In an uncertain economic world, making smart financial decisions can be difficult. Often, people run the opposite direction and dig themselves deeper into debt. According to the Federal Reserve, a shaky economy isn't stopping people from spending. In fact, consumers today owe a combined $7.3 trillion--twice the amount of debt owed during the last recession. This is no way to get rich, or even have a healthy financial balance.
Much of Orman's advice is directed toward women because she says they need to be invested in their financial decisions. Women aren't worse at investing and making smart money decisions than men are--they just think they are, says Orman. "People have bad habits when it comes to money. There are women who are aggressive and some who aren't, just like men."
The foundation of most women's bad money habits comes from a tendency to not spend time creating a budget, analyzing financial decisions and then overseeing those finances. Orman advises treating money like an additional child in your family. "You need to make money as big a priority as your children, job and house," says Orman. "Everything you love is made possible with the money you have earned. You can't let your financial baby starve."
Orman doesn't see the sense in hiring a financial advisor and just walking away. Handling finances and monetary decisions are necessities, not difficulties. "You need to take your money just as seriously as you would choosing a daycare. Don't put it into the hands of someone who is abusing it or not helping it grow to the fullest," Orman says.
Freelance writer Malia Wyckoff says she grew up in a household where discussions about stocks and banking were commonplace. As a result, she and her friends are very invested in financial decisions. "Most of my female friends either handle the family finances or share finance duty and decision making with their (respective) husbands."
That thinking makes a difference in her house whenever a money choice arises. Wyckoff says the best fianncial decision is usually clear. "Either we can afford to do something or we can't. Or, maybe we can't afford it this minute but we really want to do it, so we wait until we can. We've identified our priorities and we stick to them like glue. We can't afford not to."
Even though the right decision is clear, making that choice can be a battle, says Natalia Aponte Burns. Although she tries to limit her spending to things that will endure, there are occasions when she slips. "I keep having to make the same decision over and over again: I have to stop spending my cash and start saving it!"
Aponte Burns is currently working at home as an editor in New York so she can be home with her 10-month-old. Eventually, that arrangement will end and she and her husband will be living on one paycheck. That future financial picture is influencing her reality today. "We want to pay off our bills so that we'll have a little breathing room when we're on one paycheck. But every month I manage to spend the surplus, right up to the limit of what we can pay for! I always find stuff that we 'need' especially since I might not be working much longer."
And that, says Orman, is the crux of most people's money problems: buying things you can't afford or don't need. "When you purchase something today, you may think it's only fifty dollars and it's no big deal. But in fact that fifty could have been invested and could have become something bigger in the future."
Most people only see their immediate desires, not their long-term goals, when faced with a tempting purchase in a store. Orman advises doing a thorough inventory before splurging. "Go through your drawers and see how many lipsticks or eye shadows you have bought, but never used," says Orman. "Look at your clutter. You'd be shocked to see the hundreds of dollars you are spending on what you think you need and yet you will never use."
Self honesty goes a long way toward helping you learn to save, say those who have been there. Judith Norton, a curriculum coordinator in California, says her financial advisor, Linda Barlow, had her sit down and create a budget. Barlow, a CFP in Santa Ana, CA, then helped Norton take this information a step further. On a clipboard in Norton's car is a sheet that points out her budget for spending on things like meals, clothing and entertainment. By checking the board before stopping to make an impulse buy, Norton reins in her spending. "I've never felt deprived once I started doing that," she says. "It made me more aware of what I'd already spent and what things I'd bought. In addition, I feel more freedom about my purchases because I have it all budgeted."
Orman says it's imperative to keep a cool head and to continue to look down the road before spending money. She says a rocky economy is no excuse to stop thinking of your financial future. "It's like a chess game where you contemplate how your move affects all the pieces of your chess game. Financial security is a game where you want to conquer all the obstacles that keep you from having more and gaining more---a bad economy, credit card debt, being laid off, etc."
In the end, Orman says, true wealth comes from believing in yourself. "Have more confidence in your ability to understand and deal with money. If you have what it takes to make the money, you have what it takes to invest it and make it grow."