Podcast Episode - The Perfect Financial Storm


401k, Credit Cards, Credit Union, Loans, Mortgage, Retirement, Stock Market


July 28, 2020

Listen to Podcast Episode:

In this podcast, Suze outlines four key upcoming dates that will have an effect on many people’s financial security.


Podcast Transcript:

June 28, 2020. Welcome to the Women and Money podcast, as well as the men smart enough to listen. You know, the other day I was giving an interview to somebody who was interviewing me about the podcast because the podcast has taken off, everybody, recently. You know, if we look back at the numbers, we now have about six million downloads. Are you kidding me? That is huge, especially since we really haven't advertised it much on any level. I just mention it here and there, but anyway, you should all tell everybody to listen. Let's go for 12 million! Go on, everybody, tell everybody, listen to the Women and Money podcast, and to download the app. So, she was interviewing me about the podcast and she said, Suze, why do you name it the Women and Money podcast, as well as the men smart enough to listen? And I said because this podcast was never meant to be just for women because you have women who are in relationships with men. And what good does it do me to educate one and not the other given that the number one reason for divorce in the United States today is arguments over money? So, it's my job to make sure that I bring people together in financial harmony and to add to that in whatever way I can. So, that's why I call it the Women and Money podcast as well as the men smart enough to listen. She went, oh, that makes sense. I'm so glad that made sense to her. And don't ask me why I just told you that story because that's not where I'm going with this podcast. I always start this podcast with the date, and the reason that I start it with the date is that if I'm giving you some financial advice and you don't happen to listen to this podcast for a year from now, and then you're hearing it and you think, oh, I should do this right now. No, pay attention to the date when I say something and then you'll know if it applies or not, because I'm telling you to do things for right here and right now. But it's not just the date of this podcast that is important, it's the dates that I'm about to mention to all of you that for some of you, in fact, probably the majority of you, are going to have a very significant impact on your life. And those dates are July 25, July 31, August 31, and September 30. And what are those dates? Those dates are as follows: On July 25, if you happen to live in federally subsidized housing and you haven't been able to pay your rent, they haven't been able to evict you. But, come July 25, they will be able to evict you, and that is a big deal, especially because just six days later, on July 31, the $600 a week that many of you have been getting for unemployment because it's been subsidized by the federal government, just stops. It stops. And now what do you do? And so that's stopping at the exact same time that the evictions for rents are going away because the truth of the matter is, throughout the entire United States, there was a moratorium on evictions. However, many of the states, if you were a renter, many of the states were like, no, we're not going to go by federal guidelines, we're doing our own. So, many of the states that moratorium is already over, except for one fabulous city, San Francisco, who has said no, we're not having any dates, we're just not going to have any evictions for now. So, that's a good thing, but the majority of states, evictions, especially for renters, are going to start. So, you have July 25, July 31, and then you have August 31. And what is August 31, about? Well, that is the date that if you have been enjoying a moratorium and not having to pay your mortgage payment, especially on federally backed mortgages, guess what? That ends as well. So, now we have that problem, and then we have September 30. And for those of you who had federal direct loans, student loans, you haven't had to pay your student loan payment, you haven't had to pay any interest on it either. And guess what comes September 30? You are going to have to start making those payments. So we have approximately a month and a half, we have maybe two months, maybe three months, and then everything is going to start where you are going to have to start making these payments again. And that seriously concerns me. And it concerns me for the following reason. While I was feeling really, really happy about the stock market and I still am, by the way, everybody. And I was starting to feel better about the economy because I really believed that we were cleaning everything up, that the virus was getting better, that it was under control, that in September, October that we're going to have something that will help us, you know, curb it big time. Some medical discovery, I still think that for some reason and all was good. But now, because there were so many people out there that had to do what? They had to go out without their masks on, they had to socially un-distance, they want to do all these things because of their freedom, nobody was to take away their freedom. Now, these people are going to have a direct effect, financially speaking, on all of us because you can see it happening right now. You can see Texas starting to pull back, you can see Florida starting to pull back, you can see Palm Beach is making it mandatory, Palm Beach County, that you wear a face mask. Miami, it's mandatory that you wear a face mask. The hospitals are starting to be overrun again. It's starting up all over again, which does what? It affects the economy. And when you have that going on along with the's dates, we have what I am calling the perfect financial storm. And I'm so sorry to say that it's a storm that none of us want to be caught in. None of us want to be part of this storm, because while this is all happening, especially the virus, the chances of many of the jobs coming back for many of you aren't going to be coming back because the establishments aren't going to open. The government will keep them from opening up or the state governments will keep them from opening up, and even if they open up, people are more afraid than ever now to socialize because they realize what can happen or to be around it. Sure, there are those people who still want to go out and do things, but still, the majority of people do not. You know, the other day I was telling some friends that I have to go back to Florida for two days in July, and they were like no, please, Suze, please, we're begging you. Stay on your island, it's horrible over here, you don't want to come here, you have no idea what it's like here, Suze, please. And so they're right. I don't have any idea what it's like there, and they do. And if you could have heard them, I was like, oh, my God, it's bad. So, it's important that you really keep these dates in mind because they will have an effect on all of us. I've been telling you now for a while, can you just please wait to buy a home? Can you please wait to buy a car? Can you wait to buy a big-ticket item because I still believe that the moratorium that's being lifted right now on mandatory rent payments and everything is going to have a big effect? I mean, think about it. Just because there was no eviction freeze doesn't mean that it was a rent freeze. Do you understand that if you haven't had to pay your rent for four months, and let's just say it was $800 a month, that doesn't mean when the freeze is over, you just go back to paying $800 a month? You owe that landlord $3200, cumulatively. So, these are the things that people are going to be facing. And then, what's going to happen is the landlord's going to probably have no choice but to evict you, especially if you don't have any money. And what are they going to do because the moratorium on their mortgage payment for that property is over? And so now we all have problems, do you understand? And so you have to be very, very careful here. So, what do you have to do besides be very careful here? You really need to, at this point in time, we still have a few months away, this is the time now that if you haven't been serious about saving, and a lot of you have not been. If you haven't been serious about saving, you went out to dinner, you went out to lunch, you went out to places just because you could, because you were just so, so bound up because you couldn't go outside. Now you're outside and you're spending money. I am begging you if you've been going outside and spending money from the unemployment checks that you have been getting, I am begging you to stop doing that right here and right now because you don't want to be caught in this financial storm without any savings. If I were you, I would also make sure that you're not using your credit cards if you don't have to, just to charge things like going out to eat and things like that. For needs, OK. But leave us much available credit as you can on your credit cards in case you need to use them, because when that $600 a week stops, you're going to seriously feel it. I wish there were better things that I could tell you as to, oh my God, here's what you can do, here's a solution. Here's this, here's that. But really, if you think back on it for four months now, I've been begging you not to spend money. I've been begging you to save money, I have been begging you to do anything and everything you can to hone in on all of your cash and I hope you have. But these are just dates I want all of you to be aware of. It's not just going to affect those who don't have money, it's going to affect everybody because it will affect the economy. It will. It is going to postpone people going back to work, it's going to be postponing all these things that probably would have been able to happen, but because the virus is rampant again, now they are not going to happen. So once again, I'm just going to reiterate, hold off even if you have a job, if everything's great, can you just hold off on big-ticket purchases right now? The other day, I was giving a seminar for a corporation that was lucky enough to not have to have made any layoffs whatsoever. All their employees are working from home, they're all loving working from home. And so, I was brought in to give a seminar via Zoom to all their employees to tell them what should they be doing versus what should they not be doing. And one of the questions that I was asked was this. Suze, I listen to your podcast, I hear you saying all of these things. Why in the world, even if I have a 401k plan, I have my job, I'm able to contribute to it, why in the world would you want me to, when maybe I should be saving that money and building up a one, two, or three-year emergency fund? Why would I do that, Suze? So what I want to say to all of you is this. I get that it's very tempting, especially when you hear me say it's the perfect financial storm coming and you will tend to want to just run and keep everything safe and sound. No, this is the time that you cut back on your spending, this is a time that you save every possible penny you can, and so it's very important that you face all of this. But that doesn't mean that you stop investing, and the reason is this. If you have time on your side, five years, how many times have you heard me say this? Five years, 10 years, or preferably longer, you should be dollar-cost-averaging into these markets. You should continue to invest, you should not take money out. And everybody always keeps saying to me, well, how do you know that, Suze? It's like, what if this doesn't come back, what if this is different? So, I was looking for studies on this, and I just want to give you a few examples, all right, everybody? Transamerica recently came out with a study where they went back for 100 years, and they looked at six tragic events that have happened: World War I, the 1917 Spanish flu, they looked at 911, they looked at 2007, they looked at all these things that have gone on that were really once in a lifetime events like it is right now. And when they did a study as to what happened after the event was over in the next 10 years in the Standard and Poor's 500 Index, they found out that on average, even if you put all six of these events together, once in a lifetime events, that the 10 year period after the event was over within the stock market, the average return was 13%. 13%. Now, obviously, there was a 10-year period where it was only 7%, one other 10-year period it was 16%. But, on average, it was 13%. Now, there is no way that I can tell you that I know for sure that's going to happen again. But, if you go back 100 years and you look at six events that were like the most horrific events and that happened, I think the odds are pretty good in our favor that over a 10-year period of time it's going to happen again. So I think once this is over, 10 years from now, you'll look back and you'll go, whoa, that was fabulous that we stayed in the markets, that was fabulous that we continued to dollar cost average. So I urge you, for those that are lucky enough to still have a job, for those of you who are lucky enough to be able to still contribute to your retirement accounts, to please just continue to do so. But let me go back now for a second about the perfect storm because besides the dates that I just told you: July 25, July 31, August 31, September 30, there are other dates that are also coinciding with this storm. And those dates are 90 days from the time that you contacted who? Your credit card companies, your car loan company, your car insurance company, all of your payments that you needed to make, your utility companies. And they all said to you you could have a 90-day moratorium. Guess what? That 90 days is up as well. So, do you understand why I'm concerned here? So again, what do all of you do? You do what I've asked you to do the entire time, which is to take action. Obviously, Fannie Mae, Freddie Mac, federal assistance will continue to help you on your mortgage if you have a federally backed mortgage. And they happen to ensure and back more than 2/3 of all the mortgages out there. So, chances are, you might have one of those. Pick up the phone and call them, do not be afraid, once again, to pick up the phone and call, people. Call your creditors again, everybody, and you're just going to have to do whatever you can do to make it through. So, these are going to be rough times for some of you. So you have to be creative, you have to conserve every penny you possibly can, and you have to just really take action wherever you can take action. If you have $20k, $30k, or $40k or more in your retirement accounts. All right, if you have to take some money out of your retirement accounts and take advantage of the fact that you can do so under the Cares Act, and you have three years to pay it back, or three years to pay the taxes on it but no penalty, regardless of age, all right, then you just have to do what you have to do. But you have time, there's still time for you to try to figure out something. And so, I date things because it's important because a date is a date in time, and this is the time to take every possible action, to conserve every possible penny that you can if these dates are seriously going to affect your ability to be able to feed yourself, home yourself, or whatever it may be. So, now is the time that you can take action so these dates don't have to have the effect on you that they might have on you if you had taken the action right here and right now. All right, everybody, put up your financial umbrellas. Hi, I'm Sarah, and I'm Robert, and we're from Suze Orman's Women and Money podcast team here to tell you that Alloya's member credit unions are so proud to have brought you this episode. You know, Robert, credit unions live by people helping people philosophy. Absolutely, Sarah. And that means when you bank with a credit union, you can trust that they have your best interest at heart. The fact is, regardless of circumstance, a credit union will have your back and keep your money safe, that's the credit union promise. Go to www.MyCreditUnion.gov to find a credit union that fits your needs. That's MyCreditUnion.gov. 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.

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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