Suze Orman on her biggest money mistake: 'I believed that things defined me'

Suze Orman
Marc Royce | Copyright Suze Orman Media Inc.
Key Points
  • Suze Orman's biggest financial blunder: Buying fancy clothes and watches, and leasing a BMW to impress a wealthy ex-girlfriend.
  • In hindsight, Orman realizes she got her priorities backward. "Things will never define who I am. If you want to be a fool, keep spending money on things that mean nothing."

When people come to Suze Orman for financial advice, she's more than happy to point out that someone is on the verge of a money blunder. Fail to invest through market downturns or cosign a loan for a struggling friend, and you just might hear the financial guru and host of the "Women & Money ... and Everyone Smart Enough to Listen" podcast call you a "financial fool."

But Orman readily admits that she doesn't have a perfect financial track record. When asked to describe a money mistake she made in her youth, Orman recalled overspending to impress a woman she was dating. In hindsight, the decisions she made seem laughable: "Are you f---ing kidding me? Why would I have done that?" she says.

In her case, it was "because I believed that things defined me, and those things would win her approval."

Overspending because 'I wanted to impress'

In the early 80's Orman dated a woman named Noni, who Orman says came from "one of the major blue-chip" families. Noni wore a Cartier watch.

"Even though my parents didn't have money like that, my mom went and bought me a $1,500 Rolex Oyster back in 1980 so that I could look like a stock-broker," Orman says. "She took the diamonds out of her engagement ring and made me a necklace so I could look the part in her mind."

A $10,000 watch, an extended warranty, and more money mistakes

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Noni and her family seemed to think it was all a bit déclassé: "She said, 'Oh ... a Rolex,'" Orman says.

"So what does Suze do?" she continues, referring to her past self. "She takes money from her 401(k) so she can go buy a Cartier so Noni would be impressed. I go and lease a BMW, a big one, so that Noni would be impressed. I start buying designer clothes so that Noni would be impressed."

'I was a fool' in 3 key ways

Followers of Orman's career will note that the story contains several missteps that these days the guru strongly warns against. "I did that," says Orman. "And I was a fool."

  1. She borrowed from her 401(k). This is a big no-no for Orman. While some people view borrowing from retirement accounts as an easy way to access funds that you can repay back to yourself, with interest, it's a move that's rife with risk, Orman says. Fail to follow the repayment schedule, and you'll owe tax on the outstanding balance of your loan plus a 10% penalty for early withdrawal. Plus, "you may have that money out of the market during a time that the market rallies," Orman told Grow.
  2. She and her parents overspent. Living within your means is Personal Finance 101. These days, Orman would caution anyone against going into debt to buy clothes or jewelry or signing an expensive lease on a car. "I personally think you should never, ever ever ever, lease a car, do you hear me?" she told CNBC Make It. Her logic: At the end of the lease, you've made your payments and have nothing to show for it.
  3. She let feelings cloud her financial judgement. When it comes to love and money, Orman takes a practical approach. The Orman of the 80s who bought designer clothes to impress a girlfriend would hardly recognize the Orman of today who says you need to have frank, financial conversations before settling down with someone. "You spend the majority of your life working, saving, and investing money, but you're more comfortable talking about sex than money? Get a life," she told Grow.

Learning from her mistakes

Things ended up happily ever after for Suze. She didn't go into debt because of her overspending, nor did her retirement savings crater after she took money out of her 401(k). She met her wife, KT, in the early 2000s and the two got married in 2010.

Nevertheless, Orman says the episode taught her an important lesson about people's relationship with money — one that crystalized for her years later when she was on TV being interviewed by Piers Morgan.

At the time, Orman occasionally wore her Cartier watch, which had appreciated in value substantially. Still, knowing that Morgan was an adversarial interviewer, Orman decided to appear wearing a $200 Michael Kors watch, along with a few rings and the gold earrings she's now worn for 30 years.  

Suze Orman explains emergency savings

Video by Stephen Parkhurst

Eventually the "gotcha" question came. Morgan wondered how Orman could preach frugality given the way she accessorized. "How many hundreds of thousand of dollars of jewelry do you have on?" Orman remembers him asking.

"That's funny, Piers," she recalls replying, "because I have a $200 watch on."

"He saw that watch on me, and he automatically assumed it was an expensive watch," she says. "That's when I really got the idea that I define the things on me. Things will never define who I am. If you want to be a fool, keep spending money on things that mean nothing."

Sort out your priorities, Orman advises. "If you want to be a financial wizard, value who you are, what you do, and the things that money can do not only for you, but for others," she says. "What you show others, other than your own integrity and honesty, doesn't really matter in the end."

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