Suze Orman's 4 Tips To Never Go Broke Again
In Ernest Hemingway's 1926 novel "The Sun Also Rises," a character says he went bankrupt two ways: gradually and then suddenly.
Unfortunately, not much has changed these past 100 years. Going broke usually isn't the result of one big mistake but a series of small ones that add up over time. Suze Orman, financial advisor, motivational speaker and television host, has spent decades helping people spot those patterns early.
Here are four of Orman's key tips to help you avoid going broke.
Listen Up: I Built Wealth With Side Gigs — Here's What I Look for in a Hustle
Don’t Delay: Start Growing Your Net Worth With Smarter Tracking
Don't Touch Your Social Security Until You're 70
If you're in good health, the best financial move Orman believes you can make is to delay taking your retirement benefit until age 70. This is because your benefit at 70 will be much higher than if you start at your full retirement age of 66 or 67, she said in an AARP article. So if you want more financial security in your retirement years, wait a few years before claiming your benefits.
Live Below Your Means
Even rich athletes and celebrities go broke because they spend more than what they make. So if you want to prevent that from happening to you, Orman says you should live below your means and not let lifestyle creep get the best of you.
If you haven't already, start tracking your spending and use the 50/30/20 budgeting rule to keep your money in check. That means you're spending 50% on needs (like rent, transit and utilities), 30% on wants and 20% on savings and debt.
Don't Get a Reverse Mortgage
Another warning Orman shares is avoiding reverse mortgages, especially if you're nearing retirement age.
"Yes, you might be able to pull money out of your home now by using a reverse mortgage," she said, "but answer this: If you're broke while you're still working, how are you going to pay for the home-ownership expenses you'll still have to cover in retirement?"
She believes that if you're already on a tight budget, you're far better off selling your home and downsizing to something much less expensive than getting a reverse mortgage.
Avoid Taking on Too Much Debt
"Yes, debt is necessary," Orman wrote for Oprah.com. "It's how you own a home or get a college degree, but the trick is to respect it. Take on only what you can afford."
In other words, don't overextend yourself financially. A debt payment might look manageable now, but if it leaves you with no financial breathing room, it can catch up to you fast.
Also, remember that the more you borrow, the more you'll pay in interest charges and fees. So always compare the interest rates on credit or loan products before you apply. If you're considering a mortgage, first use a mortgage calculator to see how much you'll pay in interest over the lifetime of the loan.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion: