Suze Orman, author, television host, and personal finance guru, has inspired Americans for decades to make better investments of money and avoid serious financial mistakes. She will be the first to tell you that what you don’t do with your money can be even more important than what you do with it. Here are 10 tips to follow to make a lot of money according to Suze Orman.
1. Don’t be too quick about buying a home
Homeownership is part of the American dream, but buying one before you are able to do so can lead to financial disaster. “Sometimes it makes sense to own a home,” Orman told CNBC.com. “And sometimes, depending on where you live, it makes sense to just rent.”
This is especially true if you are in an expensive city. Instead of investing a lot of money in real estate, why not invest in the stock market? This way, you can grow your savings in a down payment on the home of your dreams.
A good way to start investing is to use an automated investment service like Wealthsimple, which will automatically adjust your portfolio to protect you from market turbulence.
2. Do not rent a car
According to Suze Orman, you should never, ever, ever, ever, ever, ever rent a car. If you rent a car, your money will be reinvested in several years of payments and you will be empty-handed when the rental period is over. Financing is a better option, but Orman says if it takes more than three years to repay the car, then it’s not in your price range. Buying a used car is another good option for you.
3. Do not co-sign a loan
When a friend or family member in need asks you to co-sign a loan, Orman says the only correct answer is to refuse. According to her: “Don’t be afraid to say no to others and say yes to yourself.”
When you co-sign a loan, you become legally responsible for repaying the money. Life is unpredictable, and if something happens that prevents the borrower from repaying the loan, you will be required to make the payments.
In addition, if the borrower is a few payments late, your credit score may suffer.
4. Don’t take early retirement too early
Our favorite financial guru advises Americans to avoid early retirement for a very good reason: it is worth delaying social security coverage until age 70.
“Every year you wait between your normal retirement age and 70, social security will add an 8% guarantee to your eventual monthly payment,” she writes in AARP The Magazine.
She says that by delaying Social Security until age 70, you will get a monthly benefit that is more than 75% higher than what you would get if you leave at age 62.
“Living to age 80 and over is no longer a rare event,” says Ms. Orman.
5. Don’t sell stocks when the markets are bad
When equities are down, investors tend to quickly lower their investments. It’s a bad idea,” says Orman.
Instead of getting rid of the stocks, she advises you to continue investing the same amount of money each month, no matter what happens in the market. By using this strategy, a bad month for the market becomes a good month to invest.
If you practice holding on to down markets, you will continue to build a strong portfolio with long-term return potential.
6. Don’t blindly trust a financial advisor
It is important to have a financial advisor you can trust.
“Don’t think they will always have your best interests at heart because they probably have their own interests at heart,” says Orman.
When choosing a financial professional, make sure it is a “fiduciary”, which means that your advisor has a legal obligation to act in your best interest.
During your selection process, ask potential advisors how they will be compensated for their work with you and what other services they can offer you. This will give you a good idea of their motivations when they invest your money. You can then have complete confidence in them!
7. Don’t borrow your retirement money
Suze Orman says borrowing money from your retirement is “the biggest mistake you’ll ever make” if it’s used to pay off other debts.
A loan is preferable to a cash withdrawal from your account, which will result in a tax bill and a 10% penalty if you are under 59.5 years of age. In addition, loans generally have a lower interest rate than a traditional loan.
But you may not be allowed to put more money into your retirement fund for six months, which means you will miss opportunities to make pre-tax contributions that will reduce your taxable income.
Worse still, if you withdraw part of your retirement savings, even temporarily, you will lose significant income if the markets recover.
8. Don’t let your debt grow
“A debt is a servitude,” Orman told CNBC. “You will never, ever, ever, ever, ever, ever have financial freedom if you have debts.” Nevertheless, she points out that not all debts are the same.
Mortgages and student loans can be considered “good debts” because housing loan interest rates are generally quite low and your degree is an investment that should generate higher income over time.
However, credit card interest rates are much higher. The longer you delay the repayment of your credit balances, the more money you lose. You can easily pay for your purchases three or four times.
9. Don’t spend to impress others
It is human nature to want to impress others. But Orman knows from experience how stupid it is.
Once, she rented a luxury BMW and bought a Cartier watch with money borrowed from her retirement fund just to impress a woman she was dating. She says it was “the stupidest thing I’ve ever done with the money.”
Spending money you don’t have to impress others will leave you with superficial relationships and stressful bills.
Work hard, invest wisely and reap your wealth once you have made it. There is nothing more impressive than real financial success.
10. Don’t stay in a job you hate
Suze Orman says that surveys show that two-thirds of workers are not really well at work.
“Staying in a job you don’t like is disrespectful to yourself and your loved ones,” says Orman on her website. “You can’t tell me it doesn’t have a negative impact on your relationships.”
Before you start looking for a new job opportunity, see if the job you have can be modified to meet what makes you unhappy.
Never express it in this way when you meet the boss or HR. Instead, tell the management that you would like to talk about how your work could be “modified” so that you can be more productive.
