Kevin O'Leary Says We Should Follow These 3 Money Principles. Is He Right?

Should you adopt Mr. Wonderful's financial fundamentals in 2023?

Shark Tank's "Mr. Wonderful" has some straightforward advice for his followers this holiday season. He tweeted, "Three guiding principles about money: keep money and emotions separate; eliminate debt; and be grateful for what you have."

Breaking down Kevin O'Leary's three principles

The successful entrepreneur and TV personality has some common sense advice on money management. The trouble is that his words of wisdom may not be that easy to implement in real life. Let's dive in to understand why.

1. Keep money and emotions separate

Unfortunately, many people spend money because they're happy, sad, angry, scared, excited, insecure, or driven by a host of other emotional triggers. If we could draw a line between how we feel and how we manage our finances, it might mean we're less likely to hit the shops when we're stressed or upset. We might not blow a wage increase on a celebratory purchase. We might not let a fear of missing out drive our investment decisions, or panic sell solid long-term investments purely because the price has dropped. We might not take on credit card debt to buy things we don't actually need.

Is he right?

O'Leary is right to say many of us would be better off if we could keep emotions out of our finances. But the question is, how? Personal finance is, well, personal. It impacts our relationships, where we live, how we work, and how we spend our time. As a result, it's extremely difficult to draw a line between finances and feelings.

A better route is to try to understand the role that emotions play in your financial decisions, particularly the things that trigger unnecessary spending. For example, many of us understand the rationale behind saving or investing a portion of our income every month. But we don't always do it, sometimes because our emotions get in the way.

The trick is crossing the gulf between what we should do and what we actually do. Rather than ignoring your emotions, look for ways to manage them. If you're struggling to save money and yet find yourself splurging on things you don't necessarily need, think about what's driving your spending. You can use that knowledge to help you build different habits.

2. Eliminate debt

Paying down debt, particularly the high interest variety, makes a lot of financial sense. Debt payments can eat into your monthly budget and make it more difficult to achieve other financial goals. In addition, the interest you pay on the money you owe can add up over time and make it more difficult for you to build wealth long term.

Is he right?

On paper, eliminating debt is a good financial decision. Instead of spending money on interest and debt repayments, there'll be more in your bank account for other things. But the reality isn't so simple.

First, there are many scenarios that can push people into debt, including divorce, medical emergencies, job loss, or other financial crises. In an ideal world, we'd all have an emergency fund to help us through a financial crisis. But we don't live in an ideal world, and many Americans don't have money saved. Sometimes borrowing is the least worst option.

Second, once you owe money, particularly on credit cards, paying it down can be a challenge. People can get stuck in a cycle of debt in which so much of their income goes toward debt payments that they may have to borrow more to keep up. Telling people to eliminate debt is like telling us to get fit -- most people know they need to do it, but need support in making a repayment plan and sticking to it.

3. Be grateful for what you have

There will always be people who earn more than you do, as well as those who earn less. Developing gratitude can make us appreciate our own situations and avoid unhelpful drivers such as envy. You may not earn as much as your neighbor or take as many vacations as a colleague. But perhaps you bring in enough money to live comfortably, have good health, and a loving family. When you focus on the things you do have and appreciate them, you're less likely to keep chasing unrealistic desires.

Is he right?

Being grateful for what you have is a great way to live within your means and avoid trying to keep up with the Joneses. If you always want what other people have, you'll never be satisfied -- it's a never-ending and costly cycle. Not only that, but you never know whether the fancy vacations or amazing houses you see on your friends' social media feeds have been purchased with borrowed funds.

O'Leary's financial principles make sense in theory

In theory, these are all sound ideas. It makes sense to be debt free, cut out emotions from your finances, and appreciate what you have rather than chasing what you don't. And as we approach the new year, it's good to get a reminder of some of those guiding principles. However, the real challenge is in moving from theory to practice and that can be easier said than done.