Suze Orman Says Today's Economic Climate Is Worse Than Before the Pandemic

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  • Consumers today face high levels of inflation and supply chain backlogs.
  • Between that and a down stock market, these are very tough times for a lot of people.

Now that's depressing.

These days, a lot of people are bemoaning the fact that living costs are soaring. And if you're feeling down about the economy, you're not alone.

Even though unemployment rates are low and the labor market is strong, these are tough economic times. And that's something financial expert Suze Orman will be the first to tell you.

Orman insists that today's economic conditions are worse than before the pandemic. That's because not only are we dealing with supply chain problems and inflation, but also a stock market that's clearly seen better days.

In fact, part of the reason Orman thinks today's economic times are so tough is that she doesn't see the stock market, which has seen its share of declines since the start of the year, recovering anytime soon. And that could be a problem for a lot of people.

Will shrinking stock values hurt your finances?

There's an easy way to avoid losing money in the stock market -- don't sell off investments when they're down. If your brokerage account has lost 20% of its value since the start of the year (which may very well be the case) but you leave it alone, you may not end up losing so much as a dime during this current stock market downturn.

The problem, though, is that stocks are down at the same time that living costs are up. And some people may have no choice but to liquidate some of their portfolio to access cash to cover their expenses.

Retirees are the most likely to land in this boat. Those who no longer work are often advised to keep at least a year's worth of living costs in a savings account for situations like these. But not everyone does that, and so some seniors could be particularly vulnerable to big losses in their portfolios if roaring inflation continues -- which Orman expects to happen.

How to cope with today's economic conditions

In March 2020, stock values plunged but recovered their value in full well before the end of the year. Orman doesn't expect a repeat scenario this time around. Rather, she thinks this market downturn will drag on, and that high levels of inflation will do the same.

As such, her advice is really to cut back on spending to the greatest extent possible. That way, you'll be less likely to have to tap your IRA or investments as living costs climb.

At the same time, it pays to shore up your emergency fund in case the economic situation deteriorates even more. Orman is a lot more conservative than some financial gurus in this regard, but she insists that workers should have eight to 12 months’ worth of living expenses tucked away in the bank.

As far as retirees go, that's a tougher situation. Now may be a good time for seniors struggling with higher living costs to consider working in some capacity. Thankfully, the gig economy is strong, and there are different flexible opportunities retirees can pursue.

But all told, Orman cautions that we may be in for a number of tough months ahead. Boosting your savings and reducing your spending is really the best solution no matter what stage of life you're in.

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