Debt, Divorce, Podcast, Saving Money, Savings
June 06, 2019
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In this Ask Suze Anything episode, we get questions from Eleanor, Lauren, Kelly, Polly, Don, Mary, Janis, and Christine.
It is June 6, 2019 and yesterday was my birthday. Yeah baby. And today I'm in Las Vegas because my birthday gift is what? Going to see Lady Gaga. Oh my God, I'm so excited. Not only am I gonna get to see Lady Gaga, I'm going to be with some of my best friends ever that I haven't seen in forever and I'm just so happy. I can't even stand it. But before I begin the Ask Suze Anything podcast, I just want to make all of you aware that you still have today, tomorrow, possibly even June 8th, 2019, where you can go to Amazon and you can download for free my e-book edition of the Adventures of Billy and Penny. My kids book. Because this is my gift now to all of you, my kids book that really is so perfect for five-year-olds, six-year-olds, seven-year-olds, right in there. Oh my God. To teach them the value of money. You want to raise kids that value money? Get them this book and the price is right again, it's the e-book edition. Alright, are we ready for Ask Suze Anything? Ask Suze Anything. This is where you write in a question, and if chosen, I will read it and answer it on the podcast. To do so, all you have to do is send in your question to Ask Suze. That's S-U-Z-E firstname.lastname@example.org. Let's start. Eleanor writes, I'm a single mom and I started my own business three years ago so I could set my own schedule. My business is growing, but it's still not enough money. I own my condo outright, but I've totaled up and I owe $21,000 on high interest cards. On a recent episode you counseled someone in a similar situation not to take a home equity loan to pay off her debt. What about a personal loan that consolidates all the balances at a lower interest rate? They quoted a 5% origination fee, with a 48-36 month repayment term and at a 10% APR. That would cut my payment in half. Are these things legit? Thanks for your help. Eleanor, listen to me. Even at a 5% origination fee, that may not seem like a lot, but if you owe $21,000, that's like $1,000 just to do business with these people. Are you crazy? And they're only lowering your interest rate to 10%? I don't think so. Here's what I want you to do. I want you to go to NFCC.org. That stands for National Foundation for Credit Counseling. And this is a nonprofit entity that has been around for years that will connect you with a qualified debt management program that will fit your needs. Now, what is that? Years ago, when people were really getting in trouble and not paying off their credit cards, all of these people came together and they created a National Foundation for Credit Counseling. And they actually teamed up with the credit card companies where they were funded by the credit card companies. Because the credit card companies would rather have some money back than no money at all. And the teaming up work like this. If you went to one of these programs, and you paid them, they would pay your credit cards for you. And if you did it that way, this program would most likely be able to lower your interest rate to 0%. 0%, 5% is a whole lot better than the 10% this other company is doing, and it's not gonna cost you $1,000. I think the fee is something like 10 or $15 per month to do this, they'll put you on a five-year program to have everything paid off. It will not hurt your credit score on any level. So that is the only type of program that you should use to help yourself get out of credit card debt period. Let's just go to a very quick Suze School here. The reason that I tell you not to use equity that is in your home to pay off credit cards is this. Number one, credit cards are unsecured loans, they are not attached to anything. So they can't take anything from you. Sure they could sue you to try to get their money back, but chances are if you don't have money they're not going to do that. Unlike a home equity loan which is secured by the equity in your home, if you can't pay that, you can wake up one day and find that your home is in foreclosure. So you never pay for an unsecured debt with money from a secured asset, like a home, like a car. That is really important. Next, when you free up money very quickly from a credit card, you take money from your home, you owe $21,000, you take out $21,000 as a home equity line of credit. You pay off $21,000 of credit card debt. Now you have all this available credit on your credit cards. Do you really think that you won't run up that credit again? You absolutely will in most cases will. So what happens is, now you owe $42,000 because before you know it you've charged your cards to the max. You still owe $21,000 on a home equity line of credit and have you helped yourself at all? You have not. So don't do it that way. Next one is from Lauren. Hi Suze. I usually turn to your advice first when seeking information on financial matters. We have talked to a few lawyers that are local here in Ohio and they consistently tell us we do not need a trust unless we have significant assets. Can you tell me if a living revocable trust is necessary for everyone in any situation or state. Thanks again, Lauren. Lauren, are you kidding me? It seems like I'm going to be saying that a lot during this podcast. Yes. There are ways to avoid probate with certain assets, any asset that you have that has a named beneficiary, your retirement account, your life insurance, your pay on death accounts, your transfer on death accounts. All of those absolutely avoid probate. But a living revocable trust is not just about avoiding probate. It's also about what happens to you in case of an incapacity. And all of those other ways will not help you in case of an incapacity. So a good living revocable trust that has an incapacity clause in it, what happens? Then if you become incapacitated, your spouse becomes incapacitated, anybody becomes incapacitated that you're involved with financially, you can sign for them, they can sign for you. You're a single woman out there, you become incapacitated, you don't have anybody really that's right there that you're married to or you don't have a family but you have friends, but you're not a business or you don't own things with your friends, you can name a trusted friend to be your successor trustee to pay your bills for you, to deal with your money for you. If you don't have a living revocable trust that is going to be very difficult to do. And this line about you don't need a trust unless you have significant assets. Are you kidding me? In most situations, the less money you have, the more you need a living revocable trust because if you do happen to own assets that are going to go through probate, where are you going to get that money to have it go through probate? And as far as that there are laws in Ohio that make it so you don't have to do it, the laws in Ohio state this. If you have $35,000 or less in assets, alright, you can go to simplified probate. It's not a big deal. You can just get out of it right away and just pass everything. Or if you have $100,000 or less and you leave it all to your surviving spouse, you don't have to go through it. But that's not your situation here. I'm reading other things in your email that say you have a current home, you're gonna get another home, your gonna uh. So no, I do not agree with these lawyers on any level. Now, while it is true, when you're first starting out, you have no assets, you're young and whatever. All right, I get it. But that's not your situation anymore. You're 32 years of age, your situation has changed and it's changing, you've got married and Blah Blah Blah. So no, I don't agree with these trust lawyers at all. I believe that a living revocable trust is absolutely necessary regardless of your situation in most cases, or the state that you live in. Next question is from Kelly. Hi Suze. My question is this. It seems every time I start to get my finances on track, I get invited to an event, vacation or party that requires money that's not in my budget. How can I turn down friends without being the loser who stays home all the time? I don't feel like a loser when I'm choosing me over others, but I don't have a trust fund, huge savings, or access to a vacation home for free, so I absolutely cannot say yes to every invite even if I wanted to. Do you have advice on how to say no without offending people? What's the best way to phrase my budget doesn't include and then insert the event, but I still love you. Kelly, you listen again to me. Did you see what you just said in this email question to me? You said, how do I say no without offending people. What about the people not offending you? You know, I have this rule of thumb, I have friends who do not have money. I'm not just friends with people who are rich. I'm friends with people that I love regardless of their bank account. Even though it breaks my heart. But that's a whole another story. And when we go out and we're going to go out and spend money, I say to them, if we're going out to a restaurant, if we're going on a vacation, if we are going anywhere, I'm treating. And if you don't want me to treat, you're not going because you are not paying for it on your own. I don't want to contribute to their debt. And I know they have debt. Do your friends know that you have debt? Chances are they do, and if they don't know they absolutely should. There's nothing wrong with telling everybody I have credit card debt. I owe this much money. You have to face it to erase it. So shout it to the world, shout it to the world and then maybe the world will start to get honest and shout back to you, oh my God, you have debt? So do I! Chances are you don't know their financial situation totally, but they should know yours. So why are you so worried about offending them? They offend you every time they put you in a situation where you have to choose spending money you don't have just to be with them. Again, if my friends don't want to go out, I go to their house and we just hang out. You don't have to spend money and you are not a loser, you are a winner. A winner. What actor said that? Used to make me sick when he said that. Doesn't matter. You are a winner because you are really trying to give to yourself, to make sure that you're okay later on in life. And even now, so be proud of who you are. Be proud of the money that you don't have currently and just tell people I can't afford to go with you. How do you afford it? Hey, if you want to take me pay for me, if you have that much money, but I'm saying no out of love for myself versus yes out of fear of how I may offend you. That's what you tell them Kell. Next one is from Polly. And this isn't so much of a question, this is in response to an email question that I answered for a woman by the name of Diane on May 30th a little bit ago. And I just want to read it to you because I just love what she said in here. She says, I listened to your podcast on May 30th, 2019. And the last email you read from Diane struck home for me as we have many similarities. I am not yet divorced but worry as I was the primary breadwinner also, and worry he may fight for half of my pensions, 401ks, however, I'm prepared if he does. Your response to Diane gave me hope and I immediately jotted this down and this is what I wanted to read to you. The word divorce is spelled D-I-V-O-R-C-E. I know that you know that. I just want you to hear what Polly did with the word divorce. D is don't give up. I stands for I can do this. V, victory is ahead of me. O, only I am in control of me. R, realize myself worth. C, Change is good. And E, everything will be okay. You might want to write those down because those words from Polly are fabulous. Next is from Don. I think Don is a man. And remember the Women & Money podcast is not just for women. It's not women and money only. It's women and money and the men smart enough to listen. So when they write in and ask a question, I tend to answer them. Not that many of them do. But anyway, from Don, my father would like to give his assets to his adult children to protect the assets from possible long-term care expenses. He thinks he can put the condo in a trust in his kids’ names and Medicare will pay if he needs nursing home care. I'm afraid something will go wrong with his plan. Do you have an opinion? I have a big opinion Don. The goal of life is not to end up in a nursing home on Medicaid. If your father thinks that care in a nursing home under Medicaid is as good as a private pay patient, I am here to tell you he is 100% wrong. For Medicaid to pay for him. He also has to be in a Medicare approved nursing home. And as our budgets and our deficits increase, decrease, they're all over the place. Medicare is being cut back, which means fewer and fewer and fewer homes are going to be Medicare approved. So no, I do not like this plan on any level. If he has money, you say in here because it was again longer than I read, a $300,000 condo with no mortgage. So if he ends up in a nursing home and you need to sell that condo, sell it. And pay for him. Use his money to take care of him. His money is not there to protect so he can suffer in his later years. Do you hear me? This one is from Mary, and again I don't really have a comment on this as much as I just want you to hear the email she sent in. Suze. I wish I had your advice when my son was in college. My ex (meaning she is divorced) said he needed my inheritance, $50,000, to help with our son's tuition. I foolishly gave it right to him. No questions asked. The retirement lady at the hospital where I work said not to give him any more money because his yearly household income was at least two million. My ex is a doctor married to a doctor and the retirement lady has access to all the doctors’ salaries. She was right. My ex and his new family now own luxurious homes and cars and go on expensive vacations while I struggle to make ends meet. You think you could trust the father of your child, but I guess not. Just wanted you to know this. Again, the reason that I am reading this to you is just to reiterate when you get an inheritance you are to keep that inheritance separate in your name and it should only be used for you, and nobody else. That is exactly what the people who left you the inheritance would want you to do. Next question is from Janis, and she says: I have been an avid follower of yours for many years, whether it be your TV show, your books, and now your podcast. I have implemented your recommendations and I'm set to retire in year 2020. That is next year. While I hear much about the importance of managing your investments up to retirement, I rarely hear much about managing post-retirement. I have a 401k traditional IRA. I know that when I take money out I will have a hefty tax bill. Is there any advice about a strategy to take money out of my account to minimize taxes? One thing that a few people have recommended is to withdraw from the IRA in the sixties and invest in life insurance, which is tax free, which you could then withdraw from it. Suze what do you think about this strategy? You said Janis, you said at the beginning of your email that you have been a follower of mine for many years, and yet you still even think or write me about wondering if life insurance would be a good investment to take it out tax-free? After you have withdrawn money from your 401k plan, you can invest it or just leave it in a money market account or whatever you want and you're not gonna have to pay taxes on it again. You could put it in a municipal bond if you want and not have to pay taxes on the interest either. There are so many things that you can do with it. But you are to not. You are to not dare buy a life insurance policy just simply so that you can take it out tax-free. You take it out tax-free because it's a loan. It is not you are just withdrawing it. It is the worst thing you could ever do. You say in here that you've saved up for 35 years. You know, and you don't want to make a mistake. Well guess what? If you do this, if you do this, it will be the biggest mistake you have ever made. Just take your 401k. Do an IRA rollover with it. And withdraw it as you need it and spend it. You don't have to take out large amounts of money. You have a long time to be able to do that. So again, don't worry, but do not buy a life insurance policy. Next is from Christine. I know you don't like annuities. That's good Christine. I'm glad you know. Actually I don't mind single premium deferred annuities. I just don't like variable annuities. I know you don't like annuities. Neither does Kramer or Dave Ramsey. So my Fidelity advisor said the other day that the only thing about Suze Orman is, she doesn't like annuities. Now I'm afraid he's trying to rip us off. And I really don't want him to be my adviser anymore. But my husband is shy about changing advisors. What advice can you offer? Your husband is shy about changing advisers Christine? You don't feel good with him? You feel that he is trying to rip you off and yet your husband is shy about changing advisors? This is your money that the two of you worked your entire life for. And the fact that you don't trust him is all you need to say to him, you need to say to him, you know what, I'm going to be changing my account to XY and Z. You need to change your account. And this thing about being shy? Listen. If your husband can't do it, you need to do it. Because chances are your husband, because men actually die before women. So you're gonna be left with this. Why would you want to be worried about what who's managing your money and your husband? So this is where you have to step up. You have to not be afraid of hurting somebody's feelings. This is not a personal relationship that you have with your financial advisor. This is a professional financial relationship. Maybe possibly one of the most important in your entire life, because they are holding on to your financial children. These financial children so to speak that are going to take care of you for the rest of your lives. And yet you don't trust them. Would you put your own kids with somebody that you didn't trust? No you would not. You would want your own children, when especially when they were young to be with people that would be kind to them, protective of them, making sure that they became the strong adults that you want them to be. But yet your own financial children, you want to stay with somebody simply because your husband is shy about changing advisors? What advice can you offer? Change the advisor now. I was a little feisty on this Ask Suze podcast, wasn't I? But then again people say that I'm always kind of feisty. You know what was interesting is recently I did a segment, actually two segments, on um The Today Show, and one of the segments was on student loans. And I was coming back from New York, back to Florida, and I was on the plane, and you know people were coming on the plane and one man stopped me as he's walking by my seat and he says you are rough. I never knew you were so rough. Oh my God you were rough on The Today Show. And he was referring to the fact that I simply answered the question from Savannah, which is when do you start saving for a kid's college education. And my answer was when you can afford to. When you have an eight-month emergency fund, when you don't have any credit card debt, when your own student loan debt is paid off, and you know your funding your retirement accounts and all of these things. And if you cannot afford to pay for your child's college education, it does not make you a bad parent. It makes you a strong parent because otherwise what happens is you pay, you get into debt. They see what Mommy and Daddy or Mommy and Mommy or Daddy and Daddy or just Mommy or just Daddy did for them. And then when they grow up, they feel they have to do that for their kids as well. Even if they don't have the money to do so. And so we are passing the message of less down from generation to generation to generation. You need to do more for yourself and not feel bad about it. It's okay, it's okay. And on that show, I said, listen, if there isn't enough money, and you know there's not gonna be enough money, tell your kids when they are 10 years of age. So that you can start planning for it. And if they have to go to community college, who cares. Who cares. And so I looked at him, and I said, you betcha I'm tough. Because somebody has to be out here telling you the truth of matters. So that you don't get taken advantage of, so you don't spend money that you don't have, so you don't make investments that are wrong for you, so that you don't take your hard-earned life savings and make somebody else rich off of it, like a financial salesperson, versus doing what's right for you. So may I always be your tough voice. May I always be willing to speak up for you. And may I always tell you exactly what you need to hear to be the strong, smart and secure women that I want you all to be.
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