Yahoo Finance editor Janna Herron debunks some personal finance spending myths and explains how purchase shaming can be harmful.
JARED BLIKRE: Welcome back. You ever get any unsolicited personal finance advice saying, don't buy this phone, don't buy this Starbucks latte. Instead, save for your retirement. Use this. Put this in an emergency fund. Well, this could actually be bad advice, even if well-intentioned. And here to tell us about it is Yahoo Finance's Janna Herron. And Janna, this sounds like good news to me because this used to be a real kind of pet peeve of mine.
JANNA HERRON: Yeah, so it definitely can be well meaning, this kind of advice. You know, it simplifies personal finances so it's not daunting, like you said. Save $20 or $30 by not buying this or that. And voila, decades down the road, you have tens of thousands of dollars for retirement. But I think it misses the forest for the trees. First, it really focuses on those small purchases rather than the real budget busting items like housing, child care, health care, all of which have been outpacing wages for years.
And even though we're seeing wage growth, it's not enough to make up for it, especially with inflation now, increasing costs of basic items like food and gas. So those costs of those really-- those bigger items are the real culprits that are holding back people's financial security and aren't easily solved by simply avoiding them or cutting them out. It's not very easy to cut out your housing like it is a latte.
Second, I feel like this type of advice-- and I like to call it purchase shaming-- perpetuates the idea that those who don't earn as much can't manage their money. And that's not true according to experts I've talked to who work with working class Americans. They simply don't have a lot to work with. And they're not really spending foolishly. They make a lot of sacrifices and a lot of tradeoffs that those of us who earn more than they do don't have to make. One expert I talked to even said they'd earn an MBA equivalent just by dealing with their finances.
And then, last-- I think this is the most damaging-- is this subtext that this kind of advice gives, is that those who earn less or those who are poor among us are not really deserving of small luxuries in life. That they must wait until they have that emergency fund or those retirement savings or whatever metric of financial security that we throw out there before they can spend on indulgences.
And given the stats that show that those born in poverty are likely to stay in poverty, that means that many of those folks would never get a chance to spend on those little indulgences. So those are some of the reasons why I push back on that type of personal finance advice.
ZACK GUZMAN: Yeah, I mean, if that's not the best way to go, if you can have as much avocado toast as you want out there without fear of being shamed for it, what is the right way to kind of think about it?
JANNA HERRON: That's a good question, Zack. I think there are two ways. One, I think we should take the personal out of personal finances, sometimes, and really explore how policy, the financial service industry, systemic barriers, and other challenges outside of an individual's control can really affect people's wallets. And we should really make that part of the personal finance discussion, instead of the, don't buy the latte.
Second, I think we need to meet people where they are financially. We need to provide personal finance advice that allows them for indulgences now and then, even if they haven't met those milestones with money milestones like the emergency fund or the retirement savings that they should have or we think they should have. Because what we really want is that people should be able to get joy out of life, no matter how much money they have or how much they earn.