human, being


Suze Orman wants me to have $27,813 in the bank
April 15, 2009, 8:09 am
Filed under: money | Tags: , , , , ,

Last weekend I watched Suze Orman’s show, and she kept hammering it home that everyone needs 8 months of living expenses in the bank just in case.

I know about just in case. We experienced just in case for five months last year. It sucked. We got through with unemployment, some credit cards, cutting back dramatically and shooting a small porno which we sold online.

(Just seeing if you’re actually reading. Kidding, Mom.)

Anyway, Ms. Orman says 8 months is the magic number. According to the calculator I ran on her site, that’s $27,813 for me. She’s also now recommending that people pay only the minimum on their credit cards (and stop charging on them) and putting every extra penny into that emergency fund.

It would take me 56 months — nearly 5 years — to put that together. That seems insurmountable. Un-doable.

And in the meantime, my credit cards would be accruing interest at 14% a year. Oh, and I should also be putting money into an IRA and hitting the match level in my 401K, and saving toward Lauren’s college fund. And I should also be saving for the things I want to buy, like a new house and a new TV. Because I’m not using my credit cards, remember.

Seriously, what universe does Suze Orman live in? I don’t drive a fancy car. Hell, we hardly even eat out anymore. My stepson lives in an unfinished basement and our carpet smells like cat vomit. I know I could find an extra $500 a month, but that would be my entire savings plan. All of it. And I can tell you that sometime during the next 5 years, as I’m building up to that 8 months of savings, I’m going to want to buy something. Or need to fix something.

So I’m going to ignore her. I don’t feel totally confident with only $150 in my savings account right now. But I feel more confident sending an extra $350 a month to pay off my cards, which got charged up when Steve’s income dropped for five months last year. When I get my cards paid off, I’ll have an extra $1000 a month, and then I can get serious about saving.

Sure, I’d feel like a princess with $27,813 in the bank. But I’ll feel like a queen with no credit card debt. I’d rather be a queen.

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3 Comments so far
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Suzie Orman really recomended that people pay the minimum on their cards to build a nest egg?? That is the stupidest thing I ever heard. I watched a Frontline episode last month about the history of credit cards and their dealings, and they depend on this kind of thinking (and a lot of people think this way already).

I could only goggle at the screen when people who could pay off their credit cards didn’t, because “you have to have a nest egg”.

Yes, a nest egg earning maybe 1.99% APR while you are PAYING in many cases over 20% APR. Hello??? Credit card companies set up in states without usury laws for a reason!

You’re doing the right thing. When and if savings/money market accounts are making more than the credit cards are charging, that’s when to listen to Suzie Orman. I believe GMO pigs will be flying by then, too.

Comment by Derende

@ Derende Here’s the link to Orman’s new advice! I couldn’t believe it either.

Comment by humanbeingblog

So, she’s advising people with savings to pay off the cards, but people with very little to fall back on to let the card charges accumulate? WTF?

I kind of see the logic, but to me it still sounds like an extraordinarily bad idea to maximize what the cards will be getting at some point. Especially if the rate of savings that someone would get is on the low side.

Huh.

Comment by Derende




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