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I know this is going to sound far afield from the topic promised in this article's headline, but just for a second, picture someone on a crash diet. Determined to drop some pounds, they limit themselves to eating tiny amounts of healthful foods, banning all the treats they most enjoy. How does this story end?
As just about everyone can tell you, the answer is not happily. While our hypothetical dieter might lose a little weight initially, the psychological pressure to indulge will build over time like water behind a damn. At some stage it overflows, resulting in, most likely, a late-night snack binge, shame, and the collapse of the entire project.
But the point here isn't better diet goals or even approaches to changing your health habits (though those exist). It's financial advice from one of the best-known names in the game, Suze Orman. So why am I talking about the perils of crash diets? Because according to Orman, the same principle applies to budgets.
In a wide-ranging interview with The Wall Street Journal recently, the author of several best-selling books of financial advice discussed everything from her biggest fishing success (a 60-pound wahoo) to her feelings about Taylor Swift-Travis Kelce mania (can we get back to the football, please?). She also has this to say: "I hate budgets."
Why? "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," she warns.
Which will come as music to the ears of those entrepreneurs who find tracking every penny in their personal lives tedious beyond bearing. I am personally thrilled to tear up my 2024 budget and delete all those fiddly apps and neglected spreadsheets. But don't get carried away. As you might expect, Orman's hatred of budgets does not mean she endorses financial imprudence.
"You have to live below your means but within your needs," she stresses later in the interview. "When The 9 Steps to Financial Freedom really hit, I bought a $250,000 apartment in New York City. I could afford a $1 million or $2 million penthouse at that time. The question is, when do you buy what you can afford versus what you need when you can afford more than what you need?"
Living within your means and getting good at telling wants from needs is, of course, essential financial advice. But without a budget, how do you keep track of whether you're actually making more than you're spending and advancing your financial goals? Orman doesn't explain in this article specifically, but plenty of others have offered ideas.
Your bank balance and credit card statements are obviously a good place to start. Former presidential candidate and co-author of her own personal finance book Elizabeth Warren, for instance, suggests a "three-number budget": Aim to spend 50 percent of your income on necessities like housing and food, 30 percent on optional fun stuff, and 20 percent for savings.
Harold Pollack, co-author of The Index Card, suggests you should be able to fit your entire financial plan on, you guessed it, an index card. Like Warren, among his rules is saving 10 to 20 percent of your income, though The New York Times also asked a variety of financial experts to come up with their own index cards. The point of all this tiny handwriting is that getting a few big-picture things right matters a lot more than tracking every latte and loaf of bread.
Or, if you're looking for a more out-of-the-box alternative to budgeting, you could try kakeibo, an over 100-year-old practice for being more mindful about your money that's popular in Japan. "Kakeibo helps people see past the extraneous to reveal the essence of what their finances are and how to use them," notes Big Think in an explainer on the topic.
Kakeibo asks you to reflect on your goals and break your spending down into four categories: essentials, nonessentials, culture, and unexpected. Then monitor how well the two line up.
The point of all these options -- as well as Orman's quote -- is to highlight that there are alternatives to the oft-repeated advice to use a budget. If you find the practice fiddly, limiting, or likely to explode at some point in a frenzy of ill-advised indulgence, then you shouldn't feel obliged to track every penny. You still need to think about how to use your money wisely, but there are plenty of other ways to do that.
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Why Financial Guru Suze Orman Says You Should Ditch Your Budget in 2024
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04.01.2024
366 Inspirational Quotes for 2024
Many Small Businesses Are Already Ahead of New Minimum-Wage Laws
How Microsoft's Copilot and GitHub Integration Could Help Small Business Development
How the Pandemic Sparked a New Boom in Entrepreneurship
How to Leverage Pinterest's Predictions for 2024
I know this is going to sound far afield from the topic promised in this article's headline, but just for a second, picture someone on a crash diet. Determined to drop some pounds, they limit themselves to eating tiny amounts of healthful foods, banning all the treats they most enjoy. How does this story end?
As just about everyone can tell you, the answer is not happily. While our hypothetical dieter might lose a little weight initially, the psychological pressure to indulge will build over time like water behind a damn. At some stage it overflows, resulting in, most likely, a late-night snack binge, shame, and the collapse of the entire project.
But the point here isn't better diet goals or even approaches to changing your health habits (though those exist). It's financial advice from one of the best-known names in the........
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