Suze Orman's latest advice for women: become powerful with your money
Orman, who admitted she had nothing to do with naming the afternoon break-out discussion, quipped, "I have no idea."
Of course, she joked. Orman had plenty of ideas and doled out advice in her trademark, rapid fire style that brooked no whining, no excuses. Save it. Literally.
She kicked off her talk citing a grim statistic recently released by the Social Security Administration reporting that one out of 34 people in the U.S. who earned money in 2008, did not earn a single cent in 2009. "Every person out there thought it couldn't happen to them," she warned, imploring women to become powerful in their attitude and approach to money management.
"It's time we all start living in our truth," she insisted, "I'm asking you to stop before you buy something and ask 'is this a want or a need? People get in trouble because they think they have enough put aside," said Orman. Her advice: "Stand in your truth," or perhaps, get real, get informed and take off the rose-colored glasses. Know what you have, what you owe, what your money is doing for you. Number two, "live below your means but within your needs."
"If you do those things I promise you, you will be okay," said Orman.
She continued, "I don't think 2010 will be pretty...the stock market going up doesn't mean a free ticket to buy things, charge things." Orman said, "I'm begging you to be very careful." In fact, Orman doesn't predict the economy to improve until at least 2015.
Orman invited attendees to join her in a "back to cash movement."
"We've got to stop being a plastic society," she urged, "start touching money." By doing so, literally getting "in touch" with our dollars and cents. Funny, how making change and counting paper money sounded so revolutionary.
But don't stop there. If you happen to be lucky enough to work in a place that has a 401K matching plan, instructed the Rist Lady of Finance, there is absolutely no excuse, er, reason, not to contribute. None. Nada. "Why would you pass up a 50% guarantee on your money?"
Once the money is settled snugly into the 401K, Orman forbids touching it until retirement. She asked the rapt crowd how many people had taken "loans" from their 401K, a few brave souls gingerly raised their hands. She explained when you pay the money back to yourself by putting it into the account, you will pay taxes on it. Then, when you take the money out upon retirement, you will pay taxes on it again. "You have just volunteered for double taxation."
Orman also sited, "The money in the 401K plan is totally protected from bankruptcy," meaning it can't be touched in the event of a financial disaster. Another reason, if you lose your job before paying back the 401K loan, the money must be repaid usually within one month at 10% interest. Nightmare.
Speaking of retirement, Orman said seniors should stop parking their money in low interest savings accounts and CD's and instead, "look into stocks that pay a high dividend yield ... anywhere from 4% to 6%." Orman announced to her financial flock that she will soon be introducing a newsletter that will define which stocks pay dividends.
For those who have at least 10 years left until retirement, Orman advised good mutual funds or stocks that also pay dividends. No matter what your position, Orman insists, "do not stop investing at this point in time. When the price of shares go down," she said, "your money will buy more."
Whatever you do, however, Orman said, "Stay away from bond funds under all circumstances."
In regard to credit card debt, Orman suggested switching any bank-owned credit cards to credit union accounts which are required by law to have an interest rate ceiling of 18%. To find an institution near you, check out the CreditCardConnection website.
On the subject of long-term care insurance, Orman called it "a must if you can afford it." She said the perfect time to buy long-term insurance is at the age of 59 and a half, and in her opinion, Prudential has the best policy today.
As a side note, Orman suggested checking out the Care.com website, an organization that helps people find caregivers who have already had their background checks vetted.
Sadly, Orman does not expect real estate to recover anytime soon and would only green light home buyers who have both a 20% down payment as well as money for all taxes and fees, and eight months of savings in a security fund. She asked audience members who was currently "upside down" or "under water" on their mortgage, hands went up. Orman advised those who found themselves using credit cards to pay for necessities and still make house payments, "just let it go ... you know you're just postponing the inevitable -- get out of it. A house doesn't define you."
In addition, Orman asked attendees to revisit what they are spending on home, health, car, life and disability insurance and noted she offers helpful tools on her website. Enter code word: Maria, until November 9 and access the information for free.
"You get powerful with every penny you save," said Orman.
In closing, Orman encouraged her audience to strive for their dreams. "Each of us is born with two wings," said Orman, who explained: the first wing is the wing of grace. The second wing, is the wing of self effort ... and when that wing flaps as hard as the first you will have everything that is possible."