'More Expenses, More Taxes, More Everything': Suze Orman On The Risks Of Upgrading To A Swanky Apartment At 40

When you hit 40, the temptation to upgrade your lifestyle can be strong, especially if you've worked hard and saved well. However, according to personal finance expert Suze Orman, a swankier apartment in a prime city could be more of a financial burden than a reward – especially if your job situation is unstable.

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In a recent episode of her Women & Money podcast, a listener posed a question many can relate to: She's 40, presumably owns her home outright, and has saved a significant portion of her net worth in cash. With relatively low expenses and the safety net of living with her parents if necessary, she's considering upgrading to a nicer apartment in the city, using her cash reserves or taking out a small loan. The problem? Her job is unstable, and she knows she might have to retire early.

Orman's response? A firm “no.”

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At first glance, upgrading to a nicer place may seem easy, but Orman warns that it could lead to more financial stress in the long run. She explains that moving to a swankier apartment means more than a bigger space. “More expenses, more taxes, more everything,” she says. If your job is shaky, you should focus on accumulating cash, not depleting it.

Her co-host KT quickly jumped in, agreeing with Orman's assessment. “Why would you do that? I would never do that if I had an unstable job and (was) 40 years old,” she said. “I’d want to accumulate as much cash as possible so then I'd feel free.”

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For Orman, the decision is simple: at 40, you should still be focused on building wealth. “These are your compounding years,” she reminds listeners. She suggests investing in your future rather than spending money on a luxury apartment. The more you can save and invest now, the better off you'll be when it comes time to retire.

Orman also stated that the listener's logic is flawed regarding interest rates and cash reserves. The listener mentioned that by liquidating her assets and putting them in a bank with 3% interest, she could generate enough income to cover twice her parents' monthly expenses. However, Orman warns that assuming a steady 3% interest rate is risky.

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“How do you know what interest rates are going to be?” she asks. Orman states that if this listener had made a similar decision in 2007 before the financial crisis, she could have faced significant losses.

So, what's the solution for someone longing for a more vibrant, city-centered lifestyle? Orman suggests enjoying the best of both worlds without making a financial commitment that could backfire. 

“If you want a swankier lifestyle, go there for the weekend and come back,” she advises. Renting a place for short visits allows you to experience the excitement of the city without the long-term financial strain of owning an expensive downtown apartment.

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Orman's advice is this: prioritize financial security, especially when you're in an uncertain job situation. “At 40, if you lose your job, you get another job,” she says. But until you're in a more stable position, stick with the home you own outright, keep saving and investing, and leave the luxury upgrades for another time.

Are you in a similar position and considering upgrading your home to enjoy a better lifestyle? Then you may consider talking with a financial advisor. They can help you navigate your finances and determine the best route that aligns with your long-term financial goals. 

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