Podcast Episode - Ask Suze Anything

Car Loans, Credit Cards, Employee Benefits, ETFs, Home Loans, Investing, Roth IRA

April 23, 2020

Listen to Podcast Episode:

In this podcast of Ask Suze Anything, Suze answers questions from Women & Money listeners Brandon, Carla, Lolo, Danielle, Tracy, Patty, Justine, and Crystal.

Podcast Transcript:

It's April 23, 2020. Didn't I kind of say that perkier than I've been saying it? Have you noticed that normally when I start these podcasts, and the reason that I date these podcasts is why? Depending on what's going on in the economy, I want you to know when I said what I said on these podcasts because I tend to record them right when they're going to drop, so they're really up to date. It's not like I've done them 10 weeks ahead of time, so here I am, and I'm doing it. And normally I've been going April 23, 2020, because it's been such a bummer out there. Let's just really get real here, it hasn't been great news, especially when it comes to money. Well, even more, especially when it comes to health if you ask me. But what's fascinating is that these markets really don't want to go down. Do you know that these markets are only down approximately now 15% from their high? Just 15%. And if that 15% had occurred when in fact it was over a long period of time versus, bam, you know, almost right away that it went down 38%. You wouldn't be as financially freaked out as many of you are right now. But you know what's funny? Actually, it's not funny. Some of you, it's very sad, but it's kind of funny because for me, I've told you. I told you to listen to me, but many of you are writing to me and you're telling me, I sold out when the market was at 38% down. What do I do now, Suze, I want to get back in. Is now a good time to get back in? I'm going to go back in, totally, what do you think of that? The truth of the matter is, you never should have come out totally, I think I tried to tell you all that, especially if you had five, 10 years or longer until you need the money. But in the same way that you would never come out totally. In a market like this, you never go in all at once, totally, either. As you know, I didn't come out at all. I have cash, I had a lot of cash that I had raised at the end of last year in January, and I've been going in little by little. I've been picking it. I've been picking technology stocks, I've been picking healthcare stocks, I've been picking biotechnology stocks, I've been picking a lot of stocks and doing quite well with it for now. But, I have no doubt that possibly in a month or two, I could be totally underwater there. But I didn't buy what I bought to make money today, I did it for the long term. So, I would hope that all of you would take that advice as well. I'm continuing to tell all of you to dollar-cost average into this market if you have money to put in. To be very careful because I get that we're going up now, and up, and up, and we're down two days, and then we're back up again. And this market, and I've said this before, is going up and down you know, based on the news in which industry is doing well. Like yesterday, when the market was open and it went up considerably. Restaurant stocks took off because the news said we're going to be opening up restaurants again. Can you tell in my voice what I think about that? But, hey, I'm not a restaurant owner, so I get it. But I'm also somebody that I'm not sure I would go eat in a restaurant right away or do a lot of things, but that's then just me. But just because the news says that many places are going to start opening up again, restaurants take off. I don't know everybody. I said this before, and I keep saying "I said this before" because I've said a lot of things before. But stock should go up based on earnings based on what they're working on, based on all kinds of things, not just the news or the fact that a stock is really popular right now. Why? Because everybody staying in and watching Netflix. OK, can we just be careful here? But, I'm now going to do a regular Ask Suze Anything where I am going to be answering just regular questions from all of you. Now, I just want to give you a little update on something. Normally, I would say, hey, if you want to write in and ask a question you would go to, and I would give you a Gmail address. So I'm not going to tell you to go there anymore because now you are going to go to the new Women and Money app, as well as the men smart enough to listen, and that is where you are going to ask your questions. That is where you are going to live stream with me, that is where you're going to be able to search all the podcasts and to find out the information that you need. And you know, a lot of you before you write in a question, why don't you search the podcasts? Chances are, you're going to find my answer to your question in one of the podcasts that I've already done. So now all of the podcasts are searchable. The questions are starting to filter in again, and we're going to load them up and you'll be able to search the questions by the topics that you want as well. Now, you're going to be able to see how I've been answering so many of your questions individually. And so not only are you going to read their question by topic if you want, but you'll read my answer as well. Shortly, here, I'm going to be answering you via voice. All right, so we're working on that possibility right now. So, rather than me typing in answers, I'm just going to tell you the answer. You're going to get your own individual little podcast right there, as well as you can go there and get the will and trust documents. There are so many things you can go to. There's a wall, there are financial success stories, there's a community. Fabulous. So just go to Apple Apps or Google Play, search Suze Orman, and download the app. People are loving it. I'm popping in on a live stream all the time. Well, actually, I've only done it twice, Suze, don't exaggerate. So you just might want to do that. But today I'm just going to do a regular Ask Suze Anything with normal everyday questions that you still need to know because the world has not stopped. You're still wondering about Roth IRAs, selling your home, what should you do with your 401k? There are so many questions that you still have, so what about if I just start to answer them now? So the very first one is from Brandon and he or she, I think it's a he, but it doesn't matter, says dear Suze. I'm a huge fan of yours since I was 12 years old (I love that), and I'm now in my third year of college and work for a company on the Dow Jones Industrial Average. So, we now know that Brandon works for a company, one of 30 companies that are there, but that's beside the point. And it goes on and says, I get a 10% discount on my company's stock and currently have $1200. I consider this my emergency fund, but I don't have any money in savings right now. I have almost $10k in retirement, I do have $17k in federal student loans, and I also have $1200 in credit card debt. Suze, what are your thoughts on employee stock plans? See, and that has nothing to do with the virus or the economy, it just has to do with plain common sense. Brandon, if you have been listening to me since you have been 12 years of age, 12 years of age, so now you're at least 20, 21, 22, you're right in there somewhere. You would know that the money that you have in the stock market is not an emergency fund. You said to me, Brandon, right then and there, you said in that email I just read that came in on the app, by the way. Love it, Brandon. You said that you consider that your emergency fund. Have you not learned over the past few months that you cannot have an emergency fund in the stock market, because, if the markets tank as they tanked just a little bit ago, there goes your emergency fund. You wouldn't have $1200 in there, maybe you'd have $700, maybe the markets wouldn't have come back so quickly, but you're still down from where you were. So the point of the matter is since you just started doing this, no, Brandon. I get that you want to put money in your stock employer's plan because you buy, they give you a 10% or 15% discount from what the price is that day, and you can turn around if you want to and sell it right away and make 10% or 15%. But you'll pay ordinary income tax on that, and that's a great deal. When I worked for Merrill Lynch I did that all the time. I can't even believe that I worked for somebody. How could I ever have worked for somebody besides myself? You know I'm not an easy person to have work for you, just so you know if you're thinking about hiring me. But the truth of the matter is, see I'm spunky today, you can tell I'm feeling better. But the truth of the matter is, you also have debt, you have student loan debt. I get that you're going to be out of credit card debt very shortly, but your number one goal, really, is to have an eight-month emergency fund. So that if anything happens, if you get sick, if the virus comes back, anything can happen in life, and we should have learned that this time around, anything can happen to anybody. So, you all have to be prepared, you have to plan for the worst and hope for the best. And the greatest lesson that we've learned from this is you need an eight-month emergency fund that is not in the stock market. So, do I love employer stock purchase plans? Yeah. Do I love them as an emergency fund? No way, Brandon. But I still love you, boyfriend or girlfriend. What do you think, do you think Brandon's a boy or girl? I don't know everybody. What can I tell you? Carla writes, huh, this is interesting. So here's what I've been doing, on the app, I have this little special back end of it and I can scroll through all the questions and I can see which ones I've answered, which ones are asking for a reply. This whole thing, fabulous thing, that Sarah created for me. And so now what I'm doing is, I'm just like, flipping through, and wherever it lands that's the one that I answer so that it's fun for me too. Yeah, you know, I deserve to have fun on here, but anyway. And Carla, she writes, the bank that I'm using right now, I happen to be totally overdrawn. OK. And they told me that if the stimulus check is sent to them that they will take it. OK. Do you know any banks that will not take a stimulus check if one is overdrawn, and that possibly I could use? Interesting. Well, you know, there are many credit unions out there that would probably work with you far better than banks. But since you're asking about a bank, you know there's one bank I have to tell you that has just been stellar, just stellar. And its Ally Bank. Ally immediately stepped up to help people a little bit ago with the stimulus check and all kinds of things and forgiving payments. And now, do you know that they have notified customers that, like you, Carla, that if you have an overdrawn balance and you happen to be receiving the stimulus payment to them, all right, that what they're doing is that they are taking care of or eliminating your negative balance and crediting your account so that you get the full payment of the stimulus check. So this goes way beyond, everybody, the pause that we've seen from others because it's a permanent credit to your account and the credit doesn't have to be paid back. So in effect, it's a gift to customers in need. So if you ask me, they seem, in terms of all banks right now that are out there, they truly seem like if you want to use a bank versus a credit union, or maybe you want to use both. That Ally is one bank that is coming to the needs of those of you who have no money. You have no money, and they're stepping up to help you. You know, banks usually step up to help you when you have a good account with them, and you do business with them and all these other things. But if you don't, I don't think so, I don't think they help you that much, but Ally does. So that is what I would tell you, my dear Carla. Lolo asks, can people without a job contribute to Roth IRAs? And Lolo, they can't, because in order to contribute not just to a Roth IRA, but a traditional IRA, any IRA like that, you have to have what's called earned income. And I imagine that if you don't have a job, you don't have earned income. And the rules are, just so you know, you can contribute up to a maximum of $6k if you're under 50 and $7k if you're 50 or older this year, or, whatever you earned in earned income, whichever one is less. So, if all you earned this year will be, let's just say $3k, then the maximum that you can put into an IRA or a Roth IRA is $3k. If you earned $30k the maximum you can put in is either $6k or $7k depending on age, so whichever one is less. Danielle says, hi, Suze. I've been a dedicated follower for over 10 years. I've educated myself on investing for retirement and learned the school district I work for has very high-fee 403b choices. I am trying to advocate to get rid of the high-fee options. The problem is, that the business administrator talks down to me and won't listen to what I have to say. I get the impression that he thinks I'm just a teacher and doesn't think my input is valuable. I know I'm knowledgeable. (I love this, Danielle, and I have to tell you, I'm loving you right now, girlfriend.) I know I'm knowledgeable, I know that I have good information to share, so how do I convince someone who has decision making power that my ideas have value? The mansplaining and condescending tone are so frustrating. OK, Danielle. Well, listen, first of all, you have to make sure that you even want to be investing in your 403b plan. 403bs, for those of you who don't know, work just like 401ks, but they're usually for non-profit corporations, hospitals, schools, things like that. And many 403bs do not match your contribution, number one. Number two, many 403bs do not offer a Roth 403b. So, the real question, Danielle, back to you is, should you even be investing in the 403b at all? Forget his condescending tone for right now. Forget trying to convince him to change. If you can't change him, change all the teachers, change all the people that you know that are investing in this 403b that obviously is not the wisest investment for them. You're teachers, you may not even have enough money to put the maximum in the 403bs. So, would you be better off specifically if they don't match your contribution and they don't offer a Roth 403b? All of you would be far better off opening up a Roth IRA if you qualify, income-wise for one. But, a traditional IRA or Roth IRA at a discount brokerage firm like TD Ameritrade, you could buy no-cost mutual funds or exchange-traded funds. You don't have to convince some condescending administrator that they should have the good of all of you upfront. But all you have to do is tell everybody that you know that number one, maybe they should listen to the Women and Money podcasts and listen to this particular question and my answer, but really educate the people around you so they stop investing in the 403b that's charging too high in expense ratios and ripping all of you off, and don't let him get to you. That's it, just don't let him get to you. Go from the bottom up versus from the top down, that's how I'd change things. Tracy says, like many others, I have been laid off. I have an emergency fund, I've applied for and have received unemployment, the stimulus check, and I also took a three-month forbearance on my mortgage. I'm in pretty good shape, probably until September or October. However, who knows how long it will take me to find another job? So my question is, should I apply for assistance with my car loan and a home improvement loan I have? I'm hesitant to extend my loan payments longer, but the extra money I could save could help with another month of not finding a job. Thoughts? Yeah, Tracy, absolutely, you should do that. Do not get caught up in oh if I don't make these payments I'm going to just be paying longer, because now I'm going, rather than 25 years, I'm going to have 25 and a half years, or whatever it may be. Your car loan payment, maybe, rather than having to pay it off in two and a half years, maybe it's going to be, you know, another three years. Whatever it may be, who cares? What you need to care about right now, right here, is that you have enough money to last you for the essentials of life, your food, your health insurance, whatever it may be, or you deem essential for you. So absolutely, Tracy, see what you can do to postpone as many payments as possible. Also, I just have to say, because I just as I'm scrolling up to look at another one, I just came across another email that came in. Actually, they're not emails, they're just questions because they're on the new app. Are you going to get the new app? OK, good, I'm glad to hear that. It says I can't believe that I took your advice. What does that mean? You can't believe you took my advice? Oh, sorry, that's not what they're saying here. I can't believe I took your advice and I called my car insurance company, and I raised my deductible from $500 to $1k and now it's saving me $250 a year on my insurance. I can't believe how easy that was. Thank you. Great, I love that. Somebody listened to me, it makes me feel good. By the way, I know you're thinking now, but Suze, so, if this person is in a car accident and now they have to pay for the first $1k versus just the first $500. People, can I just give you a real bit of information here? If you are in a car accident and you have, let's just say $600 or $700 of damage. Do you really think you should claim it? Especially with $500 deductible for them just to give you $200 more? Because don't you think they're going to raise your car insurance premiums because you made a claim? Really? So you should have a high deductible so that you pay for it and in the long run, maybe if you don't make a claim, you'll make up that difference in the car insurance premiums that were not increased. Got it, everybody? Patty says hi, Suze. My wife is 57 and I am 55 and we are trying to decide if we should sell our investment property in Arizona. It's been over 10 years since it's been our primary home, we have had no vacancies until COVID-19, and have eight years remaining on the mortgage. It is paying for itself, and we self-manage from a distance with help from family in Arizona. We would now like to buy a home here in Georgia where we are currently working, and we're planning on staying here for 10 years or more. We would like to sell the Arizona home and use the equity for more of a down payment to reduce expenses of the Georgia home and get a nicer home. What about capital gains? Approximately $200k on our Arizona home. I want to keep the Arizona home for eventual solid monthly income in our retirement years. Can you please help us make a decision? We also could potentially sell some of our stocks that are not in retirement accounts to get an additional $100k to put down. But, I really don't want to do that during this bear market. So, Patty here's the problem. You just said you want to make sure that you have solid monthly income and just because you have had solid monthly income on your property until COVID-19 doesn't mean that you're always going to have solid monthly income. Also, please know, with any piece of real estate, there are expenses. And while maybe you're breaking even right now, who knows? Is rent going to go up? Is rent going to go down? What does that mean, you're breaking even? You know you have $200k of gains, which means you must have a considerable sum of money locked up in this piece of real estate, and you're just breaking even on it. Except now, you're not even probably breaking even because now your tenants can't afford to pay you. So I don't know. I am not a total fan of real estate right now, and I do think I don't care what anybody tells me, I do think that because of the virus and the lack of jobs and the massive unemployment rates and everything, many people will be absolutely foreclosing on their mortgages and their homes. They're going to go into default, and that will affect real estate all over the place, especially if a lot of people on your block happened to default on their mortgages. So, I would not be selling in the stock market right now. And it's outside of a retirement account, so chances are, if you've been invested for a long time, you still have gains. You're still down from the top, and now you're going to lock in and have to pay capital gains tax there as well. So I wouldn't be doing that. If you have to do one or the other, I have to tell you, I would be selling the property. I would absolutely be selling the property in Arizona. And now, rather than having mortgage payments for the next eight years on a rental property, maybe you could take that money and put it towards the mortgage of the home that you're currently buying and have it paid off in 10 years, 15 years at most. So if I were you, I would put as much money down on the new home as possible. If you're going to buy a home right now and you might just want to wait a little bit, I would get a 15-year fixed-rate mortgage because you're going to lock in probably some of the lowest mortgage rates in history, if things keep going like this. And then you'll own it outright and then you can make a decision, and if you want to make investments for solid income, who knows where the bond market will go? Again, there are many dividend-paying stocks out there that I know I say dividends can always be cut, but there are certain stocks out there where they're not going to cut the dividend, and if they're not going to cut the dividend now, then I doubt highly they're going to. Such as IBMand I can say IBM because I currently do not own it and they are paying like 5.5% dividend, solid dividend. In fact, they just raised their dividend I believe. So there's no chance, really at this point, they're going to cut it, so I don't know, 5.5% with really risk of things going up, down, but still you're getting the income from it, and eventually certain stocks go up. I would absolutely be selling Arizona, putting the money into Georgia, and going from there. So Justine says... Justine has a little attitude here, everybody. She says, why do you like ETFs better than mutual funds? I have $80k in managed mutual funds that are outside of my retirement account and they have been doing great. So what's the scoop with you, Suze Orman? That makes me laugh, she sounds like me. I kind of like that. Well, I'll tell you what the scoop is, girlfriend, managed mutual funds versus index funds. So, we'll go to a little Suze School here. Managed mutual funds have a portfolio manager that buys and sells stocks. An index fund has a portfolio manager as well, however, they just simply keep all the stocks that are in the index and they don't replace those stocks unless the index itself replaces one of the stocks. OK? In markets like this, where stocks are going up and down and up and down, huge up, huge down. There is a lot of turnover in some of these managed mutual funds. And when there is a capital gain or a taxable event in a managed mutual fund outside of a retirement account, you are going to be hit with capital gains taxes, even if you weren't the one who bought or sold your shares in that mutual fund. And if you bought into that mutual fund this week and next week the manager is buying, selling, and creating capital gains, you're going to get hit with those capital gains. When you are in an exchange-traded fund outside of a retirement account, you do not get hit with capital gains and that, believe it or not, is a big deal because it absolutely cuts into your profit. Now, if you were inside of a retirement account and you're not going to have to pay capital gains tax because of that, because it's in the account, all right. But, outside of a retirement account, I would be very, very careful in owning a managed mutual fund in markets that are going up, down, up, down, up, down because the portfolio manager will take advantage of that. You betcha he or she will. They'll be buying and selling more than normal and that's the type of market that we happen to be in, girlfriend. All right, let's do one more that Sarah just sent me saying, I love this one, Suze, can you answer it? This person says, Hi, Suze. My name is Crystal, and I'm writing because my husband and I are in a disagreement. It figures that's why Sarah wanted me to do this one! She says I have a Discover card, and back in December, I did a balance transfer of my other credit cards to my Discover card at 0% interest rate for 12 months. Just before I go on, while I like the Discover card, there were many cards Crystal that you could have locked in for 0% for almost 21 months. So while it was nice of Discover to offer 12 months, it's a very short period of time, if you ask me. Anyway, Crystal goes on to say, in total, I transferred about $6k and I have been paying $500 a month to make sure I pay the card off in that 12 month period. I did speak to someone at Discover and asked them what my options were, and they informed me that I could delay my payments, but that my expiration date on the balance transfer would not change. So after the 12 months, I would have to pay any remaining balance at a 22% interest rate. All right, Discover, do you see Crystal what you just discovered about Discover? What do you think about that? I bet you Ally would have let you go. Anyway, I feel that I should continue to pay the card off to take advantage of the 0% interest rate, but my husband agrees with you (Oh, my goodness, he agrees with me!), on not paying off credit cards right now and keeping the cash available to us. Any advice you have would be greatly appreciated on this matter. Thank you for your time. Well, Crystal, this is a little bit of a difficult one. So, in normal times which we're not in right now, I absolutely would say to you, absolutely pay off the credit card so that you are in a situation where you're not going to have to pay 22% interest on it if you go over the 12 months. And if you need money, you can just charge whatever you want on your credit cards again so that you don't need to keep the cash. But, we're not, like I said, in normal times, and it is possible, not probable, but it is possible, just like many credit card companies did in 2008 that they lowered your credit limits so you could not charge. So even if you had a zero balance on your credit cards and you had a $5k credit limit, they lowered you to, like, $1k, $2k. And now you would be in trouble, especially if you didn't have any cash. But another possibility is this. All right, rather than paying $500 a month towards this credit card so that in one year it's paid off, you could pay $250 a month and save $250 for the emergency fund. And then at the end of the time, if you have it, you just pay it off in full. That's one option. Another option is that you don't pay it off at all. You save the $500 a month right now, and when things get better, you apply for another balance transfer card at a 0% balance transfer fee, at a 0% interest rate for 18 or 21 months, and then you have a whole lot longer to pay it off. And when the time comes, if you're able to do a balance transfer and you've saved the $5k, you then have a choice of paying off Discover or paying off a big chunk if you want to keep some cash on your new card. But, you have all kinds of choices here. Do you see what I'm saying? But I have to agree a little bit with your husband at this point in time, to save the cash in case there's an emergency. And then at the end of the year, if there's not an emergency, you could pay it off in full. And there you go. And if there was an emergency and you needed to use the cash, then you could always apply for a balance transfer card. There you go, that's what I think. Know what else I think? I think that you really should try the Women and Money app that you can find. It's absolutely free, everybody, that you can find on Apple Apps or Google Play. Just search for Suze Orman, and then we can do this together and I'm telling you it is going to take this podcast to the next level. Also, I'll just give you a little hint. We're going to start an affiliate program on that app to give all of you a chance to make extra money right now. If you participate in it without having to buy any inventory, it's not multi-level marketing, it's just Sarah and I were talking and we're thinking, what can we do to help people earn some extra money? To help other people with their finances and to help themselves as well? What could we do? And I came up with an idea, and Sarah now is doing all the legality for that, so stay tuned. Sign up for the app, you never know what kind of cash prizes on that app Suze Orman will be tempted to give away. So until Sunday, everybody, you stay safe, you stay strong, you stay secure, and you stay smart with your money. In providing answers neither Suze Orman Media nor Suze Orman is acting as a Certified Financial Planner, advisor, a Certified Financial Analyst, an economist, CPA, accountant, or lawyer. Neither Suze Orman Media nor Suze Orman makes any recommendations as to any specific securities or investments. All content is for informational and general purposes only and does not constitute financial, accounting or legal advice. You should consult your own tax, legal and financial advisors regarding your particular situation. Neither Suze Orman Media nor Suze Orman accepts any responsibility for any loss, which may arise from accessing or reliance on the information in this podcast and to the fullest extent permitted by law, we exclude all liability for loss or damages, direct or indirect, arising from use of the information.

Suze Orman Blog and Podcast Episodes

Suze's Financial Strength Test

Answer Yes or No to the follow statements.

I pay all my credit card bills in full each month.

I have an eight-month emergency savings fund separate from my checking or other bank accounts.

The car I am driving was paid for with cash, or a loan that was no more than three years, and I sure didn’t lease!

I am contributing at least 10% of my gross salary to a retirement plan at work, or I am saving at least that much in an IRA and/or regular taxable account.

I have a long-term asset allocation plan for my retirement investments, and once a year I check to see if I need to do any rebalancing to stay on target with my allocation goals.

I have term life insurance to provide protection to those who are dependent on my income.

I have a will, a trust, an advance directive (living will), and have appointed someone to be my health care proxy.

I have checked all the beneficiaries of every investment account and insurance policy within the past year.

So how did you do?

If you answered yes to every item, congratulations. If you are working on improving on a few items, I say congratulations as well.

As long as you are comitted to truly creating financial security, I applaud you. If that means you are paying down your credit card balances, or are building up your emergency fun with automated payments, that’s more than fine. You are on your way!

But if you found yourself saying No to any of those questions, and you’re not working on moving to Yes, then I want you to stand in your truth. No matter how good you feel, you have some work to do before you can honestly know what you are on solid financial ground.

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