Suze Orman's Biggest Financial Mistake & How to Avoid It

Is this a mistake you're at risk of making?

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Key points

• Many people make mistakes when managing their money.
• This includes financial professionals such as Suze Orman.
• Orman admitted her biggest money mistake was spending money to impress someone.

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Managing money can be challenging, and it's natural that most people make some mistakes in their financial lives. In fact, even experts who advise others about spending can end up making errors because we're all human and not always rational when it comes to our decisions.

The good news is, it's possible to learn from the mistakes that others have made -- and it can be helpful to hear about some of the issues that trusted professionals have experienced. One good example of this is Suze Orman. 

Orman has many readers and listeners, and has been offering money advice for decades -- but she admitted to making a big error with managing her money that others should aim to avoid.

Suze Orman learned this money lesson the hard way

So what was the big money mistake that Orman made? As she explained on CNBC's Make It, Orman's error was spending money to try to impress others even when it wasn't a financially smart decision for her -- or an expenditure that was worth it. 

"There was a time that I was in a relationship with a very, very wealthy person and I wanted to impress this person and I didn’t have money yet, so I went out and I leased a car,” Orman explained. 

Her car lease cost her a whopping $800 per month, and she referred to the huge expenditure as "the most stupid thing I’ve ever done with money," due to the fact that she wasted a lot of cash trying to impress someone who she didn't even end up liking later on. 

How can you avoid making this mistake yourself?

Orman's mistake is a common one that many people end up making. Spending to impress others -- or to "keep up with the Joneses" as the common expression says, could take the form of leasing a car, or buying a house that's too big, or using credit cards to purchase designer clothes. 

Unfortunately, it can be hard to avoid falling into this type of trap, especially in the age of social media when so many people post pictures of fantastic vacations or impressive purchases, and you can end up feeling like you have to keep up to get likes and clicks. 

But, there are ways to make sure you don't make this big money mistake and ensure you're spending on things you really value rather than making buying choices based on outside influences.

One of the best options is to make a budget and carefully consider how you want to allocate your limited cash. If you take the time to think about the tradeoffs you're making when it comes to spending and saving, you can make a conscious choice to devote more money to things that really matter to you. You can also make a level-headed assessment of whether a particular purchase is worth it, especially if it would make accomplishing other financial goals harder. 

You can also consider instituting a 24-hour rule before purchases, waiting at least a day before you buy so you can examine your motivations.

By following these tips, hopefully you won't fall victim to the mistake Orman made and waste your hard-earned money on an expense that impresses others without adding enough value to your life.