Sunday, November 4, 2012

My Night with Suze Orman

No, not that kind of night.

It was a slow Saturday night
and I was intermittently reading while channel surfing.  Despite having hundreds of channels, it seems as though there is less and less that captures my attention - perhaps another feature of OFS - old fart syndrome.  Then I spotted Suze Orman's show, "What Keeps You Up At Night?"  While I can't say as it completely held my attention (it didn't, I continued to read), there was enough to occasionally pique my interest.  I am not a Suze Orman fan.  Other than having a general knowledge that she dispenses financial advice, I knew little of her.  Regardless, I had hit bottom and found no better offerings so proceeded with her show to provide background noise to my reading.

I quickly understood her popularity.  Suze was dynamic, spoke clearly and dispensed financial advice like a laser guided missile.  For example, she quickly accentuated the negative cash flow of a rental property and identified how even when occupied, there was a negative cash flow which could not be justified by a reasonable expectation of appreciation.  As an ex-landlord, I could appreciate her assessment and I hope to do a more detailed post about rental real estate in the near future.  I did find her addressing her callers as "girlfriend" or "boyfriend" a bit tacky, but hey, its her show and who am I to tell her otherwise - if that helps to sell her books and keep ratings for her show, I can only say, "you go, girlfriend!"

While I found her financial advice clear and sound statistically, there were instances where I would identify some philosophical differences.  For example, there was a "stay at home mom" who's husband earned well under $100,000.  Suze strongly stated to this caller that it was critical that she have a 20 year term life insurance policy for her husband for $2,000,000.  I found this disturbing on several fronts.  First, I find the amount a bit excessive.  I appreciate that the philosophy is to provide a mechanism so that "stay at home mom" can continue her lifestyle; however, I'm not on board with that perspective.  While some may consider the cost of the policy nominal and worthwhile, it is still a notable expense for a family already having a tight budget.   Death at age thirty something is unlikely.   It is probably more likely that the husband could become disabled.  It is also probably even more likely that the couple will divorce, another life event that can bring financial strain.  You simply cannot insure against every possible bump that life may deal.  Certainly, some life insurance is recommended, but I suspect a lesser amount that is sufficient to help give the family a jump start is more reasonable.   I believe in resilience.  If tragedy should strike, "stay at home mom" may need to regroup and becoming "working mom".  This may mean taking inventory of friends and family who can provide support as the family copes with the loss and makes adjustments.  Furthermore, I am always disturbed when financial advisers and insurance agents focus solely on insuring the primary wage earner.  Suze made no recommendation that a similar life insurance policy be taken out on "stay at home mom".  If "stay at home mom" should die, what is the spouse (husband) to do?  He may need to take time from work (reduced income) or pay for help.  I think there is a more reasonable case to be made for modest life insurance policies for both parents.

Another caller where I was not on board with Suze was the instance of a couple calling in regards to their retirement planning.  He was about 55 years of age and she (the caller) was about 51 years of age with about $500,000 in assets.  Her response to them (aside from earning more and spending less), was that they must continue to work until he is 71 and she is 67... Huh???  That one pulled my head up from my book... are you kidding me, Suze?  Newsflash, we all don't have jobs like yours.  For many of us guys, being told to work until age 71 is akin to telling us to go to work until we drop dead - no thank you.  Suze also emphasized her opinion that no one should think about taking Social Security at age 62; rather, the minimum should be at 65 or preferably not until 67.  While this may make sense on paper, I don't think it is for everyone.  If you have health issues, it might make sense to take Social Security as soon as you are able.  Also, given the uncertainty of Social Security, I cannot fault anyone who decides that a "bird in the hand is worth two in the bush."  Simply stated, money today may be more valuable than money tomorrow.  Perhaps alternatives could be considered?  Perhaps this couple could move to a less costly area?  Can they scale back on their retirement plans?  Maybe they could sell the house and be happy in a studio apartment?  Maybe they can "retire" by changing to less paying job that they enjoy.  When it comes to retirement and life choices, I think a more holistic approach needs to be applied.... working until you drop dead is not a retirement plan.

Despite these differences of opinion, I found Suze entertaining and engaging.  I can understand why her show is so popular.  Further, I don't think it is essential that you agree with everything she recommends; rather, I think it is better that you understand why she is making the recommendation.  When you contemplate the "why" you are on the path to thinking what is best for you.

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