December 26, 2019
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In this podcast of Ask Suze Anything, we hear questions from Women & Money listeners Elizabeth, Jeff, and Ada.
It is December 26, 2019. You did it. It's the day after Christmas, however, we are still in the midst of Hanukkah, and today is Kwanza, so gifts are everywhere and they're still flowing. But here's the thing, especially since Christmas is over now, how do you feel? You made it. How do you feel when you're thinking about that? Very possibly, and I'm not being Suze Downer here, I'm just being realistic. Very possibly, in another few weeks, you are going to get the credit card statements that you charged all of these things on, and you're going to have to pay them. And chances are, you will look at them and you probably have charged at least $700 to $1000, because do you know that that is the average amount of money that people put on their credit cards for the holidays? And so, you're going to look at that $700 or $1000 that you put on your credit cards and they are going to entice you, and they're going to say, guess what? All you have to do is pay the minimum payment due, and that will be maybe, maybe $50, $35, $100. It just depends on how much you charged. And you'll go, yeah, I'm only going to pay that. Do you know that if you only pay the minimum payment every time you get a credit card, and let's say you have $3000 on that credit card at an average interest rate of 18%? And let's just say you're paying 2%, just a small fraction every single month, it could take you 20 or 30 years to pay that card off in full, really. But that's not what I want to drive home.I want to drive home today that so many of you feel that you cannot deny your loved ones. You cannot deny them the pleasure of opening up a gift. You don't want to be a parent that has denied your children the ability to open up a gift, and I just want to say that makes me so sad, I can't even stand it. And it makes me sad because you think that's it, it's all about what you can give them. It's for a few moments of pleasure, and then you think that they can't see the next day or the next month, or when another bill comes in, that mommy or daddy or whatever is so upset because there's no money. Do you think they can't hear when you're fighting about money? If you're in a relationship, you think they can't feel your depression when you don't have any money? Really, everybody? Really? Because, and I have said this time and time again, of course, they can. So it's right here, right during this holiday time, that you need to get in touch with how you felt on the day that you gave. Like yesterday. And what I want you to do is, I want you to write down the joy. I want you to look at the pictures, I want you to document how you found yesterday, on Christmas as everybody opened up their gifts. On Hanukkah as everybody was opening up their gifts, on Kwanza, today, as everybody is opening up their gifts. And then one or two months from now, I want you, as you're looking at all your bills that are coming in and everything that you have going on, I want you to document how you feel as you're looking at the reality of what you did in December. I just want you to look at it and record it. And then I want you to go back, and I really want you to think about, was that one day, one day of pleasure, really worth possibly another year, two, three or four of sadness because you don't have the money to pay your bills? Maybe yes, maybe no, that's something you're going to have to decide for yourself.But today is Ask Suze Anything, and I want to just say a few things about the Ask Suze Anythings. First of all, I'm just shocked that, do you know that this week was the first week that I had more men writing in asking questions than women? I don't know quite what to make of that, but I take that as an incredible compliment and it makes me very happy. It makes me happy that we have men smart enough to listen and who want to know, who admit that I don't get this, can you help me? I don't know what to do, so I'm coming to you, Suze. And that makes me just so, so happy. Because as I really, I still travel throughout the world and talk to people about their money, probably more than anybody else out there. And I still find this thing that men don't want to admit that they don't know. And I've always said that they're financial fakers, they just OK, OK, I think I understand what to do. Or, they pretend like they know what to do. But they never say I don't have a clue what you're talking about, I don't know what to do. And then everybody else listens to them, and then everybody else gets into trouble, and everybody else is usually their female spouse. And then you have two men that have possibly gotten together, and both of them don't know what to do. But both of them are saying OK, we know what to do. And then we have double trouble.So I just love it when people just admit, I need help. If you're out there and you know what to do, great. Chances are you're not listening to this podcast or really any other financial podcast because you know what to do. But when you listen to a podcast like this, it's because you really need direction, both personally and financially. So I feel quite honored that so many men this week turned to me to say help me, Suze.The other thing, though, that I've also noticed is that so many of you are still doubting that it's me answering you back or me that will be reading your emails. When you send in an email to ask a question and you send it to AskSuzePodcast@gmail.com, it's me and only me that's reading them. It's me and only me that chooses which ones I answer on this podcast and it's me and only me that chooses is if I answer you back personally or not. So, can we just get that?Now, I want to go and I want to focus today on the few emails that I have gotten this past month and these emails kind of speak to the greatest gifts in our lives, and the greatest gifts seemed to be our children. And even the children in my life, my niece, Katie, just had a new little baby boy by the name of Will. And now she has two kids, Tommy Jay and Will. And this woman is so happy, she loves kids more than anybody I know. But you know what I love most about Katie? She also has her priorities right. She knows about money, she knows what she can afford, she knows when to spend, she knows when to save. She's figured out how to keep working, she's figured out how to also be a mom. She doesn't define herself simply as a mother, she defines herself in everything that she does in life. And I just love that.And please don't take offense when I say she doesn't define herself simply as a mother. And the reason I say that is I have another niece who seems to only define herself right now as a mother and has for the past 11 years, and I can see that it's starting to get to her. That she needs something else, she needs another definition. That's all she's been dedicated to, and to say that she's one of the greatest mothers out there is putting it mildly, but one can sense that she's looking for more, and she doesn't quite know how to get that more, but she will figure it out. But I want to start today's podcast with reading emails from parents about their kids, their greatest gifts out there.This first one is from Elizabeth, and she says, good morning, Suze and crew. Do you see what I'm talking about? She thinks somebody else might be reading this. Elizabeth, it is me reading this. It is not a crew, it is me. Me. I'm a single mom to four kids. Girlfriend, you have your work cut out for you. Two twin girls, a son who's 11, and a six-year-old girl. I'm a bachelor educated registered nurse who currently makes $37 an hour working full time. I have $60,000 in student loan debt, an $18,000 car loan and $21,000 in credit card and personal loan debt.Now, for those of you, if you want to add that up, that's almost $100,000 of debt. $100,000 of debt, keep that in mind, please. I receive no child support and no government assistance. My question isn't how to pay off these debts. My question is, how can I stop feeling guilty for wanting to pay off these debts? And what I mean by that is, how can I get over the feelings of guilt for taking things and experiences away from my children in order to pay all of this off? For instance, I tell my youngest, who is very good at gymnastics, that she can't take classes because Mommy can't afford them. Or I can't take my kids out to do something fun on the weekends because it's not in the budget. I don't want my kids not to have fond memories of their mom when they were little because of the lack of money. And I also do try to do free or low-cost things with them, but gas and food still play a big financial role for a family of five. I appreciate any advice you could give me. Thank you for all that you do. Liz.Do you see what I'm saying, everybody? How much do you want to bet me, Liz, that yesterday or for Hanukkah, or for Kwanza, whatever it is, that you took some money, money that you didn't have because you have $100,000 of debt, and you got the kids gifts, or not? I would love if you email me and let me know. Did you or did you not for those few moments of them being able to go, yeah, look what I got running around the house and being so happy. Liz, out of all the things that I ever have been thankful to my parents for, the main thing that I'm grateful for is the gift of poverty. What do I mean by that?My parents, as time went on, my dad got sick. As you probably know, he was caught in a fire and he got emphysema. He died, actually, when he was 71. But, all throughout, really my life, my parents ran into one obstacle after another. My mother, when I was very young, had to go to work as a legal secretary and sell Avon on the side. And back in the early 1950s, women did not work. I knew that we were different, I knew that my mama was the only one that wasn't there during lunchtime. And then I had to go to my Aunt's or someplace else to eat. I knew that my mom was the only one that wasn't there when I came home from school. I knew that we couldn't do things, and I write about this in many of my books. I saw their pain, I saw what they were going through, and I knew that I had to pitch in because I saw both of my older brothers have to go to work at my dad's little store and do everything they could. And when he was in the hospital, they had to take over. And then I had to go once I turned about 12 or 13, I was in my dad's store helping as well with whatever I could do. And that gave me an incredible work ethic, and I never felt like, oh, look at what my friends have and I don't have that. I just concentrated on, I've got to help my mom and I've got to help my dad because I could see them suffering. And I didn't mind that.If you were to look around at so many of your friends that you may have that can tell you stories of single mothers who worked three jobs, they slept on the floor as the kids got to sleep in the one bed, and they had a studio, and what they went through and how they got to where they are, and the appreciation that they have for their mother today. Oh, my God. Those kids love their mothers, they love their fathers when their fathers have to do that. They love their parents.I have never heard a kid say, why didn't I get a gift when I was 10 years of age? When I was five years, I felt so bad that everybody else had Christmas gifts and I didn't. Do you know what I hear them say? I could remember my mom working so hard, I don't know how she did what she did, but, boy, I love her. And I'm now grown up to make money and to be OK and I'm going to take care of my mom, I'm going to take care of my dad, I'm going to take care of my parents for the rest of their lives, for I owe them everything.So I'm asking you to change how you think about this. That you should want to pay off these debts, that you should make as much money as you possibly can. That you really should say with pride to your kids, yep, you're not going to get to do gymnastics, but you're going to get to help me, Mommy, and make some money so we can pay the bills. We're going to figure out a way to do this together because we are a family that loves one another. And this is just the situation that we're in. Because what makes you think that they're not going to grow up and be in the exact same situation possibly? And then they have the strength to tell their kids, let's be a family.So I am begging you. I am begging you not to feel guilty, not to have shame, to say it with pride, to say it with enthusiasm and to give it all that you have. Because you are giving your kids the most incredible gift you can give them. Which is what? Your love, your desire to want to take care of them, your desire to want to do it on your own, and your desire to want to be an honorable woman and pay off the debts that you owe. One last thing, you say: I don't want my kids not to have fond memories of their mom when they were little because of the lack of money. They will not. They will have fond memories of their mother, who did anything and everything she could to take care of the family. And those will be memories that they never, ever, ever forget. The gifts and the other things they won't remember them. Keep doing what you are doing. Got that?So that's what I'm talking about, everyone. That's what I'm talking about. Money. Let's really for a second here talk about money. Money is not there for you to buy your kids things that they want, gifts on holidays, things like that. Although, if you have enough money, you could do that. Just actually, last Sunday, a few days ago, KT and I told you about how when we had all the money we ever could have wanted to buy the kids stuff, we never did, because that will ruin them, in my opinion.And now those kids have such gratitude and such love for us and such responsible spending habits. They now have money in retirement accounts. They now love to work and make money. The kids get it and we had that money. We had that money to give them something, but we gave them the chance to dig deep down inside and really understand, what is a holiday? What is Christmas? What is Hanukkah? What is Kwanza? What is it really all about? And it is far more than just opening up gifts. It's giving of who you are to each other, loving each other, being with each other. And it is giving to those who really, who really may never have money to experience even a meal. Just to do something that really matters in life.This next one is interesting because this is from a parent, and it's from Jeff, and he is wanting to know about his daughter, and how does he give her the gift of understanding the value of money? So Jeff writes to me and says, I have a 21-year-old daughter who is working while in college. I've tried multiple times to get her to start investing in her 401k, without success. Do you have any advice on how I can get her to understand the benefits and to start taking advantage of compound interest at an early age? Thanks.You know, it's funny. When I had The Suze Orman Show, so many parents would write in and say Suze, can you please tell my kids this? For some reason, they listen to you and they will not listen to me. I wonder why that is? Why do you think your kids will listen to what I tell them, but yet when you tell them it goes in one ear and out the other? What is it that you have conveyed to them over all the years that you have raised them, that you are not the ones that they should be taking financial advice from? I just think that's an interesting question that you might want to ask yourselves.So Jeff, here is what I would tell her, and this is my absolute favorite example. Here she is at the age of 21. You might want to let her listen to this podcast. Here you are girlfriend, you're 21 years of age. Do you know, if you just put $100 a month in your 401k, and I'm sure the place that you work has a Roth 401k, but whether they do or not doesn't matter. Let's just say you put $100 a month into your 401k, and you did that every single month until you were 65. Think you're not going to be 65? I used to think I wasn't going to be 65, then I turned 65, now I'm 66, I'm 67, now I'm 68. Now I'm actually six months away from being 69, and soon I'll be 70. It happens, sweetheart, get real. So here we are, and you're 65. Do you know at average market returns that you would have about $825,000? But you think you're so cool, do you? And you don't want to listen to your father, do you? Well, listen to me, because if you waited just until you were 31 to start, so you think it's no big deal, huh? And you think I'll just wait until I am 31. What difference can 10 years make at $100 a month, $1200 a year over 10 years? It's only a $12,000 difference. Do you know if you started contributing $100 a month when you were 31, you just did it for 34 more years until you were 65, that you would have only $310,000? So those 10 years just cost you $500,000. And that's just $100 a month. So go on, keep wasting that money. I'll, you know, I'm like, whatever.And just imagine. Let's say you really make money, you really make some money, and now you can put away, let's say, $500 a month and you can do so every single month in a Roth IRA. If you don't know what that is, you better learn, you better learn what a Roth IRA is, and you contributed $6000 a year or $500 a month, now listen to me closely, every year from the age of 21 to 31 and then you never contributed a penny again. Do you know at the age of 65 with average market returns that you would have $1.2 million? So you contributed $500 a month, $6000 a year for 10 years, and you never contributed again. Not a penny. Got that? But now you want to wait until you're 31 and you contribute $500 a month every month until you are 65. So that's every month until you are 65 starting at 31, $6000 a year every year from 31 to 65. That's 34 years. Do you know you would only have $992,000 or $210,000 less? So, in the first case, you put in a total of $60,000 over 10 years. And now you do that starting at 21, 31 you stop, at 65 you'd have $1.2 million.In the second case, you put in a total of $204,000 over 34 years and all you have is $992,000 or $210,000 less. Do you understand why these younger years are the most important years of your life? If you continue to waste these compounding years, you are making the biggest mistake in your life. Now, I'm just not answering this for Jeff. All of you should think about what I just said to you. The younger you are, the more important it is for you to start contributing and for you to continue to contribute for as long as you possibly can.So those were two emails about kids, two emails, and I have one last one because again, your kids are your greatest gifts in life, so you want to make sure that they do the right thing, but you also want to make sure that you do the right thing for them emotionally, psychologically and financially speaking. And this one is from Ada. She says, hi, Suze. I have extra money to save for my 12-year-old son. I was told through Vanguard that I should consider a UTMA account instead of a 529 because I just want to be able to save money for him and let it grow as much as possible, but not necessarily save the money for college purposes. Any recommendations?Ada, listen to me closely. Now first, let's have a little education here. Minors cannot invest money. So, if you give your minor child money, normally you have to be the custodian of that money. And the name of the account for your child will be, whatever your name is custodian account for your child, it's called a UGM account, uniform gift to minor account. So uniform gift to minors account, or, a UTMA, a unified trust for minors account. What is the difference between the two?UGMAs, when the kid turns 18, that money is theirs, and there's nothing you can do about it. In a UTMA account, you can designate, usually, it's 21 years of age. Some states allow you to go up to 25 years of age until that money is the kids. Now, why is that important for you to know?Do you really think that your kid at 18, they get a large sum of money or even $2000 or $3000, that they're going to know what to do with it? Listen to me. I get that you love your kids right now and I get that maybe little Johnny Angel is the sweetest thing you've ever seen in your life. But how do you know that Johnny Angel or Leslie Angel or whatever their names, are going to grow up and still be angels? Because I have seen Johnny Angel grow up to be a Johnny Devil, a Leslie Devil, where they're doing drugs they're drinking, they're into things that they shouldn't be into. And at the age of 18, at the age of 21, if that happens to be the case, now that money is theirs, and there is nothing you can do about it. When you put money in a UGMA or UTMA account, it is an irrevocable gift to your child. And if they find out that you gifted them money in those accounts and you did not give it to them when they were older, oh, don't think that they can't come after you. I've seen that happen as well.So it is really important, Ada, that forget about the college, forget about whatever. I would not be opening up a UTMA account or a UGMA account for a child for all the money in the world, I would not be doing it. If you want to save for your 12-year-old son, save it in your own name. As your son gets older, then you just want to give him the money, fine, give him the money, I don't care. 529 plans, chances are, your kid will go to college, it's there for them. They can get to take it out, tax-free. A big difference from UTMA accounts that you do have to pay taxes. Also on a UTMA account or UGMA account, it does count against financial aid. A 529 account does not hurt as much.So, I would be not doing it the way that you want to do it. And you can open up a regular investment account in your name, invest the money knowing that it's for the kid, the kid grows up to be Johnny Angel. Just give it to him. What do you care? That's what I would be doing. But I would be very careful about UTMA and UGMA accounts.Well, that brings us to the end of the Ask Suze Anything podcast. We have one more podcast for this year, but the next Ask Suze Anything is going to be all about the Secure Act that President Trump signed into law on December 20, 2019. And I'm going to teach you about what you need to know about it because it affects your retirement accounts, and it also affects 529 plans, among other things. So make sure that you catch that, that will be on January 2nd. But until then, just know you can ask me anything, and hopefully, I will answer. See you soon. In providing answers, Suze Orman is not acting as a certified financial planner, advisor, a certified financial analyst, an economist, CPA, accountant or lawyer. Suze Orman does not make 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. Suze Orman does not accept 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 the use of the information. To find the right Credit Union for you, visit https://www.mycreditunion.gov/. Interested in Suze's Must Have Documents? Go to https://shop.suzeorman.com/checkout/cart/index/.
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.
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.