Podcast Episode - What Keeps Suze Up At Night


401k, Bankruptcy, Car Buying, Home Equity Line Of Credit, Stock Market


May 17, 2020

Listen to Podcast Episode:

In this podcast, Suze talks about the financial things that keep her awake at night, like stimulus program recipients not getting their money and people not being prepared for what may come next.


Podcast Transcript:

May 17, 2020. Welcome to the Women and Money podcast and the men smart enough to listen. It's a beautiful morning today. You know, we were supposed to have a storm in the Bahamas, it was going to be a tropical depression. We took our boat out of the water. I felt like, oh my God, here we go again, and it briefly rained. And again, it's beautiful. And that kind of reminds me like, OK, it's always good to prepare, however, you prepare for the worst and you hope for the best. And that's what we did. And that's what all of us need to do when it comes to our money. Again, just a few announcements before I begin this podcast. So, because the weather is good, it looks like I'm going to be able to broadcast, so if you want, I will be on HSN today. This is Sunday, May 17 at 11 p.m. EST, adjust that for whatever your time zone is. And you can listen and watch me talk about the Must Have documents and you'll see why we formed the ambassador program, where many of you can make money now, off of just simply referring somebody to make a purchase of these documents. And by the way, for all of you who have signed up for the ambassador program, on May 21 by invitation only, so you have got to have signed up, we will on May 21 at 7 p.m. EST, so again, adjust that for your time zone, we're going to be talking to all the ambassadors, or I'm going to be talking to them about the Must Have documents, what they need to know, what you all need to know in order to make an honest referral. We're going to deploy the assets to help you make an honest referral, and we'll talk a little bit more about the rewards program that we are initiating. Again, the only way that you could be an ambassador is to download the Women and Money app, go to Apple Apps, go to Google Play, search for Suze Orman and it will come up. There are many other things you could do on that app, but that is how you do it. We do require that ambassadors themselves have done the Must Have documents because you have to stand in your truth and know why these documents are the most valuable thing you can do for yourselves and those that you love before you can tell somebody else to do it. One more thing. We are going to be doing a virtual town hall on The Today Show with Hoda and Jenna, and if you would like to be part of that where your question is answered, just go to www.HodaAndJenna.com. Scroll down to where you see "connect" and speak your question. And if chosen, you can be on this virtual town hall with me, Hoda, and Jenna. I think that would be a lot of fun. Anyway, let's begin. So, I have to tell you, I've been in a quandary as to what do I name this podcast? So many things I want to talk to you about, and I understand very well that in the past we've been concentrating on the stock market, and what do you do with your stocks and your investments? But I'm not worried about the stock market, I'm not worried about investments, truthfully. I'm worried about the future, and I am because, like most downturns, the people who are affected the most there those that are making under $40k a year. And in this particular downturn, it's women who have been affected most because most women that have jobs, have it in the service industry of some kind. Not all but most. And those are the jobs that have gone away. And what concerns me about all this is that it's not just what's going to happen to the job market in the future. But I'm really concerned about, right now, about all of you who have applied for unemployment and you're not getting unemployment, meaning your checks haven't gone out to you. And so I listened to all this talk, and I feel like it's just blah, blah, blah. All this talk about the stimulus and how we're going to help everybody. What good does it do to help you if you can't get the help that's there for you? You know, as you know, I'm an avid boater. I love to go on my boat but KT and I are always very, very careful. You know, we have GPS to locate you in case you go down, we have a life raft in case you go down, we have life preservers, we have these things that you can throw to people in case they fall off so they can grab it. But we also have extra line to make those things longer in case you're farther away from the boat. And I was thinking to myself, what good does it do me to have these things on the boat if I throw it out to you and you can't reach it? And it's kind of like unemployment, what good does it do for everybody to say you're going to get unemployment? You're going to get an extra $600 a week, but it can't reach you? Their systems are crashing, they're actually sinking. So I don't understand why more money isn't immediately invested in getting these systems to work so that you can get your money, so that also concerns me. So, I was going to name this podcast, "What Keeps Suze Orman Up At Night." And those are the things that keep me up at night because I know many of you are suffering. I know many of you don't know what to do and you've done everything that I've asked you to do. You've been really, really disciplined. But now you also understand why I have said to you that cash really is gold and to use your credit cards, paying only the minimum, just in case. You know, as I also listen to all the newscasters and the really brilliant pundits this week, there was a seminar, a week-long seminar, for the brightest minds in the world when it comes to the economy. And what's so interesting is half of them say everything's going to be OK. The other half say, oh, this is going to be the worst thing we have ever been through in our lives. Some say the savings rate is going to go up, some say the savings rate is absolutely going to go down because everybody's going to say nothing matters anyway so why not just spend everything that I have? And even they can not agree. So I feel like the leaders of this world, the financial leaders of this world, everybody is in total turmoil as to open up the economy, keep home, stay safe. It's what do you do when you're getting so many different messages? So, I worry about that for all of you. But here are a few things that I really do know for sure, and it is this. We are not going to return to normal, and I've said that before. But now I can see it happening. I can see companies like Salesforce, which is one of the best companies in America, in the world, actually, now issuing a statement that says for the rest of the year, we want our workers to stay at home and work from home. And I just image empty cities of huge buildings that used to house tens of thousands of employees, and now these corporations have figured out, oh, I can save a whole lot of money on rent, on electricity, on all of these things by just having everybody work from home and develop new technology that allows them to work from home even more efficiently. So that's what I think is going to happen. The other thing that I think is going to happen is that a lot of these corporations, if you have a corporate job, are going to come to you and they're going to say, we have no money, we haven't had income, we're going to have to possibly claim bankruptcy. So all of us need to take a serious pay cut. And again, I've said this before, and of course, at a time when there aren't any other jobs, you're making $80k a year and they say the pay cut is $60k, take it or leave it. You're going to say, OK, I'll work for $60k, I'll work for $40k, I'll work without vacations, I'll do anything I can just to have money coming in, and you feel so pressed to have money come in because you're not getting your unemployment checks. You're not getting your stimulus check, you're not getting the money that you needed to get to get you by to where you could have said, OK, I didn't have to use up all my savings. I didn't have to go into my retirement account, I didn't have to do all these things, but I had to because I didn't get the money that I was supposed to get. So, that almost gives leverage to these companies, knowing how desperate all of you are, to say, I need my corporate earnings to go up so my stock price goes up because I need to make money because I run a corporation and my stock options and my bonuses are all based on that. I know how I could do it, I could just cut the expenses by asking all of my employees to take a pay cut. And yeah, they're going to have to take a pay cut, because why? They don't have any money because they didn't get the money they were supposed to get in time before they really went into debt. Am I making sense to you? And so all of that really, really concerns me. So I'm telling you this because I'm also seeing another pattern that is emerging that also seriously concerns me because you can't make money right now and I get that's why everybody wants everything to open up. OK, we're not talking about that. But because you can't make money right now, even if things open up, that doesn't mean your job is coming back. What you are trying to do is make your money make more money. What do I mean by that? Many of you now, who still have jobs at this moment in time are thinking all right, they're going to probably reduce my salary because they've already put out a notice that they want that to happen. So, I should take more risks with the money that I currently have to make up for my loss of salary or my reduction in salary. So, now you're coming to me with thoughts like this. Suze, I have $100k or $200k or whatever it is in my 401k plan, and I now know because of the new government regulations that I can take out up to $100k without penalty or current income taxes on it because I have three years to pay that back. I can take out money from my 401k. And I hear you say that real estate is going down. I think I should take that money and buy real estate after it's gone down some because we don't know, is it really going to go down? Is it going to go down some, is it going to go down a lot? I don't know. I would bet that it's going to go down significantly, but that's another story, and it will depend on your locale as to how badly it does go down. But anyway, and your idea is, I should take out that money and I should buy a home with it, and I should do it with an FHA mortgage so I only have to put 3% down, and eventually, that real estate will come back and I'll make up for the money that I lost in my salary. Or, Suze, I should take out the equity in my home at these really low interest rates, and invest it all in the stock market. And the market will start to go up again eventually, and I'll make up for lost time rather than just having money that's sitting in my home. Or, I take out a home equity line of credit and I buy another home with it when real estate prices go down. This is how many of you now are thinking, and this really keeps me up at night. When you borrow money to make money, in some economies, in a great economy, that could be a fine idea, although I still don't like it because that's just not my nature to borrow money out of something that you need. But that's beside the point. It can work for many people in some economies when the economy is really strong. When everything is going up, house prices are going up, markets are going up, your incomes are going up, unemployment is extremely low. That is not where we are right now, people. And I don't know how long it's going to be until we get there. By all means, at the end of this year, we will be lucky if the unemployment rate is just 10%. That was the highest it got to in 2008. This will be the lowest it gets to right now. By all means, it could very easily go to 25% or 30%. There are, like, 36, they're going to be like 40 million people before you know it, that are collecting unemployment, although they're not collecting unemployment because they can't get their unemployment checks, because they can't get their unemployment applications processed. So, there are far more people than that that are truthfully unemployed. So, that is not the type of market that you want to be taking a risk in when it comes to, number one, borrowing money to make money. Not here, not now. This idea of you taking money out of your 401k plan, thinking you are going to pay it back in three years or at least pay the taxes on it in three years to buy another piece of property, in my opinion, or buy your first home even, is the most dangerous thing you can do, bar none. And let me tell you why. If you take out money from your 401k plan and these markets turn around, which I do expect them to do starting especially in February, you know, September to February, I do. I keep saying to you, I think in September, I don't know what's going to happen, but they are fast-tracking everything right now. And I think the whole tone of the United States and the world, because of discoveries, will start to change. And by February of next year, we'll really feel like everything is pretty back to the new normal. That's what I've told you, that's what I believe. I don't know why I believe it, I just look at all the companies developing what they're developing, and somebody's going to come up with something here to help all of us. I just have that faith. However, that's beside the point. Because remember, before I go into this explanation, I've also said to you with new technology, there's going to be a new way to do business, and many of the jobs that all of you had are not going to come back. I hate to be the bearer of bad news, but it is the truth and you know it and I know it. And if you do get to go back to work it is very possible that you will not be making the money that you made before. Just think about it. I know I'm sidetracked here, but just follow me, you can do this now. If you are a waiter and you're there, and I'm now saying waiter for both males and females. All right, so you're a waiter. But yet you've been living on tips and you've been making good money. But now, you're restaurant is only allowed to have 25% of the number of people at a time that used to be in there or 50%. That means your tips are going to go down, possibly by 50%. It also means that the people who are coming into eat may also not be making as much money as they used to be making, and they may not be tipping as much as they were tipping before all of this happened. Because they're just going out for a treat, and they're not going to go out as much as they used to go out because they don't have the money to do so. That applies also took those of you that are in retail and people who are going to go shopping. They're not going to spend as much money shopping because they don't have as much money to spend. They have more debt versus money, so that's going to affect your commission sales all the way along the line. So, you cannot plan to live your life thinking that my income is going to return to what it was before this happened. For some of you, it may, and I hope it does. But for most of you, it won't. And therefore you have got to understand that. Back to my point that I was making. So here you are, you take money out of your 401k because of the three years that you're allowed to do so. You purchase a home and you purchase a home for yourself thinking, I'm going to be able to afford this, figuring out exactly how much you used to make. And so you're figuring out everything like that, and now you buy a home, and in the meantime, all right, things seem OK. You only have 3% down. But now, because you only put 3% down with an FHA mortgage, your mortgage payments are actually larger. Oh, insurance companies have been hit, everybody's been hit. So, your monthly expenses on your car insurance, your life insurance, your property taxes, everything, especially property taxes because all the states are going bankrupt, everything starts to increase in how much you are having to pay for something as time goes on. And now, your expenses are going up, the three years have gone by and you didn't save the money, so you can't put it back in your 401k plan. Now, you have to come up with that large income tax bill that's owed on the money that you took out and you're still just making it. But now you get sick, something happens and real estate doesn't go up. It continues to go down, and now you have this piece of property that maybe you're going to have to give up because you've lost your job. But you've also missed out on three years of the market going up, because I do think the market, especially in certain areas, is absolutely going to increase. And so you're missing out on time that where your money can grow, without you having to owe money and take on other obligations, such as a mortgage. Or, you did that to buy a piece of property to rent out. Just don't do it, peeps. Don't do it because it really isn't smart, it's just not smart. Not here, not now, not with money from a retirement plan, not with equity that's in your home. You want to keep that equity in your home. If you take out equity in your home right now to buy something else to invest in the stock market, and you think you're so smart because it set such a low interest rate. And then the market doesn't go up, the market actually goes down, something else happens, who knows what can happen in the market. Or, you are a lousy investor, and you just didn't happen to purchase the correct types of stocks or mutual funds or ETFs. And at the same time, you have the expenses that you always had, but you've added to them now because you took out a home equity line of credit to buy something else, and so your expenses have increased. And then you get the fact that, oh, they're going to get rid of your job, they're going to decrease your salary. All I'm asking you right now is don't try to be smarter than you already are. The smart move is for you to be strong, smart, and secure, and how are you going to be able to be strong, smart, and secure? Well, you're smart already, because you're listening to the Women and Money podcast. You're going to be strong in that you're going to resist the temptations that many people around you are telling you to do. It drives me bats that many of you are getting your financial information, your financial advice, from brothers and sisters, and people who are desperate to make more money at times like this. So you're going to be strong and resist doing what others are doing, it doesn't matter what others do. What matters is what you need to do to be what? To be secure, because to be secure is the goal of money, and that is what this podcast really is all about. What financial moves can you make so that you are secure because when you are secure, you are powerful, and when you are powerful, you attract people? People control money, and therefore you will attract money. This is not the time for you to make any moves that make you already more insecure than you already are. So do not borrow to invest. Do not borrow from a 401k plan to do what? To buy real estate. Don't outsmart the system. The reason that the government allowed people to take more money out of a 401k than normal without having to pay taxes for three years is because they will allow you to do anything to stimulate the economy. This economy is in critical condition. It is in ICU on life support and, truthfully, everybody, it is barely breathing. The only reason that it's breathing at all is that Washington keeps passing all of these packages to put trillions of dollars into it to keep it alive. That's the only reason. And who knows if that's going to work or not? Now, I personally think we're going to be OK. Do I think we're going to be great? No. Do I think it's OK to invest in the stock market starting in the next month or so? I do, I told you that, but under a dollar-cost averaging technique. But the stock market is not the economy, the stock market is not your job, the stock market is not the price of your real estate, because remember, your property is only going to be worth as much as the other properties on your block. And if people on your block have had to claim bankruptcy, they've had to give up their pieces of real estate into foreclosure, and that drives their property value down because they had to just get rid of it, that drove your property value down as well. So that's what you're betting on, that not only you made a smart investment in what you purchased, but that everybody around you is going to be able to afford their home as well. And what if they can't? When it comes to cars, again, and I said this, I think on Thursday's Ask Suze Anything, just be careful here. Be careful here, because this is the time, as I said, many people are going to be giving up great cars that they just bought, and they're going to have to be repossessed or give them back. And by the way, when you give them back, you still owe the money, just so you know, you just don't get to give them back. When they're repossessed, you still owe the debt that you took out on that car, the debt doesn't go away. That's a whole another podcast on how that works. So, you might be able to get a brand new car for yourself, one that's used but one that's new for you. So, just sit tight here. So I get that I went on a rampage today, but I'm worried about all of these things. I think all of you, all of you should be so seriously upset that you aren't getting the money that you were promised to get you by. That this should be a lesson, really, a lesson learned. I told you, we all need to start keeping these books called "Lessons Learned," right? That promises of, you're going to get a check, doesn't mean you got the check. Promises of help and we'll take care of you doesn't mean that you are going to be helped and taken care of. You and you alone are the only ones that can take care of yourself. You and you alone are the only ones that are affected by when everybody else falls down on the job. So, I ask you to remember all of this. I ask you once this turns around and you are able to have money coming back in or if you still have money coming in, you're number one priority in life is at least an eight-month emergency fund. Maybe we should take that to a one-year emergency fund. Remember, it's three years if you're in retirement, however, that's another story. That should be your number one priority. You never want to be dependent on those that are not dependable. Do you understand me? 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.

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