Suze Orman Insists It's Time to Cut Expenses. Here's How

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

KEY POINTS

  • Suze Orman is concerned that the U.S. economy is headed for a recession.
  • In light of that, she says now's the time to spend less and conserve cash.

Spending less could really work to your benefit.

The U.S. economy is in an interesting place right now. On the one hand, jobs are plentiful and wages are growing, albeit at a slower pace than inflation. On the other hand, the cost of living is soaring, and many consumers are struggling to keep up.

Meanwhile, the Federal Reserve is implementing a series of interest rate hikes in an effort to slow inflation and bring living costs down to more manageable levels. The logic is that when borrowing becomes more expensive for people, they'll naturally start to spend less. That should, in turn, narrow the gap between supply and demand, thereby bringing the cost of goods down to a more reasonable place.

But while cooling inflation is a good thing, the downside of interest rate hikes is that they have the potential to spur a recession. If consumers start cutting back, less money will be going into the economy. As such, businesses will take in less revenue, leading to scenarios where jobs have to be cut.

Now this isn't to say a recession will hit next month, or the month after that. But many financial experts agree that an economic downturn is a distinct possibility within the next year.

Suze Oman is one of them. And in light of that, on a recent podcast, she advised listeners to start cutting back on expenses now to boost their savings in case things take a turn for the worse.

That's advice worth heeding -- difficult as it may be. But if you take the right approach to cutting back on spending, you can give your savings a lift without depriving yourself of the things you enjoy the most.

It's all about setting priorities

If you're eager to reduce your spending and boost your cash reserves, the first step in the process is to set up a budget. That way, you'll get an accurate sense of what your various bills cost you.

From there, you can group your expenses into two categories -- essentials and non-essentials. Essentials are costs you may not be able to cut back on. If you owe $1,200 a month on your mortgage, for example, you have to keep paying that to stay in your home. But you can then take a look at your non-essential expenses, order them by priority, and cut the ones that are least important.

So, say your non-essential expenses include:

  • Cable
  • Restaurant meals
  • A music streaming service
  • A gym membership

You may decide that having entertainment at home is important enough that you don't want to cancel cable. You may also decide that dining out once a week is important because it gives you a break from meal prep and allows you to socialize. 

In that case, you may decide you're okay with canceling your music streaming service and relying on the personal collection of music you have at home. And, you may decide that as much as you like working out at the gym, you can do without your $60 monthly membership and exercise for free instead by running or walking.

Take Orman's advice to heart

At this point, there's reason to believe economic conditions will worsen within the next year. Whether that impacts your job is something that can't necessarily be predicted. But it's a good idea to prepare for that possibility by shoring up your savings. And cutting expenses is the key to making that happen.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.

Our Research Expert

Related Articles

View All Articles Learn More Link Arrow