46-Year-Old Making $3,583 A Month Asks Suze Orman If She Can Afford A Year Off To Travel – Orman Warns It'll Cost Her $500,000 In Retirement

In a 2021 segment on Money.com, finance guru Suze Orman tackled various real-life financial questions, giving her signature "approved" or "denied" stamp on viewers' dreams. One scenario involved a 46-year-old woman asking if she could afford to take a year off work to travel on a budget of $40,000. Spoiler alert: Orman approved, but not without adding a healthy dose of financial wisdom.

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The Scenario

The caller, who's doing pretty well financially, has a monthly income of $3,583 and zero debt. She's got $40,000 in liquid cash and $720,000 in her retirement account, and she plans to sell some stocks to fund her travels. In addition, she intends to rent out her home short-term to generate extra income while she's away.

Orman gave her the green light to take the trip, applauding her smart financial planning. But she didn't let her off the hook without a reality check about what that $40,000 could mean for her future.

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$40,000 Today vs. $500,000 Tomorrow

Orman dropped a financial bombshell by pointing out that if $40,000 today were invested wisely, it could be worth half a million dollars 30 years from now. But how does that work?

Here's the math behind Orman's statement: Assuming an average annual return of 8% in a retirement account, $40,000 could grow to over $500,000 in 30 years due to the magic of compound interest. It's a reminder that today's spending comes with an opportunity cost – what you spend now won't have a chance to grow for your future.

Orman's message was clear: while enjoying life now is important, balance that with planning for the future. The key is to find a way to enjoy experiences without jeopardizing long-term financial stability.

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Retirement Tips: The Balancing Act

Suze Orman is famous for telling people to prioritize their retirement savings – and for good reason. People are living longer, and health care costs in retirement can be astronomical. For someone like the caller, who already has $720,000 saved, she's in a good spot. However, it's crucial to continue building that nest egg.

Some tips for anyone considering a major life change like taking a year off include:

• Maximize retirement contributions: This should be the first step if you're not already maxing out your 401(k) or IRA. The more you contribute now, the more time your investments have to grow.

• Create multiple income streams: The caller’s decision to rent out her home was smart. Diversifying income sources like this can help cover travel expenses without dipping into savings.

• Stay insured: Taking time off from work might mean losing employer-provided benefits like health insurance. Make sure to account for that in your budget.

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Enjoy Today, Plan for Tomorrow

Orman's advice boils down to finding balance. If you're in a solid financial position, like the caller, and you've planned carefully, it's okay to splurge on life experiences. As Orman said, "Girlfriend, have the best time of your life!" Just don't forget about your future self while you're out there living in the moment.

Orman's approval came with a blend of excitement and caution, proving once again that it's possible to enjoy today without sacrificing tomorrow. After all, $40,000 may not seem like a lot now, but in 30 years, it could be the difference between working in your 70s or sipping cocktails on a beach in retirement.

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