Family, Financial Independence, Financial Security, Investing, Podcast, Retirement, Roth IRA, Saving
September 06, 2022
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In this week’s Ask Suze Anything, Suze answers questions from Mary Jane, Kari, Linda, Donna, Ann, and a very special listener in need.
That's what today is. It's Thursday, and this is the day where you write in, you ask your questions, I choose a few of them, and then they are answered here on the podcast. Now between you and me, I have to tell you I read every single one of the emails that you send in. At this point, I can still handle that. So just know that every one is being read. Now I'll just tell you a little secret between you and me. I love to stay up late at night. KT on the other hand, 10:00 she is sound asleep. And we have a thing that once she wants to go to sleep, the TV and everything has to go off, which is fine with me. And so what do I do? Because I usually don't go to bed to 1, 2 or 3 in the morning even though we get up at five. It's just it's just I don't know, I think I'm just so excited about life. Actually, I think I'm so excited about this podcast that I just have so many thoughts. What should I do for my Sunday podcast? What should I do here? What can I tell you? So that you really learn what you need to know. So it can help you in life, it can help you financially, I can help you in every possible way. And so everything I look at every movie I go t, anything I do. I think about what did I just learn? What did I just learn that I could talk about on the podcast? So I stay up late at night, kind of on my little iphone with my you know little head and everything under the pillows or whatever, so that the light doesn't shine on KT and bother her. And I read your emails and as you know, I also answer quite a few of them directly. And in the morning when we wake up KT says, you know Suze, if you think that I don't know that you're staying up late at night doing this, you are wrong madam. And she said as long as you're having fun girlfriend, that's all I care about. You want to be part of the Women & Money podcast, all you have to do is send in an email with your question to firstname.lastname@example.org. And at least you know for now anyway because it could get to be crazy just for now. Anyway, I am reading every single one of them. But I do have a favor to ask you, and the favor is this. Can you please go to Apple podcast, can you please rate with a star rating? How you feel about this show when you do that? The show gets attention, which means it grows and more and more people are helped, and that is the goal of the Women & Money podcast. First question today is from Mary jane. She says that she has been leasing a car and she pays 400 Canadian dollars monthly, but also has a 400 Canadian dollars monthly insurance bill. Now that's crazy. But what am I going to do about that. Anyway, I am driving it since September 2016. After five years I have to pay $10,000 to own it. Shall I drive this car or return it and buy a second hand car? I have about 30,000 savings for rainy days. I am a hardworking individual. Thank you, Suze. Mary Jane, Mary Jane, Mary Jane. Your name makes me think of those shoes when I was a lot younger. You know those white and a little saddle shoes, Mary Jane shoes. Anyway, forget about that. Here's, here's, here's what I want to say to you. This is one of the reasons why I don't like leasing a car. However, here's what you know for sure. Now remember there is a law of money to invest in the known versus the unknown. What is the known? The known is how well you have taken care of this car since 2016. You only have two years to go, two years to go and then you have to pay $10,000 to own it. But you know everything about it. You know are the kinks out of it, you know and if you like this car, I think you are far better off buying this car rather than buying a used car a second hand car. Why? Because you don't know the truth about any other car that you buy, especially if it's a second hand car. Was that car in an accident? Was it in a flood? How well did they take care of it? Did they change the oil? So girlfriend, the answer to this question is, just keep paying for it, and at the end, see if you can negotiate with the leasing company to pay maybe $8,000 to buy this car outright. Next question is from Carrie. Or Kari, K-AR-I. Hello, I love your podcast. Well good Kari because that is the point of this podcast. Is that you love I, and and this podcast hopefully makes you love your life more because you feel empowered. That is the goal of it for you to be strong, smart and secure. She goes on and says, oh see this is what I was just talking about. Thank you for empowering us women and the men smart enough to be listening by the way. Anyway, question. Can my husband and I both have a Roth IRA, and will this reduce what we report for taxes for our income? If we also buy a whole life insurance? We already have term. Will that also reduce our net income for taxes? It’s questions like this that depress me. They depress me and they depressed me because I've been telling you and telling you that a Roth IRA will not help you on taxes whatsoever. Right now a Roth IRA is funded with money that you have already paid taxes on. A traditional IRA is funded with money you have never paid taxes on. So a Roth IRA Kari will not will not reduce the taxes on your income right now. But let me tell you what it will do for you tax wise. It will grow and it will grow, and it will grow, and it will grow. And in the end when you go to take it out, now you're gonna be able to take it out tax-free. Tax-free girlfriend. Versus totally taxable. If you leave it to your beneficiaries, they're gonna be able to take it out tax free. The traditional one when your beneficiaries take it out, totally taxable. Also, with a Roth IRA, you can withdraw your original contributions anytime you want without taxes or penalties regardless of your age, or how long that account has been open. Don't you think it's worth giving up a little tax write off today, or even if it was a big tax write off, in order to do what? Have access to your original contributions anytime you want, in case of an emergency without penalties or taxes regardless of your age, and later on in life to be able to get it out all tax free? I do, I do. So can we all just get it straight? Whole life insurance, that won't do anything for you to reduce your taxes. If anything, all it will do is it will waste your money for you in my opinion in most circumstances. Insurance was never me meant to be a permanent need. It was never meant to be there for your whole life. What insurance company is going to pay you $100,000 death benefit, if they haven't made 1,2 or $300,000 off of you? They would go out of business. So all insurance companies have what's called actuaries. And based on the information that you provide to them, they know approximately how long you are meant to live. And that is what determines your premium that you pay them every month or every year. So why do that? Nobody should be paying for whole life insurance. Term insurance, which is good for a specific period of time, is the only way to go. Caution, caution, caution. If you have a whole life policy, a universal life insurance policy or a variable life insurance policies, all three kinds of insurance policies that in 99% of the cases I seriously do not like, you do not cancel them until you know you are 100% healthy, number one. And number two, if you need life insurance, you go and get your term life insurance in place, and after it is in place, that's when you cancel your other policies. Don't do it any other way but that. This next one is from Kathy. Hi Suze, I am married and after listening to your podcast, I now know - I'm always scared when somebody says that like what do they know? No, I now know I would qualify for the Roth IRA. Well that's good. I am turning 60 and retired from teaching. My husband is still self-employed and will be 66. I have some money in a savings account and want to open a Roth IRA with this money. Does that sound like a good idea? Sounds like a good idea Kathy, but you have to be careful here. Again let's go to Suze school. All Roth IRAs, all traditional IRAs, SEP IRAs, all of them have to be funded with earned income. You cannot be retired and not have any money that isn't earned income be placed into one of those retirement accounts. What is earned income? You're earning income, you have a job, you have a paycheck, not dividends, not interest, not social security, it's earned income. So you need to qualify for a Roth under something else. And this is your husband is still working. So you qualify for a spousal nonworking Roth IRA, that's how you can do it. But that's the type of Roth IRA that you have to open. The next one is from Linda. Suze by the way, Linda is spelled S-U-Z-E. I see you spelled it S-U-Z-I-E. No, no, no S-U-Z-E. Anyway, what are your thoughts about a reverse mortgage to get the equity for retirement? Oh boy, Linda. I do not like reverse mortgages, especially right now when interest rates are low. When you get a reverse mortgage, first of all, you have to be 62 years of age or older. In many cases you have to own the house outright. And so now you take out a reverse mortgage and a reverse mortgage is simply where a bank gives you either a lump sum of money or a check book, where you can literally write yourself checks based on the equity in your home. So they pay you versus you pay them. And they will continue to pay that in everything, they can never kick you out of your home no matter what, but upon your death or when you sell it, then all the money that you took from them plus interest is paid back to them. There are many other things that can happen and go wrong with reverse mortgages. Again, I do not like them. Especially when interest rates are as low as they currently are. Because your monthly payment is based on not only the equity in your home and your age, but the current interest rate environment. So this is not the interest rate environment in my opinion that I would want to see you do a reverse mortgage. If you need money for retirement, that means that this house is costing you too much, or you have too much locked up in this house for you to live the life that you want to live. So while houses are still selling at premiums right now, can you just sell the home and downsize? That's what I would tell you. Alright. Are we liking this everybody? Anyway. Hi Suze. I'll try to keep this short. I know you appreciate that. You have no idea how much I appreciate that. Anyway. I just opened up retirement accounts for my husband and myself at TD Ameritrade. They are solo for one case because we are self-employed. Now it's time to invest that money I found in an S & P Index fund that I like. But I'm wondering if I should split the money up and put some in an ETF or individual stocks. Now here's the problem. I'll go on with the question but just in the middle of it, there's no way for me to answer this question correctly because I don't know how much money Dana put in to these solo 401ks. Obviously if she's just starting them, there can't be that much money in it. So rule of thumb everybody, I do not want you to buy individual stocks unless you can buy about 20 of them. 15-20-25 individual stocks to diversify your money. You should not have more than 4% of your investable assets in one stock. So that means you will need about 20-25 stocks if you're going to get true diversification. An exchange traded fund gives you diversification, but does it give you any more diversification than a Standard & Poor's index fund? It does not. I will continue with her question. I'm so gun shy when it comes to these things, because it's all so new to me. I just have to interject here. Dana that's good. Because sometimes it's better to do nothing than something you do not understand. And once you've done something, you've done it. So always just take your time. I'm thinking of talking to a financial advisor for help, but I'd rather just do it myself. Yes. Yes. Yes. That is the point of the Women & Money podcast. Am I shooting myself in the foot by sticking all our money in the one fund? I know you talk about diversifying. She would love my thoughts on this. Donna. Actually it's Donna. I've been calling you Dana. Sorry girlfriend. Donna. Here's the thing. Diversification means that you have your money invested across the board in all different types of stocks. When you buy a Standard and Poor's 500 index fund or whatever one you're buying, you have diverse specification in terms of the kinds of stocks that you are buying right now. Could you go from mid-cap to small-cap to large-cap and get that kind of diversification? You could. But to start with, so you don't need a financial advisor to do that. All you need to do really, really, is to just go easy, keep doing this, keep learning and put it in the Standard and Poor's 500 index fund that you like that has no fees. Got that? Sorry about screwing up your name. Here's an email from Ann. She says Suze. I bought one of your books about 15 years ago and your principles have served me very well. I drive my used cars proudly knowing I paid cash. I've never forgotten the story about the guy who paid for the ski trip with his friends with a credit card, and his apartment flooded while he was gone, and he slipped on the ice and got hurt, couldn't work, and lost his job. Oh God I remember that story. Everything happened to this poor guy. He hurt himself while he was away, he comes back his apartment was flooded. It was a huge aha moment for me. Here is my situation. I am 36 married with four kids. We live in a nice neighborhood. I want to save $300 a week for four years to put in a pool. I met with three people and they're gonna charge me $60,000. We own our home and have no mortgage, no student loan debt, no credit card debt. We have no car loans. I make 76,000 salary. We have four months’ salary in an emergency fund. About eight? Anm what about eight, what is this four months? You know, I want eight. I contribute 18% of my income to my company offered 403B with a 50% match up to 6%, and 2% to a Roth. I make 76,000 yearly. We're not paying for our children's college. Grandparents are helping. So I want this pool. I want to enjoy my beautiful children. I'm an aunty now and I want my brother and sister to come over with their kids and enjoy our time together. If a pool is out of the question, can I take my immediate family on a vacation or two each year? My husband is worried, and doesn't think we have enough saved, but I want to live a little and enjoy our hard work. What do you think Suze? Ann, you are so denied it's not even funny and this is the reason why. Because your husband is worried. The goal of money is for you to be secure. It is not for you to do something so in fact he can be worried. Now let me tell you about a pool, because I have one. They are a pain. They are such a pain in the booty, it is not even funny. It's not just how much does it cost to put in a pool. It's you got to make sure that they're cleaned every day, you've got to make sure that the chlorine levels are okay, now a pump breaks. Now this breaks, that breaks in the winter. It's too - are you kidding me? A pool is one of the more expensive things I have ever done. So no, no, and you know what else? Your kids are gonna get older, snd your kids are gonna move away, and believe me, you won't have time to go in the pool. It's not like you think so, no and you cannot have a pool. Alright, I have saved in my opinion, the best one for last. Because I personally love when it's an email that I know relates to so many of you out there that are silent. You don't have the strength to voice what's going on, and I know you're gonna be able to identify with this next email. It's from AT. And she signs it at the end with hurting audience member. Okay, Hi Suze, I'm struggling to leave my partner because first I love him, secondly, he seems to no longer respect me. And lastly because I depend on him financially. Before I go on, how is it possible? How is it possible that you love somebody that doesn't respect you? What is that? Are you sure that it's love, or is it need because you need him to take care of you? But is that really you love somebody who's been disrespectful to you? I just want you to think about that. We have been together for 23 years with two children, and I have stayed through two Infidelities. Through those infidelities, he got himself a fancy apartment. Once forgiven, he came back home. And why did you forgive him? Why did you forgive him? Do you really think people change? Do you really think so? I don't. So if you're out there, you're listening, when somebody makes a mistake, you better pay attention to it. When somebody shows you who they are, as Maya Angelou says, you best believe them. So once forgiven he came back home, but kept the apartment. I blame myself for the hurt I feel now, because I allowed this by stayngi. He's been staying out until 3:30 a.m. Coming in belligerent, and going to bed. When I confronted him about this, he stated he didn't want to talk about it. He's 42, and I am not his mother. This is so far from the man I grew to love. We were both young. He used to be so kind and loving. I don't know what happened to him, but this behavior is disgusting, and makes my stomach weak. Not to mention makes me cry myself to sleep. I would love nothing more than to walk out my door, move to a different state, and never look back or see him again. Unfortunately, I am currently unstable financially, and depend on him to help me. My paycheck has so many deductions, and I have debt from just trying to keep afloat. Do you have any advice for me? Again, hurting audience member. First of all, I hope you can feel my hug. I hope you can feel that I get it. This is one email out of thousands that I get like this. So the first thing that you have to know, is you are not alone. You are not alone. And how many women, how many women have I interviewed that left a situation like this, with their clothes on their back, sometimes their kids in their arms, not a penny to their name, and they just left. There are women's shelters that you could go and just stay in. And if I were you, I have to tell you, I would do that. This situation is not going to change. You deserve better than this. And I'm sure that now that you've been together 23 years, that your kids are relatively older most likely, and they need to see that their mother can absolutely be strong. So I will be emailing you back directly. And I will give you the name after you tell me what city you're in and everything, of shelters and agencies that you can contact that can help you. But you need to muster your courage. You need to not allow anybody to ever disrespect you again. It is not helping you to stay up till 3:30 in the morning just to make sure that he is coming home. You need to really gather all of your strength, line up your ducks, do everything. And then just do it. Not easy advice for me to give. Not easy advice for you to hear. But I promise you if you just take these steps, these steps little by little, everything will change. You have a job, you have a paycheck, you have all kinds of things. If it means you have to claim bankruptcy and get rid of all your debt, who cares? The only thing that should matter at night is that you love your life, you feel respected. You're at a place where you feel safe, and that you know that you can be a strong, smart and secure woman. AT, I have faith in you. The question is, do you have faith in yourself? Do you?
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