How Does Dave Ramsey Determine If An Abnormal Purchase Or Charitable

Buyer’s remorse frequently accompanies large purchases, particularly if you don’t have the financial means to make that purchase. Personal finance expert Dave Ramsey stands by a simple rule to determine whether an abnormal purchase or charitable donation is too much.

“We use the burn the money in the middle of the floor thing,” Ramsey said on The Ramsey Show. “If I took this much money and set fire to it, does my life change? If the answer is yes, then it’s too expensive.”

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It’s no secret that Ramsey is a fan of budgeting. He consistently emphasizes the importance of this exercise, especially when it comes to making large purchases. In a recent Facebook post, he wrote, “There’s nothing wrong with spending money on things you enjoy – just make sure you’ve planned for it! That plan is called a budget.”

By mapping out expenses ahead of time, individuals can ensure they are spending within their means and not jeopardizing their financial stability.

Many Americans struggle with buyer’s remorse, often due to impulse purchases or unnecessary spending. A 2023 Google/Ipsos poll found that:

Roughly two in five Americans (42%) have bought something on sale only to later regret it.
The primary reason for regretting a purchase is realizing they didn’t need the item (62%).
Impulse purchasing (42%) and already owning too many things (34%) are also common causes of regret.

In the poll, respondents were asked about tips to avoid buyer’s remorse. Over half of Americans (53%) believe that one way to combat regret is by price comparing across retailers. Comparatively, 47% agree that adequate research for products can help alleviate buyer’s remorse.

Ramsey’s approach aligns with this mindset—by evaluating the true impact of a purchase or donation, individuals can avoid spending decisions they may later regret.

While Ramsey advocates for financial discipline, he also acknowledges the importance of allowing some discretionary spending. In an article on Ramsey Solutions, they explained that budgeting for “fun money” ensures people can enjoy occasional indulgences without derailing their financial goals.

“We talk a lot about goals and how they need to be the perfect balance of empowering and realistic,” Ramsey Solutions wrote. “Fun money helps you with the realistic side because it lets you stick to your goals and have a treat every now and then. Fun money also helps you remember a budget isn’t all about restrictions.”

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The key is to set a fixed amount and stick to it—once the fun money is spent, it’s gone. This helps maintain financial balance while still allowing for small luxuries.

Charitable giving is also an important value for many, including Ramsey, but he advises people to ensure their generosity aligns with their financial situation. If giving away a certain amount would create financial strain, it may be too much. Instead, he recommends planning for generosity within a budget, just as one would for other expenses.

Ramsey’s approach to evaluating major purchases and donations is rooted in financial responsibility and intentionality. By using a budget, planning ahead, and considering the impact of an expense, individuals can make confident financial choices without experiencing regret. For those looking to apply Ramsey’s principles, his straightforward test serves as a practical guide: if losing the money would negatively impact your financial well-being, it’s likely too much to spend.

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This article How Does Dave Ramsey Determine If An Abnormal Purchase Or Charitable Donation Is Too Much? originally appeared on Benzinga.com

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