While there are some valid concerns about Suze Orman's advice, this is not one of them. Image source: LinkedIn Pulse, via Flickr.
Last month, I published a piece criticizing Suze Orman for spreading information that she should know -- beyond a shadow of a doubt -- is demonstrably false. The claim was that retirees would most likely spend more in retirement, especially because of medical costs, than they did pre-retirement.
In response to the article, someone who was apparently once an associate of Orman contacted me via Twitter, asking me to watch a documentary she put together. The focus of the documentary was, "How Suze Orman SCAMMED The World." Curious, I decided to give it a watch.
While there were some valid concerns, I found that many claims made no sense. One of the central arguments, in particular, I found to be outrageous. Since the video seems to be gaining in popularity, and has even been written about in other outlets, I think it's worth pointing out the faulty reasoning.
Let's take a trip back to 2008
Remember 2008? For Millenials like myself, it was the closest thing we've ever seen to a true market panic. In February, before the market collapsed, President Bush signed the Economic Stimulus Act of 2008. As part of the Act, most middle and low-income American families received a check for $1,200 to spend as they wished.
Sharon Janis -- the former associate who created the anti-Orman documentary -- claims Orman gave out terrible advice for what those families should do. When I heard this, I assumed Orman was encouraging listeners to use the money to buy a product that she was offering, or something else equally nefarious.
But that couldn't have been further from the truth. In a segment with Larry King, included in the documentary, Orman said:
I hope when all of you get that check, I hope that you take that check and you save it. I hope that you don't do what they [the government] are hoping you're going to do with it, which is go out and spend money on things you don't even need.
To me, this sounds like some of the soundest advice I've ever heard, especially at a time when the average American household was leveraged to the hilt. Janis, however, disagrees, stating: "[Orman] practically begged people not to spend their checks, in ways that would've helped to jump start the economy."
In essence, Janis is saying Orman was partially responsible for the Great Recession. "Thanks in part to Orman's media blast, most of the stimulus checks were not spent."
Are you kidding me?
In the end, it's a shame that Janis chose this pathway. She has some legitimate beef with Orman's tactics in the past (which I'll write on at a later date), but I think the average, educated, financially literate watcher who sees this piece would turn it off as soon as this segment appears.
Janis clearly doesn't have much of a handle on the types of behavior that helped cause the Great Recession: rampant spending of cheap money that wasn't sustainable. Had everyone from the get-go followed the type of advice that Orman advocates, I highly doubt we would have seen the carnage that we did in 2008.
Further, when someone makes the claim that Orman helped cause the Great Recession -- and completely ignores the sub-prime lending industry that was bigger and more consequential that Orman to an exponential degree -- all credibility goes out the window.
At the end of the day, most readers would probably be better off ignoring the documentary altogether and focusing on Orman's core message: Pay down your debt, spend less than you save, and invest the difference.
While that may seem like a simple formula, it's the only one virtually guaranteed to improve your personal financial situation.
