Protect Your Finances: Suze Orman's Top 5 Money Mistakes to Avoid

Suze Orman, a personal finance expert, warns against doing five things with money: buying variable annuities in retirement accounts, buying insurance as an investment, financing cars for more than three years, naming minors as beneficiaries, and investing in whole life insurance. Orman recommends term life insurance and setting up a revocable living trust to avoid legal issues.

Personal finance expert Suze Orman, known for her straightforward and practical approach, has recently highlighted five financial practices that she advises investors and financial professionals to avoid. Her insights, drawn from years of experience and extensive research, aim to protect individuals from costly mistakes and promote sound financial planning.

Buying Variable Annuities in Retirement Accounts

Orman warns against purchasing variable annuities within retirement accounts. Variable annuities are insurance products that combine elements of insurance and investment, often recommended by financial advisors who earn commissions from their sale. These products can come with high fees and additional costs for certain features. Orman advises that placing variable annuities in retirement accounts is not in the best interest of investors, as it can erode retirement savings [1].

Buying Insurance as an Investment

Orman also cautions against treating insurance as an investment. While some financial advisors may suggest this, Orman emphasizes that insurance and investments should be kept separate. She recommends term life insurance over whole life insurance, as it provides protection for families without the high costs associated with whole life policies [1].

Financing Cars for More Than Three Years

According to Orman, financing a car for more than three years is a financial pitfall. Many car companies offer extended loan terms, such as 84 or 96 months, which can lower monthly payments but also keep borrowers in debt longer. Since cars depreciate in value, this can lead to a situation where the car's value is less than the loan amount. Orman advises against financing a car for more than three years to avoid this risk [1].

Naming Minors as Beneficiaries

Orman also advises against naming minors as beneficiaries on life insurance policies or retirement accounts. Minors cannot legally inherit money, which can create legal complications. She suggests setting up a revocable living trust to avoid these issues, as the trust can be named as the beneficiary instead [1].

Investing in Whole Life Insurance

Finally, Orman advises against investing in whole life insurance. She recommends term life insurance instead, which provides the necessary protection without the high costs and complexity associated with whole life policies [1].

Conclusion

Suze Orman's advice is a reminder of the importance of understanding the financial products and services available. By avoiding these common pitfalls, investors can better protect their hard-earned money and build a more secure financial future.

References

[1] https://www.thestreet.com/personal-finance/suze-orman-reveals-key-information-on-costco-walmart-iras
[2] https://www.gobankingrates.com/money/financial-planning/never-do-these-things-with-your-money-suze-orman/