Suze Orman's show

I have read a few of Suze Orman's books and while I do agree with some of her advice, I recently watched her televised program "The Suze Orman Show". Personally, I don't particularly consider television to be a reliable source of financial advice. This show had a program called "Can I Afford It?" where Suze talks to someone on the phone for 30-60 seconds and evaluates their ability to afford something or other. Getting such flimsy advice has its own problems, but I found it entertaining just for the brief financial information that it gives on its callers.

The people with spending problems are immediately obvious, and interestingly they also were the ones calling in asking to buy rather ridiculous items (mostly for personal entertainment).

One thing I noticed was that people generally had 1 savings account and 1 retirement account. Yes, it's impossible to know if they are reporting all of their assets, but what struck me was the relative consistency of their savings accounts. 401ks were most common, some with huge balances. Some had IRAs, but none had both. And savings? There only seemed to be one savings vehicle for all of these people, if any at all! I definately don't agree with that, as evident by my belief in 6 essential savings goals. #1 is a diversified retirement portfolio, and a single 401k or IRA doesn't cut it. Have both? Now you're talking. Have a savings account? What's it for? You need a savings account, you need a spending account, you need an emergency savings fund...and you haven't even paid your bills yet.

It was adorable when a little girl called in asking if she can afford $70 for 2 goldfish and tank. She had saved up $178. Verdict? She should buy the goldfish. But how are you supposed to say no to a little girl calling into your TV show? 40% or so of her savings would go to this goldfish. She only got $8/mo allowance, so she must have been saving for a long time. I think this would be a good chance to teach about what money buys. $70 is a heck of a lot of money for 2 goldfish. First of all, goldfish cost 30 cents. Second, they don't need much of a tank, and a simple starter tank with everything included runs around $20. So now we're up to $20.60 + tax. If she keeps the goldfish alive for a year, maybe she could spend another $70 for a tank upgrade. Should that be her initial investment? I'd say not. Guess that's why I'm not on TV.

One thing that caused me to yell at the TV was her opinion on a gentleman wanting a $35k swimming pool in his house. A house he owed $81k on, and was valued at $100k. He was going to fund it with cash (15k from a 25k savings account - his only savings other than a 401k retirement) and a home equity loan. She gave him good advice, that he couldn't afford it and cashing out all his equity would leave him ripe for a financial disaster. Then she said something that struck me as odd, that he should continue saving for that pool.

Continue saving? Why would you put a $31k swimming pool in the backyard of a $100k home? Is that pool really going to increase the value of the home that much? We don't know what the homes around him are valued at, so he could be on the low end of the market, but investing 31% of your home value in a pool is not smart, in my opinion. For one, that's a huge investment in a property worth a small amount. What other renovations could be done to improve the value first? Second, a swimming pool statistically does not pay for itself. In fact it's on the lower end of the scale. And it may make it harder to sell your home, because it really takes a special buyer to get a house with a pool (certainly this risk is lower in warmer climates) and some will balk at the all the maintenance time/cost associated with it.

The swimming pool was a bad idea, for so many more reasons than just not having the cash on hand. Join a fitness center. But how much can you go into for 60 seconds? Another reason why I don't particularly like what she's doing. The potential to give very bad advice is really high here.