Suze Orman says avoid these 5 financial mistakes if you’re trying to get out of debt
Best-selling personal finance author and TV personality Suze Orman has inspired Americans for decades to make better money and avoid serious financial mistakes.
She’s remained as busy as ever since the pandemic hit, offering advice to consumers on how to weather tough economic times when prices and interest rates rise.
In a 2022 interview with CNN about what to do to prepare for a recession, Orman got straight to the point of debt.
“All of you, all of you, obviously should get out of debt now.”
Orman will also be the first to tell you that the things you shouldn’t do with your money may be more important than the things you do with it.
Here are her five basic tips on what not to do with your debt.
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1. Never miss a student loan payment
Struggling with student loan debt? Whatever you do, don’t raise your hand and stop paying.
While student loan payments have been put on hold and some debt forgiven, Orman said “start paying off your student loans now”.
In an August podcast episode, Orman recommends making your student loan payments a priority now while the freeze is still in effect. “Since we know the pause is coming to an end, why not start making your student loan payments right here and now at that 0% rate? Because the more you pay at 0% , your student loan will decrease.”
Orman says on his Facebook page: “Give back your student loans from the very first bill you pay. “It’s more important that you pay your student loans on time each month than any other bill.”
She called student loan debt “the most dangerous debt you can have” because you can’t clear it through bankruptcy.
2. Never co-sign a loan
When a friend or family member in need asks you to co-sign a loan, Orman says the only right response is to turn them down.
As she puts it: “Don’t be afraid to say ‘no’ to others and ‘yes’ to yourself.”
When you co-sign a loan, you are legally responsible for paying it back. Life is unpredictable, and if anything happens to prevent a borrower from paying a loan, you’ll have a hard time making the payments.
In addition, if the borrower is several times behind on payments, your credit score may have a hit.
3. Don’t let the debt pile up
Orman once told CNBC: “Debt is a bondage. You’ll never have financial freedom if you’re in debt.”
She warns that big problems can happen when you have to use your credit card to cover unexpected expenses.
Average credit card interest rates at 22.9%so the longer you delay paying your credit balance, the more money you lose and you can easily pay three or four times more on your purchases.
And interest rates on all possible loans continue to increase this year.
Orman told Moneywise in an interview: “It’s not likely next April… that the Fed funds rate could be very close to 5%, which means interest rates on credit cards could be very close. increased to that extent.
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4. Never take a hot loan
If you want a promotion from Suze Orman, just ask her how she feels about short-term loans.
“I beg you all, don’t take out short-term debt,” she said in an episode of her podcast, adding that’s the biggest mistake a listener can make.
Short-term loans are attractive because they’re relatively easy to get when you’re short on cash. However, they are very expensive. The typical annual percentage is 400%. By comparison, the average APR on credit cards is currently around 20%.
Some states have capped the APR on short-term loans at 36% or even banned the loans altogether.
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5. Don’t retire when you owe money to buy a house
A survey from mortgage bank American Financing found that 44% of Americans in their 60s and 70s are still paying off their mortgage. And 17% said they don’t expect to pay off.
“This is not okay,” Orman wrote on the blog.
She urges people to retire without a mortgage, for two reasons: to extend their retirement savings and to get out of debt – a big problem that affects mental health as well.
“If you’re going to live in that house for the rest of your life, pay off that mortgage as soon as possible,” Orman told CNBC in 2018.
But don’t tap your 401K for your monthly payments or pay off your mortgage – or any other debt for that matter.
In a recent time Interview with MoneywiseOrman warns that using the money in that account “for any purpose other than retirement” could leave you financially vulnerable once you stop receiving pay.
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This article is for information only and should not be construed as advice. It is provided without warranty of any kind.