This week’s Financial Guru Review is about Suze Orman. Suze is the author of best selling books such as Women and Money, The Road to Wealth, and Young, Fabulous and Broke.
Suze is a very popular personal finance guru. She’s appeared many times on Oprah as a financial advisor and she has a show on CNBC. She’s also on Twitter and answers many questions sent to her.
Suze Orman on Getting Out of Debt and Credit Cards
Before 2009, Suze Orman’s advice was to use extra money to pay down your debt first. Now Suze is advises paying minimums on your debt until you have a solid emergency fund of 8 months.
Suze explains exactly why she has changed her advice:
With rising unemployment, having a big emergency cash fund is vital, even if it means curtailing your credit card repayment strategy.
The sad reality is that the credit card industry is taking actions to protect themselves with no regard to your needs or how good you have been about paying your bills on time. …Many of you are even finding that when you do finally pay off your credit card debt that the issuing credit card company of that card is closing that card down as fast as they can so you cannot ever charge on it again. You did everything right, and yet still you could have your credit limit reduced, which can have a negative impact on your credit score…
If you do not have a stash of cash in an emergency fund and you have been using all your extra money to pay down your credit card debt and they keep closing your cards down—what are you going to live on if you lose your job?
I think she brings up a valid reason for building up an emergency fund before attacking high interest debt. This revised advice is an acknowledgement of what’s going on today with unemployment and credit card companies.
My only concern is, how long it would take a family to build up their funds while their high interest debt is climbing?
I do agree, though, that you should have a cushion set aside, I’m more inclined towards 3 months aside, and pay down debt with a small amount going towards fattening the emergency fund.
Suze Orman on Building Wealth
Suze is a big believer is building up and maintaining your FICO score. She has created services and products on monitoring and working on your FICO scores.
Why is this important? By having a solid FICO score you can decrease your rates for car loans and mortgages. It’s a huge gain for you and save you thousands of dollars in interest.
She also advises taking advantage of your employer’s 401(k) match while paying down debt.
Her Recession Rescue Plan, as shown on Oprah, includes the following steps:
1. Live on half your income. If you’re a two income family, appreciate your circumstances and see if you can cut your expenses.
2. Put your all your savings into an emergency fund. Any expenses saved goes towards build your 8 month emergency fund.
3. Use the stimulus package to help. If you’re laid off you can receive some assistance with your COBRA premiums. She also mentions the $8,000 tax credit for first-time home buyers. As always, Orman advises people to check their budget to see if this is feasible for them.
4. Make sure your mortgage is affordable. Suze and Oprah provide links and information on The Homeowner Affordability and Stability Plan, which can help you modify your home mortgage with your lender.
5. Focus on what you have. The last step in the plan is to focus on being appreciative on what you do have.
Suze Orman and Buying a House
Suze, like Dave Ramsey, encourages buying a home not based on what a lender tells you can afford, but what your budget can afford.
Unlike Dave Ramsey, Suze advises not paying off your mortage until you’re around 45 and don’t have any plans of moving for a long while. She also point out that a home’s price doesn’t exceed inflation by much. Don’t anticipate your retirement based on it growing as quickly as it did with the last buble.
My Tought on Suze Orman
I found her Young, Broke, and Fabulous book helpful for those looking for a foundation in finances. My only qualm is I wish she ran more numbers on some of her books. Her strength, though, is motivating people to get started, so that is a huge success right there.
If you want more numbers, you may want to check out Suze’s Road to Wealth. It’s a good resource and it can point you in the right direction fairly quickly.
What are your Thoughts?
With everything, find out if this advice is useful for you. No one is going to care about your finances like you do. Following the guidelines of a financial guru doesn’t get you off the hook for personal responsibility.
Do you listen to financial gurus’ money advice? If so, which one? Is there a financial guru you’d like me to review?
My Life ROI shares his thoughts on Suze Orman and reviews her NY Times Magazine interview.
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