In a recent video, finance expert Suze Orman highlights key strategies for improving financial health, particularly emphasizing the importance of distinguishing between needs and wants. Orman suggests that a common mistake many people make is prioritizing their wants over their essential needs, which can have significant financial repercussions, especially in retirement.
She illustrates her point by sharing her own experience of resisting the urge to upgrade to a more expensive apartment, stating, “I could afford it, but I don’t need it.” Orman challenges viewers to adopt the mindset of focusing exclusively on needs rather than wants over the next six months. This commitment could lead to a transformative shift in financial stability and resource management.
Orman defines “needs” as the essentials for survival, including food, water, shelter, clothing, and medication, while “wants” are considered non-essential desires. For instance, while enjoying fine dining is appealing, she stresses that it’s unnecessary to dine at upscale restaurants frequently. By cutting back on wants, individuals can retain more money for savings and essential expenses.
In addition to adjusting spending habits, Orman promotes living below and within one’s means. She dismisses traditional budgeting methods, claiming they often prove ineffective. Instead, she advocates for automating savings. Setting up automatic transfers from checking to savings accounts with each paycheck can simplify the saving process and encourage the establishment of an emergency fund—a financial safety net that many individuals often overlook.
For those participating in employer-sponsored retirement plans, Orman advises maximizing 401(k) contributions, particularly taking advantage of any employer match. For example, if an employer matches contributions up to 6% of an employee’s salary, maximizing those contributions can significantly increase retirement savings. To illustrate, if an employee earning $75,000 annually contributes 6%, they could potentially secure around $6,750 each year for retirement, assuming full employer match.
For anyone contemplating retirement, or for those concerned about their financial future, Orman poses three quick questions that could help individuals reevaluate their readiness and possibly enable them to retire earlier than anticipated. Her insights serve as a wake-up call for many to take control of their financial destinies and create a more secure foundation for the years to come.
