment. Saving money and paying off debt not only builds momentum, but does so at an accelerating rate.