Suze Orman: 8 Money Mistakes You Can’t Afford To Make
Written by
Katie Wudel
Edited by
Caitlyn Moorhead
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
How you manage money can have a significant impact on your life. Suze Orman sheds light on the common pitfalls that can jeopardize your financial stability. Her insights delve into the core principles of financial empowerment, emphasizing the vital role of understanding and managing debt, credit, and spending habits.
Orman’s guidance is aimed at steering individuals away from financial missteps and toward a path of financial freedom. Here are eight critical money mistakes that Orman warns are too costly to ignore.
1. Accumulating Debt
One significant financial misstep is debt accumulation. Debt binds you and obstructs your path to financial security. Orman stresses the importance of understanding your debt and striving to eliminate it, as it’s one of the biggest financial mistakes you can make.
2. Mismanaging Credit Card Debt
Credit card debt is a clear indicator of financial trouble. If you can’t pay off your monthly balance in full, you’re already facing a financial challenge. According to Orman, credit card debt signifies a deeper issue of feeling less and spending more to compensate.
“You’re already in trouble if you get a credit card bill at the end of the month and you cannot afford to pay that off in full,” said Orman during an episode of her show. “You have got to make it your number one goal to get out and stay out of credit card debt,”
3. Closing Credit Cards Prematurely
A common error is closing credit cards after paying them off, especially those without annual fees. This impacts your FICO score, which is vital for determining interest rates and financial opportunities. Maintaining a good FICO score requires understanding the debt-to-credit limit ratio and managing your credit cards wisely.
“You want a FICO score of about 720 or above,” said Orman. “About 30% to 35% of that FICO score is made up of something called your debt-to-credit-limit ratio, the credit limit that you have on all these credit cards. your goal is to never have more than a 30% debt-to-credit limit ratio because the higher the credit limit ratio the lower your FICO score.”
4. Misunderstanding FICO Scores
FICO scores, ranging from 300 to 850, play a critical role in your financial health. They affect interest rates on loans and credit cards and even impact employment opportunities and insurance premiums. A high FICO score is essential for better financial deals.
5. Ignoring Student Loan Debt
Student loan debt is especially dangerous as it’s challenging to discharge in bankruptcy. Orman warns against accumulating more student loan debt than you can manage and advises focusing on repayment strategies that don’t significantly add to the loan’s backend.
6. Overborrowing for Education
Borrowing more than you can afford for education, especially for prestigious schools, is a grave mistake. Orman suggests considering more affordable education options like community colleges and emphasizes that your success depends on you, not the school you attend.
7. Co-Signing Loans
Co-signing loans, particularly for loved ones, can be financially perilous. If the primary borrower defaults, it can severely damage your credit score and financial stability. Orman advises against co-signing unless you are prepared to manage the payments directly.
8. Mismanaging Different Types of Loans
Orman highlights the importance of understanding and managing various types of loans, including car loans and real estate loans. Keeping debt under control is key to gaining financial power and security.
The Takeaway
Avoiding these common financial mistakes leads to empowerment and financial freedom. Understanding and managing debt, maintaining a good FICO score, and making informed decisions about loans and credit are important steps toward a secure financial future.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
More From GOBankingRates
