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As an author, award-winning TV show host and public speaker, Suze Orman’s advice when it comes to debt, saving money, investing and lending has helped millions of Americans gain a better handle on their finances.
With a direct approach and practical advice that gets to the heart of the matter, Orman is one of today’s most popular and respected financial experts.
If you’re looking to freshen up your financial outlook, Orman has some great pointers. Here are ten tips from Orman to help keep your finances in check.
1. Get the Big Picture of Your Financial Situation
“It’s impossible to map out a route to your destination if you don’t know where you’re starting from,” Orman told O, The Oprah Magazine. To know where you’re headed, you’ll need to get a panoramic view of your finances, what Orman calls a “before” snapshot to shape the “after.”
“You’ve heard me say this a million times, but I want you to open every single financial statement — bank, credit card, mortgage, 401k, brokerage account — and take a look,” she wrote. “Only when you have everything in front of you can you set priorities about what to do next.”
Once you’ve gotten an overview of your finances — what’s good, what’s bad, what needs improving — then you can start prioritizing and developing a plan to meet your unique needs.
2. Track Your Spending
It’s not always the large purchases that can cause your budget to fail. Orman suggested taking a good look at every single expense you have to see where you might be overspending or losing money on unnecessary purchases.
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“You know the big-ticket expenses in your life, but all of the smaller spending can also be a killer,” Orman said. “Take a look at your monthly outflow, and I guarantee you will have a few ‘Yikes, I had no idea’ moments.”
One way to gauge your spending is to collect all of your checking account and credit card statements, plus receipts, and put them into an expense tracker or a spreadsheet. With the tracker, you can modify your spending and see what you can eliminate and where you can save.
3. Strategically Pay Off Your Credit Card Debt
You might think that paying down your credit card balance little by little is making a dent in your debt. But you might be going in circles if the money you’re forking over each month to your provider is going toward your interest, not your principal. Orman wrote about a more strategic way to eliminate debt from your life without having to forgo your credit card use.
“See if you can qualify for a balance transfer card that offers a low or 0 percent introductory interest rate for the first six to 12 months,” she said. “If you can get a good deal, move your high-rate debt to that new card. Do not use the card for any new charges, and push yourself hard to pay off the balance as soon as possible. If you don’t qualify, no worries. Always pay the minimum due on each card, on time, every month.”
Orman is similar to Dave Ramsey in her advice to start by paying off the most expensive debt first and work your way down from there until you’re debt free if you’re juggling multiple forms of debt at once.
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4. Stay on Top of Your Student Loan Payment
For many who have student loan debt, their federal student loan payments were paused for three years. Because of this, you might have lost track of exactly how much you owe on your student loan, but now that the pause is over, Orman says you need to prioritize these payments.
“Loan servicers should be contacting their borrowers to make sure they know when and how much they need to start repaying, but I want every young adult to take the initiative to log in to their account and make sure they understand what’s expected of them. Falling behind on student loan repayments is a very hard hole to climb out of.”
5. Take Stock of Your Investment Goals
One of Orman’s “Forever Nevers” is warning against investing in variable annuities, as insurance-derived products have fees that might reduce your earnings.
Orman is also averse to investing money in long-term accounts if you need your money quickly; and savings, certificates of deposit or money market accounts don’t give back yields high enough to sustain your finances for the far future.
Orman warns that if most of your invested money is sitting in a mostly liquid, cash-based account, it won’t be earning enough interest to beat the rate of inflation — leaving you with little to show for it. Orman’s solution is to buy stocks instead.
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“To fulfill a long-term investment goal, like funding your retirement, consider buying stocks,” she wrote. “The more distant your financial target, the longer inflation will gnaw at the purchasing power of your money. What you can get for $100 today will cost nearly $200 in 20 years if inflation averages 3.5 percent.”
6. Open a Roth Account for Retirement
When looking at how to save for retirement, Orman says a Roth is the way to go.
“A Roth account is hands down the best choice for young adults. With a Roth you contribute dollars that have already been taxed, and then in retirement you get to withdraw the money without paying a penny in tax.”
She says that most 401(k) plans offer a Roth option, so you should opt for that if you’re not already.
7. Fortify Your Emergency Fund
Opinions vary on how much your emergency fund should be. It depends on many factors, like how many months you want to cover and how much you want to have in your reserve. Orman has her own dollar figure she said everyone should aim for.
“By now, I am sure you have started saving,” she said. “The next step is to keep at it until you have at least eight months’ worth of living expenses.”
To free up more cash to tuck into your emergency savings, Orman recommended cutting back on your monthly spending by about 10%; she said you can save an additional 10%, by shopping around for lower insurance rates.
You might want to contribute more to your employer-sponsored 401k or switching to a Roth IRA for better, more tax-advantaged savings potential.
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Orman also recommends setting up an automatic payment into your emergency fund account that coincides with when you get paid, so you don’t even have to think about it and your fund builds up over time.
8. Take a Good Look at Your Subscriptions
Because we live in a time where subscriptions are offered right and left, there’s a good chance we don’t know exactly how many we’re signed up for.
Orman recommends creating a master list of all of your subscriptions, then sorting them into “must-haves” and “no-longer-needs.” Just make sure you stick to your guns.
“Cancel the No-Longer-Needs and stay strong. You will likely be offered a less expensive deal if you agree to remain a customer. Please be smart here. If you don’t need it, you don’t need it. Just because a $30 monthly charge is now miraculously $10 does not make it a good deal.”
9. Buy — Don’t Lease
Many people think the benefits of leasing a car outweigh buying one new. For one, it’s cheaper because a lease is not a loan and has no interest rate attached to it. If you lease a used or certified pre-owned car, you could save money because the vehicle has already gone through its biggest period of depreciation in value by the time you take the wheel.
Nonetheless, Orman advised against leasing a car, unless you want to be making payments forever.
“If the lessees are rolling into a new contract every three years … they’re going to be making monthly payments indefinitely,” Orman wrote. “If you’re shopping for new wheels … don’t lease.” In fact, she said to go for a shorter, 36-month loan, even if longer terms or other financing deals are offered. Otherwise, you’ll be stuck paying more interest for a longer period of time, and that’s money you could have saved or invested elsewhere.
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“Borrow the smallest amount of money possible and pay it back as soon as you can,” Orman said. It’s another financial step to take that can keep you and your money growing for a long time to come.
Tailor these tips to work for your own financial situation so that you’ll be on your way to managing your money like an expert. By being proactive with your money, you’ve already avoided committing what might be the biggest money mistake of all.
10. If You Have Dependents, Get Life Insurance
If there are people in your life who depend on you for financial assistance, Orman says life insurance is a must.
When considering a life insurance policy, Orman recommends one that pays 20 times the annual living expenses of your loved ones in the event of your death.
“I know that sounds like a lot, but term life insurance is incredibly affordable. And a death benefit equal to 20x (25 times is even better) your family’s income needs means they would be able to invest the death benefit in high-quality bonds and live off the interest, which will give them so much financial security.”
Paul Sisolak contributed to the reporting for this article.
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