When inflation spiked in 2022, prices initially surged and have yet to come down nearly three years later. The rising cost of essentials such as housing, groceries, and utilities has significantly burdened many U.S. households.
Given the impact of heightened consumer prices and stagnating wages, Americans may struggle to manage growing expenses.
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Household debt has also been on the rise for years, reaching new heights as the cost of living continues to outpace income.
An increasing number of consumers are turning to credit to afford purchases ranging from everyday essentials to entertainment expenses. However, many may not fully understand the impact that overspending in the present could have on their financial future.
In an exclusive interview with TheStreet, Dave Ramsey reveals how a small financial habit can quickly snowball and destroy your financial health.
Image source: Getty Images
Dave Ramsey highlights how relaxed spending habits can quickly snowball
Consumer debt levels have been rising for years, exacerbated by rising post-Covid inflation. According to the New York Federal Reserve Bank, U.S. household debt rose to $18.2 trillion in Q1 2025.
Although credit card debt dropped $29 billion from Q4 2024 levels, student loan defaults and delinquencies surged.
The majority of Americans note they feel less financially secure than they did several years ago, and on average, they are saving less than 5% of disposable income. While rising prices and wage stagnation play a major role in increased financial stress, rising consumer spending may also contribute.
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Ramsey explains how overspending and accruing debt at any income level could have disastrous financial ramifications.
“The financial habit that is quietly destroying Americans’ futures is probably just not paying attention,” he said. “I tried to out-earn my stupidity for years and I couldn’t do it. I had to actually start paying attention and make the money that I have behave.”
Americans are increasingly stressed about their finances — especially Millennials and Gen Z
Many households struggle financially, particularly younger generations trying to manage student loan payments and rising costs on entry-level salaries.
A new study from The Harvard Kennedy School shows that 40% of Americans under 30 are “barely getting by financially,” and 10% note that they struggle to make ends meet.
Related: Dave Ramsey predicts major mortgage rate changes are coming soon
Although younger consumers are hurting financially, they are less likely to cut down on spending. Indeed, 40% of Gen Z and 32% of Millennials expect to max out their personal budgets this year, and more than half of both regret making impulse purchases.
Younger consumers also face a challenging job market, a housing affordability crisis, and the difficulty of planning for retirement.
However, Ramsey warns that there is no way to “out-earn” unhealthy spending habits, and that not paying attention to your finances could have long-term consequences.
Related: Veteran fund manager unveils eye-popping S&P 500 forecast
