Bloggers critique Suze’s big about-face
Posted
Apr 21 2009, 01:45 PM
by
Karen Datko
Rating:
He's 68, has $280,000 or so in retirement savings, no debt, and wants to take his wife of 40 years on a $30,000 trip around the world. Denied, said Suze Orman. He can't go because he doesn't have an eight-month emergency fund.
We'll have to take the word of "Moneymonk" and one of her readers on this because we didn't see Suze's show. But the scenario she recalls and Suze's advice didn't sit well with Moneymonk.
"Suze, retirement is supposed to be enjoyed. This is their time. Let them have it," Moneymonk wrote. "Suze, whatever happened to PEOPLE FIRST?"
What's really taken personal-finance bloggers by surprise is Suze's about-face on paying off credit card debt, which until recently was her top priority. She used to say: "Your first step is you have to get out of credit card debt. After you're out of credit card debt, you need an eight-month emergency fund."
She now says people should pay only the minimum due each month on their cards until they have that emergency fund in place.
We can see the sense in this new advice. Sure, the interest will cause your credit card balances to grow if you're making only minimum payments. But at least you'd be able to pay for essentials with cash if you lost your job. As our partner blogger J.D. Roth at Get Rich Slowly has said, a credit card is not an emergency fund.
But bloggers found fault for the following reasons:
Her advice is too all or nothing. "JSteele" at Ask Mr. Credit Card, said, "Whatever I do, I am not planning on racking up interest on my credit cards now in order to stuff money underneath my mattress for a rainy day."
It's too much, too late. Trent Hamm at our partner blog The Simple Dollar said saving an eight-month supply of cash is a long-term goal that would have best been heard two years ago, rather than now, when he sees signs of an economic recovery.
Trent said that "an eight-month emergency fund, if you have high-interest outstanding debt, is overkill. However, in the current economic environment, there is reason for people to feel much less secure about their employment. So, in the short term, I'd bulk up my emergency fund a little -- but only in the short term."
Say what? replied Ginger at Girls Just Wanna Have Funds. "I don't know about you but my crystal ball is broken and I have no way of really knowing when the recession will cease and when/if the economy will rebound," she wrote. "... Eight months is nothing these days and frankly we should be aiming for one year of living expenses."
Suze's new advice makes sense to Paul Michael at our partner blog Wise Bread, As Suze did, Paul notes that credit card companies are changing the terms for and dropping even reliable cardholders, so "that avenue of credit could still be closed to you. Not so good if you need a fallback in times of crisis."
Overall, we think people need to look at their individual circumstances. Financial advice is not one-size-fits-all. If you don't have an emergency fund, stop spending as if you do and save up. But if you are 68 and have retirement savings, go on the trip of your life.
Michael Rubin at Beyond Paycheck to Paycheck was also irritated by Suze's advice to the retired man who wants to travel. Michael talked about the "the importance of balance and understanding both life's and one's financial ‘big picture.'"
"I hope he goes ahead and enjoys himself and ignores Suze. She is sounding like the grinch that stole Christmas," said "Tired of being broke."
Related reading:
Why Suze Orman is wrong -- again
Stop listening to Suze Orman
Is Suze Orman out of touch?
Stop picking on Suze Orman!
