Many individuals lack financial discipline or financial literacy and as a result, they make unwise decisions when it comes to their finances. This is why it is essential for Americans to note that they are throwing away $5,000 annually, due to spending happens. A little a day will eventually end up as a big amount, such as $5,000 – this especially includes unnecessary purchases. If consumers spend %13.17 on a daily basis – it does not seem like much – however, this will add up to $5, 000 per year. $5,000 that could have been used for something more meaningful and impactful.
Insight from a financial expert
Dave Ramsey, a financial expert gave his opinion on the spending habits of individuals. He provided advice to those individuals who feel that they have not been making any progress when it comes to their finances. He stated that most people who feel like this might be participating in unnecessary purchase habits and as a result spend $5,000 annually. He further alluded to the fact that these items might include a coffee, a takeaway lunch, or an online purchase you made without thinking twice.
In addition, Dave mentioned that these small unnecessary purchases can have a severe impact on your bank account – therefore preventing you from accomplishing your bigger financial goals you have set out for yourself.
Impact on unhealthy spending habits
The tweet he posted on social media, was a clear reflection of how easy it is to fall victim to unhealthy spending habits. One of the biggest traps that individuals fall for, is thinking they are only purchasing someone small daily, without considering the significant impact it may have at the end of the day. $5,000 is a lot for someone who has to pay off financial debt even if that includes student debt. That amount would make a significant different if used for the right things.
However, the unfortune fact is that money people are in denial about their spending habits. They believe they do not give a lot of money out because they are only looking at the amount they spend on a daily basis. They do not calculate the annual amount they spend on these unnecessary items and as a result they continue with their unhealthy spending habits. Once individuals take a closer look to those prices and amounts spent on items per day, they will realise the larger implications this will have on their finances.
How can you make a change in your finances?
A lot can be done with $5, 000 and individuals can use it for more meaningful things in life where they can see their ROI, Return on Investment. Dave Ramsey provides the following points of advice that consumers can take to help them manage their finances:
- Be purposeful: Be intentional when you make a purchase
- Invest in a retirement fund: do this while you can – you will be grateful for this later
- Ensure your money is going towards something worthwhile: like paying off debt
- Saving for a down payment on a home: this is a very good invest for you
- Setting up an emergency fund: This is essential in case of emergency and if you do not have cash at that current moment.
- Go on vacation without going into debt: This will add to your health and also your mental health
- Create a budget – keep track of your expenditure – and monitor it.
It is crucial for individuals to make wise decisions when it comes to spending habits. You cannot buy everything your eyes sees and then complain at the end of the day that you do not have money for important things like investment.