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updated 4/4/2011 4:04:10 PM ET 2011-04-04T20:04:10

Sure, it's fashionable to be frugal. But sometimes severe frugality can morph into a serious mental disorder.

Do you or someone you know go beyond being a cheapskate? If so, you may have a money disorder — one that financial therapists call "underspending." Here are some symptoms of a chronic underspender:

  • Avoiding the doctor so you don't have to shell out the cash for the insurance co-pay.
  • Neglecting to pay for basic necessities in life, such as seeing the dentist or hiring a repairman to fix a leaking ceiling.
  • Worrying constantly about money even though you have healthy savings and little debt.
  • Taking advantage of others to save money, whether it's leaving an embarassing small tip or constantly arguing about the quality of a provider's service to try to get an item for free.
  • Refusing to invest in even low-risk options such as CDs or money markets.

Unlike those who are simply thrifty, chronic underspenders pass up purchases not because they enjoy saving money or making practical sacrifices to reach a larger goal -- but because it physically pains them to part with cash. Their income makes no difference. Some are attorneys making $400,000 a year; others are waiters who make $20,000.

"Underspenders go without things they can afford, and they have trouble enjoying their resources," says Brad Klontz, a financial psychologist and author of "Mind Over Money: Overcoming The Money Disorders that Threaten Our Financial Health." "Severe underspenders neglect basic self care. They don't go to the dentist or doctor because don't want to spend the money."

Chronic underspenders hard to cure
Social scientists and psychologists who have studied the behavior believe that such spending tendencies develop early and are difficult to change. Americans raised during the Great Depression and Japanese-Americans who were interned during World War II can be classic underspenders. And, Klontz says, the current economy may breed a whole new generation of sufferers: the children whose lives changed dramatically for the worse after their parents lost their jobs or homes to the recession.

Many underspenders (sometimes called "over-savers") live with a deep dread of financial ruin. "They're convinced they're about to go bankrupt no matter how much money they have," says Kenneth Settel, a psychiatrist, psychoanalyst and consultant to executives in the Boston area.  "They live by the phrase, 'But I might need it someday.'"

Sometimes, their decisions aren't rational. They may put off maintenance on their home or car, or drive across town to save a few cents per gallon on gas. They often buy only the cheapest available items -- which are typically more likely to break and force them to go back to buy another, costing more time and money in the long run. Some underspenders have tens of thousands of dollars sitting in a bank account or under a mattress because they aren't comfortable with the risks of investing it. They're also likely to have relationship problems, especially if they marry someone prone to spending.

Tyler Tervooren, 26, of Portland, says he was a classic underspender until recently. Though he was making $56,000 a year as a construction manager, a job he hated, he was living on only $18,000. "I was putting off buying things that would make a positive difference in my life because I didn't want to spend any money," he says. "I was really into creating music, but wouldn't allow myself to buy anything I needed to do that. I wanted to travel, but I was afraid to spend the money."

After Tervooren got laid off last year, he started his own business. Though he's making less money, he says he's a lot happier, and that helped change his thinking. "Before, I really didn't like my job, so I had this must-save mentality," he says. "Now, I'm still frugal, but I'm much more open to spending on things that enrich my life." Just last week, for example, he spent $1,000 on a trip.

Getting to the root of the problem
Financial psychologists say they can help severe underspenders by exploring the underlying roots of their anxiety in therapy, whether it's that the patients subscribe to the "money equals security" myth or that they don't think they deserve the things money can buy. "If you help them understand what they feel guilty about or why they're anxious, that can really help," Klontz says.

Of course, underspenders are tough to treat because most of them don't see anything wrong with their behavior -- in fact, they're proud of it -- and the last thing they want to do is spend money for therapy. "Pretty much the only way I see them is if their spouse drags them in," says Settel, the psychiatrist.  

Coping solutions
So what can you do if you have these tendencies, if you know someone like this or if you're married to one? Research by social scientists shows these strategies can help:

1.Choose plastic. Underspenders are not naturally inclined to use credit cards, but studies show that when they do use credit, they spend a lot more, says Scott Rick, an assistant professor of marketing at the University of Michigan.

2.Emphasize long-term benefits of spending. Research shows underspenders are more likely to spend on things they consider to be a long-term investments. So tell them how good that massage will be for their health, not how good it will feel. "And if they're going out to dinner with a friend, encourage them to think of it as an investment in the friendship, rather than an act of consumption with instant gratification," says George Loewenstein, professor of economics and psychology at Carnegie Mellon University in Pittsburgh.

3. Create a budget for fun. Misers hate spending money that could be used for necessities, so encourage them to set aside a certain amount of money every month for pleasure or entertainment.

4.Bundle up purchases. Since underspenders are more sensitive to paying pain, avoid pricing structures that seem to punish them every time they do something. "The nightmares for a tightwad are sushi by the piece or a taxi where you have to watch the meter running," Loewenstein says. Instead, look for pricing in bundled goods and services, such as car option packages, all-inclusive vacations and prepaid gym memberships.

© 2012 CreditCards.com

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