June 13, 2021
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Today, we go to Suze School and learn about the dangers of getting a tax refund and what’s going on with BitCoin. Plus, the latest on the Stock Market and a lesson on why Series I Bonds are great.
June 13th, 2021. Don't be too disappointed everybody. You just get me today. But that's a good thing because we are going to Suze School and there are so many topics that I really want to cover. But before I even begin that I just want you to know tomorrow, June 14th at 2:30 p.m. East Coast time, I'll be on CNBC on power lunch and you never know what can happen there. Also, on June 17th at one p.m. East Coast time, I'm doing a LinkedIn live special for small business owners so all of you can register for it if you want to at CNBC.com/suzeormanevent. And again, that's June 17th at one p.m. Okay, here's what I want to talk to you about today, first I want to talk about tax refunds. One of the reasons that I want to talk about tax refunds is last week I gave a talk to people who were getting older, 70, 80 years of age and older actually than that to make sure that they were prepared for scams. How not to be scammed because it's still absolutely aggravates me that after I settled a case with some company, major company by the way, using that picture of me in yellow, saying “seniors, you have to do this to make money” and then they took it off the internet for a while. Now it's right back there. So, all of you do not fall for any scams that have my pictures in them. If you see my picture, if it's not on my app, it's not a video of me or it's not me talking about it, just don't do it okay because it is a scam. But I was talking to all these people about how not to be scammed. And one of the biggest ways that people are getting scammed right now is with identity theft when it comes to tax refunds. And I know I know that we're past the tax season at this point in time in terms of your filing date, which was May 17, but I want to talk to you about it because there's still time to change how many exemptions that you claim, so that the goal is that you do not get a tax refund. Why all of you love these tax refunds is absolutely beyond me. In 2020 the average tax refund was almost $3,000. What is wrong with all of you? Why are you letting the government hold $3,000 for you? Just so you can get it back in one month sum when you could be taking that $250 a month and paying down your credit card debt, putting it in to your ultimate opportunity savings account or to whatever it may be your Roth IRA. Why are you doing that? And you're gonna say to me because Suze I'm not good at saving and I just like it when that money comes in and I usually need it when it comes in. And the reason that I'm talking about this is, how many emails have I gotten saying Suze I haven't got my tax refund yet and I really need it. They're cutting me off of unemployment. I can't get money anywhere else. And I was counting on that money and I was expecting $2700. So, here's the question everybody, why are those of you who are expecting to get a tax refund? Why is it that you are not getting a tax refund back in the time that you would expect it to get it? And the reason is this because of identity theft, there is so much identity theft and tax fraud going on that the IRS is actually tagging tax refunds that they think are either fraudulent or they are of a stolen identity and you might not think it's a big deal. But do you know that over from 2018 to 2019, that tax fraud by identity theft increased by 50% and 2020, they actually flagged 5.2 million tax returns for fraud. So, were you one of those or not? And really of those, 1.9 million were tagged for identity theft. And most of them were identity theft and it saved the government $2.5 billion dollars in losses. And they probably expect that in 2021, given cyber theft and everything that it will absolutely increase by 50% again. So, you may be one of those unlucky ones that they're going to make you prove that you are who you are, before you get your tax refund. So, what's the solution to this everybody? Don't get a tax refund to begin with. Can you just change your exemptions, lower them? So, more money comes to you in your paychecks and therefore you make it so that you don't get a tax refund at all. So, it's really important that you do that because you know, and I know, don't you, that identity theft is totally on the rise. Identity theft is something that we should absolutely be concerned about. Which is why on past podcasts, I've suggested to many of you that you freeze your credit reports so that nobody can steal your identity. But why when somebody who knows you're going to get a tax refund, try to steal your identity so that they get your tax refund. There's no reason that they won't try that. A thief is a thief, a con artist is a con artist. So how do you protect yourself from that? The easiest way when it comes to a tax refund is just don't get one. How do you not get one? Maybe you need to ask your accountant or do some experimentation on an online tax program. You just simply change how many exemptions that you claim and therefore you get more money in every single paycheck and you should do that. Again, I just go so crazy because a lot of you are like, oh, I don't have money to get out of debt, I don't have money to fund my retirement accounts. I'm telling you if the average refund is $3,000, that's $250 a month right now that you could be using. So, can you think about that? Next Suze School is a little synopsis on Bitcoin. Now, I'm concerned about Bitcoin and the reason that I'm concerned about Bitcoin is that I am legitimately afraid, but is it illegitimately there's no way I could be anything other than legitimately afraid. But anyway, that's besides the point, I'm legitimately afraid that the government may start to control Bitcoin or at least get involved with Bitcoin. Especially because all these ransomware hijackings are being paid in Bitcoin and most of the time, they cannot track it. And one of the biggest dangers right now, in my opinion, in the United States is this ransomware, they could shut down anything that they want. And I have a very hard time believing that anybody, any corporation, any entity including the government, has locked it out so that they cannot get into the system. So, that means that besides the meat that they hijacked the company that did the meat, the oil and things like that. They could hijack anything they want the water, they could hijack hospitals like they already did. They can hijack every system of any single company. And if there is no way to really stop it at this point and the payments are all done in Bitcoin. That just concerns me. It also concerns me that very large corporations and pension plans aren't investing in Bitcoin right now, are they're hesitant to because it's not politically correct and it's not politically correct because of the amount of energy that goes into mining Bitcoins and discovering them and moving the price. And while I understand that many of the companies are looking like square, for alternative energy sources to mine Bitcoins, that's not what's happening right now. And when big money doesn't want to go into something, that kind of concerns me as well. So, as I'm speaking to you right now, Bitcoin is around $35,000 a Bitcoin. Now, what do I think is going to happen? And do I still like Bitcoins? I have to tell you I still do. However, do I think that you might really have a good chance of picking up Bitcoins a whole lot less than they are now. I do. I think it's absolutely possible or probable, that Bitcoin could at least go down to its lows that it hit in May of this year which is about $30,000 a Bitcoin. It's also very possible that it could go down to $24,000 Kramer at one point who is on mad money on CNBC, was saying that he thought it might go to $12 to $15,000 a Bitcoin. So, I think Bitcoins at this point in time are just something that you should look at and wait and just don't be so in a hurry to invest in it right now and again. Did you hear me say invest? I really do not want you to look at Bitcoin as a currency but I want you to look at it as an investment. And again, in my opinion I would be only investing with money that I could afford to lose otherwise I really would not do it. So, that is my take on Bitcoins. Next, stocks. I have to tell you I'm still cautious about stocks. Now, I get that the Standard and Poor's and the Dow Jones and everything is right around where it was and that we're really inching at the high in everything. But I want to say something here, as I've told you many, many times, the point of money, the goal of money is for you to be secure and there's just something that's making me for the past few months feel a little bit insecure about investing money in, especially certain areas of the stock market. And we already saw that many stocks in the technology area got absolutely obliterated while other stocks absolutely went up. And for those of you who invested all across the board in the vanguard total stock market index funds or ETF. You've done relatively well. Oil has done incredibly well in my opinion. But just there's still something that's just stopping me from committing the 20% that I have sitting in cash that I liquidated a little bit ago just to wait to see if these markets were going to go down. Truthfully, you know, I expected that these markets would start to trend down starting around April and in the technology area in certain areas, that's exactly what happened now. They're starting to trend up a little and I don't have a problem with that. And I'm not an investor where I look at something, I go, oh my God, I missed out on that. I wish I had done that. I want all of you to be very methodical in how you invest and I want you to be methodical not just from the financial end of it, but I want you to be methodical in the emotional part of your being in terms of how you are investing. Because if you invest and you are nervous about it, you're not sure. Then you I promise you, you will sell at the wrong time. You'll buy at the wrong time and again. That's not the goal of money. So, when it comes to investing, investing is something for the long term. Something that you're going to hold for 5, 10, 15 years, preferably longer investing is not I'm going to buy it today, I'm going to sell it three months from now or eight months from now. No, investing is where you ride the ups and the downs of the market and you're invested in good quality stocks, mutual funds, ETFs. Whatever it is and you're in it for the long run. Because I cannot remember a five-year period of time, even if you invested at the very top of the stock market, that five years later, you weren't either even or up from where you originally invested. So, we need time here. So, I am not suggesting for those of you who have time you have five years, 10 years or longer to be selling here. I never have. Have I said to you that if you need your money within one year and needed to live on or whatever it may be as a down payment on a home that is not money that has ever belonged in the stock market. So, if you have emergency funds, it doesn't go in the stock market, it goes into the ultimate opportunity savings account at Alliant credit Union. You know that's where I would be putting it if I were you, where else are you going to earn a .55% interest rate on that, let alone if you take advantage of the offer that is out there with $100 a month for 12 months, you get $100. I don't know where you're going to get that, but that's where you keep your emergency money or cash that you do not want to put in the stock market. I'm also going to tell you in a few seconds another place that you could put cash to get an incredible return right now on your money. So please listen to me. It will come right after this. But I want you to be very methodical in your investing in the stock market so it won't kill you to just wait. If you have cash to invest, it won't or you can dollar cost average into these markets, which I've always told you where you take a specific sum of money and every single month you put that exact same amount of money into the stock market. However, that may be, again through exchange traded funds, no load mutual funds, individual stocks that you're hopefully not paying commission on things like that, everybody. And that's all you have to do now. Again, you should be investing if you're doing it that way in a place that doesn't cost you any commissions, what so ever. So, you should just look at that. So, when it comes to stocks or the stock market again, my overall still hesitation is that I think I'm just going to give it to September to make a true decision here as to what's going to happen. Is something, you know, going to start to make us really go down at the end of July in August, I don't know, but I just want to wait and see. So, that's just my theory on it or my feeling on it because even though I have a lot of money sitting in cash, I feel secure with it sitting there, even though I'm really not making any money on it and I'm watching stocks that I had wanted to invest in, but I wasn't quite sure go up. I'm not doing this thing to myself of, I wish I could have, would have, should have. I want you to stay strong in your conviction to what are the moves that make you feel secure and you are not, you are not to make one move that doesn't make you feel secure. Next, an investment that I used to talk about when I had a radio show years ago, believe it or not, it was five days a week, can you believe that, from 4 to 6 p.m. East Coast time and way back when 2001, 2002, I was telling everybody, I don't care what else you're invested in. You have got to be buying Series I bonds and I in this case stands for inflation, you have to buy them and back then you were allowed to put $30,000 a year into a Series I bond. And I was doing it. I hope all the millions of people that were listening to me did it. I still buy series I bonds every single year to this date. But now the most that you can buy is only $10,000 a year. And this is kind of funny, you could take up to $5,000 of your tax refund and buy paper series I bonds for a total of $15,000 a year. But since I just told all of you, I don't want you to get a tax refund ever ever, ever, I guess you're not going to be doing that. But I just want to take a little bit of time right now and explain to you what series I bonds are, where you purchase them and why I think every single one of you, if you have extra cash that you don't want for the long run, why you should do it for yourself. Maybe you want to do it as a gift for your kids. Obviously, it has to be a custodian account but it's something I want you to think about now. On a series I bond which is guaranteed by the taxing authority of the United States government is made up of two components. They give you a fixed interest rate, that's fixed for the entire life of the bond which is 30 years. Not only do you get a fixed component, you get the second component which is made up of inflation and every six months, whatever the inflation rate is set by the consumer price index, that is what you will get an interest for those six months. So, currently the inflation rate is according to the consumer price index 3.54%. If you were to buy a series I bond today all the way through October 2021, you would be making a semi-annual interest rate of 1.77% Or 3.54% if they renew it again at that interest rate. Now, where do you think inflation is going? All I see currently is inflation is going up and up and up. Just a little bit ago. A few days ago, we hit a 4.99% inflation rate. It hasn't been that high in years. Do you know, a year ago In May, the inflation rate was 0.12% and here we are one year later and inflation is almost at 5%. But you know that you go where you go into the grocery store, you go in and buy some lumber, you go even now to buy gasoline, you go to buy anything and it's a whole lot more expensive today than it was just a few months ago. Now, is inflation going to go up? Is it going to go down? I don't know but I do know to get a really great interest rate now, if you were to consider buying a Series I bond, that would be the place to do it. Now, here's what you need to understand about Series I bonds. For the first year, you cannot take out any money. Starting after the first year through the 5th year. If you withdraw any money and you can withdraw it however you want to. If you withdraw any money, you're going to be penalized and the penalty is going to be three months of interest. After the fifth year of you holding it, you can take out any amount of money you want without any penalty whatsoever, that's number one. Number two, series I bonds are issued by the United States government and therefore you do not have to pay any state income tax on the interest that you earn. Not only do you not have to pay any state income tax, all income tax on that bond is deferred until you decide to take the interest out. So, when you redeem a bond or you cash one in, that is when you will owe taxes on the interest that you have earned. So, it's far better if you think about it than a certificate of deposit since you're getting far more of an interest rate on it right now and you don't have to pay taxes until you withdraw the money and you never have to pay state income tax on it versus a certificate of deposit that's paying you a lower interest rate. You're paying taxes on it and you're paying taxes on the state and the federal level. So, it's just something that I want you to think about. But series I bonds should be purchased through treasurydirect.gov. And that is where you would go to purchase them, to find out more information about them, and to really learn about them. But I have to tell you they're fabulous. And one of the reasons that I'm saying this is that for years I bought $30,000, like I told you every single year of a series I bond and I'm still making six or 7% on those bonds because the fixed interest rate on those bonds that never changed was really high. So, even if inflation went down, I was still making a great interest rate. Now that inflation is going up, I'm making even more on those bonds. I just think that it doesn't hurt you if you have a stash of cash that you really don't need for five years or longer, that every single year you designate $10,000 to put into a series I bond. Now, a lot of you may say Suze, I don't have $10,000. You know, I barely have $50. Don't worry about that. You can, as long as you have $25 you could go to treasurydirect.gov and by a $25 series I bomb you could actually do it with pennies. Let's say you had $27.32. You could buy online a series I bond for $27.32 if you want. So, you can buy series I bonds from treasurydirect.gov in any denomination. Whether it's $50, $100, $75 whatever it may be, up to $10,000. If you buy paper bonds which you can only do with your tax refund that you're never going to get again. Those bonds, however, come in denominations that are $50,$100, $200, $500, $1000 etcetera. I think this is a fabulous way for you to start earning money, not pay state income taxes on it and not pay federal income taxes on it until you redeem them. Again, you would go to treasurydirect.gov. So, do not forget tomorrow on power lunch at 2:30 PM tune in to see what I have to announce to everybody. It's a new company by the way that I started that I want you to hear about. And June 17th go to CNBC.com/SuzeOrmanevent, where I'm doing a special live stream for LinkedIn. It's a live special. It's live everybody and it's for small business owners. So come on, join me there. So, until Thursday, when Mrs. Travis joins us again, all of you stay safe.
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