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Book excerpt: Live below your means but within your needs

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The following excerpt is from The Money Class by Suze Orman


What I want to focus on in this lesson is how you find it in yourself to make those choices. The success of The Money Class is not just what I can teach you, but ultimately, what you are able to put into action for yourself, for your family, and for the benefit of future generations.

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Here are the cornerstones of the better financial life you can build with the lessons that follow:


The only way you can move forward is to loosen your grip on the past. I know for many of you it is quite difficult to not look in the rearview mirror. You are still hoping your home's value gets back to where it was in 2006, or you are stuck thinking about how much more your retirement accounts were worth a few years ago, or how much easier it was to generate income when interest rates were higher than they are today. Those of you looking for work are unwilling to settle for a job that pays less than your last one.

Please know that I say this with full knowledge of how deeply wrenching it is: We must let go of the past. The decisions you make today must be based on what is realistic today- not what may have been true in the past, but what you know for a fact is an honest accounting of what is happening for you right here, right now.


What derails so many of our good intentions is that we find it hard to make decisions today that will serve us well in the future. So we spend today rather than save for tomorrow. Or we say yes to something- a vacation with friends, a cousin who is looking for investors in a new business- even though spending that money now will impede our ability to reach long- term goals. The process of standing in the truth must work for you not just in terms of what is right today, but also with a clear appreciation of the measures required to attain a secure future. Money you spend today is money that will not be able to grow and help you reach your most important future goals, be it a child's college education, paying off your mortgage before retirement, or being able to live comfortably in retirement.


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Over the years you may have heard me say that money has no power of its own. It might have given you a moment's pause when you first heard it, but maybe the truth behind it didn't stick with you. So let's dwell on it a moment here, because it's truly an important concept.

When you are staring at the numbers on your worksheets, I want you to recognize that you have been the catalyst that made the decisions to spend, save, and invest those dollars. Money has no power on its own. It is the car; you are the gas, ignition key, and driver. Without you nothing happens. That should actually make you optimistic. You have the power to make the right and honest decisions about how you handle your money. And finding your power will set off a wonderful chain reaction: When you take the necessary measures to regain security- or build it for the very first time- you bring happiness into your life. You are better able to be present and connect with your family; you are less preoccupied by financial anxiety.

I am asking you to recognize and embrace this concept with your head and your heart: Your money has no power of its own; you are what gives it power. That you are here with me in The Money Class tells me you are ready to own that power, fix what isn't working, and build lasting security.


The reality is that in order to reach your goals, and maintain those goals once they are achieved, you must live below your means. If you do not have money left over each month you will have nothing to put toward fulfilling your dreams. So "below your means" means making a commitment not to spend every last dollar you take home. "Within your needs" requires that you make a cleareyed assessment of what exactly you are putting in that category.

Yes, it is the act of separating needs from wants, something that I've discussed in previous books; but now, in fact, I am asking you to take a more penetrating look.

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You need a house, but do you need a house that eats up 35 per cent or more of your monthly income? Could your family be just as content in a less expensive house where the rent or mortgage is just 20 per cent of your monthly income?

I find it so interesting that over the past thirty years the average square footage of a new home grew 42 per cent, even though the number of people living in that house actually decreased. That's a lot more house to pay for, to heat and cool, to furnish and repair.

We all need a place to live, but perhaps a smaller, less expensive place would help us achieve our new dreams. You are meeting your needs with the less expensive house but given the lower cost it will allow you to live below your means, and that can free up significant money to put toward other goals.

You need a car to get to work and shuttle the kids around. But can you honestly tell me you bought a car that met your needs but was as inexpensive as possible? The new dream car is one that is less expensive and that you drive for as long as possible.

I understand the desire to have the things that you want. You feel you work hard, so you deserve those things. But the truth of the matter is that they are just things and those things will never make you happy. Peace of mind will make you happy. Being able to sleep at night will make you happy. Not worrying about being able to retire one day will make you happy.

I want you to appreciate where I am coming from: My call to live below your means is the path to having more. Living below your means- but within your needs; this is not about punishing deprivation- will allow you to create more to put toward your goals. I need you to recognize, right here, right now, that your dreams for tomorrow reside in the choices you make today.


I want to share a dream of mine: Someday, hopefully not too far in the future, I will have people call in to my television show or stop me on the street and excitedly share with me their latest savings triumph.

I mean, let's just say no one has ever asked me if they can afford to save another $500 a month, if you catch my drift. But a girl has gotta dream . . .

I am not suggesting you never allow yourself to spend money today. But what is painfully absent from so many of your lives is an appreciation that what you manage to save today is in fact what gives your family security, hope, and opportunity. When you see it from that vantage point, you begin to understand what I mean by the pleasure of saving. It is what makes your dreams possible.

To be sure, some of you do understand the pleasure that comes from saving. But those families seem to be the exception, not the norm. So my dream is that each and every one of you can embrace the power, security, and control that comes from saving:

  • When I see a family that has an eight- month emergency fund, contributes to their workplace retirement funds, and also makes annual contributions into their own IRAs, I know they understand the pleasure of saving and that their family is not beset with financial stress.
  • When I see a family that drives a six- year- old car they own outright that runs perfectly fine, and even though they can afford to buy a new one they do not, I know they are standing in the truth.
  • When I meet families, as I have so often these past few years, that tell me with well- earned pride that they have cut back on their household spending and have reduced their credit card debt by 30 per cent, I know they get it. When you stop me in the street to tell me you have managed to cut your food expenses dramatically by cooking dinner at home and reserving fancy restaurant meals for special occasions, I see that you've got a handle on your priorities.
  • When you tell me you stopped yourself cold in the mall and put down an impulse purchase because you recognized it really wasn't something you needed, I am happy for you, for you have experienced the pleasure that comes from saving.

One of the goals of this book is to make savings part of our national conversation. It's my dream that someday soon we will share and measure ourselves by our saving exploits, rather than judging ourselves and others by what we spend. I've heard newscasters and pundits refer to this shift as the "New Frugality," but I have to tell you, the negativity of that phrase turns me off. Finding equal pleasure in savings as you do in spending strikes me as something far more hopeful and exciting. It carries with it the promise of freedom, of liberation, for when you make it a priority to save, to fund your current expenses and future goals, you are in fact buying yourself freedom from crushing debt, from having to cross your fingers that the markets- real estate and stock- will generate the money you want and need. With savings comes control. And I think we can all agree that on many levels what went so wrong in the recent past and came to a head during the financial crisis is that we lost all control over our future. We borrowed it from the banks, or based it on unrealistic expectations.


With all the spending of the past few decades came a not- toosurprising by-product. Money became our identity; we became defined by what we owned, or what we dreamed of owning. The New American Dream is rooted in a definition of self that has everything to do with character and intention and nothing to do with material things. When you are motivated by your own beliefs, aims, and principles, you possess the clarity and single- mindedness to achieve that which is truly valuable: security and peace of mind.


Making tomorrow's dreams a reality requires being able to make the right choices today. As you consider the options before you, I ask that you take a few moments to consider how that particular decision might play out over the next year, the next decade, the next generation, and imagine how you might grade your decision with hindsight. You will know you are standing in your truth today if during this exercise you can imagine your future self saying, "I'm glad I did make that decision," rather than "I wish I hadn't." For a decision to be powerful it must not only provide you immediate gratification or relief, it must in fact be a choice that brings long- lasting satisfaction.


Don't be offended - I mean that as a compliment! I have a favorite saying that I recall whenever I need help to stand in my truth: The elephant keeps walking while the dog keeps barking.

The elephant stays on course, moving toward its goal, regardless of all the barking and noise that swirls around him. I do what is true and right for me. I listen to advice. I seek advice. But ultimately I know when I am standing in the truth because my mind and my gut are in agreement. The goal is to achieve an internal calmness that comes when your intellect and your instincts are operating in harmony.

Why is this saying so important for you? If you are going to stand in your truth then you will have to be strong and tenacious.

You will have to be committed to your goal and determined to stay the course. You may feel pressured at every turn to spend money; there are many enticements all around us trying very hard to get you to part with your hard- earned cash- the sounds of excitement coming out of restaurants and clubs, the heady scents that waft out the doors of department stores, persuasive ads, the pages of glossy magazines telling you about the "must haves" of the season. Let me tell you, it's not easy to ignore all that barking. A lot of time and money and invention is spent on coming up with ways to seduce you to spend. But if you are steady and true and you are able to just keep walking when your friends say let's go skiing this weekend, let's go out to eat, come on, live a little- if you can just keep walking then you will end up where you want to be, regardless of the obstacles thrown in your path. An elephant walks where it wants - surely and steadily it arrives at its destination, and that is the truth that I want you to stand in.

In the New American Dream we must all aspire to be elephants.

We must decide what is true and right for ourselves and our family and then stay devoted to actions and behavior that are in service to our greatest goals. We must not let the barking dogs distract us.

Even though you may not be required to file a tax return this year, consider doing so anyway. You can gain a lot of benefits from filing - including free money! - that far outweigh the time and frustration spent preparing your return. (Did we mention "free money"?)

Excerpted from The Money Class. Copyright (c) 2011 by Suze Orman, a Trustee of the Suze Orman Revocable Trust. All rights reserved. Excerpted with permission of the publisher Random House, Inc.

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