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I've been following Suze Orman for about 7 months now and am beginning to start thinking that her advice isn't really suitable for everyone. Not that it's bad advice per se, but I am really starting to see that her advice is very one-size-fits-all. I really like her as a TV personality and her show is good entertainment, but I have the following gripes. Maybe some of you out there can either confirm or reject my opinions on Suze's advice. I'm a 29 year old single guy who earns a decent income and rents an apartment, so I'm not sure if her advice really applies to me. Anyway, here are my observations...
1. She seems more like a financial therapist than a financial advisor. Much of her "clients" seem to be facing serious, extraordinary problems that don't really apply to most Americans. Massive debt issues, family issues, relationship issues, etc. None of this really applies to me that much. She spends a bit too much time on her show with such "clients."
2. Her advice is generally one-size-fits-all. Although she does take some time to learn more about her clients and their specific situations, her solutions or plans of action to most problems are almost always identical.
3. Her advice really isn't free as she claims it to be. You can't watch her show if you don't pay the $30+ a month for cable television, which many people no longer have in this day and age, including myself. She makes a lot of money off selling books as well. She wrote NINE books in a 10-year period. And she sells various tools and kits on her website. She also comes off as a "pretty" celebrity with makeup, nice clothing and hair.
4. She insists on having an 8-month emergency fund. To me, this seems a bit extreme....very extreme, actually. First of all, it takes YEARS for the average person to save up for 8 months of essential living expenses. I know for me it would take about 3 years to do so. Second, if you were to lose your job, chances are you will be entitled to unemployment insurance, which would cover 75% of my living expenses anyway, and lasts far longer than 8 months. Look, I agree that we all should have an emergency fund of some sort, but maybe more like 3 months of expenses? Or just a flat $5,000 or $10,000 or something, in the event you need to spend a lot of money on some major necessity. But I also have a $3,000 credit card line that could be used for an emergency situation. And having your money sit in an emergency fund doesn't put the money to work, either.
5. She recommends saving 15% of your salary toward retirement. Again, this seems a bit much, to me. I could understand maybe 10%, but 15% is a lot. That's anywhere from $400-800 a month for most people, which seems excessive.
6. She says to only buy a home if you can put 20% down (except for special circumstances). For many people, especially those who live in high cost areas such as myself, where an entry level home is around $400,000+ this is simply ridiculous. But what if you could easily afford monthly living expenses from even putting just 10% down? I know there's PMI, but still.
7. Everybody needs a revocable trust. This is where she really lost me. A few weeks ago she announced that she now thinks that EVERYONE needs a revocable living trust. Really???? Even someone like myself who is young, single and has a low net worth? I mean, I designate beneficiaries for all of my financial assets whenever possible, but a trust seems to go to far.
The list goes on. Not that her advice is BAD, but it just seems to be a bit too conservative and difficult for the average American.
Your thoughts?
She shares very basic information. It's just a starting place. All her information is easily found online in other places. You want more complicated stuff past the basics, look elsewhere.
She isn't a financial adviser, she gives advice. There's a difference.
She changed this advice a few weeks ago when rates were rising to 10% down. And you have no business buying a house with little to no down.
I put 6% down. Got tired of it, rented it out. Pays its 15 year 3% mortgage, expenses, and runs around 28% profit (up to 60% when the mortgage is paid off).
I call it my $2 million house. What I'll make off it in today's dollars by the time I "retire"
Wrong. The podcasts have been discontinued as of Aug 31. Now you must watch her on TV no matter what if you want to see full episodes.
I use either my phone or tablet for her podcasts (I use pocketcasts), and I received the 10/05/2013 podcast. You may want to unsubscribe and resubscribe or try a different application for podcasts.
On the subject of retirement, I think even 15% is probably right on the mark. Social Security is probably not going to keep up with inflation (they have to make it solvent somehow), relying on inheritance works for some people, but not for most, you don't know how long you're going to live, etc, etc...
And beyond all that, 15% for retirement might actually be LOW for a lot of people because:
--Few people start out saving 15% for retirement right off the bat in their 20s.
--Many people get laid off from good paying jobs in their 50s and the next job they get pays a lot less than the one they lost (if they aren't booted out of the workforce altogether).
--Almost no one works continuously for 40 years straight. People lose jobs, become disabled, leave the workforce to raise kids or take care of ailing relatives, etc.
The median household net worth in the US for the op's age is $9000. He is just unaware of how little income and net worth the median US family has.
The median household net worth of retirees is only above $1m (and barely so) if you are in the 90% income percentile. Below that, it's dramatically less. Then if you figure the average safe return on $1m being 5%, that's $50k a year. Is that in-line income-wise with people in the 90% income percentile while working? No, not even close.
The median household net worth in the US for the op's age is $9000. He is just unaware of how little income and net worth the median US family has.
The median household net worth of retirees is only above $1m (and barely so) if you are in the 90% income percentile. Below that, it's dramatically less. Then if you figure the average safe return on $1m being 5%, that's $50k a year. Is that in-line income-wise with people in the 90% income percentile while working? No, not even close.
That's why Suze's advice is so conservative.
Exactly.
Also, I think maybe she says people should have an 8 month emergency fund so that they'll at least have a 3 month emergency fund; 15% toward retirement so that maybe they'll at least save 6% to 10%, etc. I guess for some people those goals seem so completely overwhelming that they do nothing....but maybe for others it wakes them up and gives them some goals to shoot for.
I think Suze's target audience is generally middle and upper middle income earners who don't pay much attention to their money and save little. There are lots of people like that out there.
Location: Chapel Hill, NC, formerly NoVA and Phila
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Quote:
Originally Posted by nep321
I don't see the need for an 8-month emergency fund for those who are not self-employed and are eligible for unemployment insurance in the event of job loss.
Remember, though, that an emergency fund is not just for unemployment. It is for any emergency. That could be a Hurricane Katrina situation where you have to find somewhere new to live, get all new belongings, and find a job or a devastating illness that makes you incapacitated for a length of time. Even with disability insurance covering some of your lost pay, you have co-pays, you may need to travel for the best care, etc. There are lots of typical emergencies that can happen that aren't just losing your job.
OP, I think you are dead wrong when you say that an 8 month emergency fund and 15% retirement contribution is too conservative. I think it's the bare minimum, and I base that on 49 years of experience with this thing called LIFE. Life throws you curveballs. A tree crashes through your roof in a 2am storm, and you have a massive deductible on your homeowner's insurance. Your car gets totalled and you get a lowball payoff from your auto insurance. You get cancer and your disability only covers 50% of your take home. You get laid off and can't find a job for 18 months, and your state unemployment only pays you for 12 months. Your dog runs up thousands in vet bills after being hit by a car. These are EMERGENCIES, for which you would rely on your emergency fund.
As for the retirement, you are out of your mind. Have you ever used one of the better, detailed retirement needs calculators to determine just how much you need to save for retirement? It's an eye popping number for most people. Try it and see. And remember, the old adage about your expenses going way down in retirement is no longer true. People are living a long time and are experiencing very high health care costs in old age. Lifestyles in retirement are different and more expensive now than they used to be. Many retirees now carry mortgages, unheard of 30 years ago. And most people don't experience the steady, stable income increases that they used to -- periods of unemployment or underemployment are now the norm, especially for people in their 50s and 60s (what used to be their peak earning years to save for retirement).
So before you get all preachy about how crazy those numbers are, stop and think a little.
OP, I think you are dead wrong when you say that an 8 month emergency fund and 15% retirement contribution is too conservative. I think it's the bare minimum, and I base that on 49 years of experience with this thing called LIFE. Life throws you curveballs. A tree crashes through your roof in a 2am storm, and you have a massive deductible on your homeowner's insurance. Your car gets totalled and you get a lowball payoff from your auto insurance. You get cancer and your disability only covers 50% of your take home. You get laid off and can't find a job for 18 months, and your state unemployment only pays you for 12 months. Your dog runs up thousands in vet bills after being hit by a car. These are EMERGENCIES, for which you would rely on your emergency fund.
As for the retirement, you are out of your mind. Have you ever used one of the better, detailed retirement needs calculators to determine just how much you need to save for retirement? It's an eye popping number for most people. Try it and see. And remember, the old adage about your expenses going way down in retirement is no longer true. People are living a long time and are experiencing very high health care costs in old age. Lifestyles in retirement are different and more expensive now than they used to be. Many retirees now carry mortgages, unheard of 30 years ago. And most people don't experience the steady, stable income increases that they used to -- periods of unemployment or underemployment are now the norm, especially for people in their 50s and 60s (what used to be their peak earning years to save for retirement).
So before you get all preachy about how crazy those numbers are, stop and think a little.
Yeah I guess Suze is right. But what about when she said that everybody needs a revocable living trust?
Wrong. The podcasts have been discontinued as of Aug 31. Now you must watch her on TV no matter what if you want to see full episodes.
More than 90% of households have some sort of cable. It's pretty much a utility nowadays. Really not a legitimate complaint for criticizing Orman.
In general her advice is okay - reallly no advice fits everyone. But she provides people with pretty decent advice - but not a substitute for a certified financial advisor, imo.
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