Credit Card, Family, Home Mortgage, IRA, Retirement, Roth IRA, Student Loans
July 08, 2021
Listen to Podcast Episode:
On this podcast of Ask Suze (and KT) Anything, Suze answers questions from Women & Money listeners Rita, Rose, Ryan, Lori, Mary Beth, Erica, Joan, Rob and more selected and read by KT.
July 8th, 2021. 2021? Is that what you were waiting for me to say? You're a little late on the uptick nowhere. You wait. You didn't give me like a signal or anything. I just wanted to see if you were paying attention. We're sitting here patiently waiting, excited to do today's podcast. Why is that? Because it's this very special day. We want to start the day by sending prayers to my twin sister and her husband, Tom. Tom’s having a little surgery which we think is going to be perfectly fine. And he went all the way from Florida back to Boston to do it with the exact same surgeon, Dr Mike Groff at Brigham Women's Hospital to have his surgery done because Mike did such a great job on me. So, we're just sending prayers in our thought. Thank God Tom surgery is a whole lot less complicated than mine was so. But we still wish him well and we love you Tom and Lena. Okay, are you ready? What is my saying? When you ask me that question? I was born. Welcome everybody to ask Suze and KT anything. And if you want to ask us a question, all you have to do is right into firstname.lastname@example.org or go to our women and money app, download that and you can ask your questions there. KT, hit it this morning. Okay, first question Suze is from Rita. I love this question. Hi KT and Suze. How do I help my 19-year-old learn about spending money? Ready, everyone. He blew $4000 in one month on video games and Nike, Nike like clothing and shoes and stuff. $2,000 from an internship advance and other savings account. We were planning on him getting a credit card so he can start building his credit history. He currently has a summer job while taking college classes this summer. Suze, I listened to your podcast. Even have the 50 plus book still learning. Please help. All right, Suze has some great advice, I'm sure, right. What's funny though is, you know, Rita is that you have the book that the ultimate retirement guide for 50 plus. Because it happens, we get older, we need to know what to do with our money. And so that's great that you're doing that. But when you're 19 you never think you're going to get older. You think money, not well not everybody does, but many kids think money is a play toy. It's there to get what you want to impress other people with it. But you need to teach this son of yours a serious lesson right now. And the thing is this, he's not going to listen when you say, don't do this, don't do that. He's going to think this is my money and I can do anything I want with my money. All right, he can do anything he wants with his money. But since he's so good, obviously with his money, according to him. No, good at spending his money, I would do this. And I know you're going to have a hard time with what I'm about to say, but I'm actually really wanting you to do this. You're going to start to charge him rent to live in the house. And you're going to say, you know, since you have so much money to waste and everything, you're going to help us out. So, you're going to pay us $200 a month for rent. You're also going to pay us $100 a month for food. You're also going to pay us if you use our car all the gasoline because gasoline has gone up so much. You're going to pay for the gasoline that you used when you used our car. If by chance he has his own car and you're the one paying for gasoline and insurance and everything. Oh, you're going to change that and you're going to say, you know what? Since you have a car, you're the one who's going to be responsible for the insurance and the gasoline money. I would not get him a credit card in his own name right now. You will be very, very sorry if you do. So, start teaching him with hard love, love that gets him to go, but wait a minute mom. Nobody else has to pay for that. Yeah, but nobody else has made as much money and as good as with their money as you are. Since you can spend $4,000 in a month buying whatever you want. So, now you're going to help us out now you are to stick to that. You are to stick to that. Obviously, you save every penny that he gives you for him. Also, Rita you should make sure that you inform him since he's so good with money. He's going to take out student loans and pay for his own college and be responsible for those payments when he graduates. You have got to teach him this right now, because otherwise I'm telling you he is on the path to serious, serious debt as he gets older. Next question Suze is from Rose. I just paid off my credit card debt a couple weeks ago. I'm wondering, where do you recommend I should be financially before closing the only credit card I have open. That's should have been your quizzie, what would you tell her, KT? I don't think she should close it at all. Just don't get in debt again. That's my girl. There's the answer, Rose. Rose, you never want to close down a credit card, especially if it's your only credit card because if you do, especially if you owe money on that credit card or have a balance, it will hurt your Fico score. So, just keep it open and don't use it. Okay, Suze. Next question is from a man but he does not wish to be identified. Alright. So, Suze, I would like to go back to college for two years and finish my B. A degree for career advancement. However, I might be offered a job that comes with employee stock options from a tech firm, aside from great pay. If I take the job, I might not be able to return to college and that would be 100% disappointing. Aside from that, I might not get any financial aid, including loans. If I decided to return now, I just want, I want to cut to the chase. Want to cut to the Chase. But he said I have students. Um he has some school loans $25,000 already, but otherwise no debt. I do not own a house and never will. Saving for retirement is a non-issue other than the stock options. And this is from a gentleman of 53 years of age. What does that mean? Well, I think it has a lot to do with going back to college. What does that mean? That that retirement is not an issue. Of course, retirement is an issue. It is a non-issue. Right. Why is that a non-issue? Retirement is your biggest issue boyfriend at 53. Right. And especially at 53 and if all you have is $25,000 in student loan debt and you don't own a home, you never will. And other than the stock option, I know you've got me all confused here. However, without a shadow of a doubt you were to take the job and the stock options, at 53 it may be your dream to go back to school and get yourself into further debt, add to that $25,000 that you have already. What are you crazy, night school? Yeah. So, if you want to do that, okay, but just like KT said, night school, but you are not in this economy to pass up a job that pays well and stock options. Do you hear me. Next, KT? Okay. Now, I'm aggravated. I know I knew that you would be, you shouldn't aggravate me. All right. I'm trying not to. But that was when I saw that he was 53. I said, Wait a minute. Take the job, man, take the job. Okay, next is from Ryan Suze. I'm writing to thank you for your advice over the last year, I've been very diligent about doing two things, paying down student loans while interest is at 0% and most importantly. Building up an emergency savings account. You see a few weeks ago at 28 years old and in otherwise good health. I was given the news that I have cancer. Sad, right Suze. This came as a complete shock to me and my family. While the prognosis is good. I'm heeding your advice to get my essential documents in order in case something happens. Furthermore. I'm personally grateful to you because I have built up enough savings to get me through this time between insurance and savings. I should be able to comfortably absorb any costs associated with treatment. So, I just want to cut to the chase here. He's saying thanks Suze. I would just like to remind your viewers that something like this can truly happen to anyone. Knowing I am financially secure during this time has made a world of difference. So, question KT question. Nope, the question is student loan interest which may restart this fall. Do you know of a way to get temporary medical forbearance? That's a good question. I don't know if we ever had a question like that? We haven't, but you know, Ryan, I don't think you're going to have to worry about that because I have just this strange feeling that President Biden will extend the student loan at 0% that you would have had to start repaying October 1st. I just have that feeling. And while I'm on this topic, KT, I just want to take a second here to talk about student loans and will president Biden forgive them, will he not? At this point in time, he's still really only favors forgiving $10,000 of student loan. And I know that everybody says, oh, just sign an executive order and then it will be passed. He's not the type of president, I'm sorry to say that really is going to do something like that, in my opinion. He's going to want to make it so where Congress votes on it and if Congress votes on it, good luck If it ever happens, because I don't think it will. But I do think and I will repeat it again, that somehow, he will extend the amount of time that you won't have to make payments on a student loan and it will be at 0%. So, let's just see if that happens. Go on. Okay. Next question is from Lori. Hi, Suze and KT. I love your show. I've been a fan for years and really got busy with your stuff during and after my divorce, six years ago, meaning the must have documents is what she's referring to. I listen in the morning while preparing for work. A great way to start my day, this morning at about. I start my day with KT to and it's a great way to start my day. Do you feel the same? I love to wake up and just see your little face and say she always says to me, hi KT, Hi. So, in any event, what Laurie is saying is that you made a statement that Many people you talk 4-5 years post-divorce are glad they are divorced from their ex in spite of the painful process. I so agree. I am a therapist and work with people every day helping them see a better future for themselves. I'm so much happier six years later and can't even imagine being married to my ex anymore. And thanks to your awesome advice, I feel so much better about my finances. I appreciate that your statement of hope for those out there struggling. So, is this, you just picked this because you wanted to give people hope and to let them know, right, that they're what I said was right that four or five years. Yeah, I think that I picked this because I just wanted Laurie’s confirmation of how she listens to you in the morning and when she gets ready for work and she's divorced obviously for quite some time. But was so happy that you told people just have faith that four or five years from now, it will be a whole new life and she's a testament to that. All right, this is another thank you. I want to just read these because I think they're important that people understand, when you give them advice and they take it, it works. So, this one's good. This one I really like. This is Mary Beth, so Mary Beth is a little behind and listening but she's an empty nester. They put their house on the market a few weeks ago and you talked about purging and clearing out and making way for something new. She said it was really difficult for them to do what you ask them to do, which was get rid of furniture, keep purging away, do everything they needed to do to make way for a new life. She said our house sold very quickly and we are moving on. Thank you Suze, for all you do. KT, I just have to say one more thing about that, which is we get so many thousands of emails, truthfully thanking me for what I did. And uh, I didn't do anything. For now, almost 40 years, I have been giving you advice of what I really want you to do. So, then the question becomes what happens when you follow the advice and what happens when you don't follow the advice. And if you're not following the advice that I'm giving you, even though you know you should be following it. You really have to ask yourself the question, why am I not doing that which I know I should do when it comes to money. So, it's you. I thank you when you listen to me because that gives me the gratification of knowing that my advice is not just falling on deaf ears. Hit it again, KT. Alright this one. This one's great Erica. She said, hey, KT and Suze, I'm 37 I'm ready everyone, I've been reading, watching and listening to Suze since I was 24. So, what's that? 13 years, right. I am a proud aunt of adorable six-year-old twins. Just throwing that in there for KT. Thank you Erica. And for all of you who are new to the women and money podcast, it's because KT is a twin, identical twin. Okay, so, so this is, and the other thing again, she said, I live well below my means within my needs. Another one of Suze's great Suzeisms, she said I'm high up at a nonprofit and I've made it so, we now offer a Roth 403 B in addition to the regular 403b. Yeah, we're very proud of you. Historically the organization hasn't had an employer match, but I'm working on changing that too. I didn't even know about the Roth 403b until you, Suze. So, thank you. I'm really happy we can offer my team the best options available. So, the question is, does it make sense for me to redirect the contributions I'm putting to the 403b to a Roth 403b or split between regular 403B and the Roth. So, I can take advantage of lower taxable income to also be able to keep fully contributing to the Roth IRA. Now Erica is telling us she currently makes too much money to qualify for the full Roth IRA, without a backdoor. If I don't lower my taxable income through pretax retirement contributions. So, what should she do? Suze? Do you have an answer to that? Wait, when it comes to the Roth, I leave this in your good hands Suze. Yeah. So, the truth of the matter is Erica and my answer may surprise you is that I want you to contribute as much as you need to into your pretax 403B, so, that you can qualify for a full contribution to your contributory Roth. And the reason that I want you to do that instead of a backdoor Roth which obviously you could do is because a contributory Roth is so much more valuable than a converted Roth. And I'm not going to get into it right now because it will just drive Miss Travis like wait a minute, we're not doing Roth's here. But if you all listen to past podcasts, you'll understand why the very best retirement account you can have bar none is a contributory Roth IRA, which is one that you contribute to every single year. So, that's exactly what I want you to do Erica. However, I want you to do me a favor, given that you work for a nonprofit and most people who work for a nonprofit, your employees don't make a lot of money that I want you to look into and go to securesave.com and securesave.com is a company that I co-founded quite a little bit ago now, which sets up emergency funds outside of plans for employees. So, it is the very first employer matched emergency fund for employees outside of plan. Can you just go there, check it out online, make an appointment to talk to Devon, who is the CEO. You can do that all online and really think about offering that to your employees. If you really want to help an employee, that is the way to do it. All right, KT, next question is from Joan Blessing. I love her name, Joan Blessing. Thank great name. That's a great good morning Susan KT. I love listening to your show and learn so much. And now thinking about replacing my car with a new car. I really don't like going to a dealership and I've read all about these online services including Carvana, which Suze you mentioned in your Sunday podcast. I'm wondering if you could do a little tutorial on which of these are good for purchasing new cars, especially used cars. Thanks so much Joan Blessing. You chose her just because of the name, right the name. I knew it. Which is Joan, I would be very careful right now about buying a used car Right now. Use cars have appreciated almost 30%. You can actually buy a car that's used and sell it for more than you paid for it, which people are doing. So, this isn't the time to be buying a used car. Obviously, you can also use Carvana, to buy a new car if you want. But the inventory is absolutely so little right now. They're just no inventory that all prices are up considerably. So, my true advice would be to you is if you could just wait maybe six months or a year from now to do that. That's when I would be buying either a new car or a used car and you betcha I would use Carvana, especially to sell my used car. All right, go on. Okay. Suze. This is my last question before the quizzie. This is from Rob. Hi KT and Suze. Suze. I've been listening to you since I started watching you on PBS. Your advice in my opinion is worth more than a college education. Thank you Rob. Here that we should tell that to our early, you know, listener who was 53 years old and wanted to go back to college. Just keep listening to Suze. So, a few years ago, my dad passed from a sudden bout with cancer. I helped my mom with some expenses and due to other personal unforeseen expenses, my credit card debt has grown to 25,000 with an interest rate of 8.9. It's almost 9%. I'm able to pay more than the minimum payment each month. But I'm trying to save to buy a property, either a house or a condo. In order to pay down the balance faster, would you recommend taking money out of my Roth IRA to pay some of it down so I could save more towards the down payment for the property. And then this is a little bit of information. So, Rob is 44, single, has about 65,000 combined with his Roth traditional IRA 403 B and mutual fund accounts, He says he has $5,000 in a pretty stable stock portfolio works full time and contributes to my 403 b at 8% with an additional company match. So, Suze, would you have some advice for Rob? Does Rob have any savings? Yeah, well combined 65,000. But that's all in retirement accounts. KT. So, he has no emergency fund at all. Rob, I really, really need you to listen to me. You've already experienced what happens when you get older and you don't have the money to pay for bills and you've experienced it through what you've had to do for your mom. And it's never easy for a parent to go to a child and say please help me, I don't have the money. Or even if the child offers and the parent really needs it, usually they say no. Which is probably the biggest mistake they will ever make when a child offers to help the parents should absolutely accept their help, let your children help you everybody. So, Rob, in your particular case, I have to tell you I don't think you're able to buy a home, right now. Right now, anyway, Rob. This isn't at 44, you’re single, you don't have children at this point that will be taking care of you. If you don't have enough money when you get older the money in your retirement accounts need to stay in your retirement accounts. And before you start saving for a down payment on a home, I want you to save for an 8 to 12-month emergency fund. And I want you to do that with the ultimate opportunity savings account with Alliant credit union. They're giving you the highest interest rate around right now or one of them anyway a .55% interest rate. And I want you and everybody who hasn't done it yet. I want you to go to myalliant.com and I want you to open up an account there. Also, if you just put in $100 a month for 12 consecutive months at the end of that time, they'll give you $100 that's like a 16.7% return on your money. You will need $18,000 at least in a savings account today to earn $100 of interest. So, that's what I want you to do. And until you have an 8 to 12-month emergency fund at Alliant and a 20% down payment for a home. In my opinion, you're not ready to buy a home. Alright, KT, the time has come. I am ready. The time has come and it's time for you and all the thousands and thousands and thousands and thousands and tens of thousands and people who listen to the podcast to know the right answer for this quizzie. Now remember I said to all of you, it's going to start to get a little bit more difficult. I want you to think about it before you answer. Hi, my name is Dawn and I hope you can help me. KT Dawn is 71 years old, healthy and she is still working. Without my salary, she says my monthly income basically equals my monthly expenses. So, if she decides not to work anymore, the income that she's going to get from Social Security and maybe a pension equals the amount of money that's going out, but it just equals it, that's it. She says, I have $100,000 in savings, write it down everybody. She has $100,000 in savings. She owes $65,000 on her mortgage and she wants to retire. Here is her question, would it be best to borrow approximately $400 a month from my savings or to pay off my mortgage, which would give me $700 more to use monthly. So, KT, should she pay off her mortgage or just take the money from her savings to continue to pay her mortgage payment? Is that a retirement account? I don't know. I don't know. Well, if it's a retirement account and she uses that money to pay off the mortgage, she has to replace it. Why? I guess she doesn't right no. Okay, pay it off own the home outright. So, that's what you would do. Yeah. Alright. We'll wait. Is that what you would do? Here's the answer to this question. What would all of you do? Would you withdraw or borrow? What is the part that's confusing me the borrow, borrow means you pay something back. So, if she's borrowing, but if she 71 and then she retires. She obviously could just withdraw the $65,000 from her retirement account and not have to pay it back. Right. So, that's the part I don't get. She says she wants to retire. She doesn't want to work anymore. Right? So, what should she do? Retire? Take the 65,000 and borrow the money. Not even borrow., just use your money and pay off your mortgage and you'll be safe and sound, your homes paid for. There you go. Now. Wait. Come on Suze. Yes. No, I thought that. No. Stop and listen to me now. Don't. Do you understand this? Everybody. She always tries to justify when she's wrong, KT. I I really listened carefully, though about the borrow, the 71. Just listen to me. Be quiet here for just one second when I talk to you and everybody else. All right. I hope I hope you all got it wrong too. Oh, that's real sweet. Sometimes the answer is the following. Dawn, I don't have enough information to adequately answer this question. That would have been the correct answer. I went there. You didn't say that you ended up giving her an answer. And here is the thing. And I've written her back by the way, because here's the information I would need to know, KT to answer. This. Does Dawn plan to stay in this home forever, number one. Number two is the $100,000 in savings. Is that in an after-tax savings account or is that in a retirement account? I need to know before I can tell her. Because if it's in a retirement account and she takes out $65,000, she's going to owe taxes on that $65,000. So, she's going to have to take out close to $80 or $90,000. So, after taxes she has enough to pay off her mortgage. And does that leave her with $10,000? And is that it? So, I need to know where is the $100,000? Is she going to be staying in this house forever? I need to know how many years left does she have on the mortgage? What is the interest rate on the mortgage? And what is her FICO score? And I need to know those things before I can put that all together and give her an adequate answer. Now here's why I chose this question as she's staring at me. Everybody with wide eyes. All right, I want you and people to understand that when you go to see a financial advisor sometimes that's where you're going with. They have to ask you questions in order to make the right decision. It scares me when you go to a financial advisor and you ask them something and they just give you an answer right off. Now maybe they can. But an adviser needs information that is personal to you to be able to give you the correct answer that's for you. So, I'll get the answers to these questions from Dawn and then I'll give you an update as to what I wrote her back and I told her I want her to do. That's why KT. I kind of thought you had something up your sleeve because when she said borrow that was like a little bit of a yellow flag borrow from what ,what's borrow and therefore that was a yellow flag I should have asked. I should have asked more questions. We should have just said I can't answer this question. Just that simple. Right, done. Okay. Now I know better. All right. But that's the reason we're doing the quizzies so that all of us know. That's good. That's a good lesson. Everybody she does not like it. I don't like that. I didn't feel I was tricked but I should have been smart and said sorry Suze not going to answer this one. Don't have enough information. So, you need to learn to take your power and say that okay I will. All right. I guess what that brings us to the end of another Ask Suze and, what are you going to do on Sunday KT. What are you going to do on Sunday? I'm curious because everyone's loving these focused lessons. So, I don't want to say because sometimes things happen and then I changed my mind and then everybody. Are you a Gemini? I'm a Gemini, so I'm not going to tell you, but I do have one totally in mind for Sunday that if nothing happens between now and then I'm going to do it. And right now it's about real estate and buying condos because I think it's really important. And obviously our heart goes out to those in Florida, Surfside has been on our mind. We live here and, and every day on the news, it's heartbreaking. Not far from where we are. And so, so I just want to talk about that. But, let's see what happens between now and then. All right, everybody, thank you so much for listening. We love you so so much. And until Sunday we all want you to do just one thing for us to remain safe, strong, secure and healthy. Say bye bye, KT. Goodbye, everybody. See you soon. Bye bye.
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Answer Yes or No to the follow statements.
I pay all my credit card bills in full each month.
I have an eight-month emergency savings fund separate from my checking or other bank accounts.
The car I am driving was paid for with cash, or a loan that was no more than three years, and I sure didn’t lease!
I am contributing at least 10% of my gross salary to a retirement plan at work, or I am saving at least that much in an IRA and/or regular taxable account.
I have a long-term asset allocation plan for my retirement investments, and once a year I check to see if I need to do any rebalancing to stay on target with my allocation goals.
I have term life insurance to provide protection to those who are dependent on my income.
I have a will, a trust, an advance directive (living will), and have appointed someone to be my health care proxy.
I have checked all the beneficiaries of every investment account and insurance policy within the past year.
So how did you do?
If you answered yes to every item, congratulations. If you are working on improving on a few items, I say congratulations as well.
As long as you are comitted to truly creating financial security, I applaud you. If that means you are paying down your credit card balances, or are building up your emergency fun with automated payments, that’s more than fine. You are on your way!
But if you found yourself saying No to any of those questions, and you’re not working on moving to Yes, then I want you to stand in your truth. No matter how good you feel, you have some work to do before you can honestly know what you are on solid financial ground.
Credit & Debt, Saving, Investing, Retirement