Home Buying, Money Management, Mortgage, Stock Market
March 26, 2020
Listen to Podcast Episode:
In this podcast of Ask Suze Anything, once again, Suze groups together questions coming in from Women & Money listeners about this volatile time in the stock market.
It's March 26, 2020. Hi, everybody. So, what should we talk about today? Anything exciting in your life? How are you? How are you feeling? Are you liking staying at home? Are you OK with everything? All right, let's talk about what I know you want to talk about for a little bit here, anyway, which is Suze, are my investments safe? Should I take my money out of the 401k? I've gotten so many emails from you, all of you saying to me, Suze, I need to come out of the market, this is all the money I have. It's never going to come back, oh, my God. Stop it. I need you to stop it. Because really, there's a tremendous amount of hope out there. It's absolutely going to come back, I promise you that. And if you don't need this money for at least five years, I promise you you're going to be more than fine and happy. That as long as you're invested properly and good quality stocks and bonds, you will be so happy that you not only stayed in but you continued if you can afford to, to put more money in as well as time goes on here. So, now I'm very aware that the past two days, on Tuesday as well as Wednesday, they were great days in the stock market, great, great days. However, I just want you to know that of course, they were great days, but that doesn't mean that it's going straight up from here. And what got me concerned is this one guy, Nick, wrote me and he said, after really almost crying for the past two weeks or three weeks about oh no, Suze, I have lost all this money. I can't believe it, I did this, I did that. Please help me, I've saved so hard, I've lived like a pauper and all of a sudden I've lost it all. Well, he writes to me today and says, I'm thinking about buying all these stocks, what do you think about these stocks? I'm like, do not, and I repeat, do not think that this is the end of the bear market and now we're going straight up from here. Everything, really everybody, is contingent on will this bill pass that really saves the financial institutions as well as all of you? And on Wednesday, the market was up 1400 points approximately at the high, and as soon as rumors started to come out that certain senators were not going to sign this bill, it dropped almost 1000 points. And so please, just keep calm here. It's not over yet, but we're getting closer to the end of it. So, I ask you to continue to stay on course here and that if you are investing, just do it on a dollar-cost averaging basis. Please don't sell out here. Please. Obviously, if you really need this money within a year or whatever, it may be all right. Maybe on a day like the past two days, maybe this is when you sell and you just take the money and there you go, you recouped some of it. But if you don't need the money again, for at least five years, let's just take a break. All right? Next. You know, I said to you a few weeks ago that I was going to be on HSN this coming weekend, and I'm not sure that that's true anymore. So, you just might want to tune in Saturday at 6 p.m. and 11 p.m. and that's East Coast time because it's live, so adjust it no matter what time zone you're in. As well as Sunday at 3 p.m. and that again is East Coast time. So that's this Saturday and Sunday, the 28th and 29th of March. If you see me there, it's because I was able to get there via telephone or however, but on the island, it's very difficult. There's very little communication, believe it or not, so I'm not sure that technologically we can make that happen. But you might want to tune in, and that's where you would call in. You could also join on Facebook if I'm there and ask your questions, and then I could answer them live over the telephone, where I'm going to be calling in from. Who knows, maybe I'll Zoom, we'll see what we can make happen. But I just want to tell you that so if you were planning to call in and you don't see me, don't get worried. I'm fine, it's just that technologically, this isn't the best place to be to make something like that happen. All right, next is this. I know that so many of you are really worried about your stocks and your investments, but I'm still worried about you. I'm worried about, are you healthy? I'm worried about, are you OK? I'm worried about what are you going to do if your business is closed down, you've been laid off, what are the things that you can do right now to get by every single day? And so many of you are really not knowing what to do. You don't know, can you apply for unemployment? What do you do about your health insurance? What do you do about all of these things? So, I thought maybe today I would once again just talk broadly and condense many of the questions that have come in and just talk to you about the topics that I really think you need to know about. Which is, how do you pay your bills when you don't have any money? How do you do that? Don't you think that's even more important than what's happening in the stock market? But, no, most of you are only concerned about the stock market. Leave the stock market alone. Again, it will be fine. All right, so let's start with everything that I want you to know right now. And remember, there will be more things on Sunday, there's always going to be more things that I want you to know is things change, so keep up with these podcasts because they are important. All right, let's begin. Many of you are writing to me and you're asking me, Suze, what should I do with the money that the government is going to send me? Currently, you may know that right now they're supposedly going to be sending you $1200 for the adults and $500 for every kid that you have. And how they're going to get it to you, when they're going to get it to you, truthfully, no one has any idea yet, so don't go spending this money before you get it. What should you do with it? Oh, you should so save it, it's not even funny. Many of you want to take this money and you want to pay off a credit card, you want to do this, you want that. If you are at home and you no longer have a paycheck coming in, and you don't know how you're going to pay for everything, the very first step that you should be taking right now is to obviously be calling every single creditor that you have. Now, I'm aware that many of the mortgage companies, such as Fannie Mae and Freddie Mac, said that all of you aren't going to have to pay your mortgage for some time. But how do you know if you have a Fannie Mae or Freddie Mac mortgage? So you just can't hear things like this on the television and assume, oh great, I just don't have to pay my mortgage. You are to call up your mortgage company and ask them, are you covered under this? Do you not have to pay your mortgage right now? And if you don't have to pay your mortgage right now, what does that mean? Does your mortgage payment get added on to the back end? Just find out how it works with your particular mortgage company. If they say to you, no, you are not covered under Freddie Mac and Fannie Mae, that's not the type of mortgage that you have, then you need to make sure that you ask them, will you do the same for me? I'm not able to make money, tell them about your situation and work with them. If you have credit card debt, you should be calling all your creditors as well and asking them if they, in fact, can absolutely suspend your payments for 90 days until you are working again. But you have to take action. So, if you're in situations like that where you are scared to death that you don't have an eight-month emergency fund, you don't have a one-month emergency fund, you don't have any money, and you're not able to make any money. Therefore, when you get money, do not use that money to pay off a debt. Don't do that right here and right now. If your credit card companies aren't willing to work with you, then just pay them the minimum payment due, but you are to keep as much cash on hand as you possibly can. This is the time seriously, everybody, that any money that comes in, your unemployment checks, whatever it may be, you have to hold on to every single penny of that as if that is the last time you are going to have money coming in. Now, obviously, it's not. Again, we are closer to the end of this than we were a month or two months ago. Some states really will go through this sooner than others, but this is coming to every single state in the United States of America, so you have got to plan right now. And if it's not in your particular state and things, they're still going relatively good in your particular state or city, or wherever it is that you're living, you need to take other actions as well. Again, you need to immediately apply for unemployment, even if you don't know if you qualify for unemployment or not. Who cares? Just apply, and they'll tell you if you're going to get it or not You have to do things that protect you. You know, Aetna today, and I love Aetna, I love CVS, I just love them as a company. Hint, hint. They just made an announcement that not only if you are insured, obviously by them, will they pay for your virus test, but if you happen to end up in the hospital, they're not going to have any co-shares or anything. They're going to pay for 100% of your treatment. I wish all the insurance companies would do that, but we have to know. So, it is important that you also call up your insurance company, your health insurance company, and you ask them, you ask your agent, if I end up in the hospital with this virus, is the company going to wave the co-share? Because the average treatment is like $20k when you're on one of those ventilators and when that happens, if your co-share is 20%, that's, like $4k. Where are you going to get that? So these are things that you need to know. The other thing that many of you are writing to me about is this. You're asking me that if your credit card company and everybody says you don't have to pay, you have to pay your mortgage, you don't have to pay your credit cards, whatever it is, is that going to hurt your FICO score? Well, the answer to that is it will not hurt your FICO score if you have it directly from your mortgage company, from your credit cards, that they are giving you a break. They are putting you in what's called forbearance where obviously, you're still going to have to pay interest on the money you owe them. It's added onto your card or the back end of your mortgage, but you don't have to make payments for 30 days, 60 days, 90 days, whatever it is. You cannot assume that, again, it applies to you unless you have heard directly from your company. If you haven't heard from your company, you haven't contacted them, you don't know for sure, and you stop making credit card payments and mortgage payments and you weren't included in that, oh, you betcha it's going to absolutely hurt your credit. For those of you who don't have any money and you really don't know what to do, and you are so freaked out, I mean if you could read the emails that I'm getting. I also want to thank all of you for all the emails coming in hoping that KT and I are absolutely OK. We're very OK, we're safe and sound. The island is locked down tight, nobody is allowed on the island at all. So there's maybe 10 people here, there's nobody here and all of us are staying very far away from each other. KT and I aren't, but that's beside the point. But we're fine, so please know that I appreciate your concern, but we are fine. We will stay healthy. We have enough fish in the freezer to last us, so all is good that way. However, you're all so afraid. You want to take in renters, you don't even know what to do. Two things that you might consider if you really have no money but let's say you have good credit. Maybe you're still working because many of you are writing and say, Suze, I'm making money but I know one day they're going to lay me off here, I can feel it. You just might want to try, if you own a home and there is equity in that home, just apply for a home equity line of credit and see if you get it. Because if you have no cash and if you do lose your job and you don't know what to do, you have a home equity line of credit in place. Also, it doesn't hurt that if you still have an income coming in and you do have credit cards, maybe you call up your credit card companies and ask them to extend your credit limit so there's more credit that you can charge on your credit cards. Maybe they'll do it, maybe they won't. Maybe you apply for a brand new credit card at a credit union or wherever you want, but this is the time to do it. Next, I want to talk about real estate. So many of you are writing in and you are saying to me, Suze, I put an offer in on the home. Should I go ahead and should I buy it? What should I do? I'm so afraid. So many of you are afraid that if you back out of the purchase that the deposit, you know, the $1k or whatever you put down, that if you back out and they keep it, that that will hurt your FICO score. It's not going to hurt your FICO score if you back out of buying a home. Also, you're afraid that if you've locked in a good interest rate and your company is saying to you if you don't do this by X date, we're going to charge you $200 a week to keep this interest rate locked, and that's keeping you in there because you don't know what to do. I just want to talk to you about real estate for a second here. This is a very, very tricky question, and it's tricky because I don't know, obviously, what will happen to the price of real estate. But I want to give you an idea of why I still think that we're pretty much at the top, or we were at the top of the market. And the reason is this. Your real estate, your home, is valued accordingly to what all the other homes on your block or in your neighborhood have sold for. All right? They do what's called comps. If you happen to be in a situation where you're buying or selling and your neighbor has lost their job because of this, and it's a job that's never going to come back ever because there are going to be jobs that never come back. It is very important for you to understand that not everything is going to turn back to normal. There will be many small businesses that absolutely have to claim bankruptcy and maybe you work for one of them. There will be many changes in how people work in the future and what they do. This was a game-changer, a big game-changer, and we cannot be so naive. And it breaks my heart to be saying this where we just assume everything's going to go back to normal. The virus is going to go away, and in a few months from now, we're not even going to know that any of this happened. I don't think that's true. Do I think that the economy is absolutely going to be destroyed for a long time? No, I don't. Do I think that we will come out of this economically speaking? Absolutely, I do. But as usual, those that are very large corporations, they will survive. But it's the small businesses that really could be hurt badly. And so therefore, it's important, it's really important that you understand that if somebody who's living next to you doesn't have a job, they've lost it, they're not going to get another job, they don't know what to do. And therefore, they have got to sell their home; they have got to claim bankruptcy. They have got to do something and they're willing to sell their home for anything anybody will pay them for it. And they're willing to sell their home to anybody who is willing to pay anything for it because they are desperate. So if all the houses on your block, just let's say, are worth $300k, $200k and there are one or two people on your block that sold for $150k, for $175k. Guess what that does to the value of a house that's similar to theirs? It brings your value down. So you just have to be prepared for that because that's exactly what started to happen in 2007, 2008 when everybody was foreclosing on their homes, it absolutely destroyed the value of your home as well, even though you did not sell it. So follow me here. This is why it was so important that I've always said to you, are you understanding how all the advice that I have given you over all these years is now coming home to roost, so to speak? You've all said to me, I'm going to buy a home for 0% down, 5% down, maybe 10%. I keep saying to you, no, please don't buy a home unless you can put at least 20% down. And you just don't even think that I know what I'm talking about, oh Suze, please. And so here is the reason why. Back in 2007, when real estate prices crashed and all the people were going to have to give up their homes in foreclosure, most people just walked away from their homes. They didn't even bother to be foreclosed upon, they just left it. They owed the banks, let's just say $200k on their mortgage but their home was worth $100k. When that home sold in foreclosure, legally, they owed the bank the difference between the $100k and the $200k. Obviously, they couldn't afford to pay that. So therefore, many of them decided, ok, now what do I do? Well, the banks had to forgive it, right? But guess what? You had to pay taxes on the difference between what you owed and what your house was sold for or you owed income tax on $100k. Because it was so horrific back then, the government allowed you to not have to pay taxes if it was your primary residence on the difference between what you owed the bank, what your house was sold for, and the difference of those two, they just dismissed it. That's no longer true today, that was just for a small period of time. So if you own a home, and if whatever happens, things start to hit in the real estate market, and just let's say you had to sell it for less than what you owed, you would owe taxes on that difference. But what's interesting is that if you had 20% equity in your home, if you had it, chances are your home is not going to depreciate by 20%. It's just not, that's not the type of markets that we're in right now. Could it go for 10% less? Maybe, but if you had equity in your home, at least you have substantial money in there that will keep you safe and sound if your home happens to depreciate some because a neighbor happened to sell for less because they were in financial trouble. Going back to buying a home right now, the same thing applies. If you buy a home right now, you may think you're having a great deal, it's the perfect thing for you to be doing. But you need to make sure because it's not just is it a great time right now to buy a home? It's is the value of that home going to hold if the neighbors next to you all of a sudden have to foreclose and sell? Do you understand what I'm saying? So I wouldn't be rushing right now to buy a home, and interest rates aren't going anywhere. Stop thinking, oh my God, I've got to lock in these low interest rates or whatever. If you look at what's happening with the 10-year Treasury note which is what mortgage rates are based upon, they are now for the first time in a while, they're just becoming steady. They're good. So it's going to be right around here a little up, maybe a little down, but I wouldn't worry about it. So do not let fear of loss drive you to possibly create greater losses for yourself. You buy a home when you are ready to buy a home. If you have any doubt, if you're afraid, I wouldn't be doing it. Remember, fear is the greatest internal obstacle to wealth, so if you're afraid to do something, just slow down. Your buyers, your real estate agent, they're going to freak. They're going to say, wait a minute, wait a minute, you've got to go through with this, of course, you do, because that's how they make their livings. The people selling that house obviously, want to sell it. Listen, you have many, many homes that you can buy. That seller only has one home that they need to sell. You know, I'll never forget, way back in the 1970s, when I was a waitress at the Buttercup Bakery, I had figured out how to buy homes with no money down. I had taken this course, imagine this, here I am in my 20s and making $400 a month, and I go to this free seminar by Lowery Nickerson on how to buy homes for no money down. And the reason that I did that is that I was paying, with my girlfriend at the time, $220 for this apartment. Her brother was paying $147 a month in a mortgage payment on a home that he had just purchased. And I'm like, are you telling me that he's able to pay less than us and he's owning a home? I want to own my own home. And so I learned how to do that. And there was a home that I so wanted to buy that was up in the Oakland Hills, and at the time it was like $60k. Remember this back in the 1970s, and I went to see it and I put in an offer. And somebody else went to see it and they put in an offer. And of course, it went to the person who, you know, had a lot better job than I did. Again, I'm a waitress, and it went to them and I remember, I was like oh my God, I love that home, that was the greatest home I ever could have had, and I was heartbroken. But I didn't give up. And then I start looking around again, and then another home I found, the same amount of money, but so much better than that other one, and I ended up buying that one. I also ended up selling that one many years later for almost $700k. The point of the matter is this. There's always another home, so don't ever think oh, my God, I'm never going to find a home that's so perfect again and be afraid to walk away from something if your gut doesn't want you to go through with it. If you love it and you have the money and you're putting 20% down, and you're not afraid, and your job is secure, and everything's good, OK. But, if you are afraid because you made an offer on a home, you have lost your job, you don't know what's going to happen, just think twice, all right, everybody? OK, that's everything that you need to know. Hopefully, you will join me on Sunday, and we're going to go to Suze School on Sunday to talk about corporate bonds, and preferred stocks, and the opportunities that many of you may find in that particular sector, just to educate you, because this is the perfect time for you to be educated. So until Sunday, I hope all of you stay safe, stay strong, and most of all, stay secure in your thoughts that you really know that we're getting closer to the end than we were. And that in time, everything really will be OK. 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/.
Get the 4 Must Have Documents that you need to protect your tomorrows today....
Credit & Debt, Saving, Investing, Retirement