Suze Orman on Oprah

[pampam]

Yesterday, I watched and she made a lot of sense. Did it make sense to you to cut the expenses to half? That sure will be difficult.

 

[rflorek]

Yesterday, I watched and she made a lot of sense. Did it make sense to you to cut the expenses to half? That sure will be difficult.

I don't think she actally said cut expenses in half. She said to bank half of what income is coming in to build an emergency fund, and make the other half stretch to cover your expenses. You're supposed to examine your expenses and "cut to the bone" as Suze says.

 

[LovinPooh]

Suze drives me crazy! Alot of what she says makes sense. But lets face it. Its harder for alot of people to have $20,000 in a emergency fund than others. If I had her money I could have all the financial commen sense in the world too.

 

[lttlmc3]

Holy crap a $20,000 emergency fund! Crazy!

 

[nunzia]

Suze drives me crazy! Alot of what she says makes sense. But lets face it. Its harder for alot of people to have $20,000 in a emergency fund than others. If I had her money I could have all the financial commen sense in the world too.

I'm glad I'm not the only one..I read an interview with her and she came across as very snobbish and elitist. But, common sense is common sense. Spend less, save more. There..I summed up many financial books

 

[DisneyPolve]

Suze drives me crazy! Alot of what she says makes sense. But lets face it. Its harder for alot of people to have $20,000 in a emergency fund than others. If I had her money I could have all the financial commen sense in the world too.

She annoys me....I am all for people having savings, but I think everyone needs to find something that fits their circumstances. Maybe use some of her ideas, but not everyone is going to fit the financial mold she puts everyone in. Plus a few weeks ago MSN had a story about how she doesn't practice what she preaches....that she goes on and on about how the stock market is the best way to grow your wealth, yet the mass majority of her "hard-earned money" is in government insured muncipal bonds.

http://articles.moneycentral.msn.com/Investing/Extra/IsSuzeOrmanOutOfTouch.aspx

 

[LovinPooh]

I did her little budget thing on her webpage for giggles. It told me that I needed a $25,000 emergency fund. All I could think of was, what, do I stop paying my mortgage to save up for this... how in the world??? It also told me that I needed to cut out my satelite radio. But, the way I see it, the $12 a month I spend on that, really isnt goign to do much for that fund I am in need of

I really cant stand it when she does her 'can i afford it' segments on her show. Yeah, I stop and watch if I am surfign and catch that part... When she is doing these, it seems more to me like she is more critical of what the people want rather if they can afford it.

and to be honest, if I had $25,000 in a bank account, I would probably be sitting on a beach somewhere or Disney than here in front of my computer

there.. I feel better now

 

[crisi]

I think Suze's target market tends to be those with affluenza. David Bach writes in a similar fashion - give up your lattes. Cut your budget by half. These aren't things you can do if your budget is "mortgage, heat, insurance, $100 a week for groceries, $20 a week for everything else." And people who won't last three months on a mere $20,000 without a ticket to the clue bus.

However, its a big enough target market. There are plenty of people dropping $5 a day at Starbucks and $10 a day on lunch and $100 a week on a pair of cute shoes or a handbag or a new shirt - or who had been until recently.

 

[ameraumi]

$20k is about 6 months worth of income for some people. While it seems like a lot when you do not have it, but it does make sense. Most financial advisors say you should have 3-6 months of living expenses in your emergency fund.

We loosely follow the DR plan and I we have skipped his BS2 (paying off debt) to save for the emergency fund. We have "storm clouds" with DH's health and I want to be sure I have the money saved in the event I need to close my daycare to care for him full time. Once we get our EF where we want it, then I will go back to paying extra on debt.

 

[semo233]

Consider the audience here on the BUDGET Board. We are already concerned with budgets and savings. There are many, many people who have no idea how to save or cut out the non-necessities. I have more confidence that the people who are already looking at ways to save money are more responsible and conservative and do many of the things that she talked about already.

Remember that she told the half of the audience with two jobs that they should be banking the money from one and the half with only one job should be trying to cut their expenses. She takes a hard line with owning a home that you can afford. In her opinion, if you can't cut any more out of your budget and you have little or nothing to save, you are living in a house and have a budget you really can't afford. She's saying that perhaps you need to downsize or get a house that will allow you more flexibility with your money. I have to say that I agree. It would kill me to sell my house, but when all else fails, it is just a building and my family and sanity are more important.

I find that by cutting my budget, I tend to live more simply and can make more room to feel satisfied and happy. I just wish I could get the rest of my family to turn out the lights when they are not being used and to cut back in similar ways!

 

[bebelle]

We lived on half for a full year before I quit working--just to be sure we could. But we could not live on half now. We have cut back dramatically but some months it is tough to live on 100%!

 

[crisi]

$20k is about 6 months worth of income for some people. While it seems like a lot when you do not have it, but it does make sense. Most financial advisors say you should have 3-6 months of living expenses in your emergency fund.

And in a bad economy - it should be more than three to six months. It takes longer to find a job in a bad economy, and you often end up settling for something that pays less.

If you are getting by on a budget of less than $40k a year - after taxes, you probably need less than $20k in savings.

Also, when you are giving advice in 20 minutes on TV - you aim for the middle of the road. Orman's advice tends to be pretty good for MOST people at MOST times. But you can't start giving the disclaimers in that short a time. For instance, if you already live off half your two person income, that's a different situation than if you live beyond your means on two incomes, and different still than someone living within their means on a single income with a SAHS. All those situations have different risk profiles and therefore require different levels of savings.

 

[semo233]

Most financial advisors say you should have 3-6 months of living expenses in your emergency fund.

She actually advised having 8 months to a year in your emergency fund now. She changed some of her advice for the current economic situation.

 

[Kathi OD]

I was laughing when she said to put 1/2 your income in savings. WTH would we use to pay the mortgage, utilities, and food? We do have an emergency fund that would probably last somewhere between 18 and 24 months, but it's been built up a little bit at a time, over a long period of time, not 1/2 our salary for a short period of time.

 

[Karlzmom]

Suze drives me crazy! Alot of what she says makes sense. But lets face it. Its harder for alot of people to have $20,000 in a emergency fund than others. If I had her money I could have all the financial commen sense in the world too.

Oh no, the "class warfare" warning shot! If you made as much money as her you'd have a higher tax bracket, employ others that you need to pay, have travel and work expenses, etc. Don't forget, if "you have as much money as her" you are getting hit everytime you turn around to "give" to everyone and everything..... As someone who started at the bottom of the economic ladder and has moved up [accruing $100k in student loan debt to do it] I can attest that even when income goes up you really don't have "that much more". As long as your "wealth" is income derived, somehow you don't really get ahead. Right now I'm thinking long and hard about the "need" to have a large mortgage to cut your tax rate.....all it does is shackle you into a house that prevents you from deciding to scale back, as the payment demands that you continue to make at least that much money.

A person's emergency savings should reflect their monthly expenses. If you have a $500 house payment then you likely need a smaller cushion that someone with a $3000 monthly housing nut.

 

[m&m's mom]

My husband and I have this saying - "It's points in time".
Several years we had 2 kids in daycare, a smalll loan and 2 car payments, our income half what it is now, etc. Things were not as rosy as they are now. We could now live on 1 income- either his or mine.
Our second income is for vacations, savings, investments etc. In other words things we could give up.
Whenever these financial advice people come on I always feel guilty I am not cutting out vacations, eating out, cable etc. I have to remind myself I am, at this point in my life, not their target audience.
All those frustrated, just remember things will get better.

 

[dreams91]

I get what she is trying to say, but if we don't spend any money or economy won't get better either!!

 

[Kit'smommy]

Oh no, the "class warfare" warning shot! If you made as much money as her you'd have a higher tax bracket, employ others that you need to pay, have travel and work expenses, etc. Don't forget, if "you have as much money as her" you are getting hit everytime you turn around to "give" to everyone and everything..... As someone who started at the bottom of the economic ladder and has moved up [accruing $100k in student loan debt to do it] I can attest that even when income goes up you really don't have "that much more". As long as your "wealth" is income derived, somehow you don't really get ahead. Right now I'm thinking long and hard about the "need" to have a large mortgage to cut your tax rate.....all it does is shackle you into a house that prevents you from deciding to scale back, as the payment demands that you continue to make at least that much money.

A person's emergency savings should reflect their monthly expenses. If you have a $500 house payment then you likely need a smaller cushion that someone with a $3000 monthly housing nut.

I agree with you to a point Karlzmom. However, a lot of people in higher income brackets increase their spending because they want to have and do certain things not because their needs actually exceed those of people who make less.

DH and I also started out at the bottom of the economic ladder. Now we are both professionals, have those student loans paid off, and make great salaries. But we are still in the "starter" home we purchased 10 years ago (nearly paid off!) while most of our friends moved on to bigger and better years ago. I just got a pretty little Mercedes last year (2008, but not entirely new and paid for in cash) after many years of driving a not so nice car. Most of my friends had much better cars long ago. In 10 years of marriage we have had 1 vacation where we have flown somewhere. Instead, we have opted for short driving trips and modest vacations. Most of our friends take an annual cruise or go to Europe (or both). And then they complain about the size of their house payment or how much they have left on their student loans.

We just made a committment to not live any differently than when we started out until all the debt is gone. Then we will start saving for a better house (or at least furnishing this one better and upgrading the kitchens and baths). About 90% of every raise has gone to building up savings and paying down debt instead of increasing our standard of living.

As for the tax rate thing, I don't feel a need to pay $1 for interest just to get $.25 back. I can live with having a higher actual tax rate when I didn't pay out a ton of money in interest. Last year we had a 23% actual income tax rate (ouch!) but paid less than $3,000 in interest. This year we will pay $1,500.

Many of our friends household incomes are substantially better than ours, but I have a feeling that none of them could survive for more than a few months without a paycheck.

It is easier to save more when you make more if one doesn't get drawn into keeping up with the Jones.

 

[princessmom29]

Suze drives me crazy! Alot of what she says makes sense. But lets face it. Its harder for alot of people to have $20,000 in a emergency fund than others. If I had her money I could have all the financial commen sense in the world too.

I was laughing when she said to put 1/2 your income in savings. WTH would we use to pay the mortgage, utilities, and food? We do have an emergency fund that would probably last somewhere between 18 and 24 months, but it's been built up a little bit at a time, over a long period of time, not 1/2 our salary for a short period of time.

Exactly. The advice she is giving is great for those who can realistically bank that kind of money. If we lived on half of our income we would be doing it in a cardboard box. There is no way we could pay for mortgage(even if we downsized) power, water, gas and food. Much less keep DD in clothes and shoes. It simply not possible for most lower middle class families to do what she is suggesting and it irritates me that she makes people feel bad b/c they don't have the income to live by her rules. She has money. lots and lots of money. She probably doesn't remeber at this point what it's like not to have assistants, personal trainers, personal chefs, and the ability to jet off at a moments notice anywhere you want to go. It is really easy to suggest that people cut till it hurts when you don't rquire that of yourself.

 

[Crystal824]

Exactly. The advice she is giving is great for those who can realistically bank that kind of money. If we lived on half of our income we would be doing it in a cardboard box. There is no way we could pay for mortgage(even if we downsized) power, water, gas and food. Much less keep DD in clothes and shoes. It simply not possible for most lower middle class families to do what she is suggesting and it irritates me that she makes people feel bad b/c they don't have the income to live by her rules. She has money. lots and lots of money. She probably doesn't remeber at this point what it's like not to have assistants, personal trainers, personal chefs, and the ability to jet off at a moments notice anywhere you want to go. It is really easy to suggest that people cut till it hurts when you don't rquire that of yourself.

I think Suze Orman probably does know what it is like to cut back until it hurts. If you really listen to her or read some of her books, she was once in a ton of credit card debt. For awhile, she even lived in her car/van. I believe she does know what it is like to go without. I do follow Suze Orman quite closely. I watch her show every week and have read several of her books.

With that being said, I do not have a 8-12 month emergency fund (it is more like 2-3 months), we are building it gradually while paying down our other debt. DH and I are young professionals with tons of student loans, we each have a car loan because our prior vehicles stopped running, we have some credit card debt due to living expenses while we were taking the bar and finding employment because you have no EF when you are in school for most of your life.

With all the financial gurus on t.v. and with books, alot of time you have to really listen to their advice and do what works for you. No, I'm not going to just get an 8-10 month EF out of thin air. It will have to be built up gradually. All my cc debt isn't going to be paid off next month, we are doing that gradually as well. We also go out to eat about twice a month and have a certain amount set aside for entertainment (not at lot but something). Why work 60-80 hours a week if you can't at least have a little fun?