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Naturally, money is tight in this deep recession, but some of us still want to be financially responsible and are wondering what is the best approach to saving money and managing credit card debt and student loans.
So financial advice expert Suze Orman offered solutions during her recent appearance on The Today Show. Of course, if you watch Orman’s weekly show on CNBC, you already know she thinks everybody should save eight months worth of living expenses, which is easier said than done when you have limited money and loads of credit card debt and student loans.
During her Today Show appearance, Orman responded to four questions:
1) Should you build an 8-month savings reserve or pay off credit card debt?
2) Should you contribute to your job’s 401K or pay off your credit cards?
3) Should you focus on paying off student loans or credit card debt?
4) Should you focus on retirement savings or savings for your children’s college?
These are all tricky questions for Orman because she always says never carry credit card debt, pay off student loans and of course, build that eight-month reserve. So how does she choose which is the most important? By tackling them two at a time.
Orman said it’s more important to save eight months worth of expenses in this tough economy than to pay off credit cards. She suggested to only make the minimum credit card payment until you have that reserve and then work toward paying off all credit card debt. She said you should only contribute to your job’s 401K if your employer makes a matching contribution, and if your employer does not contribute, you should focus on paying off your credit card debt rather than invest in your 401K. She also said student loans and credit card debt are equally important and should be paid off after securing that eight-month reserve. And finally, she said it is more important to save for your retirement than for your kids’ college fund. She said the kids can always get student loans to pay for college.
And a couple days later, Orman had an email read aloud on her Suze Orman Show that asked if you should take a vacation if you’re only halfway toward an eight-month reserve. Orman’s advice is to hold off on vacation until you have the eight-month reserve because you should be prepared in case you become unemployed in this deep recession.

By Teneshia LaFaye
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