In this episode, we review and comment on Suze Orman’s popular video “To really save money, do this …” She talks about spending, budgets, paying off debt, emergency reserve, and how to save.
Here is a transcript of our discussion:
would you tell me here’s what I would
tell them are you kidding me a budget a
budget is like a diet a diet you lose 20
pounds you gain 30 a budget you restrict
and you restrict and you restrict and
then alson a day before you even know it
you go into a store and you walk out
with seven pairs of jeans alright so in
this video we’re going to review a
popular video by Suze Orman and it’s
called if you really want to save money
do this and so as you saw in that first
clip there she’s talking about budgeting
and the idea that if you set too
restrictive of a budget it’s gonna do
more harm than good because you’re not
going to be able to follow it and then
you’re gonna splurge because of that
budget so what are your thoughts on that
so I mean I think that’s a little bit
too generalizing there are some people
that can keep budgets there are apps
there are ways to keep track your
spending either every purchase or in
general weekly monthly terms that that
work for people some people don’t need
to keep a budget because they have
enough cushion of income or assets that
it’s not as important but some people do
need to keep track of their spending or
it’s helpful if they would keep track of
their spending and I don’t I don’t agree
that it’s yes terrible to do I think you
know there’s some people where that
might happen I know there certainly are
and you know you have to be I think
realistic if you’re gonna set a budget
you know if you you try to cut your
spending in half in one month you’re
probably gonna have you know some shock
from that so yeah you know I think you
got to be a little bit realistic and you
you don’t want to overestimate your own
self-discipline when it comes to
spending you know if you haven’t been
disciplined in the past the likelihood
that you’re gonna all of a sudden have a
tremendous amount of discipline with
that is a little bit unlikely but it
doesn’t mean that you shouldn’t set a
goal or have a budget in mind I agree I
mean I think it’s about prioritizing so
I mean it it’s almost liberating to know
what’s going on instead of just spending
without keeping track at all of what’s
happening if you have a limited income
amount of asset what we all have limits
but if you’re spending near it
then you’re picking you’re saying do I
prefer going to the movies versus going
out to eat or you know you have to put
limits on there somewhere and this helps
you prioritize or think about it if you
keep track somehow and I think in a lot
of ways once you see that budget
starting to work that can be a lot of
motivation for you know people once you
see oh look my my bank accounts starting
to creep up or I’m starting to be able
to you know cut back this debt or
whatever it is yeah that can definitely
have some positive impacts as well that
can you know offset that yeah
such a little bit more of this so it’s
never about budgeting it’s about being
in control of your money here’s the real
problem people don’t know how much money
they have coming in they don’t know how
much money they have going out they
don’t have a clue where they stand today
and you can’t get to where you want to
go if you don’t know where you are
all right that’s that’s a little more
reasonable point there what was your
take on that cliff yeah my thought is
she’s right about that those things are
important you know if you don’t have an
understanding of how much money you’re
spending versus how much your income is
and really kind of taking a holistic
look at your your full balance sheet you
know what’s what’s the whole financial
picture then trying to set a little
budget for yourself isn’t gonna have
much of an impact but they’re not two
separate things it doesn’t mean having a
budget isn’t going to help on the other
side but that’s probably where you would
want to start because you know how do
you know what you’re budgeting for if
you don’t look at that suffer so I would
agree with with that part of it yeah
more information is helpful and even if
you have broad sweeps of here’s how much
I spend a month and it’s just good
having that knowledge so that you can if
you have a goal that you have the
information to either make changes or
just confirm that you’re on track yeah
and I mean it it’s fairly easy for a lot
of people to figure out because you can
just look at well are my debts going up
from year to year are my you know
account balances going up or down from
year to year you know if you’re you know
bank account is always at zero at the
end of the month
than your credit card balance is
climbing every month that tells you
you’re spending more than you’re taking
in so you know some things like that are
kind of simple to figure out on the
broader side of it but it’s it’s a good
idea to kind of you know look at a
worksheet maybe
okay here’s income here’s expenses
here’s debts yeah it’s kind of you know
sorted out they can confirm it you can
keep track of all these expenses but
it’s nice to confirm and just say yeah
this is how much went out of the bank
this year and so you have an idea just
double check your your budget or your
spending plan but just that knowledge
itself isn’t going to save you any money
so if that’s the goal based on the title
of the video that won’t save you money
it gives you you know a place to start
but that in itself doesn’t save money
fine so but at least you know where your
help
yeah you know if if you can’t save money
just make little changes in your life if
you get your hair cut every four weeks
get a cut every six if you go out to eat
once a week got to eat every two weeks
do little things but not where you feel
like you’re restricting yourself
otherwise you’re gonna blow it big time
so all right yeah what’s your thought
okay so on that that little bit there I
disagree with it so the things like she
just mentioned okay I’m gonna eat out
every other week instead of once a week
okay if you look at how much money you
can save by doing that versus major
expenses so for most people major
expenses are going to be housing gonna
be transportation housing inaudible yeah
food and utilities those type of things
if you if you look at those three
categories that’s gonna be a big thing
so you know I don’t know maybe depending
upon the size of your family okay so
it’s $50 every two weeks that you’re
saving by not eating as often that’s
that’s significant but that’s not gonna
be as much as oh I’ve got a mortgage
that’s $1,000 more than I should have or
something like that should I refinance
or lunch they turn right the big
decisions are the thing
that are gonna make the most impact you
know skipping a haircut or getting your
hair cut less often is not I mean that’s
that’s not how you become wealthy that’s
not going to make a difference in the
long run yeah well and I think it is
it’s looking at the expenses dependent
it’s gonna be person-to-person what
makes sense what is not going to feel
restrictive but making changes if that’s
the goal if you need to save more you’re
right you want to hit the big items
first and work your way down I need and
I want but if you don’t have an
eight-month emergency fund if you aren’t
fully funding your retirement account if
you have credit card debt if you’re
behind on payments if your student loan
is in deferment or even in default
you better get serious with your life
and you know what a need is you need to
buy food at a grocery store for you to
eat you do not need to go to a
restaurant you need gasoline in your car
possibly to get to work
you don’t need gasoline in your car to
go skiing so you can fool yourself all
you want but in the end the only person
that you are hurting is you so if you
don’t have money you should only buy
needs you have to buy needs because you
need it if you alright so in this part
it seems like she’s just contradicting
what she already said in the video so
don’t be restrictive yeah don’t restrict
but then you know only spend money on
needs so I I mean I would hope that
every reasonable person understands the
difference between a need and a want and
maybe that’s part of it don’t justify
you know you’re spending on oh this is a
need when it’s not there definitely some
people out there I think you know I
certainly know something bid do that oh
I I needed to buy this you know $50,000
a new vehicle when you know cuz my old
one broke down well you could have
bought something else for a lot less
that you know serve the same purpose no
I need yeah we hear that sometimes so
there’s that kind of a thing but at the
same time it’s I mean she’s just kind of
contradicting what she said already yeah
I think some people are gonna need to be
restrictive if they have a lot of debt
they want to change their position
they’re gonna need to cut back somewhere
but I think the real more general point
is get an idea of your spending what are
you spending it on get an idea of your
income you know what that is and then
like you said start from the biggest
expenses if you need to make changes and
work down to make some adjustments but
you know knowledge is gonna be the most
important thing right yeah I mean I I
suppose if you’re an individual that
doesn’t know the difference between a
want and a need
you should probably figure that out
first so maybe that is good advice but
yeah just give up your wants you’d be
amazed how your life turns around so
you’re talking about things that people
need to do to take care of debt to pay
off things that are hanging over their
head perhaps but what about saving for
the future which should be the number
one priority because that’s that’s a
debate I hear all the time well I know I
should really be paying off that college
loan but I have nothing saved for
tomorrow when it comes to college loans
I am here to tell you college loans are
the most dangerous debt you could have
of any kind of debt out there more
dangerous than mortgage debt IRS debt
credit card debt why because in most
cases student loan debt is not
dischargeable in bankruptcy so if you
just stopped paying it all of a sudden
you watch 20,000 grow to 40,000 grows to
80,000 grows to a hundred thousand and
that’s when they come knocking on your
door because they want you to get
further in debt because they can garnish
your social security check if they want
to so when it comes to certain debts
such as student loan debt you better pay
your student loan debt before you are
even saving for an emergency fund if
it’s one or the other debt has to be
your choice but why do you all have to
be all or nothing investors
why can’t you if you have a hundred
dollars split it $50 towards debt $50
towards savings that’s not how we think
about money but we sure need to and as
you said again to reiterate certain debt
takes priority over perhaps awesome and
and putting something aside for once yes
so obviously the definition of making it
in America has changed quite a bit even
over these last few years what is making
it in a manner
coming to you these days making it in
America is you are able to sleep at
night and not worry when you get up in
the morning how are you going to pay
your bills making it in America knows
that one day you’re going to be able to
retire but it’s not going to be at 59
and a half it will probably be at 67 or
70 making it in America is that you can
smile for the things that you have not
for the things that you wish you did
makes me smile just sitting with you
thanks AJ
okay so then she kind of goes off on a
tangent talking about student loan debt
not really sure why but so her assertion
is that that’s the most important debt
to pay off first because it’s the
hardest to get rid of and I mean if
you’re if your end goal of the way
you’re gonna get rid of your debt is
you’re gonna default on it maybe that’s
that’s a strategy but you’re if you have
a sound financial plan you shouldn’t be
thinking about I’m going to default on
all these different things you know if
you’re in a dire situation you know one
thing to think of you default on your
student loan they’re not gonna take your
house for that so maybe you want to pay
your rent first before you pay your
student loans so I don’t know if she’s
or your mortgage or whatever the
situation is so I I’m not really sure if
maybe she’s being compensated to say it
or something but it does I agree with
that that student loans aren’t gonna get
forgiven in bankruptcy so it sure it is
an issue but like you’re saying if the
issue is you have so much debt that
you’re not going to be able to make
those payments and so that’s why you’re
prioritizing one over the other I mean I
think you that’s all right that could be
a situation and then you are
contemplating bankruptcy and in the
student loan won’t be forgiven so you
should be continuing to pay on it but in
most situations you want to be able to
cover your debt and we definitely pay it
off and as far as prioritizing it that’s
more with extra money if you have extra
money which when you put it towards well
usually highest interest you know the
the highest interest loan credit card
debt you’d want to put if you have an
extra $50 that’s where that that’s where
it would go as far as splitting savings
and we usually say it’s nice having a
prudent Reserve that’s priority number
one you know pay off your dad pay pay
the minimums on debt build up a prudent
reserve you have a prudent reserve yes
start building for additional savings
paying down debt starting at the highest
interest yeah my thought is you know
let’s say you’re someone who’s in a
situation where you have a student
and you’ve got you know let’s say maybe
your student loan is usually there in a
fairly low interest rate so you know say
maybe you have a 3% student loan and
you’ve got a credit card at 25 percent
right or 30 or you know some of them are
outrageous
does it make any financial sense to pay
off that student loan first and keep
paying a super high interest rate on the
credit card because you’re worried that
if you default on the student loan
you’ll never be able to get rid of that
like it it just doesn’t make sense
just that one condition where you’re
contemplating bankruptcy which do I pay
but you have enough to pay the minimums
on both yeah paying both and then if you
have extra of course go for the high
interest sure so for the total of the
video does that save you money in any
way I would say no it does not
so maybe just like a quick idea of what
we would say are good ways to save money
so to really save money to do this we’ve
covered we’ve covered a little bit of
that already is you know just kind of
critiquing what she said but you know
like Bill had said you know you want to
build on you know have a reserve so if
something happens you have three to six
months of funds there available so you
know something that’s unexpected doesn’t
create a financial crisis for you so
that’s part of it you know pay down debt
usually the thing that makes the most
sense is starting with whatever’s at the
highest interest rate because you’re
just gonna be paying more interest on
that and then from there once you can
build up additional savings you know
investing that sort of thing and kind of
build beyond that yeah I mean I hate I
guess to really save money do this I
would say and maybe she talked about a
little is just find out what’s going on
so get a handle on what’s income what
expenses you have what is costing a lot
if you want to save extra money then
what is your highest expenses and can
that be adjusted auto auto is a big one
and it’s not an asset it is not a
liability but it’s a depreciating asset
it’s not a growing appreciating one so
the more you could minimize that expense
the better
there are programs I know I’ve used men
before I didn’t find it that helpful
because it it doesn’t calculate moving
money between accounts very well and a
lot comes up as uncatted eyes but even
your credit card gives you some
information about spending don’t I guess
I’d recommend not trying to keep track
of spending in a manner that you’re not
gonna keep up so don’t make it too
tedious that you’re keeping track of
every every expense and that you just
drop keeping track of it but if you
could just download what were your
credit card expenses this month or what
were your bank expenses out you can get
general ideas of where your spending is
and if there’s a really strange month
then dig in a little deeper and find out
why but I wouldn’t make it too tedious
yeah so have a plan take a look at
everything that you have figure that out
that’s that’s a good first place to
start and then you know from there just
work on kind of doing things that are
gonna affect the biggest expenses so you
know look at the the cost of those
things and where you can make changes in
those because that’s gonna have the
biggest impact long-term more so than
you know depriving yourself of eating
out once a week or something like that
that that’s gonna have kind of a minimal
impact but if you’re you’re walking kind
of that that razor’s edge between you
know bankruptcy and you know keeping
afloat or something like that well then
you know maybe it is time to make some
of those sacrifices but yeah in general
yeah start with the biggest you planning
and look at the big expenses yeah all
right so hopefully that was helpful to
you and you enjoyed it yeah thanks for
joining us it will have a series of
videos coming up we’ll keep posting so
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