Never More Important Than Now

Thanks to Ezra Klein (who tips his hat to Megan McArdle) I see that Oprah's website has made Suze Orman's new book, Suze Orman's 2009 Action Plan: Keeping Your Money Safe & Sound , available via free download through the end of the day today. I don't know about you, but I can almost never get enough Suze (though the dawn of the HD era has led me to reconsider that thought a time or two). Regardless, Suze+free book download is not a combination that I'm prepared to resist.

So, I downloaded Suze's new book and started flipping through it. There are chapters on where America and individuals stand today, a bit about how we got into this position, and then a variety of advice for how best to handle your financial situation in various areas: Credit, Retirement Investing, Saving, Spending, etc...And in that basic structure there is some very good news. The best-selling author has had the good sense to draw a bright line between saving for retirement and other, shorter-term savings. This is a critical distinction that is all too often lost. Without short-term savings, families are vulnerable to falling under crushing financial pressures if they're faced with anything from unexpectedly job loss, to an untimely illness, or even trouble with their automobile. These are the kinds of pressures that drive people into bankruptcy, lead them to take up public assistance programs, and lead many many more to using risky, high-priced services such as those offered by payday lenders.

On page 85, Suze writes "Never has having an emergency savings account been more important. The weak economy increases the odds that we will see rising layoffs in 2009; that’s why I want you to push as hard as you can to find a way to set aside at least eight months of living expenses in an insured savings account."

That is great advice, and it's heartening to see someone with the kind of bully pulpit that Suze Orman possesses giving such a strong endorsement to savings. It strikes me that this type of goal will seem out of reach to a lot of people. The old conventional wisdom said that you should have three to six months of living expenses saved up, and that goal has been out of reach for too many Americans. Now, if only there was something that policymakers could do or something that employers could do to encourage low- and moderate-income Americans to build the kind of emergency savings that can help them to develop the asset wealth to avoid many of those pitfalls...