Car Loan, Emergency Fund, Financial Planning, Home Buying, Insurance, Investing, Social Security, Taxes
March 12, 2020
Listen to Podcast Episode:
In this podcast of Ask Suze Anything, we hear questions and stories from Women & Money listeners Kathleen, Tina, Sonja, Leigh, Margaret, Joan, Margaret, Sally, Kiana, Allison, and Anonymous.
Suze Orman here and you are listening to the Women and Money podcast, March 12, 2020. So, the markets go on and on, up and down and all over the place but, today, that is not what we're going to talk about. I already addressed what I thought in the market or about the market on March 1 as well as March 8, however, I won't be addressing it again on the podcast, March 15, I just want to see how this entire week plays out so I could give you my entire thoughts on what's going on. Today, however, we are doing an Ask Suze Anything and I love the Ask Suze Anything's because this is where you write into AskSuzePodcast@gmail.com. And I do try to read all of the emails, even though, I know that you get responses that say, there is no way possible that I can answer all of them and that is true. I do not now because I don't know what happened last week, it just exploded. So, I now don't answer all of them but I do try to answer those that, you know, I think really would need some advice.Now, before I go on and answer your questions, I just have to address this one woman by the name of Kathleen. And Kathleen wrote to me and she asked a question, and I happened to read it and I thought, you know what? I'm going to write her back. And her question was one where she thinks that one of the properties that she has a loan on is going to be paid off, and she's going to have approximately $600k. And her question was, what should she do with it, that you know, she's used to managing their own money, but they tend to live on dreams, and they don't have a whole lot to show for it? Or, at least that's how I read the email. She asked me what my thoughts were on how she should invest $600k. And when somebody says a few things in an email, I'm like, oh, boy, these markets are really crazy right now. This is not the time that if you've never invested before that you should be investing $600k. Not here, not for the next year or two, it's like this is not what you want to be doing. So, for many of you, when I read your email and I think it's appropriate, I do recommend a financial advisor in New York that has been my own personal financial advisor, truthfully, and I've worked with him for over 20 years now, and I love him, and I've talked to all of you about him before. And so, when I think it's appropriate, I send an email back that says, here is his name, here is his email address, you should write to him. And then I go on and I explain how I don't get a referral fee, you know, so don't worry about that, but it doesn't matter how I feel about this person, it matters how you feel about this person, and I sent that to her. Then, I get an email back saying, you know what? I've decided I don't want to deal with somebody who's really far away. It's, you know, from where I live and blah, blah, blah, blah and so I'm not going to use him. And I'm like, I write her back again, can you believe it? I write her back again and I say, OK, no problem because I didn't want her to feel like there was a problem with that. OK, you don't have to use him, I don't care if you use him or not, I was just trying to help. And then I get another email back saying this was a strange response. I don't really believe that it's you, Suze, and blah, blah and goes on again. So, I told her, I wrote her back and I said, well, listen to today's podcast and you'll find out it really was me. Now, Kathleen, if you're listening, I gave you that referral because I really am afraid of people who are starting to invest in the market at this point in time with that much money, that's all. But, you know, if you feel like you could do it yourself and you want to invest, listen to my March 1 and March 8 podcasts, and then you'll kind of know what I think everybody should do, but sorry that you didn't believe it was me! Also, I just want to say something in regards to that. When you get an email back from me and it says this really is Suze, it's because it is, it's me answering you. But I understand. I have to tell you, I totally understand that you don't believe it. That's why I'm hoping to have the app up. I looked at it the other day, I didn't quite love it, and I'm not, not until I love it am I going to put it up. But with the app, then you're going to really know it's me and your chances are, you're going to hear my voice answering you versus me typing all of the answers. But anyway, all right, so no problem. All right, before we also begin with the questions, I just want to read an email that I got from Tina. And I want to read it to you because maybe you can learn from what she learned. She said, Suze, you had a podcast in the past season advising the reassessment of homeowners and vehicle insurance should be done regularly. I've never done that so I contacted an insurance broker. She was brilliant. Not only did she get me more coverage for my home, lower deductible, and saved me $400 a year. I get the homeowner insurance policy information in the mail, and I see she has my home listed as a three bed, two bath, two-car garage with central heat and air. I contacted my agent immediately. I do not have a three bed, two bath, two-car, I tell her. She explains, that they have identified the details of my home via public records in the assessor's office. I'm stunned that the office who assesses my property taxes has incorrect data. To make a long story short after phone calls, emails, office visits, and an appraisal that the County Assessor did indeed updated the details of my home in their records. I do not yet know how this will reflect in my property taxes, however, my agent updated my insurance records to correctly reflect the details of my home, and that has saved me even more money on my premiums. This is my first home, and I bought it in 2001. I checked the policy for my previous insurer, and there it was. I had been paying premiums on a three bed, two bath, two-car garage home for over 18 years. All the money I could have saved! But on the bright side, my broker assured me while getting all the mess corrected, that if my home had burned down, insurance would have built me a three bed, two bath home, and two-car garage since that is what I paid for. I'm ever so grateful to you, Suze, for advising that I check my insurance coverage. That one tip alone will save me thousands of dollars from here on out. And that is signed, from a faithful follower, Tina.I love that, Tina. I love it, I love it, I love it. And the reason that I wanted to read your email to everybody is, one of the largest expenses that you have, besides the mortgage on your home, is your home insurance, your automobile insurance, your insurance policies. But none of you ever bother to check. Are you over-insured? Are you underinsured? Are you even properly insured? Are you checking your property taxes? Are you paying taxes on the right description of the house that you are in? Or, are you like Tina and you have been overpaying because they didn't have the details of your house correctly. So, that's just something you might all want to check. All right, since I'm talking about homes, let's go to Sonja and it says, hi, Suze. I'm looking to buy a home in the next six months. My lease is up in September. I'm finally serious about my finances and I've been listening to your Ultimate Retirement Guide. Thank you. I'm paying down as much debt as I can with no savings. I owe more on my car than it's worth and I'm upside down on the loan, it's my biggest debt, $20k, what a rip-off. Moving forward do you have any advice on this? Thank you for your helpful info. I'm in my 50s with so much anxiety, what a mess. Thank you, Sonja. So Sonja wants to buy a home in the next six months. Sonja, please listen to me. The reason that you have anxiety is that you keep spending more money than you have to be able to spend. So, you cannot buy a home right now. Where are you going to get the 20% to put down? Where are you going to get the eight-month emergency fund, besides the 20% to put down? And why do you have to buy a home? It's like the same thing that you bought a car. You bought an expensive car, now you're upside down on your car loan. Don't think that can't happen to you with a home. We don't know where the market's going, we don't know where the virus is going to take us. It is very possible that real estate prices could start to go down because if all of a sudden people are losing their jobs, the stock market is going down, the economy is going down, we're going into a recession. Then, people can't afford to pay their mortgages, anything can happen at any time. So, sweetheart, it's all right. It's all right, let's just slow down. Forget about buying a home. Let's take the money that you have, get yourself out of debt, save an eight-month emergency fund, start saving a 20% down payment, and in the meantime, find yourself an affordable place for you to rent when your lease is up. The next one is from Leigh, she says, I want to pay for some of my mother's expenses at a personal care facility. I don't understand the gift tax exemption. Why is it important to pay within the annual limit? If I go over the limit, will my mother have to pay and consider it income? It's very confusing. Leigh, here's how it works. Every single one of us can give to as many people as we want, they do not have to be family members, $15k a year. If you give somebody more than $15k a year, they do not have to pay tax on it, but whatever amount that you give them over that $15k comes off of your lifetime exemption. Now, your lifetime exemption comes into play when you die. You are only allowed, currently, this is in the year 2020, to leave somebody $11.4 million estate tax-free. When you give somebody more than $15k in one year, it comes off that $11.4 million. So, let's just say you gave your mom $115k this year. That extra $100k over the $15k annual gift limit comes off the $11.4 million. So now, you could only leave $11.3 million to somebody, estate tax-free. Now, I would love it if that was one of your problems, but somehow, I have a feeling it is not. But that is how it works. Next email is from Margaret, she says, oh my, I just found your podcast. Well, welcome my dear Margaret. By the way, I just want to tell all of you about the podcast. It is skyrocketing in numbers. It is like the number eight podcast now out of all business podcasts, and I think it's the number 80-something out of all podcasts, and there's like hundreds of thousands of them. So thank you so much. We are expanding. Do you want to know what I love about it? It's really kind of happening by word of mouth. I haven't taken out ads, I haven't spent money to advertise it, I've mentioned it on a few shows that I've been on, but just for a second, a second mention, that's it. And you are telling everybody one by one about the podcast. So keep telling everybody. Let's really, let's make it the number one podcast out there. So, Margaret says, I'm 64 and trying to figure out if I should start taking social security as I am now employed for only $12k a year after a corporate lay off two and a half years ago. Margaret, please don't take social security at 64. If you are 64, that means you were born in 1956. So, the full social security age for you is 66 years and four months. If you take social security before 66 years and four months, like you take it right now, for instance, at 64 you're only going to get 84.4% of your full social security that you are owed if you just wait, essentially, two years and four more months. What I would really love you to do, obviously, is to wait until you are 70. But, if you have to take it, then at 66 and four months, OK, but please don't take it before that. You do know, however, that in the year 2020 that you could make $18,240 or under before they're going to deduct anything from your social security checks if you take it before 66 years and four months. So, you're making only $12k a year. I shouldn't just say "only" because that could be great for you. And so you're fine, but please, just find a way to wait. All right, this one is an interesting one, I think. Right, it's from Joan and she says, hi, Suze. Please discuss the myriad of benefits of not having kids. Being child-free, not childless, thank you, has made a huge positive difference in my life, yet, I never hear public discussions of this life choice. Here's the thing, Joan, is that I'm child-free. I don't have any kids of my own. KT and I do not have kids together and I've always been a woman who really never wanted children. I always felt like my work was my true baby, and it just, it wasn't a passion of mine. And a lot of you may be saying, well, Suze, you've been a lesbian your entire life, of course, you're not going to have a child. But, I could have adopted children. Many of my friends, in fact, I'm kind of surprised, but the majority of them have kids. They all have kids where they've adopted or, they got pregnant somehow so that they could give birth, and they love it. And so, I get that I'm free, I get that, I love that. But, want to know what's just a little sad is that I also know probably that KT is going to die before me? And I get that all of our nieces and nephews, especially a few of my nieces say, Aunt Suze, I'm going to take care of you when you get old, do not worry about it. But I do worry about it because I don't want them to take care of me. They may have to be taking care of their own parents, and I'm lucky enough that I really do have enough money that if I get older and I need care like that, I will get myself the best care I possibly can. But there's something sad about when you don't have children and then you do wonder who is going to take care of you. But financially speaking, are you absolutely better off, maybe, because you didn't have children? Probably, because kids are really, really expensive. Emotionally speaking, however, when you really want a child, there's nothing more gratifying than having children. But for those of you who know that you really don't want to have children, do the children a favor and don't have them. So, that's the answer to that one. All right. This one is from another Margaret, she says, I'd like to move to an apartment to eliminate repair and replacement expenses on my condo. I would net about $105k which I would like to invest to receive about $1k a month towards rent. Where is the best place to invest? Margaret, this is the problem that everybody in the United States is having right now. Interest rates are at their all-time low, and good luck getting 1%, 1.5% here shortly because I have no doubt that the Feds are going to continue to lower rates, and before you know it, we'll get 0% and that will be that. So, it's almost impossible to get a safe amount of money like that, $1k a month. In fact, you're asking for a $105k to return $12k after taxes. That is impossible. You cannot get that anywhere, even when interest rates were at 5%, 6%, or higher. It's an impossible thing, really, because you really need to get at least like 15% a year on your money, so that after taxes you have $12k to put towards rent. So, the best place to invest it is to invest in the knowledge of knowing that is an absolute impossibility for you to be able to get and still have access to that $105k. All right, we have another email, and it is from Sally, who says, I'm 45 years old. I am just now working on getting rid of my debt due to several issues in my life within the past 10 years. Anyway, my question isn't how to get out of debt or retirement. My question is the emergency fund, how is that determined? I mean, I understand that it's eight-months of expenses on what it takes you to live month to month, but I still don't quite grasp how it is determined. I don't know, Sally, it seems to me that you kind of do grasp how it's determined. You have bills that you have to pay every single month. Those bills are rent or mortgage, utilities, your cell phone, your insurance, food at a grocery store, gasoline, car insurance, health insurance, whatever else, things that you have got to pay every single month, or if you don't pay it, they will cut off the service. You won't have lights, you won't have water, you won't be able to eat. They're going to kick you out of the place that you live, they're going to repossess your car. Your student loans, you have to pay those every single month if you have them. So, there are certain debts that you have to pay every month, there are certain expenses that you have to pay every month, and so you need to total up what those expenses are, and then you need to multiply that by eight. And that is your eight-month emergency fund. That's how it is determined. This next one is from Kiana, she says hi, Suze. I'm a 37-year-old single mom of an 11-year-old girl. I make $94k per year, however, I have nothing in capital letters to show for it. I don't want to be 60 and not be able to feel comfortable. My daughter is currently in private school, but I'm considering taking her out next year for public school. I truly feel like I make great money but can't do the things I want to do. I know that I'm overspending, but I just don't know where to start. Can you please help me or lead me in the right direction to make things better financially for my future? Kiana, if you know that you are overspending, why don't you start right there and stop overspending? You're 37, before you know it you're going to be 47, and before you know it you are going to be that 60-year old who's not going to be able to feel comfortable or do anything. And let's really start with your daughter. I understand that all of you when you have kids that if you can afford it, you send them to private school because you want them to have the best education possible. I don't know. My cousins and other people in my family were able to go to private high schools, and lab schools, and the's fancy-schmancy colleges. And I went to a public grammar school, high school, on the south side of Chicago in the serious hood during the riot years. You know, back in the 1960s, and probably had a horrific education when I look back on it, and it doesn't seem to have bothered me any or hindered me from becoming seriously successful. So, if you can afford it, OK. I personally love when everybody sends their kids to public school because so many of you, parents, are writing me and you don't have any money because you are spending $50k a year to send two of your kids to private high schools. And I don't know, I just think that I'm not sure that it's what should be done. You're spending that much to send her to private grammar schools, so if you really mean Kiana what you say, then you need to take your daughter out of private school and send her to public school. Tell her why. Make sure she knows that you're not punishing her for anything but that she needs to contribute to this because you are a single mom and you are a single mom of a single child and she is that single child of yours. And so, the two of you are a team and the team has to make it, and that's where you start. And you say, also, honey, can you help me and stop me from overspending? When you see me about to buy something that I don't need, can you say, Mom, don't do that and I can help you do that as well? So let's do this as a team so that both of us can have a better financial future. All right, let's just do maybe two more. This one's from Allison. Hi, Suze, I love your podcasts and how you empower women to take control of their finances. I'm getting married later this year, and my fiance and I have started thinking about and planning for buying a home in the next several years. I'm currently in graduate school, so I don't have much money. My fiance's family gave him a trust fund, which he receives more access to overtime. By the time will be looking at homes, he should have about $600k, although, at the current moment, we have access to $425k. My fiance thinks that we should withdraw a large amount of the money to assist us in purchasing a house in a few years to have a lower rate for our mortgage, whereas I think that money should stay in the stock market to continue to grow over time for our retirement plans. So essentially, what Alison is asking me is which one of them is right? Allison, have you looked at the stock market lately? You know, it could be three or four years before this market returns. So, I happen to agree with your fiance on this one. You never know what can happen in life. This was a gift to him from his parents via a trust fund so that no matter what, you will have something to show for it. Because as we're learning right now, the market can go up, and then it can seriously go down, which I have no doubt it's going to continue to do. Oh, this one is sad. This was hi, Suze. I have a 31-year-old son who is in recovery from heroin addiction. His finances are a mess and his credit is ruined. At this point, it's been two and a half years since he made a payment on his two credit cards. We live in Ohio, and the statute of limitations for credit cards is three years I believe. With the opioid epidemic out of control in our country, would you consider addressing this topic on one of your podcasts? I listen to podcasts on addiction and recovery, but I've never heard anyone address the topic of addicts getting their financial lives back on track. This is a huge problem for most addicts, and the daunting task of financial repair can be enough to drive someone to relapse. So, first of all, what I want to say to you is that you say you're from Ohio. And the statute of limitations in Ohio is six years, not three years, so you have a little bit longer to go. But, here's what I want to say. I deal with many, many, many people who are recovering from addiction. And for some reason, I've just never chosen to talk about it yet on the podcast until I saw your email and a few others that I'll deal with over the next few weeks as well. You have to have faith here, and you have to know that if he's two and a half years behind since he's made a payment on his credit cards, it's fine. Just forget about it because paying them off is not going to help his credit score on any level. Once you are over 90 days late on a credit card payment, the damage has already been done, so that's the least of his worries. So, what you need to do is just be really positive for him and be there for him. And who cares if he has a bad FICO score, who cares if he can't get another credit card? And then little by little, his life will come back. I have somebody who is very close to me, who I watched not go through a heroin addiction but, you know, have problems. And it's just, it happens, it just happens. And I have a really good friend from grammar school, and her husband was an addict and he ended up dying. Your son is still alive, so it's hard, it's hard and there really should be in recovery, a whole thing on the 12 steps to get back to financial solvency. But the best thing I can tell you is, make sure he keeps going to the meetings, make sure he keeps getting help that way. Do not ever let him stop doing that. The day that he stops doing that is the day that he's headed back for trouble. And so, most of my friends who have been addicts on, you know, with one thing or another, could be 30 years clean, and they still, every single week, go to a meeting. That is far more important, if he can stay clean, he can clean up his money as well. Have you noticed that I kind of stayed on different topics this week? I couldn't stand talking about the stock market anymore because there are more things in life, really than the stock market. And, I get that it's consuming everybody right now, but I kind of really, I wanted to lighten it up a bit because our lives are made up of more than is the market going up, is the market going down? What's happening with oil, is going up, is it going down? By the way, speaking about oil, I know last week I mentioned oil stocks, and I know on Monday of this week a few days ago, oil plummeted. It plummeted, and KT said to me, are you freaked out? I said, no, I'm thrilled, because remember, we're dollar-cost averaging. We want the price of these stacks to go down, down, down. So as we're dollar-cost averaging, we're going into them so that the dividend yields will be going up, up, up. And so it's all just very interesting, but it's really something on Monday to have watched what happened to oil and then throughout the rest of the week, it was just very fascinating. But stay the course there. All right, that brings us to the end of another Ask Suze Anything. Send me your questions, and you never know when you'll hear the answer on this podcast. 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. 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/.
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