Suze Orman, the renowned financial guru, continues to empower individuals to navigate economic uncertainty with a robust blend of practical frugal living tips and insightful warnings against common financial pitfalls. This guide unpacks her essential strategies for building lasting financial strength, from smart savings habits to long-term investment wisdom, all while emphasizing that true happiness transcends mere wealth.
In a world grappling with inflation and the looming specter of recession, the wisdom of financial titans like Suze Orman becomes more critical than ever. For decades, Orman has been a beacon for Americans seeking to master their money, inspiring millions to make shrewd financial decisions and sidestep costly mistakes. Her latest warnings, especially concerning the banking sector’s turmoil and persistent inflation, underscore the urgent need for individuals to “be strong” with their money.
The Foundational Principles of Financial Strength
Orman’s teachings are anchored in a powerful core belief: “You’re never powerful in life until you’re powerful over your own money.” This philosophy drives her advocacy for financial independence and meticulous preparation for inevitable hard times. She continuously urges her audience to scour their spending and find ways to reduce costs, emphasizing restraint when it comes to discretionary spending.
Her advice is particularly poignant given current economic pressures. As she wrote in a “Money Monday with Suze Orman” post, “Please be extra strong right now, and scour your spending to find ways you can reduce your costs. I have been warning you that we may be headed into a recession sooner than later. The recent turmoil in the banking sector only makes me worry more.” This proactive stance is a hallmark of her approach, preparing people before crises fully unfold.
Suze Orman’s Five Financial Blunders to Avoid
Orman identifies several common financial missteps that can significantly derail one’s financial progress. Understanding and avoiding these blunders is a cornerstone of her practical wisdom.
1. The Tax Refund Trap
“If you’re getting a tax refund, you are making one of the biggest mistakes out there,” Orman once told CNBC. This seemingly welcome windfall is, in her view, an interest-free loan you’ve given to the government by having too much withheld from your pay. Instead of celebrating a refund, she advises adjusting your withholdings to receive more money in each paycheck throughout the year.
Should you receive a refund, Orman stresses the importance of having a clear plan. Her top recommendations include paying down high-interest credit card debt, contributing to a Roth IRA for long-term growth, or bolstering your emergency savings account. She believes accumulating up to a year’s worth of living expenses in an emergency fund is a critical step towards financial security.
2. The Costly Car Lease
Orman’s stance on car leasing is unequivocal: “You should never, ever ever ever, lease a car.” Leasing means continuous payments without building any equity, leaving you empty-handed at the end of the term. While financing is a better alternative, she cautions against taking longer than three years to pay off a car, suggesting that if it takes longer, the car is likely beyond your affordable price range.
A more frugal approach, supported by many financial experts including those at Consumer Reports, is to buy a reliable used car. Models that are just a few years old often offer excellent safety features and modern technology at a significantly lower price point. Orman’s ultimate advice for car purchases is simple: “Your goal should be to buy the least expensive car. Period.”
3. Underinsuring Your Ride
While cutting costs is essential, Orman warns against skimping on car insurance. Minimum state coverage, such as $25,000 for bodily injury per person, $50,000 for total bodily injury, and $25,000 for property damage, is often insufficient. “It will be a financial disaster paying out of pocket for serious injuries, loss of wages, rehab and such for the other driver (and their passengers) if you cause an accident,” she states on her website.
To find a better balance between cost and comprehensive protection, Orman suggests shopping around for policies and considering raising your deductibles. This strategy can lead to significant savings on premiums while ensuring adequate coverage in the event of a serious accident.
4. The “Want vs. Need” Battle
One of Orman’s most fundamental pieces of advice revolves around distinguishing between wants and needs. “Now is not the time to stretch to buy things that aren’t 100% necessary if you’re still working on building up your savings or paying off your debt,” she wrote. This “need vs. want game” is a powerful tool for kick-starting savings.
Before any purchase, ask yourself: Is it a necessity like food, medication, or essential clothing, or merely something you desire, like another fancy coffee or the latest gadget? She challenges consumers to be “shopping ninjas,” asking, “If I had to pay 100% of the cost right now, rather than just 25%, would I still buy it? Could I buy it without it becoming unpaid credit card debt?” A ‘no’ to either question is a sign to reconsider.
5. The Million-Dollar Coffee Habit
Perhaps one of Orman’s most famous and provocative warnings targets the daily coffee run. She famously declared that you are “peeing $1 million down the drain” by regularly buying store-bought coffee. This isn’t just about the immediate cost; it’s about the lost opportunity for that money to grow.
Her math highlights the power of compounding: $100 spent on coffee each month could, if invested in a Roth IRA earning a 12% rate of return, grow to roughly $1 million over 40 years. This stark example underscores her belief that “every single penny counts” when saving for your future, whether for investments, an emergency fund, or simply to alleviate the pressure of rising monthly bills.
Practical Frugal Living Tips for Everyday Wealth
Beyond avoiding blunders, Orman also advocates for practical frugal living strategies that don’t require extreme sacrifices. These tips are designed to balance smart money management with maintaining a fulfilling lifestyle.
Automate Your Path to Prosperity
One of the simplest yet most effective ways to build wealth is to automate your savings. By setting up automatic transfers from your checking to your savings account – whether weekly, bi-weekly, or monthly – you ensure consistent savings without conscious effort. Financial institutions like Bankrate consistently highlight automated savings as a top strategy for meeting financial goals. Start small and gradually increase the amount, making your financial future a priority.
Declutter Your Budget: Cut Unnecessary Subscriptions
Streaming services, gym memberships, and various apps can quietly accumulate, becoming a significant drain on your budget. Orman recommends a monthly review of all your subscriptions. Identify and cancel services you no longer use or genuinely enjoy. Eliminating even one or two unused subscriptions can free up hundreds of dollars annually, often without impacting your daily lifestyle.
Mindful Spending: Shop with Discipline
Shopping smart is about being mindful, not necessarily sacrificing quality. Before every purchase, Orman suggests asking yourself, “Do I really need this?” This simple question can prevent impulsive buys and keep more money in your wallet, helping you stay out of unnecessary debt. It cultivates a disciplined approach to consumption.
The Kitchen as Your Cash Cow: Cook at Home
Dining out frequently is a major budget drain. Orman is a proponent of cooking at home to save money and enjoy delicious meals. Planning your meals and cooking in bulk can significantly reduce reliance on expensive takeout. This practice can be transformed into an enjoyable activity, allowing the money saved to be reallocated towards financial goals or occasional special treats.
Guilt-Free Joy: Embrace a ‘Splurge Fund’
Frugality does not equate to deprivation. Orman champions the creation of a “splurge fund” – a dedicated portion of your budget specifically for leisure and enjoyment. Whether it’s for concert tickets, a spa day, or a weekend getaway, having a designated amount for fun ensures you can indulge guilt-free, without jeopardizing your broader financial goals. This approach acknowledges the importance of life’s pleasures while maintaining financial discipline.
Own What You Drive: The Long-Term Car Strategy
Reiterating her earlier advice, Orman consistently emphasizes that owning a car is almost always more cost-effective than leasing in the long run. By purchasing a vehicle and maintaining it for many years, you build equity and avoid perpetual monthly payments. A well-maintained car can last a decade or more, saving you substantial amounts over time compared to the leasing cycle.
Embrace Minimalism: Your Wardrobe, Your Wallet
Orman encourages a minimalist mindset, often suggesting starting with your closet. A minimalist wardrobe isn’t about having less style; it’s about investing in versatile, high-quality pieces that you genuinely love and wear often. By cutting down on impulse buys and avoiding fast fashion trends, you can save money, reduce clutter, and still look effortlessly put-together.
Securing Your Golden Years: Retirement Wisdom
For those nearing or in retirement, Orman offers specific advice to alleviate fears of running out of money, emphasizing proactive steps over passive worry.
- Talk to Your Kids: Orman stresses the importance of open communication with adult children. They deserve to know about your financial situation, and they might offer invaluable support in thinking through options or even helping manage accounts. This shared responsibility can bring peace of mind.
- Double Up or Downsize Now: Moving to a smaller space is often a wise move in retirement. Going further, Orman suggests frank family discussions about potentially living with one of your children, or having a child live with you, with everyone contributing to costs. This growing trend offers both financial relief and strengthened family bonds.
- Continue Investing (Some) for Growth: While a conservative approach with cash and short-term bonds makes sense for much of a retirement portfolio, Orman advises keeping a small portion—perhaps 20% to 30%—in dividend-paying stocks. Historically, these investments have shown the potential to generate gains that outpace inflation, ensuring some of your money continues to grow and maintain its purchasing power against rising costs.
The True Wealth: Happiness Beyond Money
Amidst all the practical financial advice, Orman frequently reminds her audience of a profound truth: “Money will not make you happy.” While acknowledging the necessity of sufficient funds for basic living costs, she firmly believes that accumulating more money beyond that does not guarantee increased happiness.
Happiness, she argues, is an asset you create through your thoughts and actions. It stems from strong relationships, quality time with loved ones (not merely what you spend on them), and celebrating what you already have rather than fixating on what you lack. This perspective provides a crucial balance to the pursuit of financial independence, reminding us that wealth is a tool for a fulfilling life, not the sole definition of it.
Conclusion: Your Path to Financial Mastery
Suze Orman’s comprehensive framework for financial success transcends simple budgeting. It’s a holistic approach that empowers individuals to gain control over their money through thoughtful decisions, disciplined spending, strategic savings, and a clear understanding of long-term goals. Her advice, from automating savings to prioritizing needs over wants and planning for retirement, is both realistic and actionable, designed to help you navigate economic complexities without sacrificing your well-being.
By integrating these principles into your daily life, you’re not just saving money; you’re building a foundation for enduring financial independence and a richer, more secure future. As Orman consistently demonstrates, small, consistent changes today can indeed lead to monumental rewards tomorrow.
