Dave Ramsey offers clear advice to overspenders despite inflation

After the 2020 COVID-19 recession, there has been fairly consistent economic growth in the US, and the Dow Jones has performed well – barring a few dips. However, many Americans are worse off financially, and inflation may be to blame.

34% of Americans live paycheck to paycheck and 70% report being financially insecure. The gap between the healthy US economy and the struggle of American workers continues to widen, leaving people disillusioned with their financial goals.

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TheStreet spoke with Dave Ramsey about the disconnect between strong economic performance and the inability of many households to make ends meet.

Excessive spending breeds dissatisfaction with the economy

83% of Americans say they overspend, and 84% indicate they exceed their monthly budget. In addition to inflation, credit cards can make matters worse: 58% of consumers note that credit cards strongly influence higher spending patterns.

Ramsey believes that overspending on non-essential goods is the main contributor to the dissonance between the economy and the financial well-being of ordinary Americans.

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“When you complain that your situation is dire but there are packages delivered to your door every night, you can’t have it both ways,” he said. “People are worried about the economy and they’re stuck.”

“However, they spend as if they were in a prosperous economy, buying superfluities instead of necessities. It’s shocking how people budget while complaining about the economy.”

A woman is seen holding a credit card while shopping on a mobile phone.

Image source: Shutterstock

Inflation reduces the purchasing power of wages

Ramsey insists that the only way consumers can get through financial hardship is to cut back significantly on spending.

“If you’re in the middle of a storm, you roll down the hatches. You don’t keep jumping in puddles,” he said. “You go inside, close everything, and curl up until the storm passes.”

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While most Americans agree that they overspend, it’s clear that paychecks aren’t stretching as far as they used to.

However, 24 percent of workers earning $100,000 a year report living paycheck to paycheck, even though it’s double the national average. Bankrate’s US economy reporter Sarah Foster notes that inflation is a “silent thief” that has significantly reduced wages.

“Prices have risen nearly 21 percent since the pandemic first started in February 2020, taking an extra $210 for every $1,000 someone used to spend,” she said. “For many Americans whose pay hasn’t kept up with inflation, higher prices essentially translate into total wage destruction.”

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