The Facts
Suze Orman is a self-touted "financial expert" who has become a fixture on television shows like Oprah, Larry King and just about anything owned by the peacock. Her Wikipedia bio shares the following: Orman was born in Chicago, Illinois in 1951 to immigrants who ran a deli. Orman came from a working class background and has said that she did not "grow up with money." She holds a BA in social work from University of Illinois. In 1973, she moved with friends to California and lived for three months in a van on Hearst Avenue in Berkeley. She soon became a waitress at the Buttercup Bakery on College Avenue. In 1980, a longtime customer named Fred gave Orman a loan of $50,000 to help her fulfill her dream of opening her own restaurant. Orman invested the money at Merrill Lynch, but four months later was broke again, after she was swindled by her stockbroker. Knowing that she couldn't make the money back as a waitress, and having started learning more about finances and investing, Orman returned to Merrill Lynch and entered their training program to become an account executive. She discovered through her training that her stockbroker had committed an illegal act and she thus sued Merrill Lynch. Suze received the entire $50,000 back plus interest and was able to pay back her former customer. After she completed the training, she was hired by the firm and remained there until 1983 when she left to take a position as a vice president of investments at Prudential Bache Securities. In 1987, Orman resigned and opened her own financial planning firm, the Suze Orman Financial Group. She acted as director of the firm until 1997, when she stepped down as her writing career took off with the publication of her second book. She has since written six straight best selling books on financial planning.
The Rep
- Suze holds the PBS record for most successful fundraiser with her shows promoting her books
- She is the go-to financial guru for Oprah, Dr. Phil, Larry King and seemingly anybody else that will have her on their show
- QVC also touts her as one of their best sellers
- One of the most influential people in the world according to Time magazine in 2008
- Critics often site her advice as being too simplistic
- Her financial credentials listed in some publications have come under fire for being exaggerated
- She recently made headlines for going against her founding principles: Paying off debt and stokckpiling an "Emergency Fund"
Suze Orman is looked on by many as the know-all, be-all, end-all when it comes to planning and saving for a prosperous future. There is no doubt that those that have followed her advice have found themselves living a better, less financially stressed life. But does that alone make her worthy of being an expert?
Is her advice too simplistic? Is there a simpler way to say, "Yes?"
You can click on a "Debt Eliminator" plan on her website. Once there, you can enter your outstanding credit card debt. She then asks what your minimum payment is and if you have additional money you can pay toward the debt. If you only have one credit card with a balance and say you can pay an amount greater than the minimum, you get this response:
"You need to pay the $150 minimum amount due PLUS $250 (the extra amount of money you said you had available) for a total of $400 on this card. Continue to pay at least this much each month on your card until it is paid off in full. Once your card is paid off, and if you need to use it again, be sure to only charge an amount of money that you can afford to pay off each month. Next, I want you to sit down and write a personal vow that you will never charge more in a month than you can afford to pay off in full. Getting rid of credit card debt is a great step, but staying out of debt is the ultimate goal to build financial security."
If you put in additional cards with varying interest rates and balances, surprisingly it gives you a secret code to enter on any credit card's website that makes your outstanding balance trickle down to zero by applying a fractional penny from each transaction made by other credit card borrowers that don't know about this secret code. No, not really. It tells you to pay off the highest interest rate card first, and then tackle the smaller balance cards until you get down to one card. After that, see above example of having one card with an outstanding balance. Pretty simple stuff, right? But, maybe some people just can't understand the basics of living within their means.
Suze is an advocate of paying off all your debt and then building an emergency fund equal to 6 months salary in the bank that you never touch in case something unexpected happens, but she recently hit the news with a change of plans. Due to the hardships of this recent economy, she said to scrap the pay off all the debt stuff and just pay the minimums and build up the cash in your account.
But this change in plan begs us to ask: If the golden plan that she has been preaching for twenty something years was the answer to any emergency situation that came up, how come when an emergency actually happened, the plan was immediately scrapped for a new one? Clearly, Orman's original advice was too idealistic at best. And, one has to wonder, wouldn't it be better if you were able to pay off all your debt and then use your credit line as the Emergency Fund in this uncertain time? Cash will certainly always be king, but a credit line can be a lifeline at times.
Money in the bank is a psychological thing. One creates their own bottom that they feel comfortable with keeping. For some, going below $500 in the bank account is a sign of trouble, some $10k or maybe a million, while some certainly cash it all out every paycheck, it doesn't really matter. Ideally, we would all have $30k in the bank, but that's just unrealistic. And actually would be problematic for the economy if that were to happen by creating stagnation and, more than likely, inflation.
The other problem with this new twist to the plan is the idea that all debt is a bad thing. Suze herself started out borrowing a large sum of money to fulfill her dreams at the time. Things didn't go so well, but that's due to some illegal shenanigans and then her dreams changed. But who's to say if she wasn't swindled, she wouldn't have a bazillion dollar company going right now thanks in large part to that first loan?
So, Suze's advice boils down to being debt free and to save a boatload of money and to NOW save the money and don't pay off any more than the minimum of your credit card debt. That seems incredibly foolish and downright dangerous considering her unmistakable power in influencing many people's (especially the women-folk's) financial decisions.
One must wonder how many spousal arguments if not outright divorces lay at the feet of this "expert."
Because of the shift of plan when the Suze hit the fan and because her advice of "debt=bad, money in hand=good" is nothing different than someone in your life (mom, dad, grandpa, some homeless guy on the street) would offer up, it is our opinion that Suze is a lot of talk and circumstance, but little if any substance and absolutely not an expert.
The X Factor
The fundamentals of Suze's original plan will never fail or go out of style and countless people will never learn how to save a dime, plus hundreds of thousands of new suckers are born every minute that soon gain their financial independence whether they want to or not. These new people to the system will have the same inept ability to screw things up just as those before them did time and time again.
But, Suze will probably retire a gazillionaire, so she can easily point to the proof of her own success. To that we say, "Blech, this miracle elixir tastes a lot like piss."
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