Overspending is “the worst thing you can do right now,” according to financial expert Suze Orman; the following are eight other things that, given the current economic climate, Orman believes you should avoid doing.
Author of best-selling books on personal finance and a popular figure on television Suze Orman has been motivating people in the United States to improve their money management and steer clear of damaging financial errors for decades.
Since the pandemic began, she has been just as busy as she was before, advising customers on how to weather the difficult economic times ahead, during which both prices and interest rates have increased.
In a blog post published on June 16 and titled “Are You Saving or Spending This Summer?” Orman writes that she can understand the desire to let loose and have a good time this summer after the relatively restrained lifestyle that has been the norm for the past couple of years.
In spite of this, she stresses the importance of exercising some financial restraint in light of the raging inflation that is currently taking place.
“If you want to put yourself in a vulnerable position in the event that a recession does occur, the worst thing you can do right now is overspending on summer vacations and other enjoyable activities,”
Orman will be the first person to point out to you, whether you are going through a difficult time or a prosperous time, that what you do not do with your money maybe even more important than what you do with it.
The following are eight of the most fundamental pieces of advice that she has to offer regarding how to save and spend your money.
Do not sign a car lease.
To paraphrase what Suze Orman has to say on the matter, “you should never, ever, ever lease a car.”
If you choose to lease, you will put your money into a number of years’ worth of car payments, but at the end of the lease term, you will be left with nothing.
Even though financing is the superior choice, according to Orman, if it will take you more than three years to pay off the car, then it is out of your price range.
Another option is to purchase a pre-owned vehicle. You can save a significant amount of money by purchasing a model that is only a few years old because it will have excellent safety specifications and the same audio-visual technology as a new car.
Don’t let your spending get out of hand; keep an eye on it.
Even people who are generally good with their money will completely lose their minds when it comes to spending when special occasions, tax refunds, or bonuses are involved. Orman attributes the problem to a lack of planning and self-control, particularly with regard to the act of giving gifts.
“Set a goal for yourself to avoid using a credit card to purchase any presents… According to Orman, “you’re much more likely to purchase only what you can afford.” According to her, holiday credit card debt, in particular, can linger for a lot longer than the recipient will remember the gift you gave them.
In addition, your close friends and family members would feel embarrassed if they discovered that the gifts they gave you were more expensive than you could reasonably afford. According to what Orman has written, “time and love are the most valuable possessions you can share.”
When you decide to shop, especially if you do so online, it is important to research prices and use various tools to ensure that you do not overpay for the items on your list.
Don’t try to save money on your auto insurance.
There are three primary types of coverage that are typically included in auto insurance policies: Coverage for bodily injury liability per person, coverage for total bodily injury liability, and coverage for property damage that you cause. In many states, the minimum amounts of liability coverage required are $25,000, $50,000, and $25,000, respectively.
Orman does not believe that to be nearly sufficient. According to what is written on her website, “it will be a financial disaster paying out of pocket for serious injuries, loss of wages, rehabilitation, and other such things for the other driver (and their passengers) if you cause an accident.”
According to the findings of a study carried out by WalletHub, the typical monthly premium for the bare minimum of coverage in the United States is $60. It is in your best interest to do some comparison shopping to find the most affordable policy possible.
Increasing your deductibles is another way to potentially bring about significant savings.
Do not forego purchasing a life insurance policy.
According to the findings of an industry research group called LIMRA, approximately four out of ten adults do not have life insurance.
According to Orman, life insurance is a product that is essential for everyone, but it is especially important for parents. It gives you the peace of mind that your family will be taken care of in the event that something unexpected happens to you and you are no longer present in their lives.
And it’s affordable: a woman in good health who is 40 years old and wants a policy with a death benefit of $500,000 for 20 years might pay less than $35 per month for it. Orman suggests that you purchase “level term” life insurance, which means that the premiums remain the same throughout the policy’s duration.
“Come on, Mothers. (And Dads),” the expert on personal finance says on her website. “(And Moms)” You can’t possibly tell me that spending less than one dollar per day to ensure the well-being of your family in any situation is too much money.
Do not spend money on things that you do not truly require.
Playing the game of deciding what you need versus what you want is the best way to get your savings off the ground.
When you are getting ready to make a purchase in the near future, you should first consider whether or not you really require the item. Is it something that you have to have, like prescription medication, food from the grocery store, or a good pair of shoes for work?
Or is it something that you simply desire, such as another beverage at the bar, fast food for dinner once more, or a second pair of knee-high boots?
“If it’s something you want, just walk away from it. If it’s something you need, you should go ahead and buy it,” Orman writes. If you give this a shot for a period of six months, you will be astounded by how simple it is and how much money you will save.
In a podcast episode from 2019, Orman mentioned that having the right mentality is critical to understanding when it is appropriate to spend money and when it is appropriate to save money.
You need to derive just as much pleasure from putting money away as you do from spending it.
If you are miserable in your job, don’t stay there.
According to Suze Orman, surveys reveal that approximately two-thirds of workers do not feel engaged in their work. And if you count yourself among that group, you’re doing a disservice to yourself.
Orman says on her website that staying in a job that you don’t like is disrespectful to both yourself and the people you care about the most. “There is no way that you can convince me that doesn’t have a detrimental effect on the relationships you have.”
However, giving up might not be the solution to the problem. Check to see if the job you already have can be adjusted in some way to address the factors that contribute to your dissatisfaction before you begin your search for a new opportunity.
Just make sure that you never phrase it in that way when you talk to the manager or HR. Instead, explain to management that you would like to discuss the possibility of “tweaking” your responsibilities in order to increase the amount of work you get done.
Refrain from receiving a tax refund.
According to Suze Orman, if you are receiving a tax refund, you are committing one of the most significant errors that can be made.
Why? Simply put, too much of your pay has been withheld for taxes, which means that you have effectively made a loan to the government without charging them any interest. When you are due a refund of $2,400, it means that you have allowed yourself to be shortchanged by $200 every single month during the previous year.
However, research has shown that people in the United States are enthusiastic about receiving their tax refunds and eagerly plan out how they will spend the money each year.
Orman is not going to back down. A tax refund has been described as “the biggest waste of money that you will ever get” by her in the past.
Do not spend unnecessary money on coffee.
The habit of stopping every day to pick up a cup of dark roast or a cappuccino is a routine that needs to be broken, according to the money expert. It is not a “need” but rather a “want,” and it is costing you a significant amount of money.
Once, when speaking to CNBC, Orman remarked, “You are urinating $1 million down the drain as you are drinking that coffee” (causing coffee drinkers across America to do a spit take).
If you spend $100 every month, that is money that could grow in a Roth IRA — to approximately one million dollars after 40 years, assuming a 12 percent return on the investment. Here is how the math works out:
You really like those pricey coffees from the store, right? Put an end to that. When it comes to putting money away for the future, Suze Orman advises that “every single penny counts.”