Podcast Episode - Financial Danger Signs

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On this podcast, Suze shares some lessons on why we should not make emotional financial decisions.  Then, Suze walks us through investing in crypto and planning your retirement.

Podcast Transcript:

September 19thth, 2021. Good Morning everybody now before I even begin today's podcast, I just really want to say so many of you have already written in and you said Suze, we missed you last night on HSN, what time are you going to be on HSN today? It will be 3 p.m. East Coast time, 12 p.m. pacific time. Remember it is live. So, if you want tune in and really, I think all of you should to see what I have to offer. Alright, that's out of the way. Today's podcast really is about financial danger signs because I do think that there is danger out there about how you are feeling, thinking and acting with your money or the money that you don't have. So, the very first thing that I want to talk about actually happened to me a few days ago when I was on the Today show with Hoda and Jenna and the very first caller was a woman who loved her seven-year-old child so much and she said that this child was on the spectrum and he didn't really want to go out and the only thing he really wanted was an RV, he felt safe and that's what that she wanted to buy him. And so, it was like, okay, show me the money and when the money was shown what it really said was that this woman was making a tremendous amount of money. She was making at least $10,000 more a month than what she was spending. So, obviously her paycheck allowed her to buy this RV and the cost of it by the way was approximately you know $120,000 anywhere from $90 to $120,000. That is a lot of money. When I continue to look at her finances, what struck me was she only had $10,000 in an emergency fund, $70,000 in mutual funds, $200,000 in a retirement account and approximately $630,000 of student loans. When I asked her how she was going to pay for this, she said she would take out a loan and it would be about $2,000 a month. Now everybody thought of course, because she had so much income over her expenses that Suze Orman was absolutely going to approve her and that Suze Orman especially was going to approve her why? Because it was for her seven-year-old child. And of course moms, dads parents whatever should do anything they can for their children. And when the time came from my decision, I absolutely denied her and I think that was a very hard one for everybody to take because this mother really wanted to take care of her kid. My solution to her was simple rather than spending $120,000 approximately on an RV, which would be $2,000 a month more. Where are you going to house it? There's other costs involved. Things like that. Why not just rent one every week? Why not see if that helps this seven-year-old maybe all of a sudden the seven-year-old grows out of whatever is happening and now the seven-year-old doesn't want to go into the RV anymore and here you are stuck for x amount of years spending $2,000 a month. The main reason, however that I denied her was the biggest mistake and this is a dangerous sign for all of you to really, really pay attention to. The biggest mistake is just because you think you have a paycheck coming in today and you have extra income today that therefore you can afford extra $2,000 a month payment. That that's not a big deal and that's how the majority of you, by the way, figure out if you can afford something, or not. Is there extra money in your take home pay check that you really aren't using? So, you can get a new car and increase your payments by $200 a month over what you're currently paying. You can get a little bit bigger house or a lot bigger house because you have extra money in your paychecks. That's how you figure it. That isn't how Suze Orman figures it. Suze Orman figures it like this, your paycheck stops, you get sick, you lose your job, you're in a car accident, something happens and you no longer have any money coming in. Do you have at least 12 months of an emergency fund in a savings account, so that you could pay all of the bills that you're currently paying and the expenses, everything that goes along with it for at least a year until you heal you get another job, whatever it may be? Do you or do you not? And if you don't, you can't afford it. So, in this person's situation and I get I get how much I wanted even say yes to her. I can't and that's not me being mean and harsh advice and you know, Suze can really do a slap down and things like that. No, it's about me being protective of you when you don't have the common sense to be protective of your self. So, now the woman goes ahead and let's just say she did and she goes ahead and she buys the RV, she doesn't listen to me. And she only has $10,000 in an emergency fund and now she can't pay for it, she loses her job, whatever. So, all right now she has another $70,000 in mutual funds. But when you go to mutual funds or any investment that you have outside of a retirement account, you have got to take into consideration that when you make a sale, there are going to be tax ramifications. If you haven't owned it for at least a year, you're going to pay ordinary income tax on it. Even if you've owned it over a year, her capital gains tax because she makes so much money isn't 15%, it's all the way up there to the top everybody. So, it's really possible that between state and federal she could lose 30% of that money to have to do what, pay taxes and what if the stock market was down at the time that she needed to sell it. So, you are not to look at money that you have in investment accounts, as an emergency fund. When I talk to you about an emergency fund, I am talking to you about money that you can get in two seconds if you need it. Maybe some of you are in a situation that it might take a day or two for whatever reason. But that is an emergency fund that you can get it, right here and right now without any tax ramifications. Without any selling at a loss, nothing and that is what determines if you can afford something or not. So, if you ever are doing this and you're in a situation you feel like I have to be a good mother, I have to be a good parent. I have to do this for my children, my seven-year-old. Stop for one second and understand that your role in my opinion as a good parent is to always be able to provide security for yourself and the child. How many times have I said, you know, you get on a plane and they always say if the oxygen mask fall down, put it on your face first and then the child's but your tendency is always to put it on the child's first, and that's because they're always talking to the women on that plane, that if something happens to you, who's going to take care of your child? Financially speaking emotionally speaking all kinds of ways. So, it is really important for you to think first. All right, I want to do this. But can I afford it or can I not? what happens if I lose my job? What happens if I get sick? What happens? And you know, maybe I'm so passionate about this because I've spent now over a year still healing from an operation that I had on July 23, 2020. And even though I know I can go on TV and I look good and everything that doesn't mean that when I'm off television and you're not seeing me that I'm not still going through it because I am and I always think to myself, what would happen if I didn't have the money that I had because you know, and I know that I don't have to work if I don't want to and I do this podcast because I love it and I love it because I care about you and I care that you get information that is for your good and not some financial advisors good but for your good. And I also care that many of you that are listening to this are older. You're my age. I love that you're 65 or 70, 75, your 80. Because listen, where else do you have to go? Where the information truthfully is geared for you? Because most of these podcasts, most of these financial shows are all geared towards who, millennials and hey I can't blame them and I'll get to that in a second. But I want to make sure that every one of you from being young, middle-aged, elderly, all the way through that you find information here that can help every single one of you in every possible situation. So, I'm passionate about this because you have to make decisions that are wise and when you make wise decisions than their powerful decisions and then you're standing in your truth. And when you stand in your truth, then everything starts to come your way. Really everybody, it's just that simple. So no, you can't just do anything for your children. You can't just blanketly say, oh they want this, they need this, oh my god. It's one thing if they're sick, whole different thing. But anything else if it's a want and you can't afford it. You just have to say sorry honey, but no. Alright now, I also just touched on the millennials and I do want to talk about them for a second because as you know the markets really haven't been doing much, they go up, they go down and if you look at it, they're kind of just stagnant right now and kind of trending down. Now do I think that's going to continue down or not? I don't know. But as you know, I always wanted to have money 10-20% in cash so that if the markets did go down or there were certain things that I felt like we're, oh now is the time to invest in them that I was able to do. So however, what's important to understand about millennials and this has to do with Bitcoin and cryptocurrencies. Like I said, this podcast is really for everybody because I know I have a lot of younggins out there that listen as well and I think it's important for us as we get older to also understand trends. To understand who is ruling where things go over the long run and in my opinion it is the millennials. Now, many of you may not even know what a millennial is and a millennial as anybody who was born between 1981 and 1996 and as many of you are including me, you know, we're baby boomers. So that was 1946-1964 and they were like 76 million of us. But you know that the millennials are actually larger, then the baby boomers and that the average age now of a millennial is approximately, I guess it's around 26 or 27 years of age. So, what are these millennials interested in? Well, what's interesting number one is that they're getting at that age, obviously where housing will be on their radar, automobiles will be on their radar and crypto and Blockchain and growth stocks and things like that, will be in their vision of what they want to start investing in. So, it's important that when you look at Bitcoin or you look at cryptocurrencies such as Ethereum or whatever it may be, that these are investments that if you are making it again, because it can go either way. And I know a lot of you are still interested in this topic. I still like this topic, I like it. But here's what you have got to understand if you're investing in cryptocurrencies or Blockchains, can you just do me a favor and stop looking at the price and the fluctuations of it every day. If you're investing in it, you're investing in it for the long term, few years from now, you want to see where it will go. You're not investing in it for it to go $5,000 up or whatever it should be an investment for the long term, especially if these corporations keep putting money in it and some of their cash now is in Bitcoin. Who knows where it can go? There are very smart people out there who think it can go to $500,000 Bitcoin. There are very smart people out there that are saying not going to go anywhere, the government is going to get involved and it's going to go down and that will be the end of it. What you have to know is any money that you put in a Cryptocurrency is money that you can absolutely afford to let sit there for years now. I don't know if it's five years or 10 years or whatever it is or is money that you can afford to lose. Now recently, and I was talking to one of my nieces who I loved so very much and it was so smart. It's not even funny and we were talking about investing in cryptocurrencies. So, I told her what I was investing in and she went ahead and she invested, I asked her after she had done that, how are you doing? She said well I put about $4,900 into Ethereum and I put about $35 or $50, it was something like that, into this other crypto and I said okay that's all you put in it. She said yeah because I really like Ethereum. I said fine then what started to happen was the little crypto that I gave her went from 35 to 50 to 70 to 80 to 85 up to 100. It was then on 113. And I think that around then is when she emailed me and she said Aunt Suze. Do you think I should sell all of my Ethereum and put it into this other crypto? Now, I don't want to be somebody who tells my relatives what they should do. I want to be somebody that educates them on how I do something and if they want to follow my advice fine, but I am not going to make the decisions for them. So, I said to her, let me tell you how I invest. I am an investor. I am not a trader, meaning when I put money in something like this we're not talking about cryptocurrencies. I am in this for the long run. I am not in this to make x amount of money right away. I want to see where does it go 5 or 10 years from now. So, I buy it and this is exactly what happened with me. I bought it at 35, and then I bought some more at 50 and then I bought some more at 75 and 85 and my last big chunk was at $113. And I said I'm just going to hold it so you have to make a decision what you want to do. And then she said, fine, I'll think about it. Now, it runs from 113, 250, 285, 204. And I write her and I say, well what did you do? And she said to me, I left everything alone because that's what I wanted. And I said, and are you happy about that, knowing how far this one crypto ran? And she said, I'm really happy. And I wrote her back and I said, why, thinking a normal human being would be so upset that they didn't get in and get that run. And she said because I trusted my gut, I stuck by what I thought, I have to tell you everybody, I was so ecstatic at that, I can't even tell you. And so, what's important about investing is that you do what is right for you regardless of what anybody else says. And now that crypto is back down I think as we speak at 134 but you have to do what you know, you have to do and not listen. But going back to millennials, but this is their interest, this is where they are going to drive things. So, you just have to be aware that if you are involved in crypto or you want to be involved in crypto that there is a huge millennial movement. That is really, in my opinion, going to change the way investments happen in the future and how things move, just something for all of us to think about. Now to the next spectrum of the market, and the next spectrum is working till 70, so I'm going to go for millennials now to working until 70 and why I want all of you really to start changing how you're thinking about retirement. One thing that is scaring me, big time, is inflation, I have to tell you and partly that's happening because the price of food is going up, the price of cars are skyrocketing, if you're somebody out there who has to rent an apartment rents are up significantly. If you're in New York City, rents are up 70% alone and a lot of these rent increases are because the landlords have learned that sometimes the government is going to step in and they're not going to make you pay your rent if things like this happen like just happened, so there's a moratorium on evictions. So, to protect against things like that, landlords are raising rents. Everything is going up, even I just got to notice the other day, as you all know, I have a boat and my boat has a trailer and I got a notice from the trailer company saying if anything happens to your trailer or you need another trailer, steel prices have gone up, this has gone up, that's gone up, shipping has gone up. So, the same trailer that you have, if you need to replace it is going to be 35-50% more and we just want you to prepare for that in case something is needed on your behalf and I'm thinking everything is going up. So, it is costing you more to live right now than it did a year ago, than it did two years ago and many of you, however, especially in the retirement arena, you're finding that interest rates are still low, you're not exactly sure where to spend money and you figured out everything that this is what it costs you every single month to live. So therefore, you only need this much money and now what you're finding is that you're running short and you're running short why? Because costs of things that you use every single day gasoline, everything is absolutely increasing. So, as you get older, you always have to give yourself a pad for inflation. If in fact your monthly expenses just let's say our $4,000 a month, you should figure everything at $5,000 or $5,500 a month. You should not just cut it that your income meets your expenses because if something happens, likes happening now, how are you going to cover that? Oh, I know you just take more out of your retirement accounts, The more money you take out of your retirement accounts, the less money that is in there to grow for you and in the long run as you get older, it is really possible that what you could run out money faster than you think. So, this 4% rule, which many financial advisors tell you, if you just take out 4% of the money that's in your retirement account over your lifetime, you should absolutely be okay. I'm not so sure if that's true anymore. If I were advising I would figure out everything on. If you took out 2% or 3%, I would give myself room. The other thing that I am scared about really and that I think is a financial danger sign. Do you know that this year will be the first year in our 40-year history of social security that Social Security is going to run a deficit and if it continues to run a deficit by 2034, the funds will be depleted. And what then happens well probably at that time they're only going to be able to pay 78% of all the promised benefits that are out there now, there are solutions to this. But those solutions also very possibly could affect every single one of you. So, you're figuring out your life based on this is your Social Security check, this is what you're getting from your retirement accounts. These are your expenses today and everything is working today. I love that everything's working today. But I care about your tomorrows and maybe I care about your tomorrow's more than you do. But I think it's really important that you always have a retirement cushion, which is why I have said to you forever, once you have retired, I want you to have a three-year emergency fund. I want you to have enough cash liquid to pay for everything for three years and I talk about that in great detail in my ultimate retirement guide for 50 plus and that's a book. Seriously, if you are over 50 you should absolutely read it. If you go on amazon um that's not where you should buy it. If you ask me, by the way, they charged too much, you might just want to buy it by going to suzeorman.com/ultimate and then you can buy for $10 hardback, and that includes shipping. So, if you want to buy it, that might be a place that you go also, it's being offered on HSN today in a great bundle so you might get it that way. But you really need to understand what happens as you get older, why you should downsize right now, if you're thinking about a reverse mortgage, just downsize now. And all these things that are dangerous signs that you need to pay attention to. Now, some of the solutions that you probably are going to see for them to solve the social security crisis is they'll probably do a few of these things, maybe they're probably going to raise your full retirement age and remember it used to be 65, then now it's for most of you, 67, there's nothing to say that they can't take it to 70 So that you don't get to take full social security until you are 70. They may absolutely, you know, get rid of the wage cap, which I think is around $142,000 right now, in terms of the amount of money that we pay taxes for social security and they may very well even reduce the benefit for high-income earners. So, because there is such uncertainty out there, you need to pay attention to the possibility of what financial danger signs are lurking in your personal financial situation. It is so important for you to think about these things because I don't like inflation, I don't like what's happening with Social Security to tell you the truth, I don't really like that people are making decisions with their hearts in terms of when they're buying stuff versus being hardcore and making it with their heads and being really rational and reasonable before they decide to buy something. So, I think that is important. I know that I'm moving quickly here and partly because I have a lot to do today before I do HSN in just a few hours. But these are all things that have been on my mind and one of the reasons that I said earlier, stop looking at things, stop looking at the stock market. Stop looking at crypto, stop looking at the fluctuations, is because if you watch things go up and down every single day, your emotions are going to take over and you are going to sell at the wrong time. You're going to buy at the wrong time. Remember you are in this for the long run at least five years or longer. So, the best way to invest really is by dollar cost averaging every single month into whatever it is that you want to buy, just make sure that there's no commissions for you to do so, obviously there's a little commission for your currencies and everything, but just something to buy. Also, one of you asked me Suze, are you still doing Paypal and Coinbase, is that where you're doing it? I've actually switched now to FTX, this trading platform that I really love because of how it keeps me informed and I get to see certain things. So, you might want to check out if you're really into this FTX.us. It's for the United States here, they all over the world. But it's a platform that I happen to love. But other than that, Paypal and Coinbase absolutely fabulous as well. Coin base has more crypto on it, then Paypal. So, Coinbase may be a better way for you to go. But you have to not be ruled by your emotions. So, the emotions of buying something for a child, even if you can't afford it. The emotions of, oh my god, it's going up and up and up and I wish I had bought it. And then you make a mistake not be like my little niece who didn't do that. She stood in her truth and I'm sure in the long run she will be absolutely correct as Ethereum in the long run also I think will be fabulous. And their platform is changing very quickly. The way that you take the emotion out of investing is through dollar cost averaging, and a lot of you will say, but Suze when the markets are going up and your dollar cost averaging, you're making your cost basis higher than lower. I don't personally care to tell you the truth. If something is going up, I like that it's going up and I like that I'm on the right side of it. A lot of you only like to buy things when they go down, in the hopes that they're going to go back up. If you just keep investing month in and month out in items that give you diversification that you know that you're going to hold for the long run and that are good quality, I'm telling you will be okay. How's that for a rollercoaster of a ride? I can't even remember where we started, where we ended. But I do know this. There's only one thing that matters when it comes to your money and it is this people first, then money then things. And when I say people first, I mean you, you have to take care of yourself first before you take care of other people. Then you take care of your money, then you can buy things. It's just that simple. So, until Thursday you stay safe bye bye.

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