Suze Orman has the status of a financial guru. But I have never been able to understand why this self-proclaimed expert has such a following. Imagine a celebrity chef who has given herself food poisoning, or a car expert who couldn’t change a tire.
Orman has said things about money over the years that make me think she’s more sizzle than steak. The following are prime examples.
1. The impressive car she couldn’t afford
First, the reason I finally wrote this article after considering it for years: In a 2017 CNBC.com story, Orman said:
“There was a time that I was in a relationship with a very, very wealthy person and I wanted to impress this person and I didn’t have money yet, so I went out and I leased a car. I leased a 750iL BMW, and my lease payments were like eight hundred dollars a month.”
There are people who will foolishly trap themselves into inescapable, multiyear contracts they can’t afford to impress themselves or others. Maybe you’ve met one. But someone who calls herself a personal finance expert?
I’ve made money mistakes, and said as much in articles like “My 10 Dumbest Money Moves — and How You Can Avoid Them.” But leasing an $800-a-month car I couldn’t afford because I was dating someone “very, very wealthy”? Nope. Not when I was 18, 21, 41 or ever.
If this were the only odd thing escaping Orman’s lips, perhaps I could let it go and continue believing she’s a personal finance whiz. Unfortunately, that’s not the case.
2. The restaurant that wasn’t
According to Orman’s website, after attending college for a degree in social work, she worked as a waitress in a Berkeley, California, bakery. After seven years of waiting tables, she borrowed $50,000 from several customers so she could start a restaurant of her own.
But here’s where it gets weird. Instead of using the loan to open a restaurant, she deposited it with brokerage firm Merrill Lynch, where she proceeded to lose all of it through speculative trading, blaming the losses on a crooked financial adviser. That’s when she decided to become an investment adviser herself and got a job at the very firm that had just ripped her off.
Orman goes on to say that, while working there, she sued Merrill Lynch, recovered the money and repaid her would-be investors.
Still, the fact remains she borrowed money and, rather than use it as promised, lost it all gambling instead. Ever done anything like that? Me neither.
I get it: We all love the story of someone who learns from mistakes and becomes successful. But there has to be a limit. If I voluntarily chopped off my own foot, you might grudgingly applaud my participation in a marathon. But wouldn’t you always question my judgment?
3. Flip-flop on stocks
In 2007, the New York Times Magazine interviewed Orman. After indicating her net worth was north of $30 million and her preferred investment was municipal bonds, here’s what she said when asked whether she “played” the stock market:
“I have a million dollars in the stock market, because if I lose a million dollars, I don’t personally care.”
A personal finance expert who doesn’t believe in stocks? Since stocks are one of the only investments capable of beating inflation, that’s strange — and bad — advice. Not only does she essentially compare stocks to gambling by suggesting she could lose it all, she also remarkably says she doesn’t mind losing a million dollars.
Orman later apparently changed her mind about stocks, at least for us little people. Just one year later, in an interview with Money Magazine, she decreed that broad-based index funds — suggested by nearly every money expert, including me — should take a back seat to much riskier sector funds. Her words:
“All the stats say that index funds outperform 80% of managed funds out there. And a few years ago I’d have said just buy Vanguard’s S&P 500 index fund (VFINX) or its Total Stock Market index fund (VTSMX). But today I think you have to be more active, and I like exchange-traded funds that let you own particular sectors, like iShares MSCI Emerging Markets (EEM), United States Oil Fund (USO) or the Metals & Mining SPDR (XME).”
A side bet with a sector fund isn’t necessarily dumb. In 2016, when oil was trading at less than $30 a barrel, I suggested investing in an oil ETF. I’m up about 51 percent, but that’s a side bet. I didn’t suggest selling a diversified index fund to do it. I’d never suggest sector funds over a far more diversified S&P 500 fund for a simple reason: They’re way too risky.
As testimony to the risk of sector investing, here’s how Orman’s recommendations worked out:
- EEM was trading at about $47 per share when she offered her advice on June 19, 2008. At the end of last week, it was at about $43.
- USO was trading at about $110 back then. As the end of last week, it was about $15.
- XME was trading at about $94 back then. As the end of last week, it was at about $36.
So, of her three suggestions, all are losers, two catastrophically. And how did the S&P index fund she rejected perform? It was about $124 a share on June 19, 2008. Last week, it closed at $255 — an increase of more than 100 percent.
Granted, this was 10 years ago. Perhaps Orman reversed course sometime between then and now. But even if the funds she recommended had been winners, her advice was still laughable.
For simple advice, check out “The 10 Golden Rules of Becoming a Millionaire.”
4. Prenups for all
As far back as 2010, Orman was pounding the table on prenuptial agreements. She said repeatedly in print and on air that a prenup is essential for all couples, no matter the circumstances.
She also suggested they’re a wonderful bonding experience. From an article on Oprah.com:
“Drawing up a prenuptial agreement together is a sign of incredible trust and financial openness — you’re fooling yourself if you think you can achieve complete intimacy without it.”
Hopefully, she’s not trying to say that you can’t achieve intimacy without a prenup.
What she presumably means is that if you’re going to share your life with someone, it’s important to share your financial life as well. I agree — who wouldn’t? But sharing financial intimacies with your partner isn’t the same as sharing them with your partner, your lawyer and your partner’s lawyer, and then paying thousands of dollars to have them converted into a legally binding document.
Sure, in an ideal world where prenups are free and easy, maybe we should all have one. But in this world, prenups can cost $3,000 and up.
Despite the cost, prenups are essential in certain situations, which I spell out in “Should Everyone Have a Prenup?” But it’s ridiculous to insist that spending that kind of money is mandatory for every couple.
Even more ridiculous is suggesting the process is going to be a “sign of incredible trust and financial openness.” That’s like saying your divorce papers are “a wonderful opportunity for financial openness and the ideal time to reflect on the assets the two of you built together.”
Prenups are by definition the opposite of “incredible trust.”
Having gone through both a prenup and a divorce, trust me: Both may be necessary, but neither is a moonlit walk on the beach.