Suze Orman Says This Is the Biggest 'Need' People Get Wrong

Going overboard on this expense could be problematic.

Most of us have things we pay for on a regular basis that aren't needs, but rather, wants. These include things like streaming services, meals at restaurants, and vacations.

It's a good idea to put the needs you spend money on ahead of your wants, since those are expenses you can't function without. But financial guru Suze Orman insists there's one need that a lot of consumers get wrong. And that's a mistake that can prevent them from meeting their financial goals.

Are you overspending on your vehicle?

Unless you live in a city with a solid public transportation network, you probably need a car to get to work, run errands, and just plain function. But you may not need as expensive a car as you think you do.

In a recent blog post, Orman talked about consumers' tendency to overspend on a vehicle. She said, "The biggest need that I see people get wrong is their car(s). The average monthly loan amount for a new car is now more than $650 a month…That just smells of people treating themselves to a nicer car than they need."

She makes an important point. Car prices are up these days, so if you take out an auto loan to finance a vehicle purchase, you could end up with a series of monthly payments that are higher than what you may have been looking at a few years ago.

But that doesn't mean you should be signing up for an auto loan that costs you $650 a month. And to get a smaller loan, you'll need to buy a less fancy car. It's that simple.

Now you might argue that it's worth splurging on a car since it's something you use all the time. So if you're looking at a $650 auto loan payment each month, but you can swing that payment all the while continuing to add money to savings and avoid credit card debt, then sure, go for it if it'll make you happy. But if that $650 payment makes it so you can't contribute to your IRA account, then it pays to consider getting a less expensive car.

It pays to err on the side of being frugal

While Orman says it's common to see people spending a lot of money on their vehicles, it's not just cars where people tend to go overboard. Rather, the mentality that it's okay to spend extra can trickle down into different spending decisions both large and small.

Orman gives this example on her blog, "You’re at the grocery store and pick up the more expensive brand and tell yourself it’s just $1 or $2 more and you deserve it. I agree, you do deserve it. But if you stand in your truth, do you need it? That $1 or $2 per item can add up to $20 or more per shopping trip. Over the course of a month, or a year, that can add up to significant savings that could go toward paying down debt and saving."

She makes a really good point. If you're going to splurge on something that makes you happy, limit it to a single item. If you allow yourself to spend extra every time the opportunity comes up, you might hurt your ability to make progress on your financial goals.

In fact, before you make your next car purchase, think about what spending less on a monthly auto loan payment might do for your finances. If you can score a $450 monthly payment instead of $650, you might tell yourself you'll put $100 of that into your savings account and spend the remaining $100 on takeout meals from your favorite restaurants.

And if you do decide to move forward with a more expensive car, just promise yourself you'll cut back in another area. Otherwise, you might end up sorely unhappy with your financial situation down the line.