Suze Orman is one of the most well-known names in the personal finance industry. Her advice has helped millions of people — but that doesn't mean every piece of wisdom is perfect for everyone.
As you start building your net worth , it’s important to filter through financial advice and consider what works best for your individual situation. Here are six pieces of advice from Orman that you might want to think twice about following.
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1. You need millions and millions to retire early
Orman is known for cautioning people that they need millions of dollars in savings to comfortably retire, especially if they want to retire early .
While having a large nest egg is certainly ideal, the notion that you need an astronomical amount of money to retire early isn’t always true. The amount you need depends on your lifestyle, expenses, and retirement goals.
It’s possible to retire from full-time work early with a modest amount of savings if you are willing to live frugally, manage your investments wisely, and stick to a budget. Or, perhaps you could retire from your main job and continue to work somewhere else in a part-time gig.
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Orman has suggested that people should continue working until they are at least 70 to ensure they receive the maximum Social Security benefits and grow their retirement savings.
While this advice works for some, it’s not realistic for everyone. Health issues, job availability, or the desire for more personal time can make working until 70 a challenge.
For many workers, a better approach is to assess financial readiness earlier and create a retirement strategy that balances work with enjoying life. If that means working until 70, so be it. But it might mean retiring a bit earlier.
3. Put saving for retirement after the needs of your parents or kids
Orman has often emphasized the importance of taking care of family members, especially when it comes to the needs of aging parents or helping children with financial support.
Orman once advised a TV viewer to stop making contributions to a retirement account so the viewer could take care of an ailing family member.
While being there for your family is certainly admirable, sacrificing your own retirement to do so can be risky.
If you don’t prioritize your retirement savings, you may end up in a financial bind later in life, forcing your children to take care of you. It’s crucial to strike a balance between supporting loved ones and securing your financial future.
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4. Never pay for conveniences
Orman has often advised against spending money on conveniences, like daily lattes, eating out, or other non-essentials. She believes doing so can leave you broke.
However, while cutting back on unnecessary expenses is a good rule of thumb, the idea that you should never pay for conveniences can be overly restrictive. For many people, paying for convenience saves valuable time and reduces stress, which can be worth the cost.
It’s important to strike a balance and spend on conveniences when it makes sense for your lifestyle and mental well-being.
5. Always invest in Roth accounts
Orman frequently praises Roth IRAs and Roth 401(k) accounts as the best retirement saving vehicles. While Roth accounts have many advantages — such as tax-free withdrawals in retirement — they aren't the best fit for everyone.
If you're currently in a high tax bracket and expect to be in a lower one during retirement, traditional accounts might make more sense because they offer tax deductions today.
It’s essential to evaluate your personal tax situation and future financial goals before deciding which type of account is best for you.
6. Active investing is the way to go
Orman has been known to support active investing, where individuals or fund managers attempt to outperform the market by selecting individual stocks. While active investing can offer rewards, it often comes with higher fees and greater risks.
Research shows that most active investors underperform the market over the long term. For many investors, a better strategy might be to stick with low-cost index mutual funds or exchange-traded funds (ETFs) that track the market’s overall performance.
In that way, you will hopefully slowly and steadily build wealth over time rather than trying to beat the market through active management.
In the end, the decision about whether to pursue an active investing strategy is one you should make with your financial advisor.
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While Orman has shared plenty of useful advice over the years, not all of her recommendations are suitable for everyone.
Boosting your financial health is a personal journey, and what works for one person may not be right for another. Instead of following blanket advice, consider your own goals, financial situation, and lifestyle needs before you start investing .
Money tips that can work for everyone
No matter what your bank account balance is, there's always an opportunity to optimize and improve your finances. Here's a quick checklist of things you can look at today.
Focus on paying off your debt. Debt can hold you back from making progress with your overall financial well-being. Aside from cutting expenses, there are tools that can help you pay off debt faster like balance transfer credit cards and debt counseling.
Earning extra income can give you breathing room. If finances are tight, earning some extra money to supplement your income can make a huge difference. A new job is one option to consider, but if you're not ready to make a big change or already retired, a part-time side job could be a better choice.
Cut your expenses. It sounds painful and so not fun, but it doesn't have to be. Take a look at your biggest expenses because that's where you'll probably find the biggest savings. For example, auto insurance rates have been soaring so shopping around for a new insurance company can be the fastest way to cut your bill. Also, look for ways to cut your grocery bill (despite rising inflation).
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