Suze Orman Warns of a 'Financial Tsunami.' Here's Why

That's a pretty unsettling thought.

It's easy to see why some people may be feeling optimistic about the U.S. economy. Unemployment is reportedly at a 54-year low, and jobs are supposedly nice and plentiful.

Or at least that's what many people are choosing to focus on. The reality, though, is that today's economic picture isn't as rosy as some might think it is. And Suze Orman cautions that a lot of people may be in for a rude awakening in the coming months.

In fact, she warns that consumers could be in for a "financial tsunami." Here's why.

Economic conditions could decline broadly and individually

The U.S. economy might seem like it's in great shape, but in reality, things have the potential to deteriorate pretty quickly this year. For one thing, layoffs have already started. We've already heard about many large employers reducing staff in an effort to cut costs ahead of a potential recession.

And speaking of recessions, the Federal Reserve's aggressive interest rate policies have the potential to drive us into one. As borrowing gets more expensive, consumers may be forced to cut back on spending. If that happens to an extreme enough degree, it could be enough to fuel a broad economic downturn.

But even if the broad economy doesn't tank, a lot of people's personal finances might worsen over the next year. And a big reason boils down to higher living costs and expensive borrowing.

Orman worries that many people don't understand the consequences of paying higher interest rates on products like credit cards, HELOCs, and loans. As such, payments and expenses are going up for a lot of people because of inflation and rising interest rates, and most consumers don't have enough money in savings accounts to give themselves a cushion.

In fact, a recent survey by SecureSave found that 67% of Americans do not have the money in savings to cover a mere $400 expense. It's these people who risk falling behind on their debt payments and bills even if their income holds steady. And if people in that boat wind up losing their jobs, the results could be downright catastrophic.

Be careful with borrowing, and aim to build some cash reserves

We don't know what sort of turn the economy will take in 2023. Maybe things will be perfectly fine, or maybe we'll see an uptick in layoffs and a rise in the national jobless rate.

The best thing consumers can do individually to protect themselves is to build up emergency savings. Having money in the bank could make it possible to get through a layoff with less long-term financial damage.

Those with high-interest debt should also do their best to pay it off as quickly as possible. Products like HELOCs and credit cards come with variable interest, which means these debts in particular can become more expensive over time.

It's not necessarily a bad thing to be optimistic about the economy. But it's important for consumers to shore up their finances in case conditions worsen rapidly.