Suze Orman hates when you redo your budget each January: ‘If you restrict,’ you'll eventually ‘explode’

Ringing in a new year — and seeing your December credit card statement — may tempt you to do a budget overhaul.

If you really want to save money this January, resist pulling out your spreadsheet, Suze Orman, personal finance expert and host of the podcast "Women & Money (and Everyone Smart Enough to Listen)," recently told The Wall Street Journal. She compared budgets with crash diets, and said the restrictiveness almost always leads to a purge.

"I hate budgets," she said in the interview. "If you restrict, you limit, you cut back, you don't buy this, you don't buy that and then all of a sudden, you explode and you go out and you buy everything at once."

Orman isn't the only person who has drawn that comparison. Making moral judgments about how you spend can actually hurt your progress toward financial goals, according to financial educator Melissa Browne.

"Budgets don't work for many people in the same way diets or one-size-fits-all eating approaches don't work long term," Browne recently told CNBC Select. "I don't believe it's about budgeting, but rather spending and investing well."

The good news: There's an easy, less demoralizing alternative, Orman said. Instead of fixating on what you shouldn't buy, Orman recommended thinking about smaller decisions that make you feel more in control of your bank account.

"Just do one thing that might make you feel more secure," she said. "Is that saving $10? Is that not going out to eat?"

That means you don't have to cut out date nights or a seasonal shopping spree to feel better about your finances. You can take opportunities to save money when it feels empowering, rather than robbing yourself of things you enjoy.

More good news: A strict budget isn't the only way to track your spending. In fact, 73% of Americans don't regularly follow one, according to a 2022 survey by OppLoans.

Self-made millionaire Ramit Sethi, star of Netflix's "How to Get Rich," similarly called meticulous budgets "pointless" in 2019.

Instead, create a spending plan that doesn't have you ruminating over every dollar spent, he told Make It in 2022.

He recommended developing a "conscious spending plan" that tracks your monthly costs, savings, investments and "guilt-free spending." That way, you can ensure you're setting aside enough to cover your bills, and even save a little, before you spend on discretionary items and activities.  

Spending is unique for everyone. Despite hating budgets, Orman told The Wall Street Journal she would "drop dead before I bought a coffee" out and called eating out "one of the biggest wastes of money out there."

Instead, she uses that money to splurge on private domestic travel, she said.

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