Why Suze Orman Shunned a Million-Dollar Penthouse

There is perhaps no greater financial danger for advisors’ wealthiest clients than the age-old desire to “keep up with the Joneses.”

People with high-paying jobs and millions of dollars in the bank normally don’t have much to worry about, financially speaking — save their own ability to burn through their fortune in pursuit of an imprudently lavish lifestyle inspired by comparisons to people with even higher-paying jobs and billions, rather than millions, socked away for the future.

In fact, according to the bestselling author and former Merrill Lynch broker Suze Orman, advisors must be wary of all their clients’ ability to “learn” to spend excessively, and they should not assume that millionaires can’t run into liquidity problems thanks to poor decision-making about spending and investing.

Orman underscored the insight by means of a few personal anecdotes shared in a recent interview with ThinkAdvisor, during which she was joined by fellow SecureSave co-founder Devin Miller. The pair said SecureSave’s emergency savings platform is experiencing rapid growth, including via its recent adoption by Humana, and a big reason why is the solution’s universal appeal for savers at all levels of the income spectrum, including those who don’t necessarily expect to face a short-term cash crunch.

Why Some VPs and Executives Can’t Retire

“The truth of the matter is that, for so many people, it’s the more you make, the more you spend,” Orman said. “They think, ‘If I could just make $10,000 more a year, then I’d be set, or if I get past $100,000 or $200,000 per year, I’ll be content.”

The reality is that people generally become accustomed to spending more as they earn more, and it’s all too easy for one’s spending behaviors to outpace even meaningful salary growth. Plus, people often don’t think about the tax ramifications of higher earnings, and that can put an unexpected damper on their ability to balance the budget as their income grows.

“You can picture it,” Orman said. “Your salary gets bigger, but so does your house. Your clothes get nicer and your jewelry becomes more expensive. In the end, you can easily end up with less disposable income than you had before, and you don’t even see it coming.”

Back when she was doing brokerage work in the late 1980s and early 1990s, Orman explained, many of her clients were in the field of gas and electric utilities.

“Among the workers, there were lots of successful early retirements,” Orman recalled. “The typical workers might have only $100,000 in their 401(k), but they got $2,000 a month from a pension, and they could happily retire because they knew how to live within their means.”

Ironically, it was vice presidents and executives who often couldn’t retire — because they were paying for boats, second homes and vacations. As Orman put it, their lifestyle creep meant they were less financially secure in retirement than workers who enjoyed far more modest wages and benefits during their careers.

Free Money Is Free Money

According to Orman and Miller, SecureSave’s emergency savings accounts are enjoying impressive take-up rates across all manner of employers and economic sectors, and this is for a few reasons.