Myths about personal finance spending and how shopping shaming can be harmful

Yahoo Finance Editor Janna Herron debunks some myths about personal finance spending and explains how shopping shaming can be detrimental.

video transcript

JARED BLIKRE: Welcome back. Do you ever get unsolicited personal finance advice that says, 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 be bad advice, even if you mean well. And here to tell us about it is Janna Herron from Yahoo Finance. And Janna, this sounds like good news to me because it used to be kind of a bummer of mine.

JANNA HERRON: Yeah, so he can definitely have good intentions, this kind of advice. You know, it simplifies personal finance 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 he misses the forest for the trees. First of all, it really focuses on those small purchases instead of the actual budget-wrecking items like housing, child care, health care, all of which have been outpacing wages for years.

And while we’re seeing wage growth, it’s not enough to offset it, especially with inflation now driving up the costs of basic items like food and gasoline. So those costs of those really… those larger items are the real culprits that are holding back people’s financial security and they’re not easily solved by simply avoiding or eliminating them. It is not very easy to cut the carcass like a latte.

Second, I feel like this type of advice, and I like to call it shopping shaming, perpetuates the idea that those who don’t earn that 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 just don’t have much to work with. And they’re not really spending foolishly. They make many sacrifices and many concessions that those of us who earn more than them do not have to make. One expert I spoke to even said that they would earn the equivalent of an MBA just by dealing with their finances.

And then lastly, I think this is the most damaging thing, it’s this subtext that gives this kind of advice, is that the low earners or the poor among us don’t really deserve little luxuries in life. That they have to wait until they have that emergency fund or those retirement savings or whatever financial security measures we throw in before they can spend on indulgences.

And given the statistics showing that those born into poverty are likely to stay poor, that means many of those people would never have the opportunity to spend on those little indulgences. Those are some of the reasons why I reject that kind of personal finance advice.

ZACK GUZMAN: Yeah, I mean, if that’s not the best way to do it, if you can eat as much avocado toast as you want without fear of being embarrassed, what’s the right way to 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 finance, sometimes, and really explore how politics, the financial services industry, systemic barriers and other challenges outside of an individual’s control can really affect people’s wallets. And we really should make that part of the personal finance discussion, instead of not buying lattes.

Second, I think we need to get to know people in their financial situation. We need to give them personal financial advice that allows for indulgences from time to time, even if they haven’t reached those milestones with money like the emergency fund or retirement savings that they should have or think they should have. Because what we really want is for people to be able to enjoy life, no matter how much money they have or how much they earn.

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