Suze Orman's 2 Money Rules To Stick With — And 2 To Reconsider
Knowledge is studying the money experts at length. Wisdom is knowing when to heed and ignore them.
Suze Orman is an American financial advisor, author and podcast host whose advice has helped millions of people to save more and avoid debt. But even though most of her money rules work for the average American, some may not make financial sense to you.
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So here are two Suze Orman money rules that still hold up and two that you might want to reconsider.
Stick With: Live Below Your Means
Even the richest entrepreneurs and the most famous celebrities go bankrupt because they spend more than what they make. So if you don’t want the same to happen to you, Orman says you must live below your means and not fall victim to lifestyle creep.
So if you haven’t already, start tracking your spending and stick to the 50/30/20 budgeting rule to stay within your means. That means spending only 50% on needs like rent, 30% on wants and the remaining 20% on savings and debt.
Stick With: Not Taking On Too Much Debt
Not all debt is bad, but Orman believes that having too much of any debt can hamper your financial goals and undermine your budget.
“Yes, debt is necessary,” Orman wrote. “It's how you own a home or get a college degree, but the trick is to respect it.”
In other words, take on only what you can afford. The best way to avoid debt trouble is to have a plan to pay it off. That starts with not taking on too much debt in the first place.
And remember, the more you borrow, the more you’ll pay in interest charges and fees. So always compare loan products across multiple lenders before you apply.
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Reconsider: Never Lease a Car
“I personally think you should never, ever, ever, ever, lease a car, do you hear me?” she told CNBC Make It.
She’s against it because she believes that when you lease, you’re pouring money into the car lease each month with nothing to show for it at the end of the day.
“If you rent a car, you’re going to rent a car year in and year out,” Orman said.
Sure, leasing a car isn’t for everyone, especially if you tend to go over mileage limits or want to keep the car for a long time. But calling it a bad financial decision across the board may be overly simplistic in today’s market.
Reconsider: Pay Off Your Mortgage as Fast as Possible
Paying off a mortgage early sounds like a responsible thing to do. But financially, it’s not always the best use of extra cash, especially if you locked in a very low mortgage rate during the pandemic. For example, someone with a 2.5% mortgage may potentially earn higher long-term returns by investing extra money instead of aggressively paying down low-interest debt.
That doesn’t mean paying off your house early is wrong. Some people value the financial freedom that comes with being debt-free. But sometimes, keeping extra cash accessible can be more valuable than tying it all up in home equity.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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