Where I Agree & Disagree With Suze Orman
Suze Orman is a divisive person. Some people love her, some people don’t. Regardless of how you feel about her, there is no denying she is one of the most influential people in the personal finance world. When she says something, people listen.
Since people listen to what she says I think it’s important to point out to my readers where I might disagree with her. That’s why I was interested when I read an article on Yahoo Finance listing the “20 biggest money no-nos, according to Suze Orman”.
I love articles like this because it’s an easy format to quickly discuss a number of personal finance topics. Don’t forget to join the conversation and ask questions or give your opinions/experience about any of these topics.
Here we go.
1. Don’t be too quick to buy a home (Agree)
We are off to a good start, I agree completely with this. One of my biggest criticisms of Suze Orman has been how certain she is that there is only one right answer when it comes to money decisions.
It’s called “personal finance” because the decisions are personal. My answer to most personal finance questions is “it depends”.
Here’s what Suze says about buying a house.
“Sometimes it makes sense to own a home,” Orman tells CNBC.com. “And sometimes, depending on where you live, it makes sense to simply rent.”
I agree.
2. Don’t ever lease a car (Disagree)
“you should never, ever ever ever, lease a car.”
What was I just saying about Suze’s tendency to make blanket statements without considering someone's personal context?
I’ve written about this exact statement from Suze Orman in the past.
It’s true for many people leasing a car does not make financial sense. It can be very expensive. There can be lots of fees hidden inside a lease agreement.
However, there are times where it makes good financial sense for some people to lease a car. I wrote about why it made sense for me to lease my car below.
3. Don’t co-sign a loan (Agree)
“Don’t be afraid to say, ‘no to others and say ‘yes’ to yourself.”
This is a tough one because logically we all understand why we should never co-sign a loan or lend family members money. The problem is that when you have a family member who is in a desperate situation it’s easy to be guilted into helping.
Having lent family members money in the past and it has gone very, very bad. On this point, I agree 100% with Suze if there is any possible way you can avoid it don’t lend your family money or co-sign their loan.
Nowadays if I have a family member or friend who needs help with money, I offer to sit down with them and review every line of their finances and find ways to help them with their money problems.
Both parties feel much better about me giving them my time rather than my money.
4. Don’t take Social Security too soon (Mostly Agree)
“Living well into your 80s and beyond is no longer some rare event,” Orman says — and you want to make sure your resources will last as long as you do.
Suze’s point here is that every year you delay taking social security they will add 8% to your payout when you do decide to take it. As she points out with higher life expectancies the chance of you dying before the age of 70 is not as high as they used to be.
I tend to agree with her on this, it makes sense to wait as long as possible before taking social security.
Of course, if you are in a dire financial situation in your 60’s you may not have any other choice but to take it as soon as you can.
5. Don’t sell stocks when markets are bad (Agree)
Again, I agree completely. When the stock market drops you have a “paper loss”. If you sell, when the stock market drops you lock in a “real loss”. The people who got truly wiped out during the 2008 financial crisis were the people that panicked and sold at the bottom of the market.
Buy low, sell high. If nothing else, you need to sell for more than what you paid originally.
6. Don’t put blind faith in a financial adviser (AHMEN!)
“I don’t think that they’re always going to have your best interest at heart, because probably they have their own best interest at heart,”
That quote sums up exactly how I feel about many financial advisors. Next time you sit down with a financial advisor ask them one simple question, “how do you get paid”. If they can’t answer that in under 30 seconds, walk away.
If a financial advisor gets paid off commission from selling you insurance and mutual funds you might be getting biased advice.
Personally, I would only work with a “fee-only” financial advisor. That way I know they are only getting paid for giving me advice, not for selling me products.
7. Don’t borrow from your 401(k) (Agree)
Suze Orman calls borrowing money from your 401(k) “the biggest mistake you will ever make”
This is a big mistake that a lot of people make. Most often they are borrowing from their 401(k) to pay off debt.
If you borrow or make an early withdrawal from your 401(k) you lost in 3 ways.
- You may trigger penalties in taxes
- You lose the power of compound interest
- You have less money in retirement (or work longer than you planned)
I have written extensively on strategies to pay off a debt that do not involve draining your retirement accounts.
These strategies include;
- Debt consolidation
- The snowball method
- The Avalanche method
If you have not already, go read this story.
8. Don’t let debt linger (Agree)
The longer you put off paying down your credit balances, the more money you lose.
I vividly recall the crippling anxiety I felt when I had more than $50,000 in student loan debt. Looking at my account balances made my stomach turn. To save myself that anxiety I simply decided not to look at or think about my loan balances and payments very often.
Out of sight, out of mind.
That ended up costing me dearly. The less I thought about my debt, the more often I would miss payments which lead to extra interest charges and penalties.
My finances were a mess until I accepted a simple, but brutal truth: Unless I tackle my debt head-on, things will never get better.
Once I changed that mindset, I was able to start paying down that debt and repairing my credit score. After a while, it became less and less scary looking at those loan balances.
Eventually, it became enjoyable to watch the debt melt away. It became a bit of a race; how fast can I bring it down to zero?
Out of sight, out of mind is no way to handle your finances. Face the brutal truth of your financial reality and take it head-on. Get the debt paid and move on with your life.
9. Don’t spend to impress others (Agree)
This used to be called “keeping up with Joneses”. Your neighbor buys a new sports car, so you feel like you must buy an even nicer sports car to maintain your economic status.
Today, I call it “lifestyle inflation”. Once you start making more money, you feel like you need to “upgrade your life” to match your new salary. It’s a great way to stay on the wealth-building treadmill is the number one reason why many high-income individuals have accrued very little wealth.
10. Don’t say it’s impossible to save (Agree)
If you have made up your mind that it’s simply impossible for you to save and invest you have already lost the war. I know what it’s like to have a very tight budget and to feel like there isn’t enough money at the end of the month when the bills come due.
How much money you have leftover at the end of the month comes down to two factors.
- Money coming in
- Money going out
Money coming in. There are a few possible ways to increase the money coming in each month. The first is maximizing your income from your job. You might want to consider if it’s time to ask your boss for a raise.
If that is not in the cards, it could be time to start looking for ways to increase your skills and land a higher paying job. Of course, that takes time. If you need extra cash right away, consider a side hustle.
Money Going out is the part of the equation we have immediate control of. If you are willing to sacrifice and cut back on some non-essential spending, you would be surprised how much money you’ll be able to free up.
Even if you can only free up a few dollars a month to save and invest, it can make a difference for your financial future.
11. Don’t spend on things you don’t really need (Agree)
The first article I ever wrote on Medium was titled “Your Pumpkin Spice Lattes are costing you $250,000 and Pushing your Retirement Back Years”.
The point of the article was that there can be a huge opportunity cost for buying things that you really don't need. You end up having more money going out every month, but you also give up the potential gains from investing that money over your lifetime.
Spend money on things that bring value to your life and save the rest of your money to secure your financial future.
12. Don’t retire too early (Strongly Disagree)
“I hate it. I hate it. I hate it. I hate it”- Suze Orman on FIRE
Suze Orman is no fan of the Financial Independence, Retire Early (FIRE) movement. She thinks that you’ll need up to $10 million to retire early.
As I’ve written in the past FIRE is not about retirement, it’s about empowerment. The FIRE movement has given many younger people a sense of control over their financial lives and their careers.
Some choose to retire early once they have achieved financial independence. While others choose to start their own business or pursue their passions rather than working at a job that provides the highest paycheck.
Achieving financial independence allows you to live your life independent of financial constraints.
13. Don’t go without a will (Agree)
I strongly agree with this point. If you don’t have a will you should consider creating one as soon as possible, especially if you have a family.
14. Don’t take out a reverse mortgage in your 60s (It Depends)
A reverse mortgage is a type of loan that allows seniors to access their home equity without selling their house. There are typically no monthly payments on the loan and it is repaid when you sell the house or die.
This is a tricky one. I would agree that if possible, it’s best to avoid taking on any kind of debt in retirement. However, I could see a situation where it makes sense.
If you plan on never selling your house, it could potentially make sense to access that equity and invest it in income-producing assets that provide you a monthly income during retirement.
It’s probably best for most seniors to sit down with a financial advisor (who has their best interest at heart) to review the numbers.
15. Don’t miss out on matching money (Agree)
Suze is talking about the importance of getting the full employer match from your 401(k). I agree 100% with her on this issue. If you have a 401(k) offered at your workplace, make sure you enroll in it and that you contribute enough to get the full employer match.
Typically, employers match up to 5% of your salary. If you earn $100,000 and you contribute $5,000, they would contribute another $5,000 on your behalf. If you are not maxing out your employer match you are leaving FREE MONEY on the table.
Maxing out a 401(k) over the course of your career is an efficient and boring way to become a millionaire.
16. Don’t stay at a job you hate (Agree)
“Staying in a job you don’t like is disrespectful to yourself, and your loved ones,”
In my mind, personal finance is finding the right balance of building wealth and living a happy life. If you are working at a job you hate, you have lost that balance.
If you hate going to work every day, find a job that will make you happy. If you are following all the other items on this list, you will still have the opportunity to build wealth even if you take a pay cut.
17. Don’t ever buy a new car (Disagree)
“The second you drive that car off the lot, it depreciates, 10%, 20%,” she tells CNBC. “Let somebody else get that depreciation.”
I understand the argument that a car begins depreciating in value the second you drive it off the lot. I would also agree that in most cases it makes sense to buy a used car. I don't agree that it never makes sense to buy a new car.
Maybe the car company is providing a deep discount for buying a new car rather than a used one. There also tends to be higher maintenance costs with used cars.
It just rubs me the wrong way when someone declares it’s “my way or the highway” on issues that warrant further analysis.
18. Don’t go without life insurance (Agree)
I look at life insurance as a necessary inconvenience. I know it stinks paying those premiums every year, but if the worst were to happen it could spare your loved ones from financial hardship at a time where money is the last thing they should be worrying about.
19. Don’t ever miss a student loan payment (Agree)
I’ll add to this, don’t ever miss any loan payment!
20. Don’t invest for the wrong reasons (Agree)
“They decide, ‘This company is great, I’m going to invest in that,’
I love Netflix. They have a fantastic product at a reasonable price. However, just because I like Netflix does not mean I invest in Netflix. In fact, I do not invest in any individual stocks.
I invest in low-cost ETFs that track various stock indexes.
I do this for two reasons.
- Research has shown that most stock pickers will fail to beat the return of the general stock market in the long run
- Picking stocks and investing in actively managed funds have substantially higher fees than index investing.
So why would I want to pay higher fees for what is likely to be a lower return?
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This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.