Podcast Episode - Suze School: Stay Calm

Credit Cards, Credit Union, Debt, Investing, Retirement, Saving, Stocks

March 17, 2022

Listen to Podcast Episode:

Suze is back and after a brief update on her health, she weighs in on everything happening in the world right now and how it impacts your money. Are you in a “financial” hospital?

Podcast Transcript:

March 17, 2022. Alright everybody, what do you think I am back now before I continue, I know I know today is supposed to be Ask KT & Suze Anything. However, I think I'm going to do that this coming Sunday because so much has happened since you last heard from me, not only in the economy and in the world but in my own life as well. So just a very, very quick update which is I didn't have an operation on my voice. I had an operation on my sinuses that had an infection in it that was very close to my brain and it was leaking into my throat that made me lose my voice. How's it sounds? What do you think? Alright, it will get better as time goes on. However, so on February 24 as many of you know and I thank you so much for the thousands and thousands of prayers and well wishes that I got. It's really a little bit overwhelming but they all work. But on February 24 I went into the hospital and a 2.5-hour operation turned into 4.5 hours and because it was so close to my brain there was a little puncture blah blah blah blah. And then even though I came home and everything seemed like it was okay three days later, major complications happened and I went back into the hospital for about four days or five and it was bad to say it was bad is putting it mildly and then about a week ago I finally got to come home and I'm no longer on all these heavy duty antibiotics. I'm starting to feel much better. But I have to tell you that was something else. I'm not so sure about these past two years really. It's been an amazing journey for me. Let me say a few things whenever I go anywhere, or anything happens to me. I always learn so much and I learned not only about myself and KT and everybody around me, but I learned about the people who spend their lives taking care of other people as well. And it blew me away. How much the nurses who were so fabulous, how much? They absolutely knew nothing about the money that they were making. They didn't know the difference between a 15 and a 30-year mortgage. They didn't have a clue what a Roth IRA was. There was one nurse, a male nurse and now they're getting paid a lot of money to be a nurse. They're getting like $1,000 a day, was bragging to me about, here he is, he's 33 years of age. He makes $1,000 a day. So therefore, he's only working three days a week so that he could spend four days with his kids. Yeah, he didn't know what a Roth IRA was either. He didn't have a trust, he had no idea about the compounding of money and the difference that working just another day a week, what it would make in the future for himself and his kids blew me away. And then so many things started to happen besides the hospital things such as we're on the verge of possibly World War Three and your prayers and your well wishes really would have to go out to Ukraine. I mean every time I would sit there and feel just even a little sorry for myself, I was like Suze Orman, what is wrong with you? Look at what's happening in Ukraine and many of you may not know, but that's exactly Kiev Russia at the time, that's what it was called, is where my father is from. I'm 100% eastern European and I sit there, and I look at my family ties and what's happening there and I'm like, are you kidding me? Are you kidding me? So none of us in my opinion, no matter what we're going through should feel really any pity for ourselves or anything given that there are people over there that are sick and giving birth and all these things and they don't have a hospital, they don't have antibiotics. They don't have heat; they don't have water. So that kept everything and still does keep everything in perspective for me. But besides World War Three and Ukraine and everything and that we, you know, World War Three that might happen, who knows? I'm not exactly sure it will, let's hope it doesn't. But you have to look at what's going on here and what all of you are facing right now. We have inflation and almost 8% and we have a seriously volatile stock market. And especially depending on what you're invested in, You're either maybe down 10% or possibly, 50, 60, 70, or 80% gasoline, which I told you about oil a long time ago has increased significantly so that it's costing you two times at least at the pump. When you're filling up to get gasoline, mortgage rates have totally started to increase. There's a supply shortage still. So used cars are up almost 40% on the year. New cars, everything. And really Feds have raised interest rates for the first time yesterday in three years, which actually affects every single one of you. Because when the Feds start to raise interest rates, then interest rates that the credit cards charge, you go higher, mortgages go higher, all kinds of things go higher. I'm not sure that savings accounts will go higher, but your costs in many ways start to increase. So here you are. And the question has to be asked and answered. It's almost like all of you are in a financial hospital and not even knowing what to do what not to do. But the truth of the matter is you have to just take a breath. I've said that to you for the past two years, when things get really chaotic and I can tell by the emails that I'm getting from you. I'm able to read them again by the way that you're all wanting to know what should I do? What should I do? What should I do? I want you to take a breath as we go to Suze's School even though it's Thursday. All right listen to me closely. I've said to you over the past three years, have I not that I really want you to just continue $2 cost average every single month into either the Vanguard Total Stock Market Index Fund or the Aristocrat Fund symbol NOBL or whatever the Exchange Trade Fund may have been because I wanted you to be diversified. And I said to you over and over again that the only people that should be invested in the stock market no matter what are those of you who do not need this money for at least five years or longer have I not also said to all of you that every single one of you needs at least especially if you are in retirement and you are needing to access money that is in a retirement account to either live on or because you're older. And you have to start taking required minimum distributions from your either 401K. or IRAs have I not said to you That you need at least 3-5 years of cash of cash as a cash cushion so that if you need this money to live on and the market start to go down, you don't have to sell your stocks at a loss that you then take the money that's in cash, whether that's cash in a retirement account or cash in a savings account, that's when you start to use that money. Have I not said that to you? Have I not said to you that if you're working and you still have money coming in you need at least a 12-month emergency fund because you never know what can happen? I still don't even know how it would be possible that if I needed to be working for money right now, I don't know how I would have made it for the past two years. Everybody, I don't know how that would have been possible. So maybe I need to go, you need a two year emergency fund and how many emails do I get from you saying you're back in the hospital, you're an order valve just split again, whatever it may be and you need cash which then brings me back to the Alliant Credit Union and yes, I'm going to go back there because if you are not taking advantage of the offer that Alliant is making for all of you and it will probably go on only till the end of this year and then I'm pretty sure that will be it. What are you doing? So, I ask all of you to go to MyAlliant.com, at least read about it there, but you have got to start saving money. Cash is king, cash is absolutely king during times when these markets are doing what they're doing and the reason that they're doing what they're doing is because of the uncertainty in the world, could you even start to think of a more uncertain time then right now, can you even go back and think about when you have been afraid that maybe we really are going to go to war, Maybe we are going to suffer something, whether it's a cyber-attack or a chemical warfare or Europe or whatever it may be. I'm asking you all to be really honest with yourself because so many times we just go through life saying it's going to be okay, everything's alright. I don't have to worry about it, I can go out to eat, I can go on vacation, I can get another new car, I can buy a bigger house, I can get more clothes, I can do this, I can do that. Are you sure? Are you positive because I'm here to tell you as far as I can remember and I was born in 1951, as far as I can remember, we have never experienced as uncertain times as we are experiencing right here and right now on a global level so you have really got to get your act together, you have really got to get your emotions under control. You have really got to know where your money is invested. Doesn't make sense where you are invested. Are you holding onto things just because over the past two years they skyrocketed? You know, I always go back and think about that one email that I got with that person who wrote me saying, should I sell my Netflix, and I think it was at 546 and then it went to 700 and now it's back at 300. Let's go to Suze's School very quickly here. When something goes from 100 to 50, That's a 50% decline. For it to go back from 50 to 100, that is 100% increase, 100% increase. So are a lot of you holding onto stocks that you bought that are seriously down 50, 70, 85% or more, really everybody. And if you are, are you being realistic about the possibility of them increasing 100, 200 whatever percent it may be for you just to get back even so all of you need to sit down and look at everything that you own and know what you own, why you own it. There are past podcasts here that goes into the earnings per share of a company, what you should look for because what people are looking for now, when it comes to investing is certainty, they're not looking at a one day, this is going to be a great company and one day it's going to make money, they want to know right here and right now that it's making money, it's making a product that people can use that. It has cash on the books and it's returning money to investors and it's returning money to investors by either dividends or buying back stock or whatever it may be. Have I not always said to you that if you own individual stocks, not only do, you need to be diversified, But you need at least 25-30 individual stocks and you should not have more than 4% of your assets in one stock. And as that stock may happen to grow in value and now all of a sudden, maybe that one stock is 40% of your entire portfolio. You have got to have the courage to sell and do what, diversify that money, but you didn't do that. Which is why I have said to all of you about exchange traded funds being the best place for the majority of you to be because you don't watch your money, the majority of you, you know, you just want your life to be simple. So if we look at the exchange traded funds that I've asked you to buy, maybe you're down 7% from its high, but you didn't buy in and it's high, you've been buying in every month, like I've asked you, so really you may even still be up? But again, like I just said a second ago, you didn't buy in at the high, that's why I've been asking you to dollar cost average, You have to know that nothing goes up and up and up forever. It just doesn't work that way. However, you also need to know that it's very probable that it takes 3-5 years from something to go from its high down to its low, possibly back up to its high again, which is why I've wanted most of you to have 3-5 years of a cash cushion to pay your expenses, especially if you are in retirement accounts that you are living off of now. I just want to tell you something because it came out today. So, I think it's important that you also understand this. I know a lot of you love to buy these individual stocks, I get it are a lot of you love managed mutual funds because some financial advisor has convinced you that this mutual fund that is managed by these people, this team of people have outperformed, they're doing great and they're worth it and forever, I've been asking you to just do index funds now, why is that? And that's not just for the past three years. This has been true for all the years. I was on television for all the time that I would even see individual clients, it just never made sense to me to put people into managed mutual funds. Now, why is that? Do you know that? The stats came out today and in the year 2021. Alright, so just a few months ago, that’s 79 of active fund managers underperformed their benchmarks or indexes. So you if you put your money in a low cost good index fund, some of them that I've been telling you about, you would have outperformed 79 of the managed mutual funds that many of your financial advisors probably put you in. Do you know that over the last 10 years, your index funds Outperformed 86 of the active fund managers? So, I want you to think about that for a second. Just a second. You can make money without you having to have all these different mutual funds or exchange traded funds. You can make money without having a money manager who does all these things for you and charges you all this money and you don't need that. Now, there may be some of you out there who have serious sums of money and when I say serious sums of money, You know, maybe you have half a million, a million, five million, 20 million, or more. And you want diversification in many ways. OK. That I understand, but really for the majority of you that listen to this podcast, I will forever believe that every single one of you has what it takes to do it on your own. You know, a few months ago, I'll never forget this. Maybe it was a month ago now. I was watching an analyst on Tv who a very famous chartist and a chartist is somebody who charts the movement of a stock or a commodity and by the movements that it makes. So, it's technical analysis, they do all of this calculation and they know if something is overbought oversold and it's time to sell. And I was getting ready to do a podcast and that was at the time that I was saying to you, yeah, I still want you to stick with Excel E, which was the oil ETF. That I asked all of you to buy way back in 2020, that's up significantly, It's in its seventies right now. And I said, and also consider Chevron and I was getting ready and I was doing this podcast and I happened to at the exact same time, watch this person who said oil reached its peak. I would be a seller of oil. And I'm like, what did he just say, Oh my God, and I'm telling everybody that oil is still good, I don't feel that way, by the way right now, but I'll go back in a second about that. And oh my God, maybe I'm wrong, but I went, no, I don't think I'm wrong and this was way before the war and everything else that's happened in in Ukraine and I went on and I said to all of you watch it closely everybody. But I still think it's something that you should be buying. And sure, enough oil went up and up and up when it's up as high as $130. Even though it's back down now to about 95. I still think it's very possible that oil will go up again to around $100 area. And I still think that especially Excel E and those, even though they may have had a little bit of a pullback that it's something that if you just watch carefully, you could still do okay in it. But in case things change since I told you to do this so long ago, all of you are sitting on incredible profits. Also, Devon Energy symbol DVN has almost an 8% dividend. And so again, if you are willing to watch it closely, I would not be putting a lump sum in at this point. But If you need a dividend of eight and you watch oil and you stay there okay? But be very, very careful with those at this point. It's not like when I told you to do it back in 2020 or you know a few months ago quite a few months ago. So, I don't feel so horrible about those. But you have to be careful here. But the main thing you have to do here is stay, come to stay calm because if you are diversified, if you have a fixed rate mortgage, if you don't have any credit card debt, if you're in a situation where the only thing that's going up right now is not your portfolio or your 401Ks but are your cost of living, you're gasoline, you're food and all of those things. People just cut back, cut back a lot of times. You use your car when you don't need to be driving everywhere. You go to the store and you buy a lot of food and I get that it's really difficult right now, but cut back on the kinds of food that you're buying, do what you can to seriously cut back on your expenses right now and if you can't cut back on your expenses, Then that's what the 12-month emergency fund at Alliant Credit Union was for. Take it from there. But whatever you do, don't stop investing in your 401k where it's going into an index fund. Don't stop investing in your Roth IRA just because you're scared to death and you don't know what you should not be doing is taking large sums of money and investing it all at once. I don't care if the markets skyrockets do. I think that the market because it's been going up for the past day or two that we're on a trajectory to go straight up now. I personally think that the markets have a good chance of really going back down again, especially maybe the first or second week of April and then maybe go up again. But choose your timing wisely when the markets are up like this, like yesterday, that’s not the day to invest in the Index Fund, wait till it's down 5 or 600 points and that's the day that you invest. Now a lot of people write me and ask me, Suze, I'm funding my Roth IRAs right now and I hear that you've said put all 6 or $7,000 in there at once and then dollar cost average every month. Why shouldn't I just you know, dollar cost average from an account into my Roth IRA. And the reason is I want you to be able to take action when the markets are down. So, you have to be very limber right now in terms of your thoughts and how you think about things and how you see things. A few suggestions if you happen to have an adjustable rate mortgage on your home and you're going to keep it, you better get a fixed rate mortgage right here and right now when it comes to Series I Bonds. I still love them. If you want, you can get it now, you can wait a few more months and get it for the next six months and probably get a higher interest rate. But I'm not sure if you will or you won't but I'm thrilled about I Bonds for those of you who have been buying Tips, you can see that they are down. Which is why I always asked you to buy Series I Bonds versus Treasury, Inflation Protection Securities or the ETFs that go with them. I'm still sticking by that and I still believe in the long run as long as you have at least five years until you need money. If you just keep dollar cost averaging into low cost, no load index funds, you'll be fine. But if you get nervous and you stop, if you just say, oh my God, I've got to sell everything, I can't do this. It's freaking me out. You will be making one of the biggest mistakes of your life. So this Suze's School really is about, take a breath look at everything that you have, make sure that you are diversified, make sure that you have that emergency fund, especially if you are working, make sure that if you are retired and living off retirement accounts that you have at least 3-5 years of a cash cushion to pay your monthly expenses above your Social Security and your pension and whatever else it may be, make sure that you get yourself out of debt, make sure that you really have a grasp on your money. Alright. I got through my first come back podcast. I hope this helped you to gain a little perspective, and I'll see you on Sunday with Miss Travis. But until then I want all of you to stay smart, strong, and secure. See you later. Bye bye.

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Suze Orman Blog and Podcast Episodes

Suze's Financial Strength Test

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.

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