25 Top Money Tips From Suze Orman You Can Use Today
Money mastermind Suze Orman achieved wealth without a silver spoon to get her started. She didn’t come from money and managed to morph an ordinary career in waitressing to an astronomical one in personal finance. She worked and continues to work hard. And now, at 72, Orman boasts a net worth of around $75 million.
As she amasses wealth, she continues to share her hard-earned money advice. Orman has dozens of practical tips that anyone can apply to their finances at any time. Here’s a look at 50 of her top tips.
Free Yourself From Shame
In a post on Oprah.com, Orman explored how to get a financial fresh start, and highlighted that the first step in doing so is to free yourself of shame — a move that may be tougher than you’d think.
“The first, and most difficult, step is to absolve yourself and your spouse or partner of any guilt,” Orman wrote. “So, you need to make a promise to me. I need you to agree that the past is past, and we are going to focus on the future. Whatever mistakes you feel you have made with money, whatever moves you wish you had or hadn’t made, are irrelevant. We are free to move forward only when we remove the emotional shackles of regret.”
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Get a Full Picture of Your Finances
In the Oprah.com blog, Orman asserted that it’s impossible to map out a route to your destination if you don’t know where you’re starting from. The same goes for money. You need to take a “before” picture of your finances before you can revamp them.
“You’ve heard me say this a million times, but I want you to open every single financial statement — bank, credit card, mortgage, 401(k), brokerage account — and take a look,” Orman wrote. “Only when you have everything in front of you can you set priorities about what to do next.”
Use Online Banking
If you’re not already enrolled in online banking, get on it; Orman’s orders.
“It should be free, and as long as you use your home computer, it’s also safe,” Orman wrote on Oprah.com. “The advantage of online banking is that you can pay bills superfast, and your account is automatically credited or debited for each deposit and payment, making it easier to stay on track.”
Get Life Insurance
If you have anyone financially relying on you in any capacity, you need life insurance.
“For the vast majority of us, term life insurance is all we need, because it protects you for the ‘term’ of the policy (from five to 30 years) and is incredibly inexpensive,” Orman said in the Oprah.com blog. “As always, it’s important to buy a policy from a firm with a strong financial rating, but even if an insurance company runs into trouble, your state insurance department has funds set aside to help protect you.”
Always Know Your Credit Score
Credit scores fluctuate. It’s crucial that you’re always in the know of where yours stands. You’ll need good credit for good loans.
“The big takeaway from the meltdown of 2008 is that banks are going to be a lot less eager to lend money to you,” Orman penned on Oprah.com. “You will need a sparkling financial personality — a FICO score above 700, solid verifiable income, a manageable amount of existing debt — to get good offers for credit cards, auto loans, mortgages and refinancings.
“And you can expect lenders to continue to tighten the screws on your existing credit lines; all the credit they loved to give you before 2008 now makes them nervous.”
Make an Ample Emergency Fund (at Least 8 Months)
Typically, financial experts recommend that you have an emergency fund that covers at least three to six months of living expenses. Orman has a longer timeline in mind.
“Every family should have an emergency savings account that can cover at least eight months of living expenses,” she said on Oprah.com.
Get Fit
If you want to live rich, live healthy.
Recognizing the virtue of health, Orman penned on her blog, “It doesn’t matter how old you are right now. We can all make a plan to be kinder to our bodies. Maybe it’s working up to a 30-minute walk each day. Or moderating our intake of whatever comfort food is our weak spot.”
Ditch the Pricey Coffee Habit
Mmm, those handcrafted lattes! They’re so great until we see the financial toll they take. Orman firmly shakes her head against those luxurious sprees in the name of caffeine.
“You need to think about it as,” Orman said. “You are peeing $1 million down the drain as you are drinking that coffee. Do you really want to do that? No.”
Separate Money for Savings From Money for Investing
If you want your money to work as hard as it can for you and your family, take a note from Orman and separate your money for savings from your money for investments.
“There is a vitally important difference between money you need to save and money you need to invest, yet it’s a distinction many people don’t grasp,” Orman wrote on Oprah.com. “Money you know you need or want to spend in the next few years is savings. Money you keep handy for an emergency belongs in savings. Money you hope to use soon for a down payment on a house belongs in savings. And all savings belong in a low-risk bank savings account or money market account. The goal is to keep your money safe so that when you go to use it, it will be there.”
Orman also explained how to designate money for investing.
“Money you won’t need to use for at least seven years is money for investing,” she penned. “The goal here is to have your account grow over time to help you finance a distant goal, such as building a retirement fund. Since your goal is in the future, money for investing belongs in stocks.”
Evaluate Spending Patterns To Save More
“When I suggest that people send in more money to pay off credit card balances or increase the amount they save each month for retirement, I hear the same sad story,” Orman penned on Oprah.com.
“‘Oh, Suze, I would if I could, but I can’t because there’s no extra money left at the end of the month.’ I beg to differ. There’s no money left because you haven’t evaluated your spending habits. You need to dig deep and be willing to change those habits; to set goals and use those goals as the motivation for lifestyle changes that will allow you to save and invest.”
Pay Off the Costliest Debts First
Like many other financial experts, Orman recommends paying down the costliest credit card balances first.
“When the first card is cleared, direct your payments to the card with the next highest interest rate,” Orman wrote on Oprah.com. “Keep doing this until you’ve zeroed out the balances on all your cards.”
Open a New Checking Account, If Necessary
Another tip for a financial fresh start that Orman shared with Oprah.com applies to your checking account.
“If you’re vexed by your checking account (you swear you should have more money; you can never figure out why your checks bounce), start fresh by opening a new one,” Orman said. “Leave enough in your existing account to cover any checks that haven’t yet been processed, then transfer the rest to the new account and close the old one.”
Make This the Year To Pay Off Credit Card Debt
Credit card debt has a way of hanging over our heads year after year, only becoming heavier and harder to navigate. Make this the year you resolve to finally tackle it.
“Doing so will make you and your family stronger and happier — forever,” Orman wrote on Oprah.com. “What happens to the stock market and the housing market is completely beyond your control. Credit card debt, however, is completely within your control. Every time you pay off a card with a 15% interest rate, you get a 15% return on your money.”
See Whether You Qualify for a Low Balance Transfer Card
“See if you can qualify for a balance transfer card that offers a low or 0 percent introductory interest rate for the first six to 12 months,” Orman penned on Oprah.com. “If you can get a good deal, move your high-rate debt to that new card. Do not use the card for any new charges, and push yourself hard to pay off the balance as soon as possible. If you don’t qualify, no worries. Always pay the minimum due on each card, on time, every month.”
Find ‘Hidden Money’ in Your Credit Card Statements
Another masterful tip to apply to your finances today, according to Orman’s writings on Oprah.com, is to carefully scour recent credit card activity. You’ll likely find savings opportunities therein.
“Take a clear-eyed look at your credit card statements for the past six months,” Orman said. “Can you really tell me that there isn’t at least $50 or $100 showing up that you could easily do without? I didn’t think so. I call this ‘hidden money.'”
Reduce Your Monthly Utility Bills by 10%
Millions of Americans are struggling with the rising costs of utilities, but if you’re crafty, you can cut costs here, too.
“I challenge you to reduce every one of your monthly utility bills by 10%,” Orman wrote on Oprah.com. “Change your calling plan or get rid of the landline account unless you absolutely need it.
"I bet you can seriously trim your utilities by spending one afternoon increasing your home’s energy efficiency. Attach a draft-blocking guard to the bottom of any external doors; add caulk or weather-proofing material around drafty windows; put low-flow aerators on your shower heads and faucets; and replace burned-out bulbs with compact fluorescent energy savers (they’re pricier than conventional bulbs but last much longer, saving you money over the long term).”
Consider Buying a Used Car
Who among us wouldn’t prefer a shiny new car over a less sparkling used alternative? It may not be what we want, but often a good used car is what we need (for our financial health).
“Consider buying a used or certified pre-owned car rather than a brand new one,” Orman wrote on Oprah.com. “If you get a three-year loan, you have plenty of life left in your car, and money that once went to car payments is freed up for other financial needs."
Never Lease a Car — and Reduce Auto Insurance Premiums
Orman urges Americans looking for financial health to avoid leasing cars. She also has tips on reducing auto insurance premiums.
“Since you don’t own the car, you never have a time when you are driving your car free and clear,” Orman wrote on Oprah’s site. “Also, raising your deductible or designating one car to be used for low-mileage driving (under 15,000 miles a year) can reduce your insurance premiums by 15% or more.”
Build a Retirement Plan the Right Way
We all need to be aggressively saving for retirement, and we can only start doing that by having a concrete plan in action. Here’s what you should be doing in order to do it right, according to Orman’s post on Oprah.com.
“If your 401(k) and Roth IRA lost value in 2008, that’s a good sign. It means you were invested in stocks, and that’s exactly where you should be invested — assuming your retirement is at least a decade away,” Orman wrote. “Only stocks offer the chance of high returns that outpace the annual 3% to 4% inflation rate. In your 20s and 30s, aim to keep 80% in stocks and just 20 % in bonds; you have time to ride out stock swings.
“As you age, slowly ramp up the percentage in bonds; in your 50s and 60s, consider keeping 40% or more in bonds to help buoy your portfolio when stocks are slumping. The biggest mistake you can make is to stop investing in your retirement accounts or to shift money from stocks into ‘safe’ money market accounts.”
Invest for the Long Haul
Like Warren Buffett, Orman advocates for sticking with your (diversified) stock market investments through the ups and downs.
“Here’s some perspective: The 2008 market slide is the 10th bear market (commonly accepted as a decline of at least 20%) since 1950,” Orman penned for Oprah.com. “If you’d put your money in stocks in 1950 and stayed invested through the ups and downs, your average annual return through 2007 would have been more than 10%. That’s not to say you can count on an average of 10% over the next 50 or so years (7% to 8% is probably more realistic), but it illustrates how keeping focused on the long term pays off.”
Diversify Your 401(k)
Any financial expert worth her salt will insist that you diversify your asset allocation, and Orman is no exception. She recommends you try to reduce stock you own in your 401(k) to under 10% of your total retirement assets.
“Just ask employees of Enron, Bear Stearns, Merrill Lynch and Washington Mutual how smart it was to make big bets on their own stock,” Orman penned on Oprah.com. “Mutual funds and exchange-traded funds (ETFs) are ideal for retirement savings because they own dozens of stocks in their portfolios.”
Look for a ‘Target Retirement’ or ‘Life Cycle’ Fund
“If you’re flummoxed by all the investing options in your 401(k), look for a ‘target retirement’ or ‘life cycle’ fund,” Orman wrote for Oprah’s site. “Then pick the specific portfolio that dovetails with your expected retirement age and you’re all set; you will be invested in a mix of stock and bond funds appropriate for your age. You can also invest your Roth IRA in these types of funds; Fidelity, T. Rowe Price and Vanguard all offer these one-and-done options.”
Don’t Make Your Home Your Fund for Retirement or Vacations
If you’re fortunate enough to own a home that you can afford, don’t take it for granted by thinking of your abode as your nest egg.
“A home is not an investment that will fund your retirement or vacations,” Orman wrote on Oprah.com. “The 10% or 20% annual gains during the housing boom were temporary insanity. Buy a house you can really afford, and over time it will rise in value. But its main value is as a home. Period.”
Prioritize Needs, Not Wants
Between rising costs of living and inflation, many of us are stretched thin these days and cornered into living paycheck to paycheck. The trick to getting out of this trap is to live within your needs but below your means. You can do this by prioritizing needs over wants.
“Every time you go to spend money, you ask yourself the question, ‘Is this a want or is this a need?'” Orman told CNBC. “If it’s a want, do not buy it,” Orman said.
Pay With Debit Instead of Credit Whenever Possible
Credit cards are sort of like tickets to debt. Given this, Orman recommends opting for cash or debit instead of credit cards. This hack is particularly useful if you’re already in debt.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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