The November 2012 print issue of Oprah magazine includes a nugget of very important financial advice from Suze Orman. While I’m often critical of the financial advice you read in most magazines because it’s too simplified, I actually found something worth sharing!
The set-up: A reader wrote in, asking whether Suze “approved” of the reader’s plan to withdraw retirement funds to pay credit card debt. The reader is a retired 59-year-old police offer with a fixed annuity of $100,000 and $25,000 in credit card debt.
The advice: Suze makes some good, very practical points that the withdrawal will be taxed and may include fees, both financially draining consequences. Yes, that’s important. But it’s not what had me think “I’ve got to blog on this”. Instead, the part of Suze’s reply that sang to me was when she questioned what led to $25,000 in credit card debt. These were Suze’s wise and cautionary words:
If you don’t have a strong handle on your spending and expenses–and please be honest here–then the last thing you want to do is use your annuity to dig yourself out of debt. That kind of quick fix, in the absence of some serious behavioral shifts, will only lead you right back into the habit of acquiring credit card debt.
I’m not religious, but let me say: AMEN! What this reader suggested by using some of her annuity is a lot like the quick fix of a few years ago, that “fix” being paying off credit card debt with a home equity line of credit. Folks would do that, not fix their habits, and eventually find that they had credit card debt again. It’s the principle of the need for some serious behavioral shifts that makes working with a financial counselor so effective when the other “quick fix” options don’t work. Just following the money-saving quick tips out in the Ether is a bit like learning how to drive based just on street signs. Both approaches eliminate critical context for informed decision-making and both approaches are pretty limited on feedback until things get awfully messy.