1. Don't be too quick to buy a home
Invest your extra money to buy your dream home
Homeownership is the ultimate goal for many but buying one before you're able can lead to financial disaster.
"Sometimes it makes sense to own a home," Orman told CNBC. "And sometimes, depending on where you live, it makes sense to simply rent."
That's particularly true if you're in an expensive city. Instead of pouring a lot of money into property, Orman says why not invest in the stock market? That way, you can grow your savings — maybe into a down payment on that home of your dreams.
A good way to get into investing is through an automated investment service. In Canada, good options include using a robo-advisor or using an easy automatic saving and investing app, such as Moka. With a robo-advisor account, you provide your risk tolerance, investment goals and either a lump-sum or ongoing amount you'd like to invest and the brokerage does the rest. Good options include:
- Wealthsimple: While this brokerage does offer robo-advisor, professionally managed portfolios it also offers investors the option to talk to a human being — an advisor to help you make sense of it all. For new clients, opening a Wealthsimple robo-advisor account gives you access to the current promo offer: Get $25 bonus when you open and fund your first Wealthsimple self-directed investing account with at least a $500 initial deposit. For more information, read the Money.ca full Wealthsimple review.
- Questwealth: This robo-advisor is from the popular, low-fee discount broker, Questrade. Investors can select from aggressive, growth, balanced, income or conservative portfolio categories. Then you choose the type of account you want to invest in, such as a TFSA or RRSP. Fees with this robo-adivosr are very competitive (0.25% management fee for accounts up to $100,000), but the minimum account size is $1,000. Open a Questwealth account, today.
If you'd prefer to set and forget your savings, check out Moka's innovative app. Using the automated savings tool, the Moka app rounds up all purchases you make and take these extras cents and dollars to help boost your savings. You can then select to invest these savings (along with additional funds) into a variety of investment products, including stocks and exchange-traded funds (ETFs). Open a Moka account today and pay just $15 per month for professionally managed portfolios and automatic saving and investment plans.
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Start Trading Today2. Don't lease a car
Don't lease a car
In Suze Orman's words, "you should never, ever ever ever, lease a car."
If you lease, you'll sink your money into several years' worth of car payments and be empty-handed when the lease term is done.
Financing is a better option, but Orman says if it will take longer than three years to pay off the car, then it’s out of your price range. (You certainly don't want to consider one of today's seven-year car loans.) Buying a used car is another way to go. Models that are just a few years old will have great safety specifications and the same audio-visual tech as a new car, at a fraction of the price.
3. Don't co-sign a loan
Never co-sign a loan
When a friend or family member in need asks you to co-sign a loan, Orman says the only correct response is to turn them down. As she puts it: "Don’t be afraid to say 'no to others and say 'yes' to yourself."
When you co-sign a loan, you become legally responsible for paying back the money. Life is unpredictable and if anything happens to prevent the borrower from repaying the loan, you’ll be on the hook to make the payments.
Plus, if the borrower is late on their payments, even a few times, it will impact your credit score. That's not good. Instead, offer your friend or family member other options for borrowing money even if they have bad credit.
Read More: Learn where to find the best Personal Loans in Canada
Unexpected vet bills don’t have to break the bank
Life with pets is unpredictable, but there are ways to prepare for the unexpected.
Fetch Insurance offers coverage for treatment of accidents, illnesses, prescriptions drugs, emergency care and more.
Plus, their optional wellness plan covers things like routine vet trips, grooming and training costs, if you want to give your pet the all-star treatment while you protect your bank account.
Get A Quote4. Don't sell stocks when markets are bad
Don't sell your stocks when markets are bad
When stocks are hurtling down, investors tend to drop investments fast. This is a bad idea, says Orman.
Instead of dumping stock, she advises that you just keep investing the same amount of money each month, regardless of what the market is doing. Using this strategy, a bad month for the market becomes a good month to invest.
"I wish for 2008 again," she tells Yahoo Finance, referring to the year of the big market meltdown. "That’s when the fortune was made. That’s when you could buy stocks for pennies on the dollar."
If you train yourself to hold on tight through market dips, you’ll continue to build a solid portfolio with long-term earning potential.
5. Don't put blind faith in a financial advisor
Don't put blind trust in your financial adviser
It's important to have a financial advisor you can trust.
"Don’t think that they’re always going to have your best interest at heart, because probably they have their own best interest at heart,” Orman says.
When selecting a financial professional, make sure they are a "fiduciary", which means your advisor has a legal duty to act in your best interest. During your vetting process, ask prospective advisors about how they'll be compensated for working with you and about other services they can offer. This will give you a good idea of their motivations when they invest your money. Even better, consider an adviser — a professional with accreditation.
6. Don't let debt linger
Don't let debt linger
"Debt is bondage,” Orman tells CNBC. "You will never, ever, ever have financial freedom if you have debt." Still, she points out that not all debt is the same.
Mortgages and student loans can be considered "good debt," because home loans usually have fairly low interest rates and your degree is an investment that should generate a higher income over time.
However, credit cards have much higher interest rates. The longer you put off paying down your credit balances, the more money you lose. You can easily wind up paying for your purchases three or four times over. It's not easy getting out of this kind of debt, but with certain solutions, such as debt consolidation, it's possible.
Now, if you’ve already got credit-card debt, it’s important to get out from under those hefty interest rates. Consolidating to a lower-interest personal loan could help you save and pay off your debt faster.
Read More: Need to lower the cost your debt? Consider a debt consolidation loan. To get the best rates compare the top personal loan providers
7. Don't spend to impress others
Don't spend to impress others
It's human nature to want to impress others, but Orman knows from experience how foolish this can be — and how hard it can be on your finances. Orman once leased a fancy BMW and bought a Cartier watch with money borrowed from her 401(k) — the American equivalent to a registered retirement savigs plan (RRSP). Her reason? She was trying to impress a woman she was dating. Recalling this situation, Orman confesses it was "the most stupid thing I’ve ever done with money."
In the end, spending money you don’t have to impress others will leave you with shallow relationships and stressful bills. Work hard, invest wisely and reap your fortune when you’ve made it. There’s nothing more impressive than true financial success.
8. Don't say it's impossible to save
You might easily find ways to save up to $100 a month.
Too often, Orman tells people they ought to consider saving more — only to have them respond that it's impossible because there's never any extra money left over at the end of the month.
"I beg to differ," she says, on SuzeOrman.com. "There’s no money left because you haven’t evaluated your spending habits. You need to dig deep and be willing to change those habits."
Practically anyone can squeeze out up to $100 in "hidden money" for saving and investing each month, Orman says. For example, you might boost your home's energy efficiency and cut your utility bills by as much as 10% by caulking drafty windows, putting weather stripping around exterior doors and switching to energy-saving lightbulbs.
9. Don't spend on things you don't really need
Don't spend on things you don't really need
There’s no better way to kick-start your savings than by playing the need vs. want game.
The next time you're ready to buy something, ask yourself whether you really need it. Is it a necessity, such as medication, food from the grocery store or a solid pair of shoes for work? Or simply something you want — like another drink at the bar, fast food for dinner again or a second pair of knee-high boots?
"If it’s a want, just walk away. If it’s a need, then buy it," Orman writes. "Try this for six months and you’ll be shocked at how easy it is and how much money you’ll save."
10. Don't retire too early
If you want to retire young, you'll need at least $5 million, Orman says.
Orman was asked what she thought of the FIRE movement on a recent edition of the podcast Afford Anything. That's FIRE as in "financial independence, retire early." Her blunt response: “I hate it. I hate it. I hate it. I hate it."
This set off a firestorm among the FIRE faithful, but Orman explained that it would take a lot of money to make retirement work at, say, age 35.
"You need at least $5 million, or $6 million," she said. "Really, you might need $10 million." In her opinion, anything less wouldn't offer you enough protection from a potential financial catastrophe, like an expensive illness.
"You will get burned if you play with FIRE," Orman explained.
11. Don't go without a will
Everybody needs a will, but most Americans don't have one.
"Do you have your estate planning in place? If not, you might want to think again," Orman writes on Oprah.com.
While everybody needs a will, many don't have one and lack other important end-of-life documents, including a revocable living trust. That's a legal arrangement that holds your property while you're alive and transfers it to your heirs after your death without the complicated process known as probate.
Orman says set up a revocable living trust for passing down your house and other major assets and draw up a will for your other special possessions, like great-grandma's wedding ring or your first-edition book collection.
12. Don't take out a reverse mortgage in your 60s
Tempted to take out a reverse mortgage? It's better to wait.
A reverse mortgage is a type of home equity loan for seniors that allows you to receive the money as a lump sum or in monthly installments. The loan is repaid, with interest, when you die or sell the house.
You can take out a reverse mortgage starting at age 62, but Orman says that's risky. In her view, it's best to treat a reverse mortgage as a last resort for emergency money and to wait as long as possible before going that route.
"If you tap all your home equity through a reverse at 62 and then at 72 you realize you can’t really afford the home, you will have to sell that home," she says.
13. Don't miss out on matching money
Always contribute enough to your retirement account so you get maximum matching money from the boss.
If you have a retirement plan through work, don't leave free money on the table. Make sure you're putting enough in so that you'll receive the full matching contribution from your employer.
Orman says your company might kick in 50 cents for every dollar you contribute, up to 6% of your salary.
"Under those terms, if the employee contributed $3,000, the employer would kick in another $1,500," she says, on Oprah.com. "Hello! That's a guaranteed 50% return on your investment."
So, raise your paycheque contributions and start maxing out the match today.
14. Don't stay at a job you hate
Not loving your job? Do something about it!
Orman notes how a lot of workers aren't really into their jobs. And if you're in that group, you're selling yourself short.
"Staying in a job you don’t like is disrespectful to yourself, and your loved ones," Orman says on her website. "There is no way you can tell me that doesn’t negatively impact your relationships."
But quitting may not be the answer. Before you start looking around for a new opportunity, see if the job you have can be modified to address whatever it is that makes you unhappy. Just don't ever frame it that way when you meet with the boss or HR. Instead, tell the management you'd like to talk about how your job might be "tweaked" so you can be more productive.
15. Don't buy a new car
If you're infatuated with new cars, you'll have to break out of that.
If you love being the first person to drive a brand-new car and you can never get enough of that new-car smell, you'll have to get over all of that, Orman says.
"The second you drive that car off the lot, it depreciates, 10%, 20%,” she tells CNBC. "Let somebody else get that depreciation."
Your home may appreciate in value, but that rarely happens with a car. So don't waste your money on new, but always buy used. It takes some work, such as carefully checking the vehicle and applying for a car title transfer, but you'll save much more in the end.
Then, keep your vehicle as long as you can — at least 10 years, and maybe even 15 or 20. Orman says that's how wealthy people do it — including herself. When you do buy, remember to use a service to compare auto loans so you can get the best rate.
16. Don't go without life insurance
You need life insurance to protect your children in case something happens to you.
Orman says for parents in particular, life insurance is a product you can't afford to go without. It provides peace of mind, because it will protect your family if something happens to you and you're suddenly out of the picture.
Learn more by using our guide on how life insurance plans work.
And it's cheap: A healthy 40-year-old woman might pay less than $35 a month for a policy with a $500,000 death benefit. Orman recommends term life insurance, where the premiums never change for the term of the policy. "C’mon Moms. (And Dads)," says the personal finance guru, on her site. "You can't tell me that less than one dollar a day is too much to ensure your family is safe no matter what."
Read More: Best life insurance in Canada 2024
17. Don't ever miss a student loan payment
Don't even think of skipping out on your student loans, no matter how high the debt is.
Struggling with student loan debt? Whatever you do, don't just throw up your hands and stop paying.
"Make paying back your student loan the very first bill you pay," Orman says on her Facebook page. "It is more important that you make your student loan payments on time each month than any other bill."
She has called student loan debt "the most dangerous debt you can ever have" because you can't erase it through bankruptcy. If you try to walk away from your loans, the debt will catch up with you eventually. The CRA can garnish your wages for student loan debt — in other words, take what you owe directly from your pay.
18. Don't invest for the wrong reasons
Picking stocks can be like throwing darts. You're not always going to hit it.
Orman says too many people — especially young people — make investment choices purely because a stock seems cool or trendy.
"They decide, 'This company is great, I'm going to invest in that,'" she tells CNBC. If that's your strategy, "maybe you'll hit it right, maybe you'll hit it wrong."
It's less risky to diversify your investing by putting your money into index funds and exchange-traded funds, or ETFs. Open an investing account and put in regular amounts through what's called "dollar cost averaging." Stay steady through the market's ups and downs and you'll always come out ahead, Orman says.
19. Don't take a tax refund
When you take a tax refund, you've essentially given the government a free loan.
"If you’re getting a tax refund, you are making one of the biggest mistakes out there," Suze Orman says.
Why? Because you've essentially had too much of your pay withheld for taxes — and have effectively given the government an interest-free loan. When you're owed a $2,400 refund, you've allowed yourself to be shortchanged $200 per month throughout the year.
But people love their tax refunds and eagerly plan out how they'll use the money each year. Orman is isn't backing down. On CNBC.com, she calls a tax refund "the biggest waste of money that you will ever get."
20. Don't waste money on coffee
Your daily stop to pick up a cup of dark roast or a cappuccino is a habit you need to break, the money maven says. It's a "want," not a "need," and it's costing you a ton of money.
"You are peeing $1 million down the drain as you are drinking that coffee," Orman recently told CNBC (causing coffee drinkers across North America to do a spit take).
Here's the math on that: If you're spending $100 a month, that's money that could grow instead in a Roth IRA — to roughly $1 million after 40 years, assuming a 12% rate of return. But you love those fancy store-bought coffees? Get over that. "Every single penny counts" when you're saving for your future, Suze Orman says.
21. Don’t retire owing money on your home
Don't let a mortgage wreck your retirement.
According to a 2022 report from Statistics Canada, the overall percentage of older Canadians that own a home mortgage-free is decreasing, effectively suggesting that a rising portion of near-retirees are carrying housing debt as they are about to hit retirement. “This is so not OK,” Orman has blogged.
She urges people to go into retirement mortgage-free, for two reasons: to stretch their retirement savings, and to rid themselves of debt — an albatross that affects even mental health. “If you’re going to stay living in that house for the rest of your life, pay off that mortgage as soon as you possibly can,” Orman tells CNBC.
Without a mortgage, you'll have more financial security in retirement, she says. So work until you're 70, use excess emergency savings and do whatever else it takes to get that house debt paid off.
22. Don’t let your wallet get sloppy
Don't allow your wallet to get overgrown.
There's nothing too profound about this piece of advice. Orman is literally talking about keeping your wallet organized and knowing exactly what’s in it.
Your wallet, she says, is "a picture of your life." It especially reflects how you think about money and manage your finances. Crumpled bills stuffed in any old way show disrespect and a lack of accountability.
What’s in Orman’s slim wallet? Her driver's license, health insurance cards, exactly $170 in cash neatly arranged by denomination, and three credit cards with perks that suit her lifestyle. The amount of cash is no accident, either: The digits 1, 7 and 0 add up to eight. “In Asia, eight is the number of wealth," Orman explains.
23. Don’t buy a home you can't afford
Are you sure you can afford that house?
Being able to afford a certain rent payment doesn’t necessarily mean you can afford a house with a similar mortgage payment.
“The big mistake that many people make is that they’re paying $1,500 a month for rent and they go out and look for a home and they can get a home for a $1,500-a-month mortgage,” Orman said.
But the costs of moving in and keeping up a home over the long term far exceed those of renting a place. And you'll need to get the best mortgage rate you can. Orman reminds potential homebuyers to factor in not only the monthly mortgage payments but also the down payment, closing costs, initial repairs, moving expenses and ongoing maintenance costs.
24. Don’t risk your retirement to pay for your kids’ college
Don't make your retirement a lower priority than sending your kid to college.
Orman is incredulous over reports that saving for retirement is taking a back seat to saving for college.
81% of parents believe it is their duty to put money away for their kids' higher education while another 52% would willingly go into debt in order to help pay for post-secondary schooling. This is according to a recent survey survey by Embark, an education savings and planning company.
"Are you nuts?" Orman blogged. "Your 20s and 30s are when saving in retirement gives you a huge advantage: decades when your money can grow." When parents whine that they’d do anything for their kids, Orman comes back with, "Top of the list should be to make sure you will never be a financial burden for them."
25. Don’t skimp on car insurance
Make sure you have adequate car insurance coverage.
Car insurance policies include three key areas of coverage: for bodily injury liability per person, for total bodily injury liability, and for property damage you cause. Minimum coverage amounts in many states are, respectively, $25,000, $50,000 and $25,000.
Orman doesn’t think that’s nearly enough. "It will be a financial disaster paying out of pocket for serious injuries, loss of wages, rehab and such for the other driver (and their passengers) if you cause an accident," she blogs.
There’s no denying that auto insurance premiums are high, but she advises working with an independent agent who will comparison-shop the rates for you and find you the best deal. Raising your deductibles also can result in significant savings.
Read More: The best car insurance companies in Canada 2024
26. Don’t let holiday spending get out of control
Don't go crazy over Christmas shopping.
Even people who normally spend responsibly take complete leave of their senses when the holidays roll around. Orman blames a lack of planning. She recommends dividing your total gift-giving budget by the number of people on your list and sticking to the maximum per person.
“Challenge yourself not to buy any gift with a credit card … you're much more likely to purchase only what you can afford,” Orman says. She says holiday credit card debt can linger much longer than the recipient will remember your gift.
Plus, friends and relatives would feel ashamed if they found out their gifts were beyond your means. "Time and love are the most valuable possessions you can share," Orman writes.
27. Don’t keep kids in the dark about credit
Teach kids how to use credit responsibly.
Suze Orman shakes her head at reports that millennials are avoiding credit cards.
"I am wholeheartedly on board with preferring a debit card," she says. "But everyone needs to also have a credit card and use it responsibly."
She thinks parents who don’t teach kids how to use credit do them a disservice. After all, the credit bureaus factor spending and payment history into credit scores, which determine who gets a car, house or small-business loan, and the kind of interest rates they pay.
Orman recommends teaching good credit use in one of three ways: adding your teen to one of your existing accounts; co-signing for a no-fee, low-limit card; or having your kid apply for a secured card that requires a deposit.
28. Don’t let fear stop you from getting rich
Stop thinking that you can't be successful.
Orman doesn’t mince words. "Stop feeling sorry for yourselves and go out there and create the financial life that is waiting for you," she tells CNBC.
Fear, she believes, is often the only thing standing between you and a pay raise, a better job, shrewd investments and other financial goals. "You most likely are your own financial obstacle," she continues, "and you have to remove your fears from wanting to create more."
So, stop saying you can't do this thing or that thing, or that you're not smart enough, or that you were never good with numbers, or whatever. Orman's best advice is to change your mindset about money, pay off debt and start getting rich.
29. Don’t ever take out a payday loan
Suze Orman says getting a payday loan is one of the biggest financial mistakes you can make.
If you want to get a rise out of Suze Orman, just ask how she feels about payday loans.
“I am begging all of you, do not take a payday loan out,” she said on an episode of her podcast, going so far as to add that it’s the biggest mistake listeners could ever make.
Payday loans are tempting because they’re relatively easy to get when you’re strapped for cash. However, these short-term loans are offensively expensive. The typical annual percentage rate (APR) — what it costs you to borrow funds — is 400%. By comparison, the average APR on credit cards is around 17%.
Several states in the US have capped the APR on payday loans at 36% percent or have even banned the loans altogether. In Canada,
Read More: Here are good options for emergency loans for people with bad credit
30. Don’t become a landlord
Landlords are responsible for repairs in the properties they own.
The return of the house-flipping craze makes Orman nervous.
Even blazing hot markets inevitably cool down. If you can't sell a flip house at a profit, you may have to rent it out. And being a landlord isn’t as glamorous as it looks on HGTV. Landlords must replace toilets, keep critters at bay, and let in tenants who lock themselves out.
“Do you think … you can attract responsible tenants who would pay enough to cover your property tax and maintenance charges? Even if you could, do you really want to be a landlord?” Orman asked one fan.
She says don't do it unless your emergency fund can cover at least eight months’ worth of mortgage payments.
31. Just don’t sell blue-chip stocks — period
Suze Orman says with stocks, buy and hold — and hold and hold.
Orman speaks from personal experience. In 1997, she invested around $5,000 in Amazon. She sold the stock a few years later and quadrupled her money.
However, the shares would be worth millions today. "It makes me sick to even tabulate it," she told CNBC.
Investing in individual stocks isn’t her favorite game plan, but she says people who play the market should at least do extensive research on the companies they’re interested in. She says Google, Facebook and others are expected to retain their competitive edge for years to come.
“If you do buy, though, make sure to hold," Orman advises. "You keep a great stock forever."
32. Don’t let vacation time go unused
Everybody needs a break. Even you.
Suze Orman is all for taking vacations. She’s the first to say everybody needs a recharge now and then — especially people who intend to work until they’re 70.
Saying no to a trip you can’t afford is a good thing, but there’s no excuse for not using your vacation time. And you don't have to spend a ton of money to enjoy it.
"Unplug from your work. And do something that gives you pleasure. Day trips. A home project you never get around to," Orman blogged. "There are so many ways to step out of your demanding work routine without spending money."
If nothing else, you’ll be more productive and engaged on the job.
Sources
1. CNBC: Suze Orman to millennials: Don’t make these 4 money mistakes (Oct 15, 2018)
2. Yahoo Finance: Suze Orman to average investors: Don't sell during downturns(Oct 15, 2018)
3. Suze Orman: Suze Orman’s 10 tips to spring clean your finances(Mar 23, 2015)
4. AARP: 3 Rules on downsizing for retirement (Aug/Sept, 2018)
5. Afford Anything: 3 Rules on downsizing for retirement (Aug/Sept, 2018)
6. Oprah: Suze Orman's estate planning checklist (Oct, 2011)
7. Suze Orman: You can’t afford to stay in a job you dislike (Jun 15, 2017)
8. CNBC: Suze Orman: When it comes to buying a car, ‘plenty of you are being downright dumb’ (Apr 20, 2018)
9. CNBC: Suze Orman says this is the No. 1 investing mistake young people make (Sept 27, 2018)
10. CNBC: Suze Orman: If you waste money on coffee, it’s like ‘peeing $1 million down the drain’ (Mar 28, 2019)
11. Embark: Canadians are saving for their child’s future at the expense of their own (Jun 6, 2023)
12. Suze Orman: Spring checkup: Are you driving around with enough insurance? (Jun 6, 2019)
13. Oprah: Suze answers your top real estate questions (Feb 7, 2012)
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