Before becoming a world-renowned financial guru and television personality, Suze Orman was a broke waitress. Her story is one of success, and in recent years she has listened to the pleas of twenty- and thirty-somethings who want advice specific to them and the current economic climate. College students are graduating deep in student loan debt – and often credit card debt – and are facing an economic climate that makes it difficult to get a job right out of college.
In “The Money Book for the Young, Fabulous & Broke,” Suze Orman addresses the unique concerns of this group of individuals, and offers some advice that is contrary to what many of us may have learned.
Money Issues Important to Recent College Graduates
The book is organized by chapters that correlate to important money issues:
1. Know the Score
Orman says that the most important thing twenty- and thirty-something-year-olds can do for their financial future is to know and improve their credit score. She thoroughly explains what the FICO score is comprised of, how to improve it, how to run a credit score report, how to fix errors, and how your credit score can affect your financial future.
2. Career Moves
Orman’s advice in this chapter is sometimes surprising. She advocates that you find a job you love, and not just work for the money. She even advocates using credit cards for a few years to supplement your income if you have a job you love but that does not pay much in the beginning. Orman doesn’t advise that you finance an expensive lifestyle, but rather that you use credit to help survive by meeting basic needs until your career pays enough to support you completely.
3. Give Yourself Credit
Because Orman advocates that young people use their credit cards for basic living expenses if their jobs do not pay them enough, she uses this chapter to give advice on how to limit your expenses with credit cards, such as by finding low interest cards with no annual fees. She also explains how to avoid getting behind on credit card payments.
4. Making the Grade on Student Debt
Student loan debt plagues millions of college graduates, and Suze Orman offers encouragement that the student loans are likely to be worthwhile as the incomes of those who carry them climb over the years thanks to their higher education degrees. She also offers specific ways to both cope with student loan payments and lower the interest rate.
5. Save Up
In this chapter, Orman offers specific techniques to find more money in your budget and begin to save. For instance, she doesn’t say to stop going to the bar altogether, but instead suggests that you make better decisions, such as buying a beer or a glass of wine instead of a $10 martini, or even going to a cheaper bar. Other techniques include checking your credit card statement monthly for errors.
6. Retirement Rules
Trying to tell most new college graduates who may be deep in credit card and student loan debt to save for retirement is a hard sell, but Orman offers a compelling argument. For example, if someone who is 25 invests $300 a month for 15 years (a $54,000 investment) and earns an 8% return in a retirement account – and then doesn’t invest any more after that – he or she will have $1.05 million by the age of 70. Orman explains the various retirement vehicles that are available, and which one to invest in first.
7. Investing Made Easy
Explaining the principles of investing in one chapter is not easy, but Orman provides a basic primer of the stock market and mutual funds, explaining specific terms such as load or no load, and small and large cap funds. In addition, she gives a short synopsis of the best choice for allocating funds in your 401k or Roth IRA.
8. Big-Ticket Purchase: Car
Orman immediately argues against leasing a car, providing mathematical data to prove why leasing is not a good investment. She would prefer that people in their twenties buy used cars, but she also has strategies for those who want to buy new. She outlines the best way to deal with car salespeople, and the financial implications your choice of a car has on numerous aspects, such as insurance.
9. Big-Ticket Purchase: Home
In the last 5 to 10 years, many financially unprepared people have jumped into home ownership, and they have suffered the consequences. While Orman does not suggest that you have to be completely debt-free before purchasing a home, she does insist that your debts be on the decline, and that you have at least 3% available for the down payment (though she would prefer 20%).
This is one of the most thorough chapters in the book. She clearly outlines all the fees and expenses that come with home ownership that many people do not consider, such as closing costs, maintenance, property taxes, and insurance, which can make a home payment that seems within your budget suddenly several hundred dollars out of reach.
10. Love & Money
Many people get married in their twenties and thirties, so Orman ends the book with this chapter. While the chapter includes practical advice, such as whether to have a prenuptial agreement and what kind of life insurance to purchase, she also stresses that you should carefully pick your partner, because when you marry someone, you are marrying their finances and their financial behavior. This can affect you positively or negatively throughout the duration of your marriage.
After each chapter, Orman includes reader scenarios pertaining to that particular topic. For example, in the student loan chapter, some of the scenarios include:
“I finally have a little money left after paying my monthly bills, but I don’t know if I should use that cash to pay off my student loans or to invest in my 401k or a Roth IRA.”
“I lost my job, and now I can’t afford my student loan payments.”
Each chapter contains 5 to 10 questions and answers pertinent to recent college graduates. These are particularly helpful, as they bring the preceding chapter’s information into context, making it applicable to real-world situations.
Quick Information Retrieval
Orman knows that most young people are used to quickly receiving information via the Internet. Her book is broken down to allow for quick viewing. Each chapter starts with a table of contents for that particular chapter, which allows readers to easily go to the pages with the information they are seeking. A “Quick Playback” section highlights the main points of each chapter in just a few sentences.
The last page of the book before the useful glossary section includes a quick summary called “Do Not,” which includes all the things young college graduates should not do, such as lease a car and purchase a variable annuity.
Suze Orman delivers tough advice on her show and her regular columns, but in this book, she tailors her advice specifically to recent college graduates, and as a result, offers guidance that runs contrary to many other personal finance advisors. Because this book is tailored to a younger generation, recent grads may find it more useful than most general personal finance books. If you are a recent college graduate saddled with student loan debt or know someone who is, this may be a book that you may benefit from reading.
What are your thoughts on Suze Orman’s “The Money Book for the Young, Fabulous & Broke“?
Riverhead Trade, 400 pages, paperback