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Renowned financial advisor Suze Orman is known for her sage advice on all matters of personal finance. From retirement planning to investment strategies, her insights have guided countless individuals towards financial stability and success. But can her principles be applied to structuring a sound reverse mortgage plan? Let’s delve in and see.

Understanding Suze Orman’s Financial Principles

Before we apply Orman’s principles to reverse mortgages, let’s first take a look at some of her most notable financial principles:

  1. Live Below Your Means but Within Your Needs: Suze Orman advocates for living a lifestyle that is not just affordable but also fulfills your needs. This principle emphasizes the importance of creating a financial buffer for unexpected expenses and the future.
  2. First, People, Then Money, Then Things: This principle highlights the importance of prioritizing relationships and personal wellbeing over financial gain.
  3. Emergency Fund is a Must: Orman stresses the importance of having an emergency fund to cover at least eight months of living expenses. It provides a safety net in the event of unforeseen circumstances like job loss, health problems, or a market downturn.
  4. Invest in Your Future: Saving for retirement is one of the most crucial aspects of financial planning. Orman encourages investing wisely to secure a comfortable and secure retirement.

Understanding Reverse Mortgages

A reverse mortgage is a financial tool designed for homeowners aged 62 and above that allows them to tap into their home equity without selling their home. The homeowner can opt to receive the funds as a lump sum, monthly payments, or a line of credit. The loan is repaid when the homeowner sells the home, moves out permanently, or passes away.

Applying Suze Orman’s Principles to a Reverse Mortgage Plan

Now that we have an understanding of Orman’s financial principles and reverse mortgages, let’s see how we can apply her wisdom to structuring a reverse mortgage plan.

Live Below Your Means but Within Your Needs

A reverse mortgage can be a powerful tool in aligning your post-retirement lifestyle with your financial capabilities. It can provide a steady source of income to meet your needs without straining your finances. However, it’s crucial to remember that a reverse mortgage is a loan, which means it will eventually need to be repaid, with interest. It’s important not to see a reverse mortgage as a ticket to an extravagant lifestyle, but rather as a way to supplement income, cover unexpected costs, or finance necessary home improvements.

First, People, Then Money, Then Things

A reverse mortgage doesn’t only affect you—it can also have implications for your family and heirs. It’s essential to have an open and transparent discussion with your family about your decision to take a reverse mortgage. This ensures that everyone involved understands the implications and agrees with the plan.

Emergency Fund is a Must

While a reverse mortgage can be a useful tool in bolstering your finances, it should not replace an emergency fund. Even after taking a reverse mortgage, it’s important to have liquid assets available to cover unexpected expenses. Some people may choose to establish a line of credit with their reverse mortgage for this purpose.

Invest in Your Future

A reverse mortgage can play a strategic role in your retirement planning. If used wisely, it can help you better invest in your future. For example, some homeowners use a reverse mortgage to delay taking Social Security benefits, allowing them to increase the benefit amount they receive later on.

Suze Orman’s financial principles offer valuable guidance in making sound financial decisions, including the structuring of a reverse mortgage plan. Applying her principles can help ensure that you approach a reverse mortgage in a way that fits your lifestyle, prioritizes your wellbeing, and contributes to a secure and comfortable retirement. Always remember to consult with a financial advisor to understand all the implications before making a decision.