When it comes to our financial standing, the pandemic hasn’t impacted everyone the same way.
Financial advisor Suze Orman characterizes the situation as a clear divide between those who have and those who don’t. Some people have actually flourished over the last year thanks to reduced expenses and stimulus payments. Others are barely managing after losing jobs and exhausting their savings.
Orman laid out guidance for both groups during an online event hosted by Visionary Women on Feb. 3. Visionary Women is a Los Angeles–based nonprofit focused on empowering women.
What to Do If You’re Having a Hard Time, According to Suze Orman
If the pandemic has left you in a difficult financial spot, Orman advised concentrating on hanging on to whatever funds you can. If you receive stimulus payments or unemployment benefits, use that money to cover immediate needs and stash any surplus.
“I do not want to see you take this money and pay down credit card debt with it,” she said. “I do not want to see you take this money and pay off something that you owe, whatever it might be.”
Orman recommended utilizing federal student loan forbearance and making only minimum payments on other debts for now.
“I don’t care if your FICO score goes down,” she said. “I care that you have the ability to feed yourself and your children.”
You may need to seek help to cover basic necessities, but don’t let that diminish your sense of self.
“Lack of money doesn’t make you lack of worth,” Orman said.
What to Do If You’re Doing Well, According to Suze Orman
If your finances have actually improved during the pandemic, Orman encourages considering helping someone in need — but only if your own situation is solid.
Beyond steady employment, Orman urged keeping a 12-month emergency fund. Forget the usual guidance of having three to six months of expenses saved. The events of the past year demonstrate the need for a much larger cushion.
After you’ve established that rainy-day fund, ensure your other financial matters are in order.
“You better be contributing to your retirement account,” she said. “You better be getting yourself out of credit card debt. You have to be doing everything today to protect your tomorrow.”
If you own a home and have built equity, think about opening a home equity line of credit (HELOC) — even if you don’t need to draw on it immediately. Using a HELOC is preferable to withdrawing from retirement savings, Orman noted.
“It makes absolutely no sense to withdraw money from a 401(k),” Orman said. “Do you know that your retirement accounts are not affected in bankruptcy?”
Should things deteriorate and you have to file for bankruptcy, funds held in a 401(k) are typically protected.
Suze Orman’s Pandemic Guidance for Everyone
Whether you’re struggling or have prospered financially during the pandemic, being mindful about spending is crucial. Even though we may be closer to the pandemic’s end than a year ago, significant uncertainty remains ahead.
“Everybody should live absolutely below their means but within their needs,” Orman said. “They should not be spending what they can afford. They should be spending less than what they can afford to spend. You should be saving money and saving money, because the truth of the matter is you can never be too rich.”
Nicole Dow is a senior writer at Savinly.
