GoBankingRates: Suze Orman: This One Common Mistake Is Sending You Down a ‘Path to Poverty When it comes to getting your finances in order, you might not know where to start. But no matter who you are or what circumstances you’re facing, Suze Orman, money expert and co-founder of emergency savings startup SecureSave, said that you should start by building up an emergency fund. “The one thing that every single person needs is an emergency savings account,” she told GOBankingRates. “I’ve been saying that for over 40 years now, and it’s been getting to be more and more of a problem.” Here’s why not having an emergency savings fund is a mistake that could lead to poverty. Lack of an Emergency Fund Could Send You Into a Cycle of Debt Orman believes that many Americans are not prioritizing saving for emergencies because there are now so many options available to cover an unexpected expense. “Because there are so many credit cards available, because there are payday loans, because you can take a loan from your 401(k), because you can take money out of your Roth IRA, people aren’t saving for the little unexpected emergencies that send them down the path to poverty,” Orman said. Investing for Everyone While you might not think twice about maxing out a credit card or resorting to a payday loan or a 401(k) loan to cover an unanticipated expense, Orman warns that this could turn into a financial disaster. “They have charged up their credit cards to the hilt. Now what do they do? They take money out of their 401(k) as a loan, [which is a] horrific idea for many, many reasons,” Orman said. “They go to payday loans, and they’re on this forever treadmill going downhill, simply because why? They didn’t have $150 to pay for new brakes or a new tire or whatever it is that they needed, so they go to the only source that they know.” How To Build an Emergency Fund Orman recommends automating the process of building an emergency fund so that you don’t end up in that never-ending cycle of debt. “If something isn’t done automatically for somebody, if it isn’t just withdrawn without them having to do anything, they will not do it,” Orman said. You can set up an automatic deposit from your checking account into an emergency savings account, or take advantage of an employer-sponsored emergency fund like SecureSave if it’s available to you. Orman believes that as you see your savings grow, you can reframe your whole attitude about money. Investing for Everyone “SecureSave isn’t just about giving people a way to save money, it is also to change people’s psychology and turn them from spenders into savers,” Orman said. “Once you see, for the first time in your life, $1,000 in your account that you can get any time you want, now you want it to go to $2,000 and $3,000. Now, we have changed the saving behavior.”

Posted by Suze at 2023-08-21 16:05:17 UTC