The New York Times recently published an article digging into how upgrading your smartphone could be robbing you of longer-term financial goals.
Similar advice has popped up over the years regarding other purchases deemed frivolous: avocado toast, Nike sneakers, and, of course, lattes, which longtime money guru Suze Orman equated to “peeing $1 million down the drain.”
On the surface, this is supposed to be helpful advice. Avoid these kinds of purchases and you could invest the money and watch it grow into thousands of dollars over decades for your retirement. At the very least, you could sock this money away for an emergency.
But this advice — let’s call it purchase shaming — misses the reality of many people’s finances and what is really holding them back from achieving financial security. It also perpetuates damaging stereotypes about poverty that allow the major culprits behind people’s money woes — loosely regulated financial institutions, bad policy, and companies that don’t pay workers enough — to escape scrutiny.
“Because systemic change is harder and requires a longer term investment, it’s easier to put the onus on the individual,” Mae Watson Grote, founder and CEO of Change Machine, a nonprofit dedicated to building financial security, told Yahoo Money. “It’s easier to counsel someone to save three months for emergencies.”
The real anchors on people’s finances are those items that have been outpacing wage growth for years: child care, health care, housing, higher education. And now, add to the list basic food items and gas, which are outstripping recent gains in wages. These are bigger budget busters than a latte or sneakers, or even an iPhone, but you can’t easily slash them from your life or find ways to make them cheaper.
Tips on eliminating small indulgences won’t help people who can’t afford rent or health insurance.
“To achieve financial security, you need a base level of wages relative to cost of living,” said Rachel Schneider, co-author of the book “U.S. Financial Diaries” that documents how low- and middle-income earners manage their money. “How to manage money you already have, that’s secondary to do you have enough money to live? For a lot of people, that answer is no.”
Video: Personal finance spending myths and how purchase shaming can be harmful (Yahoo! Finance)
The bottom 20% — or 1 in 5 American households — have on average $15,140 in income a year, according to the Bureau of Labor Statistics, while the next highest quintile brings in $34,550. They have so little they can’t cover their average annual spending, which is not exactly living large.
And one of those …….