Suze Orman Recommends These 2 Steps to Protect Against Life's Uncertainties

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KEY POINTS

  • Unexpected surprises are a fact of life.
  • It's important to be as prepared as possible if things don't go as planned.
  • Suze Orman suggests having emergency savings and life insurance so you’re prepared for uncertainties.


Can these two steps help safeguard you against disasters?

As the past few years of the global pandemic have demonstrated, it's impossible to predict when a disaster may strike -- and what form it will take. Almost no one expected COVID-19 to erupt when it did or to have the far-reaching consequences it has had across the globe.

While the pandemic was likely (hopefully) a once-in-a-lifetime event, the reality is that unexpected and unpleasant surprises can happen to anyone at any time without warning. The important thing is to be as prepared as possible when this occurs to try to minimize the damage.

Personal finance guru Suze Orman has recommended two steps that people should take in order to be prepared for life's curveballs. Here's what she's advised.

Build up a solid emergency fund

When addressing the steps necessary to be ready for life's "what ifs," Orman advised making two crucial financial moves.

First, she believes it is very important to have emergency savings. "Having money set aside to pay for unexpected bills is one of the kindest moves you will ever make," Orman said. "It gives you greater peace of mind knowing that whatever might be around the next curve, you have the means to navigate through it."

Ideally, Orman believes your emergency fund should be large enough to cover a year of living expenses. This is more than most experts recommend saving, and she acknowledges that it's a substantial sum -- but she believes most people can make it happen by setting up automatic contributions from a checking account to an emergency savings account either on a weekly or monthly basis.

While she acknowledges that it will still take time to save so much, she believes this is one of the keys to getting on the "path to financial freedom."

Make sure you have enough life insurance

Orman's second key piece of advice when it comes to preparing for unexpected surprises is to ensure you have sufficient life insurance if people are counting on you. She warns against relying on life insurance offered through an employer because the death benefit most likely isn't large enough, and advises buying a policy that would replace 20 times the annual income needs of surviving loved ones.

"That will enable them to invest the death benefit conservatively and support themselves mostly from the income, rather than eating into the principal," Orman said.

Is Orman right?

Orman is absolutely right to advise both building up a sufficient emergency fund and making sure a sufficient amount of life insurance coverage is available. No one wants to find themselves facing huge expenses they can't cover, or to leave their loved ones in this situation. A generous emergency fund and large life insurance policy will ensure that doesn't happen.

An emergency fund may not necessarily need to be quite as large as she recommends, and she's also conservative in her suggested life insurance coverage amount, as many experts believe it's sufficient to have a policy that replaces 10 to 12 times your annual income. But it's better to be more prepared rather than less prepared, and if you can afford to save enough and pay premiums for such a large insurance policy, there's little downside to doing so.

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