Suze Orman: The 1 Rule That Will Bring Financial Security
Written by
Katie Wudel
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Financial stability is a goal many strive for, yet it often seems elusive. Personal finance expert Suze Orman simplifies this pursuit with one fundamental rule: buy only what you need, not what you can afford.
This approach, according to Orman, is a sure path to financial security. Here’s what she had to say about living within your means.
Understanding Needs vs. Wants
Orman emphasizes the distinction between buying what you need versus what you can afford. This principle is crucial, especially when you can afford more than what you need.
During one of Orman’s speaking engagements, she shared a personal example, saying, “I could afford a more expensive apartment, but I did not need it.” This mindset, she believes, can significantly transform one’s financial life.
The challenge lies in discerning between needs and wants. Needs are essentials for living – food, shelter, basic clothing, and healthcare. Wants, on the other hand, are items or services that enhance comfort or lifestyle but are not essential. Orman’s advice is to focus on needs, especially when wants tempt you due to available funds.
Implementing Suze Orman’s Rule in Daily Life
To truly embrace this principle, Orman suggests a commitment: “From this day forward, I would like you to make a vow to yourself that for the next six months, I would like you to only buy needs, not wants,” she said during a video of her speaking engagement.
This six-month period is not just about saving money; it’s about cultivating a mindset that prioritizes financial health over immediate gratification.
This exercise in restraint might seem daunting, but it is a practical step toward understanding personal spending habits. It encourages reflection on what truly constitutes a need and helps identify impulsive buying tendencies.
Living Below Your Means
Orman further elaborates on this concept with a straightforward mantra, “Live below your means, but within your needs.” This phrase encapsulates the essence of her financial philosophy.
Living below your means involves spending less than what you earn, thereby avoiding the trap of lifestyle inflation where increased earnings lead to higher spending.
Orman points out the folly of wasteful spending. “Why waste money? Just because you can afford it doesn’t mean you should buy it,” she said in a post on her Facebook page. This perspective is not about deprivation but about making intelligent choices that prioritize financial well-being.
The Long-Term Benefits
Adhering to this rule has profound long-term benefits. It leads to accumulating savings, reducing debt, and building a financial buffer. This buffer becomes essential in times of unexpected expenses or economic downturns. Furthermore, it cultivates a sense of discipline and mindfulness about money, traits that are invaluable in achieving and maintaining financial security.
The Bottom Line
Orman’s rule of buying only what you need versus what you can afford is a powerful tool in achieving financial security. It’s about making conscious choices that align with long-term financial goals rather than short-term desires.
By living below our means but within our needs, we set ourselves up for a stable and secure financial future. This simple yet profound advice could be the key to transforming your financial health and achieving lasting peace of mind.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
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