Suze Orman: I Hate Budgets — Do This Instead
Written by
Andrew Lisa
Edited by
Gary Dudak
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With the third month of the year underway, millions of Americans are resigning themselves to the fact that they didn’t follow through on their New Year’s resolutions. Again.
Some of the most common January money vows involve budgeting. For example, this year you’ll track your income and expenses, assign a purpose to every dollar and live according to a spending plan. And this time you mean it.
You can bet that the annual ritual of failed budgeting promises doesn’t surprise Suze Orman. Despite being one of the most basic commandments of standard personal finance gospel, the bestselling author, podcaster and founder of the Suze Orman Financial Group thinks budgets mostly lead to frustration and failure.
With dying budgeting resolutions now being taken off life support all across the country, the famed financial advisor might have a point. Here’s what she says to do instead.
Wait, You’re Saying Not To Budget My Money?
Orman is known for straight talk, and in a recent Wall Street Journal interview, she didn’t disappoint, stating plainly, “I hate budgets.”
She reasons that count-every-dollar budgeting makes splurging inevitable, just as impossible-to-sustain crash diets invariably lead to binge eating.
She said to the Journal, “If you restrict, you limit, you cut back, you don’t buy this, you don’t buy that and then all of a sudden, you explode and you go out and you buy everything at once.”
Spend Lavishly on What You Love and Never on What You Don’t
Like so many of her fellow money pros, Orman insists that the first step to achieving good financial health is knowing the difference between wants and needs.
In 2020, she told CNBC, “Every time you walk into some place, ask yourself: Is this a want or is this a need? If it’s a want, walk away. If it’s a need, you have to buy it.”
But not all wants are created equal, and Orman suggests spending only on those that make your life worth living. For example, she told the Journal, “I seriously splurge on private air. Unless we go to Europe or something because that’s ridiculous.”
But conversely, she said, “I refuse to eat out. I think that eating out on any level is one of the biggest wastes of money out there.”
That includes even a cup of coffee, which she clearly can afford if she really wants it. But that’s the whole point. She doesn’t really want it. She just kind of wants it — and kind of wanting something isn’t a reason to buy it.
“I do Cafe Bustelo coffee every morning,” Orman told the Journal. “I would drop dead before I bought a coffee.”
So, What Do I Do Instead of Budgeting?
So, why would Orman allow herself to splurge on expensive private air travel but deny herself the occasional barista-crafted cup of Joe for just a few bucks? Because the first is something she values and the second isn’t — and she’s good enough at math to know that over time, a little can go a very long way if you put it in a tax-advantaged account instead of a coffee shop’s cash register.
She told the Journal, “Let’s say you’re 25 and you put $100 a month into a Standard & Poor’s 500 index fund through a Roth IRA every single month for 12 months, every year, until you are 65. You will probably average a 12% annual rate of return over 40 years. At the end of those years, you have a million dollars.”
Instead of budgeting to try to gain a sense of security and control over your money, Orman recommends exercising real-world control by cutting out the wants that you don’t really want.
She told the Journal, “Do you feel powerful and secure? If you don’t, just do one thing that might make you feel more secure. Is that saving $10? Is that not going out to eat?”
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