Laws of Money: Law #1

I just started reading The Laws of Money by Suze Orman. The first law, Truth Creates Money, Lies Destroy It, speaks to the heart of being honest with yourself and others about money. Suze steps you through the scenarios of former clients whose lies have resulted in insurmountable debt. For example, she tells the story of a young man who took an expensive vacation with friends even though he didn’t have money to pay for it. A month before the trip he was laid off from work, but still he didn’t tell his friends he couldn’t go. Instead he went with his friends accumulating $5,600 worth of credit card debt along the way. When he returned home, he learned that a major storm had swept through his area, and his home had been flooded by a hole in the roof. His car stopped running because the battery died, and while he was away someone called to offer him a job, but when three weeks passed without a response, they hired someone else. If the young man had been honest about his finances, he could have patched the roof before the storm came and accepted the job when the call came through. Instead, he ended up over $30,000 in debt, having to pay for the trip, the car, and the house, while remaining unemployed.

This story is clearly an extreme. But Suze also provides a common example of everyday lies about money. She describes two women. One is driving an older car and dressed in clean but unfashionable clothes. The other is driving an expensive high-priced car and designer fashions. Although the second woman looks wealthier, odds are that the first woman actually has a higher net worth. In fact, Suze says the second woman is probably leasing the car, has no savings or retirement plans, will never be able to pay for her child’s college, and fears she’ll be a powerless and penniless bag lady one day.

Whenever you buy something you cannot afford, you are lying to yourself. You are trying to be someone you aren’t, someone that at that moment in your financial time line you cannot be. Suze offers these tips to ensure you remain truthful about money:

  • Tell yourself who you are, financially and in other important ways, by the choices you make with your money.
  • Don’t be afraid that people will not like you if you do not have money.
  • Be careful not to let the money you spend become a badge of your success.
  • Each decision you make with your money puts you at a crossroads between truth and lies. One road leads to creating what you want, the other to destroying what you have.

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