Suze Orman’s 9 Steps to Financial Freedom
Leading financial expert Suze Orman originally published her New York Times bestselling book, “The 9 Steps to Financial Freedom: Practical and Spiritual Steps So You Can Stop Worrying,” in 1997. Since its publication, the book has been converted to an online course.
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Unlike traditional financial management books, Suze’s nine-step approach to money is based on emotions and the human spirit. Orman emphasizes that fear, shame and anger are the chief roadblocks to wealth.
Here are the nine steps to financial freedom, as outlined in her book.
Identify a Money Memory
According to Orman, you can predict your financial future by first looking into your past. Certain events and words spoken in your youth can influence your attitude toward money as an adult. For example, losing money or something else that’s valuable can instill a fear of losing money in the future. This type of fear can cause you to be a conservative investor and not trust others, such as financial advisors.
In this step, Orman notes that most people’s biggest problems are directly related to their early, formative experiences with money, and your greatest fears can block your path to financial freedom.
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Face Your Money Fears and Create New Truths
When you replace your money fears with new truths, you can begin moving in a positive direction. Maybe you’re afraid of losing everything you have and becoming homeless. You may fear that if your spouse walks out, you won’t be able to support yourself or your children. And how about the fear of losing your job and not being qualified for another position?
Orman’s philosophy is that thoughts become words, words become actions, actions become habits and habits become destiny. Exchanging your old, crippling fears for new truths and repeating them every day until you believe them can produce a positive change in your financial life.
Muhammad Ali repeated strong and sometimes seemingly arrogant affirmations like, “I’m the greatest!” He believed his words and in himself, and his truth became his reality.
Be Honest With Yourself
Taking control of your finances requires an honest look at your current situation. First, determine how much money you need to live on each month. Next, compare your income with your spending habits to understand your financial status.
Orman believes that most people deceive themselves by thinking they need less money than they actually do to continue living as they currently are. Their projections are usually far off from reality because they forget to include irregular expenses, such as medical bills, vacations, holidays and insurance premiums.
Orman has a simple solution to rectify this problem:
Determine your monthly expenses by adding up your bank statements, your credit card statements, your canceled checks and anything else that shows how much you’re spending.
Make categories for each item and divide each category by 12 to determine your monthly living expenses.
Add up all of your income.
Subtract your spending from your income to see if you have enough money to meet your financial obligations with some savings left over.
Be Responsible for Your Loved Ones
Orman emphasizes that people should always come first. She says providing for the future of those you love is non-negotiable. This financial responsibility includes having:
A valid will or trust
A durable power of attorney for legal matters
An advance healthcare directive
Adequate life insurance
Long-term care insurance
Long-term disability insurance
An estate plan
Respect Yourself and Your Money
For many, the more they make, the more they spend. The opposite should be true: Spend less than you earn. If your company offers a good retirement plan, Orman suggests that you should invest the maximum amount, if possible, each month.
A simple trick to making yourself spend less is to put more into your retirement savings. Doing this will help secure your financial future, and you’ll train yourself to spend less, just as you did when you didn’t earn as much.
In “9 Steps to Financial Freedom,” Orman illustrates how disorganization can lead to a lack of money. Clutter equals disrespect and leaves little to no room for money to come in. She advises organizing your wallet and the money in it. Orman gives clients who struggle with disorganization homework assignments to clean and declutter their homes. It’s about making room for what they really want in their life.
Trust Yourself
In money matters, trusting yourself means doing what’s right for you and not being influenced by “the Joneses” or doing what everyone else is doing. If you’re not comfortable with investing in the stock market, then don’t take the risk. If you decide that investing is right for you, educate yourself, take charge of your portfolio and perhaps work with a financial advisor to manage it.
Even if you didn’t learn about financial literacy in school, you don’t have to feel ignorant about financial matters.
This step also focuses on owning what you want outright instead of leasing a high-priced item like a car. Orman also advises paying off all credit card debt to avoid a credit card crisis. Here’s Orman’s debt-payoff solution for financial freedom:
Total all of your credit card debt.
Start paying for things with cash and save the change in a jar or some other secure container.
At the end of every month, collect the change and put the extra money toward your credit card debt.
Be Open to Receiving All That You Deserve
Throughout Orman’s life, she has discovered that giving to those in need makes her happier and often leads to her receiving even more. It’s all about cause and effect.
Orman has observed that her more generous clients experience similar results. For new clients facing financial difficulty, she encourages them to consider giving more. Those who follow her lead often experience incredible financial gain.
In general, Orman suggests giving to parents in need, being cautious about giving to friends and relatives (including your children) and giving to charities whose work you value.
Understand the Money Cycle
No matter how well you plan financially, it’s important to familiarize yourself with the ebbs and flows of money. When planning your financial future, remember that money has its ups and downs.
If you’re at a low today, it won’t last forever. Try to turn every seemingly bad situation into a positive one. Financial setbacks can lead to financial success down the line, but Orman believes true wealth lies within every person.
Recognize True Wealth
If you’re relatively young now, you might look back later and feel differently about what’s important. What will you value the most?
Your net worth may be more important to you now than it will be years later. Your self-worth may be tied more to your health than how much money you have. Orman suggests deciding on what’s really important to you and putting those things first. It takes time and attention to change the patterns of your mind.
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