Suze Orman Says Build Up Emergency Cash As Much As Possible

In Suze Orman‘s most recent book, “2009 Action Plan,” she urges people with credit card debt to pay off their balances as quickly as possible using the high interest first method. “The fact that you pay just the minimum is a huge warning signal to your credit card company,” she writes, “that you may already be on shaky ground.” Now she’s changed her mind and says you should just pay the monthly minimum and put the rest of your money toward building an emergency cash stash. Based on the way credit card companies have been behaving, we think she has a point.

Originally, Orman’s goal was maintaining a high FICO score by having paid-off credit cards on your account. This served a second purpose, too: your active, paid-off cards provided a source of quick cash in case of a huge life emergency.

Now that credit card companies are slashing credit limits and unexpectedly closing accounts on customers—even ones with stellar payment histories and low debt-to-credit-limit ratios—Orman says all bets are off.

So here is the problem. If you do not have a stash of cash in an emergency fund and you have been using all your extra money to pay down your credit card debt and they keep closing your cards down-what are you going to live on if you lose your job? Chances are you may not have any available credit, or too little credit, to use in the event you are laid off. Nor will you be able to get a new card if you are unemployed.

So what’s the right size for an emergency account? Orman says 8 months of living expenses, and even if it takes you a couple of years to build that up, this is no time to trust that your credit cards will be there for you in the months to come. Once you’ve hit that magic number, go back to clearing off those credit cards.

What do you think is the right amount of an emergency savings to build up, especially if you remove the safety net of open lines of credit from the picture?

“A Change in Credit Card Strategy” [] (Thanks to Greg!)


Edit Your Comment

  1. Dustin White says:

    why is the crazy looking woman upside down?

  2. BeastMasterJ says:

    Eight months? What happened to three to six months?

  3. Skaperen says:

    Telling people to pay off the higher interest cards first is just going to encourage card companies to raise their interest rates so they can be the ones paid off first so they can generate some cash flow.

    • I_am_Awesome says:


      Yeah, I’m sure that credit card companies never realized that the highest interest cards are the ones that people (should) pay off first until Suze Orman told them that.

      Paying off the highest rates first results in the least interest paid, which is what you’re after. If your rates are all in the same ballpark, the “snowball” method (lowest balance first) may be the way to go; it results in more interest paid, but it feels good to pay off a card completely (or so I’m told, I’ve never carried a balance).

      Suze’s advice is good as always, but if you have any other source of backup money in an emergency (i.e. borrowing from a relative) you ought to pay off the credit cards first to avoid paying so much interest. The goal here is to make sure you’re covered if you lose your source of income; if you can accomplish that and pay down your debt at the same time, that’s ideal.

      And if your employer matches 401k contributions (even if they only match 50%), you’re probably going to want to max out that match; it’s an instant 50-100% return on your investment.

      • FrankenPC says:

        @I_am_Awesome: Invest in the market right now? Are you insane?

        • enm4r says:

          @FrankenPC: You realize you could go with the most conservative bond fund available in your 401k and receive a 50/100% ROI immediately? You’d be crazy not to take it if you can put up with the minimal cash flow loss. If you need the money to make it through the week, obviously that’s not the right choice for you. But employer match is probably the easiest way people could have a positive investment year without much effort at all.

        • tgpt says:

          @FrankenPC: a lot of employers offer a 401k (or 403b) option that has a low-but-guaranteed rate of return. Dump the money in there for now if you’re feeling conservative.

  4. Pinget says:

    I’m wondering about Orman’s motive. This would perhaps forestall the massive credit card defaults everyone’s expecting. It also would ensure a huge present for the credit card banks as your balance continues to rack up interest at those new sky-high rates as you build your savings. Whose best interest is this for?

    • Skaperen says:

      @Pinget: Having a way to live (financially) for 8 months or more is the critical first requirement. Before this mess, having a CC with zero balance, paid off each month, would have achieved that. But CCs can’t be trusted, now. So if you have one, and have a balance in it, the only way you can be sure you have that much in liquidity is to leave it there, since paying it down won’t assure you can use the card for that much in the future.

    • stinerman says:


      I’m being laid off on 5/1.

      I’ve been putting about 60% of my income toward student debt. That stopped the day I found out I was getting canned. Why? I can’t pay rent with my credit card. I also can’t pay my credit card bill with my credit card.

      I’m paying minimums on everything and saving. Yeah, it sucks in the long run because I’m going to have a few thousand laying around at 0% interest when I’ve got some large balances, but I need it to be able to hold out until I find another job.

      Once the job is found, I’ll go back to paying tons toward debt.

      • Alessar says:

        @stinerman: 0% interest? Do you have it in a mattress?? Even if you don’t trust a lot of banks, there are some stable ones out there. I’d look at a credit union.

      • pippenz says:

        @stinerman: Please open a moneymarket account with that money.

        You don’t need to be making 0%. I use ing direct and I can withdrawal at anytime. Look into it…Or something similar.

  5. B says:

    My tip: Don’t buy any books written by Suze Orman, and don’t buy any stocks recommended by Jim Cramer.

    • christoj879 says:

      @B: I always thought Jim Cramer was a pretty good investor with a great portfolio and sound advice.

    • SammyD1st says:



    • battra92 says:

      @B: Hear hear! I’m sick and tired of this woman being treated as a credible source of financial advice.

      The SNL skits about her are hilarious, though.

    • calquist says:

      @B: Her advice is very basic and clear for the people who need it most. Her advice is also pretty generic. She isn’t telling people which stocks to buy, she is just saying “match your 401(k), pay off your cc, establish credit” which are things that people really should be doing. So far, I definitely consider her a ‘good guy’.

  6. rpm773 says:

    She may have some good points, but it was posted here a couple days ago that credit card companies are cutting available lines of credit below current balances, causing customers to incur a fee. Presuming they’re doing that on customers they find riskier, the strategy described above may cause customers to appear riskier, increasingly the likelihood of this happening.

    Pick your poison.

  7. B says:

    This seems like a phenomally bad idea to me. Best case senario, you’re paying 15% interest on you debt, and getting 4% interest from your savings account, which nets to a 11% loss. You’d be better off investing with Bernie Madoff.

    • GTI2.0 says:

      @B: This may be why you’re not a financial adviser. This is not the time to try to earn more interest, it’s the time to sock cash away and pay that 11% as insurance that you won’t be out on your ass when you lose your job.

    • acasto says:

      @B: That advice isn’t about trying to make money off interest, it’s about surviving the currently chaotic credit situation. Since even those with good credit and histories are getting screwed left and right, she’s saying people need to make sure they have cash backing them up because AmEx or Visa may leave them high and dry. In the event of job loss, paying the bills trumps the bit of interest someone could make or loose in the immediate future.

    • winshape says:

      @B: 4% interest savings account? Where? Even ING is paying only 1.65% right now.

  8. umbriago says:

    “Gas prices probably will go down, I hope, to essentially $3 a gallon.” – 9/17/08

    I’ve quit listening to these people. It’s clear no one knows what’s going on and no one knows what’s going to happen in a week or six months. Jesus Christ on a stick, why get yourself all worked up over so much speculation?

    Stupid link of one idiot talking to another

    • aerick79 says:

      @umbriago: I hear ya! All this is someone crying wolf, and that person is Sue. I am not a financial adviser, but I would never believe and what she says.

  9. iammoses says:

    You are just a set of numbers in some risk matrix to them and when your numbers hit certain thresholds they do stuff to your account. The possiblity of people not paying their debts is in that risk matrix, if a credit card company goes out of business because people default then that is the company’s fault for not being aware of that outcome. The credit card companies don’t care about you and you should not care about them.

  10. rugman11 says:

    The thing I hate about general advice like this is that every case is different. I’m paying off debt since I have (relative) job security. I might suggest for my parents to do this since my dad’s company could close any day. But unless your job is in imminent danger it makes more sense to keep paying off your debt.

    • Anonymous says:

      @rugman11: Don’t like Orman’s advice? Just wait a couple weeks and it will change.

      You’re absolutely correct. My problem with advice like this is that probably Orman’s never had to carry a credit card balance in her life. How is she an expert?

  11. wcnghj says:

    B: So what happens when I finish paying off all of my credit cards(all 2, 9% and 7%-fixed) years early, loose my job, and have no savings?

    If my cards haven’t been closed, do I take out cash advances to make the mortgage payments, let the card chargeoff and have my credit ruined?

    I don’t think so.

    • christoj879 says:

      @wcnghj: You buy a gun.

    • B says:

      @wcnghj: How are you going to pay off your credit card debt when you’ve lost your job, though?

      • enm4r says:

        @B: Presumably it’s acceptable to default on credit cards, but we all need a place to live. If you can borrow a couch to sleep on, chances are you can borrow what you need to make minimum payments while you “pick yourself up.”

      • oneandone says:

        @B: Very slowly and with minimum amount payments. Yes, you’ll end up paying a lot in interest over several years, but some people have to weigh that against the need to eat and pay rent.

        Also, if you don’t pay your credit cards, what’s the worst that can happen? Among other things, your credit score gets ruined, making it difficult to get more credit in the future. But that’s what’s happening to most people already – so where’s the incentive to prioritize paying off your credit cards when there are more pressing financial concerns?

  12. iammoses says:

    Well if there is no food in your pantry then yes, you do whatever it takes to feed and shelter yourself and your family. Having ruined credit is better then living at the homeless shelter or digging thru trashcans for food.

  13. DrWebster says:

    While I think trying to save as much money as possible is a great idea, I think neglecting to put some towards credit card debt is just delaying the inevitable — and making it worse when you do go to pay off the debt because of all the interest. A compromise of splitting extra money between savings and paying down debt seems to be the best approach to me. You’re still getting some money in savings, but also not screwing yourself over.

  14. rainbowsandkittens says:

    @ Consumerist: FIX THE COMMENTS!

    @ Pinget: You can put your cash in a credit union, it doesn’t have to be a major bank. Suze is a practical and smart woman, and I’ve found her advice helpful over the years. I started working on an emergency fund after watching one of her programs a few years back, and within weeks of saving up 6 months’ of living expenses, voila, I was laid off. Now that I’m married and own a home, stability means more to me than ever before.

    When I was younger and could have afforded a payment on flashy car, Suze’s advice always helped me get over my temporary materialism and return to the real world. Those habits helped me pay credit cards in full every month. By the time I was 22, I had a 740 FICO. I really have Suze to thank for this. Sure, some of her advice seems obvious, but in reality today’s young people are woefully financially illiterate.

  15. sled_dog says:

    How about this: Pay off your credit card and cut it up. Starting then, put everything into savings.

  16. TurnkeyDB says:

    Where the he!! are you still getting 4% for your checking?? I’m there tomorrow!

    • NTC-Brendan says:

      @yodel: – I am actually getting 5.02 on one account and 4.25 on another. Sweet site.

      Amen Brother! My family has been on a cash, zero-debt existence for the last few years and life is so much sweeter for us. I highly recommend it but won’t force it upon anyone or harp on it. I am here to help if anyone wants to delve into it further.

      • winshape says:

        @NTC-Brendan: Thanks for the tip on THAT’S what I’m talking about.

      • FrankenPC says:

        @NTC-Brendan: I’m thinking about going further than that. I’m going to buy an acre of land and plop down a manufactured home. Grow my own food. Supply my own energy and water.

        My take on this market is that we need to become self-reliant. Investing for luxury items is one thing. But investing in your very existence is suicide.

  17. jp7570 says:

    And isn’t this the same woman that was essentially shilling for Fair Issac (FICO)? To any advice from her I say, “no thanks”. Common sense says to save as much as possible, especially these days. We don’t need a fake financial guru to tell us that.

  18. Jessica Schwartz says:

    How much for emergency savings? As rugman11 said, it depends on your job security. I have a job with nearly 0% chance of getting laid off. If by some chance something did happen, I could find another job within a month.

    I try to have a good mix of paying down debt and saving to buy a house. Just made $500 payments on each of my 2 credit cards (paying them down to less than $1000 on each) after reading Consumerist’s report about how to increase your credit report. ;)

    • floraposte says:

      @Jessica Schwartz: Though there’s more than just layoffs to consider–I might be getting a pay cut, for instance (oh, excuse me, “unpaid furlough,” during which I’d have to work). Depending on the reduction, I may need to draw on savings to get through that period.

  19. jblack says:

    I think Orman is offering excellent advice at this point. Getting a loan for a durable product is a difficult business, and getting a loan for consumables is very difficult. Cash spent to pay down a debt is cash not in hand to purchase the bare necessities that one may not be able to afford in the near future if the economy continues to degrade. Worse, if you run out of cash, you may find that the social services that you used to donate to may not be able to help by the time you need to ask for it. By storing cash, you guarantee that you’ll be able to buy the things you need without depending upon the kindness of debt agencies and charities.

    Orman has earned some respect from me by acknowledging that survival today is a different game than it was twelve months ago. Her advisements can’t hurt and may help, and don’t have any overt benefits to companies that she may be affiliated with.

  20. quail says:

    It is definitely a “sky is falling” approach. You horde your money when you believe your personal economy is going to go in the tanker. And here’s the thing, credit card companies can ruin your credit score and unleash collection agencies in your direction but they can’t do anything more. On the other hand if you don’t have money to pay the rent or mortgage after a layoff you can wind up in the street.

  21. Anonymous says:

    Just for background – I have been providing free help for the last few years to folks who, for various reasons, end up way down in debts and despair.

    My first advice would be to forget any set rules regarding the number of months in security cash to build up.

    Instead, make a budget. A REAL budget, one with all the expenses you have at the moment. Then a revised budget, one pared to the bone – your minimal financial responsibilities.

    Then do a bit of investigation: Look at your skills, look at your job title, and ask around. Figure out how long you could expect to wait before finding an acceptable job. Find out what kind of “emergency” job you could get quickly, in a pinch, and how long iy would take to get that.

    Combine both in a 12 months projection spreadsheet for your cashflow: Money in, money out. Boost your minimum financial by about 25%. If after 12 months you are still in the red, extent 6 months at a time.

    The money you need in savings is whatever enable you to maintain break-even during that rough patch.

    And I mean savings – cash. No financial instrument with any risk – no matter how low someone claims it is, and you know why! – and nothing that’s locked, unless you want to build a ladder with some bonds, where you have something to cash every 30 days.

    As to why not repay your credit cards first, considering the interest: Paying interest on your CC is better than losing house, car and going hungry in a cardboard shack.

    Expecting your credit to serve as emergency cash is a bad idea: No guarantee it will be there, and with no cash is coming in, you end up kiting to make monthly payments which is prohibited by TOS and may cost you the card. What do you do THEN if that was your strategy?

  22. pecan 3.14159265 says:

    Credit cards are increasing interests, so if you can only pay the minimum I guess the best course of action is to keep paying the minimum and hope your rate doesn’t go up?

    In a lot of cases that we’ve seen on the Consumerist of people whose credit line has been cut, it’s been severe, sure, but none of the people cited seemed to be on shaky ground. If you are paying only the minimum every month, it seems like you may be indeed on shaky ground. It’s a double-edged sword. Higher interest rates or emergency fund…not to mention the temptation to pull money out to pay off the card because the high interest rates make people panic.

    If it were me, I’d pay off the debt as much as I can each month while still having an emergency fund. Debt will eat away at everything you’ve saved in the long run. Just get rid of it.

  23. Cat_In_A_Hat says:

    I’ve always like Suze and her advice books. As a 23 year old I’m happy to say I have $0 in “bad” credit card debt and am working toward paying down my car and “good” student loan debt I’ve just taken on for graduate program, which based on my savings schedule should be paid off by May of 2010. Unlike many of my friends who have their parents picking up the tab for their schooling and rent, I’ve mananged to tuck away about 4 months work of living expenses and keep working towards building up a bigger emergency fund. Right now I’m working in a job that doesn’t offer benefits or health insurance for my position and instead of foregoing these expenses, thanks to suze’s advice I’ve mananged to find a decently priced health insurance plan and have started a Roth IRA to work towards building retirement until my employment situation improves. She’s help me become more savvy when it comes to spending money and is great at what she does. Stop bashing SUZE!!!!!

  24. Cat_In_A_Hat says:

    @ Cat_In_A_Hat *liked

  25. chrisjames says:

    With credit card APRs commonly in the double digits, and savings accounts almost universally below 5%, even 3%, either method will have its ups and downs. Proclaiming one over the other, in any economic climate, is poor advice.

    Before you decide to shore up savings and let that 24% APR card fester for a year, consider your position! What’s your job security? Can you see yourself staying for at least 1 or 2 months? 4 or 5? A year? Some people can, others could be fired tomorrow. Some may be assured severance pay. Know where you stand at all times. Prepare your resume, and start looking for a new job anyway. If you get a position, even while holding one, it’s likely you’ll get at least half a year of steady paychecks. If you’re in a service industry or similar where job hunting works on different rules, then try to leverage any skills you’ve developed to break into a new career, even if it’s not ideal. Consider sacrificing career goals for short-term security. My mother-in-law has been living like a queen in California on this model for years. It’s not sustainable at all and it’s fast catching up to her, but it works very well short-term.

    What reserve cash pots do you have on hand, or how can you rebudget? Not everyone’s investments have evaporated. Have yours? Maybe now is a good time to restructure your finances. Refinance any loans if possible (be cautious, obviously). Craigslist or trash those little used items or things you can do without that are costing money (your kids’ texting plans? an above-ground jacuzzi? the XBOX? anything else that racheted up your credit card debt??). Seek carpool and sell that second car. Give public transportation a try. Lastly, it’s a mortal sin to dip into retirement, but it’s a possibility in a dire emergency, don’t discount it.

    More importantly, I want to retread on B’s subject. Consider your cash potential when deciding between paying off the credit card and building up savings. Credit cards and other debts generate a large negative cash flow, while savings generate a small positive flow. Savings is an investment on future cash reserves, but each untended finance charge will, in the end, eat away at that reserve. Minimum monthly balance dues can be far lower than the monthly finance charges (beware!), but even if you’re meeting the charge penny for penny each month, that’s like tossing a little bit of your money away each cycle. At the way credit card rates are skyrocketing, it’s a huge chunk of your money you’re losing compared to near static money in savings. Every large chunk you take out of your debt, is a larger chunk next month you can devote to savings. Future potential vs. present stasis … measure your situation and decide which side of the scales you should add to.

    The worst, worst advice is that it’s better to just go bankrupt than not have money in an emergency, so don’t worry so much about the debt. No! There’s balance. Sit down and think for yourself. Spend a night, or two, or four, or a week shifting your finances around, budgeting your expenses, reconsidering old investments and examining new ones, looking to the future, and working out a way to achieve both goals together. Slowly build your savings up while paying your debts off in as big a chunk as you can manage. Cross credit lines off your list as emergency cash reserves, but rethink your potential need for cash reserves in the first place.

    Also, 8 months is pushing it. Everyone should have enough cash on hand to cover 200 years of unemployment, but you must compromise in the face of other responsibilities. The standard 3-6 months minimum is fine, even for present day. Going without a job for 6 months is just… I don’t see how. At that point, forget rethinking finances and start rethinking yourself.

    (As a quick tip, make sure you factor in insurance benefits you’ll lose if you lose your job. Don’t go without decent medical insurance!)

  26. TorrentFreak says:

    Buy gold.

    Then buy more gold.


  27. William Mize says:

    It’s too bad Jean Chatzky doesn’t get much love from The Consumerist. I find her advice more realistic, less shilling, and find her personally less annoying and much, much easier on the eyes. Yummy. Just sayin’.

  28. chris_l says:

    @undefined: @battra92:

    Trolley McTrollTroll, how are you?

    This morning I heard someone blame Obama for the AIG bailout, ignoring the fact that AIG got the overwhelming majority of their bailout during Bush’s term.

    I really wish America didn’t have a collective memory span of a goldfish.

  29. razremytuxbuddy says:

    Suze Orman is finally stating the obvious for people without the cash to just pay things off. It was obvious months ago, while she was spewing something way different. Her advice is always either misguided or too late. She assumes everyone in the US has buckets of cash sitting around waiting for her to tell you where to put it.

    PBS needs to give her to the boot, too. Her PBS “specials” are merely infomercials she doesn’t have to pay for.

  30. njrob_2006 says:

    I work at a mid-sized financial services company that has managed to avoid getting involved in the toxic assets that are the source of many of today’s problems with our industry. Having seen first hand the impact that troubles on Wall Street have on Main Street, my advice to anyone who thinks that they have ~100% job security is that you are not being realistic. What makes our economy strong is also what makes it vulnerable. We are all interconnected in some way whether we like it or not – when someone defaults, it affects everyone else. Your employer itslef may not have exposure to the economy, but the chances are, someone you do business with is exposed and is passing that risk on to you. By that token, we are all at risk. I’m not a fan of Suze Orman (I find her very annoying), but this is the first time what she is saying makes sense. If you have a family to support, the last place you should be placing your savings right now is in your credit cards and your home, in that order. 8 months of savings seems light if you have a family to support. While markets may recover sooner, jobs may not return for some time longer. The cost of retaining some sense of liquidity is well worth it during these times.

  31. FoxCMK says:

    Paying down debt is vitally important at this point – the sooner the better.

    Saving money is right up there. It’s difficult for me to tell which is more important than the other, but I’d say a healthy balance between the two is a good idea. But it all depends, obviously.

    Her advice isn’t bad. It’s just situational.

  32. Anonymous says:

    The idea of letting my debt sit and grow is nauseating, but in this economy, Suze is right about saving. I’m putting away 10 months’ worth of living expenses and loan payments and once that’s done, I can go back to paying off my loans…if I still have a job by then.

  33. tz says:

    In this market it might take 8 months to get a job. So I would agree with this piece of advice. Meanwhile the credit card companies are arbitrarily changing the rules (even if you have stellar credit). So your 6-10% cards might all go to 29% overnight if one becomes “overlimit”. Or for no reason at all. And you won’t know which one in advance – but probably not the one you are paying down first. I was planning on paying down the Chase card last until it imposed the $10/month fee, so I paid that one off.

    Unless you plan on doing something stupid to get fired, count unemployment for 13 or 26 weeks. I think the payment varies (greatly) by state. Depending on your benefit, you may be treading water while looking for that new job.

    Also the cash reserve of 8 months allows you to collapse it to 6 months or less if card X was the high interest one, but card Y has turned evil and needs to be paid down first.

    See if you can get a credit card from a local but large enough credit union (they also vary, some are as bad as banks so do some reading). The interest rate will be lower and they will be less likely to do something evil.

    I’m planning on paying the minimums until one turns evil or the reserve is such that I can pay down all of them 20%-25% at once.

  34. FlyersFan says:

    @ Razremytuxbuddy:
    You said Oreman constantly changes her tune, spewing something way different every so often. This is exactly why I think Dave Ramsey is the best Financial Personality out there today. He sticks to his guns consistantly. He says pay off the smallest debt first so you feel a sense of accomplishment right away and are more likely to stick to your debt snowball.

  35. muckpond says:

    in the vein of “pay yourself first,” i think it’s important to build up SOME kind of savings. you don’t have to put 100% of your $$ into savings. you could still pay more than the minimum to your card (so you’re not raising any flags), and stash whatever is left into savings.

    people who talk like this is a black-and-white decision bother me. you don’t have to pay exactly the minimum or exactly the payoff amount. above the minimum payment, YOU CHOOSE how much you can afford to put on your credit card. at that point, it’s a discretionary amount.

    but i highly recommend anyone who is living paycheck-to-paycheck to have some sort of savings (even if it’s not a whole 8 months worth). that’s vital anytime — not only in this day and age.

  36. Truthie says:

    This is getting sort of ridiculous. Yes, build up your emergency cash, and you really should have 6 months worth (or more) of expenses in the bank in case you lose your job.

    But I’m not sure it’s great advice to tell EVERYONE to stop paying down debt. Once you have a sufficient cushion it probably makes sense to continue paying down your debt over time, especially on things like credit cards with high interest rates. Maybe you shouldn’t put ALL your excess cash toward paying down your credit card right now, but I think it’s OK to pay more than the absolute minimum (which may not always even cover just the interest on some cards).

  37. PinkBox says:

    Hm. So pay off your cards immediately, but somehow save up as much emergency cash as you can also.

    What she doesn’t tell you is that as soon as you pay off the card, they’re going to close your account and cause your credit to take a hit.

  38. theblackdog says:

    Suze has been recommending that we build up emergency cash for a long time so she’s not really changing her tune.

  39. pecan 3.14159265 says:

    PinkBox: If you’re paying off the card and close your account (they wouldn’t do it for you) you probably don’t care about the short-term impact on your credit score cause…well you’re probably not borrowing money anytime soon either.

  40. Saboth says:

    I guess this is a good idea as far as personal finance, but if everyone stopped paying debt, stopped buying things and stopped investing in the stock market just to squirrel away an emergency fund, wouldn’t our economy kinda collapse?

  41. Jevia says:

    I have balances on several credit cards, and have been slowly paying off one (with a larger than minimum payment), with minimums (rounded up, i.e. a $27 due gets a $30 payment) on the others. Most of these balances were from playing the “balance transfer” game where a card offered me 4.99% until the balance is paid off if I transfered, so I did that with several cards to get my interest rates reduced from 15-19% down to 4-5%.

    I haven’t had any credit limits slashed, accounts closed or interest rates raised (knocks on wood). Hopefully it will remain so. What I have noticed, however, is that I’m no longer being offered ANY balance transfers. Not just the transfer for a new low rate, my cards aren’t even offering me transfers at my “regular” rates (which I never did anyway).

    I will have one card paid off by September and another by December, then the snowballing really begins. And yes, I am also still putting away a few hundred every month into a savings account too. Hopefully the cards won’t get closed once they are paid off, but at least since we already have a home and (relatively) new car, a short-term credit hit wouldn’t hurt us anyway.

  42. fivepoint says:

    This his HARDLY a ‘sky is falling’ approach. People should ALWAYS have 4-8 months worth of living expenses saved and stored away for a rainy day. Losing a job is something to plan for regardless of the current financial state of the economy.

  43. Anonymous says:

    I have a spreadsheet tracking progress of my 8 month emergency fund. I just hit 54% of it last pay check. It’s good advice to have an emergency fund but unfortunately a luxury for many people.

    If i had several CC’s maxed out I would probably take the FICO hit and let them go and put my payment money in a savings account. I have a feeling that in a few years we’re going to see a federal FICO repair program to help spur lending from the consumer side of the equation.

  44. gafpromise says:

    Dave Ramsey says start with $1000. It won’t take long for most people to build that up and it will generally cover minor emergencies like car repairs. As a long-term savings account he recommends 3-6 months, and that’s in case of job loss or a catastrophic medical emergency. But I’ve been focusing on paying down debt for the last couple of years.

  45. Oleg Chetverikov says:

    Why do we need people on TV telling us how to do basic money management? We are not talking about credit default swaps, this just basic common sense. How about using our own brains and think for ourselves.

  46. ADismalScience says:

    Telling people to build up an 8-month cash supply now is laughably late at best and deflation-bait at worst. 8 months would an ideal stash leading into a recession; now that ours has shown several signs of bottoming/ending, I would contest that 3-6 is still valid if you’ve held onto your job. Not only would an 8 month stash require a lot of deferred consumption in an already-thrifty consumer spending environment, but savings rates and treasuries imply that those cash investments will have a deleterious effect on her average client’s long-term wealth. My recommendation would be to put 3 months in cash aside and put the remaining 3 of emergency savings into liquid small-cap stocks and small-cap funds.

    I was in cash 8 months ago with a year of expenses. In April several CDs I own are maturing and I’m putting that money to work into equities and housing. After Q1 bank results and the inevitable pullback, of course.

  47. Subsound says:

    It’s good advice, even though I hate her. More living expenses in your accounts right now more then paying off great chunks of debt…even if it hurts you later you will have living expenses to fall back on. If you are secure though, or have a ton in savings already, pay the hell out of your cards.

  48. econobiker says:

    9:43 PM on Wed Mar 18 2009 @ Consumerist: FIX THE COMMENTS!

    Yeah- I am good on other still-Gawker sites (Jalopnik/Lifehacker) but the reply button over here is killing us…

    I recommend Dave Ramsey for those in dire need before Orman unless you want to embrace the same essential message from a pro-“Girl Power” person…

  49. shiftless says:

    Get on this. Yes, yes, yes, you absolutely need at least 8 months of backup money. Also, pay more than the minimum on your credit card. What are you, crazy?

  50. SoCalGNX says:

    Having money gives you options. Its nice to have paid down debt but the reality is that anyone’s job is at risk. Those who smugly think they are safe from job loss could have a rude awakening.

  51. SadSam says:

    I think Suze is generally right that Americans, in general, ought to have a bigger emergency fund (or if they don’t have a fund they ought to start one). I’m more of Dave Ramsey fan and he starts you off with a baby emergency fund, you pay off your credit card and other debts and then you fully fund an emergency fund. We generally followed his plan but I continuted to add to our emergency fund even while we were paying down our debt because I was worried about the economy back in 2007. We got our debt (except the mortgage) paid off, we don’t use credit cards (except for travel or business expenses) and we continue to add to our emergency fund but not at the expense of other savings goals.

  52. kwsventures says:

    Suze is America’s goof ball. Only financial novices listen to her act.

  53. SpitfireM1 says:

    I apologize if this has been posted before as I’m short on time and couldn’t read every post, but I recently heard the best ‘rule of thumb’ for size of an emergency fund that I’ve heard to date.

    Simply, save one month for each percentage of unemployed workers in your area. For example, if you are in LA with an unemployment rate of 11%, you should ideally have 11 months of income saved. If your area’s unemployment rate is 5%, you should have 5 months of savings.

  54. jetdillo says:

    Both my cards just raised my limit, one by 25% and the other by 50%. What does THAT say ?(except maybe that those who pay off every month are no longer the detested scum of the CC world)

  55. Anonymous says:

    My mom (elderly, over 80) told me that she is deliberately not paying off her credit cards in full because Suze Orman said not to on TV. Now she’s getting calls from the credit card collections departments. She could be paying these cards off in full, but now she has money under her matress and a trashed credit report. THANKS, SUZE.

  56. Ramzilla says:

    Wow. Suze says to save cash for when things go wrong. Brilliant. Gee Suze, how did you come to this amazing conclusion? No shit bimbo. Common f’ing sense tells you to have emergency cash on hand. I just bet her book is filled with all kinds of other common sense type things. Buy her book; it will be money well wasted. Seriously, this hooker needs to find another line of work if she can’t come up with anything worth while. Her and her book remind me of when celebrity bitches put out an exercise book that later turns out to be bullshit.