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Suze Orman says this spending rule is the key to financial security. Are you following it—or ignoring it?
Suze Orman says this spending rule is the key to financial security. Are you following it—or ignoring it?
Suze Orman has spent decades improving the financial outcomes of many Americans.
The financial advisor and host of The Suze Orman Show has written 10 consecutive bestselling books on personal finance and given countless speeches on the subject. She also hosts a successful podcast, Women & Money.
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However, Orman summed up decades of financial advice while speaking to a live audience: “If you live your life with [this] one rule, your life will start to change.”
Here is a more detailed analysis of its main rule.
Orman’s Game-Changing Rule
Orman suggests that anyone looking to build financial security should “buy what you need instead of what you can afford when you can afford more than you need.” In other words, his main advice was to live below your means.
As an example, Orman said she could technically have bought an apartment that was much more expensive than what she actually has. But by buying a property that was below her budget, she created a monetary buffer that increased her sense of financial stability in the long term.
Orman isn’t the only successful entrepreneur who lives by this rule. Warren Buffett still lives in the house he bought for just $31,000 in 1958.
IKEA founder Ingvar Kamprad, the late, bought clothes at flea markets even after he became a billionaire. Mark Zuckerberg’s car collection is limited to mundane models like a Honda Fit, an Acura TSX sedan and a Volkswagen Golf GTI hatchback.
These billionaires could afford the fanciest cars, mega-mansions, or high-tech luxury gadgets, but they insisted on buying only what they needed. Maintaining this gap between needs and wants is a critical part of their wealth-building strategy.
Unfortunately, many Americans have difficulty exercising such restraint.
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The Problem of Overconsumption in America
Most Americans seem to break (or ignore) Orman’s golden rule. Instead of buying less than they can afford, the average consumer tends to buy much more than they can afford.
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According to a loan tree to studyMore than 18 million American homeowners are considered “housing poor” — spending more than 30% of their monthly income on housing costs.
Likewise, a report Market Watch found that 82% of Americans struggle to keep the monthly cost of car ownership below the recommended threshold of 10% of their monthly income.
Even families with relatively good incomes are stretching themselves. Nearly half (42%) of consumers earning more than $100,000 a year were living paycheck to paycheck, according to a 2023 PYMNTS Intelligence study survey.
Many find themselves in debt as they struggle to bridge the gap between what they can afford and what they want to buy (but don’t need).
Total household debt increased to a record $17.69 trillion in the first quarter of 2024, according to the Federal Reserve’s Household Debt and Credit Report. Credit card and auto loans have been rising along with mortgage debt in recent quarters.
This has put many American families in a precarious position. However, Orman believes his golden rule could help some of these families get back on track.
“How do you begin to live by this rule?” she asked during the live presentation. “From this day forward, I would like you to make a vow to yourself that for the next six months… you will only buy needs, not wants.”
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.