Is Suze Orman's Advice Too Basic?

First let me say I believe Dave Ramsey and Suze Orman have brought more people to consider their personal finances than most other financial writers. Orman has additionally brought more women into thinking more about their finances and take control of their financial futures. However, every time I see her (which, to be fair is not that much) something troubles me.

Her advise is often very simplistic.

I watched the show awhile ago and there was a segment on the show called "Can I afford It?" No offence to the people that called in, but it was like a bad SNL skit.

• Caller: Suze...Can I afford a Plasma TV?
• Suze: Tell me, do you have any cash on hand for Emergencies?
• Caller: No...
• Suze: Any Retirement savings
• Caller: Yeah I have $2500 in my 401K
• Suze: How old are you?
• Caller: 50
• Suze: I wouldn't...get some bonds right away...

That was totally made up but it isn't that far off the calls received. It isn't her problem who calls in, but the way real radio or TV works is that they feed the callers and queue them...some someone tosses her some real softballs...at least when I watched.

Her tips that I have read out on the web were pretty pedestrian as well.

• Don't Eat Lunch out
• Search your closet for lost money
• Use Self-Serve pumps at gas stations

They might as well also include:

• Don't put your money in a pile and burn it
• Don't eat dirt
• Don't try All of the get rich quick schemes...its not fair to others that want to get rich too...

Love to hear you opinion, am I being too hard on her based on the few shows I have seen? Is one of her books a must read? Let us all know!

Nothing wrong with simple, just simplistic! It really comes down to this: If you want to create wealth first you need to spend less than you make. Period. Then topics like Budget, Emergency Fund, 401K, debt management and investing should be reviewed in depth.

Two Great Carnivals to See

A quick post, because today is crazy busy!!!

Two great must-see Carnivals are going on. The ever popular Carnival of Personal Finance is being held at Baglady! There is a really interesting slant on this one, probably a carnival if seen in real-life that would scare kids! But its on the net so it can't hurt you!

Next, the Carnival of Debt Management is running at Credit Card low-down. These are laways jam-packed full of goodness, and this one is no exception.

As a blogger these are really great way to let others see your great work!

Back off to crazy-town!

The Active Veil Of Consumerism

We have a family budget meeting at the end of every month. For February we discussed the good progress we made, when a question came up from our middle child, our 10-year old daughter.

"If we have $2000 in our Emergency Fund and $3000 saved on taxes, that $5000, right?" "Why can't we use some of that to go to the mall like we used to?"

After some chuckles I noticed that others were thinking along the same lines...and probably me too. See when we would get money in before we would allocate some of it for "fun." We would buy something on our list that we had all agreed we wanted. New TV, DVD player, etc.. But not this time.

What we were all feeling was the break from the past.

Before we would "celebrate" our wins more. We would look forward to bonus as it meant a second Christmas, albeit with more expensive gifts! Although this was an illusion...what I call the active veil of consumerism. Sure we had debt, check out the Pinball machine. No retirement, Trip to Vegas. But every grain of sand in the hourglass was working against us. Every spend, pay-off, spend cycle got larger! The Power of Compounding was our Enemy...

That is why with our Success Map firmly in hand we had planned out what we were going to do with this Tax Refund...and it was going to be boring. No Ice Cream, no Pony rides, just put it into E*Trade for our 2008 Property Tax bill.

And that is what we said to her...how doing that in the past, while fun at the time, gave us the debt we are paying off now. And how every dollar we save or use towards paying off that debt gets us closer to our Freedom Goal.

Her reaction: "Ok, that makes sense, but I still like the mall though!"

Personal Finance QuickTake: Uneasy Feeling

Yahoo had a really good article today talking about consumer sentiment. Basically even through the housing boom and access to way too easy credit, consumer sentiment has been a bit wary. It was almost like everyone knew this was too good to be true.

Easy credit has led directly to a disconnect with consumer's paycheck and their ability to spend. Gas prices rise, which raises price inflation food and travel, heap on medical expenses running at high double digit growth and a melt down is inevitable.

This is called...inflation.

The problem is you don't fix inflation by lowering interest rates! You do by raising them. This puts our Fed in a bit of a bind. If the raise rates the economy tanks, if the lower them inflation goes nuts.

How bad can inflation get? Picture Europe before WWII. Literally wheelbarrows full of money to buy bread! Not worth the paper it is printed on...Not saying go dig a trench and hide, it it foretells of tougher times ahead. It also says that this doesn't get fixed with a $1200 check from the Government.

How do we cope? Get out of debt. Save and spend less than you make. Not sexy but it works!

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Debt Chain Freedom

Have you ever thought about quitting you job and doing something else, like writing or gardening or even working with the less fortunate? Why don't you?

Probably for two reasons: one, you have debts; two, you don't have the money to do that.

Those are the physical manifestations of having debt. Real life debt chains. The only way to free yourself is to break those chains.

To break the chains first you must Visualize your Debt. Think of every dollar owed as a link in the chain, every different debt is a chain each holding you down like a staked balloon. So if you have four credit cards to pay off, imagine four chains tying you to the ground.

I personally like to look at each of my debts that way. For example, I received my bill for my CitiBank Platinum Card. I continue to make the minimum payment on this as it is not my top snowball debt, yet! My bill showed I owed $9119. If i think of every dollar a 1 inch link, that is 759 ft of chain! But today I paid off $313, or 26 feet! so after I paid this I literally imagine cutting off that 26 feet of heavy rusty chain that was holding me down!

OK, I know it sounds weird, but for me I like to feel the following:

1. Progress - Thinking about cutting of the 26' of chain feels like real progress to me.
2. Value - I am freeing myself inch by inch! I am buying my freedom at $1/inch!
3. Keeps me in Check - I don't want to add another inch to these heavy oppressive chains do I? So why would I take on extra debt?

For me this has really helped, just paying off dinners that I had 5-years ago doesn't make feel better. But every time I retire $1 I really do feel lighter!

Last whacky tip. Actually go to Home Depot or your local hardware store where they sell chain by the foot. Find the heaviest chain you can and buy one link. They will look at you a bit strange, but then keep that heavy piece of chain on your desk or wherever you do your bills. Every time you pay off even $1, pick up the link and feel the weight and think about that manifestation falling off of you. If you are tempted to spend, do the opposite, image all the extra feet of that chain tying you down.

This is a quick visual and sensory piece of conditioning that can help you stay on budget and manage your money better.

KISS me Wealthy!

I think it was Sleeping Beauty where the all the poor Girl needed was a kiss, from Prince (not the Prince...nor Morris Day and/or the Time, that's another story). I am pretty sure it was because her family forgets to invite the crabby next door neighbor to a party.

Well a KISS can help secure something in life, wealth. But the one I am referring to is the acronym: Keep It Simply Stupid!

You can over-complicate budgeting and money management to the point where you literally cannot succeed. The first budget I did after our middle-one was born had 373 line items! I had a line item for...gum!

What this really meant though was I had 373 potential failure points and only 1 (meet budget) success metric. Now here is the balance:

Failure Points - Exceed budget

Success metrics - Each of my Top 10 goals, (10 success metrics); Meet my snowball target, pay all of my bills, etc..

I think you get the point. These are very easy to understand success points that allow for creativity to achieve the goals. On top of that, the chances for success well outnumber the chances for failure. Success breeds success. Appreciate your successes and embrace them and you will have more.

In relation to finances, embracing KISS will make it easier to do the things you need to do to build a strong financial future. Budget, Saving, Paying off debt, Planning for retirement and Building a wealth portfolio real isn't that hard. It just takes making 100 right decisions a day.

If you are going to be successful you have to make the correct decisions...not every time, just more of the time. You can do it, Just Keep It Simple Silly (I don't think you are stupid!)

Mortgage Crisis vs Integrity

There was a great story about the Mortgage Crisis on 60 Minutes. While we have all heard the various issues explained about how much inventory is out there, how many people have been pushed out of their homes due to the ARMs resetting. But something struck me hard while watching the videos.

I have always felt bad for the people who lose their home. We nearly went through it as a kid and it was a horrible experience. There was real shame in being in a nice middle-class neighborhood and really not being able to afford it anymore. However, in the videos a couple were basically saying..."Whatever!"

In the "walking away" video, the couple admits that: they overpaid, they got a ARM knowing it would reset, and that they can pay the new payment after the increase...but they are going to let the house go and be repossessed. When asked by Steve Kroft, "Why?" They basically say that they aren't going to pay that kind of payment for that kind of house. Basically if the investment was working they would continue to pay, but now that is not...Oh well! They will go rent for a few years, get their FICO back up and give 'er a try again!

Maybe we are weird, or it is just the way we believe that you should act, but we would just never do that. If we lost, or gave up our house it would only be after every measure was taken. When we were going through trying to pay all of our medical bills and old debts, a bunch of people (including one of the ladies at the hospital) suggested to really consider bankruptcy, but we believed that we weren't disputing any of the charges, so we had the obligation to repay them.

Maybe some feel it is OK to some because 50% of this (or more) falls on the backs of the lenders giving loans to those with very little hope of paying them back. But for us integrity is blind. I am not saying that if you decide you must go bankrupt you are doing wrong, just that it should be a last, ditch effort. For us it is worth the effort and harm to our budget to try and pay our debts. No matter to whom.

So how about it? Are we just Luddites, and hopelessly out of step with the way the world works?

You Need to Develop a Success Map

How many of you have paid off all of your debt before, only to say "Never Again" and then few years later do the same thing? I have. Not to the level I am working towards now, but multiple times I have worked for a bit until I paid it off and then went back to how I charged before!

What's worse is that each time its a bit deeper, isn't it. Well the Credit Card Companies raise your credit line since you paid it off! This becomes a vicious cycle. If this has happened to you before, or it you don't want it to, I suggest you put together a Success Map.

If I look back to all of those times I paid it off just to recharge again, there is one thing that happened each time. I thought I had reached my goal...heck I did, but I didn't reach my end-goal just a stage-goal. This is why I say often that Budgeting is a lifestyle, not a prison sentence to be hopefully paroled from!

This is were I really like Dave Ramsey's Baby Steps, or other guides that help you plan out what comes next. First, you really have to have your goals together. Is it buying a house? Saving for your kid's college? Retire early? Buying your own business? It doesn't matter, but you need to plan for it now, before you have paid off your debts, because you need to apply that same drive and moxie that killed those debts to the next project.

For us here it is:

1. Emergency Fund - Done
2. Pay off all consumer debt - In process
3. Save 6 months expenses -Next
4. Fully fund Retirement accounts - up to 15% of gross
5. Pay off house
6. Invest all available funds
7. At $1 Net Worth -Buy own business

You can go to step 10 or beyond, my brother is a planner like that, but the point is to have a plan for what to do next. If you don't, you could be restarting the process at step #1 all over again, and each time it is a deeper hole to get out of, with less time to do it.

So set your plan up soon if you don't have one and make sure that you review your goals frequently enough that they still match where you want to go in life, before you get there!