1. Don’t lease a car
In the words of Suze Orman, “You should never, ever, ever lease a car.”
When you lease, you’re wasting your money on several years of car payments and are left empty-handed at the end of the lease.
Financing is a better option, but Orman said if it takes more than three years to pay off the car, then it’s out of your price range.
Buying a used car is another option. Models that are only a few years old have excellent safety specifications and the same audiovisual technology as a new car, at a fraction of the price.
When it comes to buying a car in the current market, Orman’s advice is simple:
“Your goal should be to buy the cheapest car. Period.”
2. Don’t skimp on car insurance
Motor vehicle insurance policies have three main areas of coverage: Personal Injury Liability per person, Collective Personal Injury Liability, and Property Damage caused by you. Minimum coverage amounts in many states are $25,000, $50,000, and $25,000, respectively.
Orman doesn’t think that’s anywhere near enough. “It will be a financial disaster to have to pay out of pocket for serious injuries, lost wages, rehab and the like for the other driver (and their passengers) if you cause an accident,” she says on her website.
WalletHub conducted a study stating that the minimum amount of monthly coverage costs the average American $60. It makes sense to shop around to find a better policy that suits your needs and budget.
Increasing your deductible can also result in significant savings.
3. Don’t spend on things you don’t really need
There’s no better way to boost your savings than by playing the Need vs. Want game.
The next time you want to buy something, ask yourself if you really need it. Is it a necessity, like medication, groceries from the supermarket, or a sturdy pair of shoes for work?
Or just something you want – like another drink at the bar, some fast food for dinner or that last gadget?
“The key is to push yourself to save more,” Orman wrote on her blog Feb. 16. “If you eliminate desires and spend the smallest amount on necessities, I think you’ll be pleasantly surprised at how much money you’ve been able to divert to savings.”
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4. Do not accept tax refunds
“When you get a tax refund, you’re making one of the biggest mistakes,” says Suze Orman.
Why? Because you essentially withheld too much from your paycheck for taxes — effectively giving the government an interest-free loan. If you’re due a $2,400 refund, you’ve been missing out on $200 a month all year.
But polls have shown that Americans love their tax refunds and are busy planning how they’ll use the money each year.
In the past, Orman has called a tax refund “the biggest waste of money you’ll ever get.”
Orman says if you don’t make a plan for the money and stick to it, you’ll likely end up spending it on something you don’t need.
“Your IRA is a good use of that money,” Orman wrote in a blog post last year.
5. Don’t waste money on coffee
Your daily stop to get a cup of dark roast or a cappuccino is a habit you need to break, says the money connoisseur. It’s a “want,” not a “need,” and it’ll cost you a lot of money.
“You’re peeing $1 million down the drain while you’re drinking that coffee,” Orman once told CNBC (which caused coffee drinkers across America to spit).
Here’s the math: If you’re spending $100 a month, that’s money that could grow in a Roth IRA instead — to about $1 million after 40 years, assuming a 12% return.
But you love those fancy store-bought coffees? Get over it. “Every single cent counts” when you’re saving for your future, she said.
There are many other ways to use this money. You could invest that spare change or use it to top up your savings or emergency fund — which could come in handy if inflation keeps ratcheting up your monthly bills.
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