These 4 Suze Orman Tips Will Save You From Financial Ruin

Take control of your finances, now and in the future.

Popular financial guru Suze Orman has a host of advice and information about how to improve your financial situation, and in so doing, to live a happier and more fulfilling life. But right now, as we grapple with continued economic uncertainty and rising prices, many people fear what might come next. Here are four pieces of Suze Orman wisdom that could help you avert financial disaster.

1. Hope for the best, prepare for the worst

This mantra runs through many of Orman's blogs and podcasts, and can impact our finances in several ways. The most obvious is the need to have an emergency fund to cushion you against anything from job loss to a medical crisis. Put that money into a savings account you can easily access if something goes wrong.

Right now Orman advises building a fund that can cover as much as 12 months of living expenses. Orman also recommends re-checking your target amount against current bills to be sure you've factored in the increased costs of essentials like food and gas. If you don't have anything put aside for emergencies, building up enough cash to cover a year's worth of living costs can feel like a daunting prospect. Try to start small -- every dollar you can save now will help.

Orman also tells her listeners to pay down debt, particularly as we prepare for the potential job losses and economic instability that could come with a recession. "You are asking for so much trouble if you carry credit card debt right now," she said in June. Sadly, paying down high-interest debt is easier said than done, especially if you are struggling to make ends meet. Aggressively prioritize your needs over your wants. If there's any way you can take on extra work while there's a labor shortage, it may be worth the short-term pain.

2. Don't give up your power

Whatever your financial situation, Orman warns against ever blindly following a financial adviser or tax accountant. "You cannot just take a financial advisor's word for anything," she says on her Women & Money podcast. Don't be afraid to ask questions, especially if something doesn't seem to make sense. And don't assume that a so-called expert magically knows better than you do. You need to be involved in decisions that impact your finances, as ultimately, it is you who will have to deal with the consequences if things go wrong.

3. Dollar-cost averaging is your friend

Orman is a big fan of dollar-cost averaging. Rather than investing a lump sum into crypto or the stock market, Orman advises buying a set amount at regular intervals, particularly during these uncertain times. If you automatically put, say $100 a month or more into an index fund, it can even out some of the market's ups and downs. Plus, it means emotion is less likely to drive your decisions as you invest every month, no matter what the market is doing.

Speaking in a recent podcast, Orman explained that the stock market may fall again in the near future. "So how do you deal with that?" she asks. "You deal with that by dollar-cost averaging. You deal with that by not stopping investing, if you have seven, 10, 20, 30 years or longer until you need this money." Her view is that if you put in a lump sum all at once, there's a risk you'll buy at the wrong time and the value of your investment will fall.

Dollar-cost averaging isn't right for everybody. Some argue that if you have a lump sum to invest, the sooner you do it, the better. The idea is that the longer your money is in the market, the more time it has to produce returns. If you instead split your cash into smaller monthly installments, it can mean less time in the market.

4. Don't neglect your retirement

Times are tough for many Americans right now. The cost of groceries feels like it's higher every time you go to the store, and headlines are full of warnings about a potential economic recession. Even so, Orman says your retirement savings should always be a top priority.

There are many reasons to keep on top of your retirement savings, not least of which is the incredible difference compound interest can make. Orman says, "A $10,000 investment made at age 45 will be worth around $32,000 at age 65, assuming a 6% annualized return. Invest the same $10,000 at age 55 and it will be worth less than $18,000."

If you think you might be able to work for longer and make up for lost time further down the road, Orman warns this might not happen. "Please don’t assume you will continue at a high-powered career job well into your late 60s," she says. "That’s just not how it works out for most people."

Bottom line

The best way to avoid financial ruin is to plan ahead as much as possible. We can't predict every bump in the road, but we can assume there will be bumps and plan accordingly. In some ways, having the confidence to take an active role in your finances is as important as any of the actual steps you take. Otherwise you're effectively driving down that bumpy road with your hands off the steering wheel.

In the near term, creating an emergency fund and paying down debt will go a long way. In the longer term, building up retirement savings and making steady contributions to your investment portfolio can give you a solid foundation so you can handle whatever life throws your way.