Suze Orman’s 2 Personal Finance Rules to Follow (and 2 to Rethink)
Personal finance expert Suze Orman has years of experience guiding people on how to make the most of their money. She focuses on debt reduction and the emotional side of money, and you may be able to better your finances by digging into her resources.
Like most personal finance gurus, not every rule Orman encourages will make sense for you. Here are four of her rules — two that make sense for most people, and two you may want to reconsider.
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2 rules to follow
1. Make sure you have an emergency fund
Orman is a big fan of establishing an emergency fund that can cover your monthly expenses should the unexpected happen, like you lose your job or face a surprise medical bill.
Financial advisors typically recommend having enough money in a liquid account, like a high-yield savings account, to cover your expenses for three to six months. But it depends on your circumstances: If you have unpredictable income streams or often incur medical or vet bills, you may want to save a bit more.
2. Maintain solid credit
Orman suggests prioritizing your credit score, which can impact how likely you are to be approved for loans and how much you’ll have to pay in interest. A high credit score makes it easier to get good terms on loans like mortgages and auto loans.
FICO scores (the most commonly used credit scores) of 670 to 739 are generally considered good, while 740 to 799 is considered very good and 800 to 850, excellent. Checking your credit report for errors, paying bills on time, having a mix of types of credit and getting a credit card are all ways to possibly boost your credit score.
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2 rules you may want to rethink
As the name implies, personal finance is personal. It's important to consider whether Orman's next two rules actually make sense for you.
1. Avoid leasing a car
A house is likely the most expensive purchase you will make, but a car may be the second-largest purchase. Orman recommends never leasing a car since it requires that you make monthly payments on a car that you’ll never own. She said on CNN in 2023 that it was a "waste of money."
Like with most financial decisions, it’s not black and white. Leasing a car may make sense for some people. The advantages include that you can drive a higher-priced car than you may be able to otherwise afford, and that you won’t have to go through the trouble of reselling. But on the flip side, you're pouring money into something that’s depreciating in value and you risk facing charges if you want to get out of the lease early.
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2. Rely on debit, not credit
Orman suggests keeping your credit card usage to a minimum to avoid credit card debt. She says to rely on debit cards, and only use a credit card for one or two recurring charges you can put on autopay.
The thinking is that you want to avoid credit card debt, which comes with high interest rates. But if you can pay your credit card in full each month, there are perks to using credit. The rewards programs that come with credit cards can help you save on travel, groceries and gas, for example. Plus, using a credit card helps you build credit, and they tend to offer better protection should someone get a hold of your card than debit cards, since they’re not linked directly with your account.