Get Motivated! Series: Suze Orman

Recently I was given the opportunity to attend a conference about motivation featuring such well-known speakers as Rudy Guiliani, Colin Powell, Suze Orman and Zig Ziglar. I’d first heard about the conference on the radio and was interested until I heard the incredible $225 per person admission fee. For prices like that they’d better be telling me the meaning of life or the answers to all of the conspiracy theories for the past 500 years! Luckily, my work happened to secure some tickets at a promotional rate and I was one of the managers invited to attend.

While I certainly wouldn’t say the advice imparted was on the same level as the meaning of life, there were some nuggets of information from each of the speakers that are worth sharing. So with that, I’m happy to introduce the first-ever Saver in the City blog series on motivation – starting today with Suze Orman.

Suze Orman, personal finance expert
Get Motivated!: Securing your Financial Future

I’ve read enough blogs and financial websites to know that Suze Orman is controversial and not exactly the most well-liked financial expert out there. Whether because of her brash in-your-face attitude or her stance on finances I don’t know, but after seeing her yesterday I have to say she made some solid points with which I believe most financially responsible people would agree.

 *Americans rely way too much on credit: At the beginning of her talk, Orman did an exercise where she asked everyone with credit card debt to stand up. About half of the 4,000 people in the room got to their feet. Next she asked those with car loan debt, followed by student loan debt, mortgage debt and so on to stand up. By the end, literally 99.9% of people were standing, which was a pretty sobering picture when you consider that the attendees at this conference were probably a good representative sample of the U.S. in general.

*We brought this financial mess onto ourselves: According to Orman, “We’ve spent ourselves into this situation, we can’t spend our way out of it.” Amidst all the finger pointing, I’m glad to see some “experts” attributing blame to the general public. Yes there were greedy mortgage brokers, shady credit card companies and M.I.A. regulators, but whatever happened to personal accountability? If people hadn’t actively participated in living well beyond their means, all of those industries that took advantage of the situation wouldn’t have thrived.

*The key to your financial future is no debt: Here I’d have to say I disagree with her slightly. The only debt I currently have is my mortgage and while I’d love to have it paid off, that’s not currently feasible. I can easily make the payments each month and I even make one extra principal payment a year, but I don’t know anyone personally who could buy a house with cash up front. Therefore, until I am in that enviable position, I’d much rather be building equity than throwing more than $1,000/month toward rent.

*If you own a house, have an 8-month emergency fund: Right now I have an emergency fund of about $10,000 which should cover me for 5 months of living frugally. Although 8 months at first sounded excessive to me, I’ve also never lived through a recession with unemployment possibly reaching 9%, so I might start working on adding to this fund.

*Never take a loan from your 401k plan: I’ve had the magic of compounding interest drilled into me by my banker dad so I’ve never considered this, but Orman gave a few other practical reasons why this is never a good idea. First, 401k money is protected against bankruptcy so you’ll at least have that to fall back on if you’re ever faced with such a situation. Secondly, if you lose your job the money you borrowed from your 401k can come payable as little as a few weeks later. If you can’t repay it, this money is considered ordinary income and fully taxable.

*Keep investing: But only if you have 8-10 years or longer until retirement. If you have less time until you plan to retire, consider putting your money in safer investment vehicles. For people in their 20s and 30s, though, this is a great time to employ dollar cost averaging to purchase good quality, high yield dividend paying ETFs, mutual funds or stocks.

While I wouldn’t call them predictions, Orman also speculated on how bad the economy could get and how long the housing market may stay in the weeds…and the news is not good. With regard to the federal funds rate, she warned it could hit 0% in the next year, which would make savings account rates basically non-existent. For housing, she didn’t see a turnaround until maybe 2010, and even then she said we would not see rates of appreciation near early-2000 levels for a long, long time, if ever.

At the end, she challenged the audience to do three things:

• In the next two weeks, go one day without spending a penny.
• In the next month, go one week without using a credit card.
• In the next three months, go one month without dining out.

I consider myself pretty financially savvy, but honestly, I could do #1, I’d probably resent #2 and I’d fail miserably at #3. How do you think you’d do, Saver in the City reader?

Filed under Finances | Comment (0)