Suze Orman is appearing on PBS right now on her fifth special, Young, Fabulous, and Broke. I’ll live-blog the first hour of the program. You can catch her on WNET 13 New York or possibly your local PBS station. Show them your support.
Read on and reload throughout the hour! Keep in mind my server is a little slow when it comes to posting.
Her first point is about how talking to a 24-year old made Suze question the financial beliefs to which she held fast. She realized that following her standard advice is difficult for the 25-to-35 age group: the “Young, Fabulous and Broke” as coined by Suze.
Just about everything in the economy today is working overtime against this generation. We have to take responsibility for funding our retirement. The old advice doesn’t work anymore.
She is relating the FICO score to your SAT score. Build the credit score while you’re young and you’ll have the ability to get good rates on debt and even get jobs (?) just like good SAT scores will open doors to colleges.
Don’t close down credit cards… keep them active (but unused) to keep your debt to credit limit ratio high. That will have a good effect on your FICO score. I used to close old credit cards. Now I just leave them open, having heard this advice a few years ago.
She’s talking about the FACT Act. On the east coast of the United States, we’re still waiting for free credit reports to be available to us.
Advice: Don’t depend on a paycheck. Make your mark so those who give you your paycheck are dependent on you. Suze gives us a story as an example. She advised a young person not to take a $65,000 job because it wasn’t what she wanted to do. Work for something you love and strive to be what you want to be for the rest of your life.
Once you get that job, you must kick ass and not ask for a pay raise. You have to be the greatest worker they’ve ever seen. But how can you survive on a sub-$30,000 salary in New York?
Suze’s answer: credit cards! Consider it investing in yourself. Borrow what you have to while you’re in the “establishing” stage. You, the youth of America, are the only undervalued asset left in this economy.
Good use of a credit card: groceries, gasoline for work.
Bad use of a credit card: eating out, gasoline for going out with buddies.
One and a half years later, Suze’s example received a great raise and didn’t need to use her credit card any longer. Use the credit card in order to “give your all to the place you’re working” and they’ll notice and want you. And don’t ask for money. Prove yourself and the money will follow.
Ah, pledge break. Before the break, Suze gave us a hook so we don’t change the channel. When we return, she’ll give us three things for something-or-other. During the break, Suze tells us that when she became a financial advisor with Merrill Lynch, she realized the importance of financial education.
The audience is very responsive when Suze offers a 50% return on their money. This is probably heading towards a “company match on 401(k)” bit. She is saying that it is necessary to not take this “free money” opportunity. I had to lower my 401(k) investment, but I still invest just enough so I get the full company match.
This is exactly what she’s suggesting for those whose company offers a match. If a company doesn’t offer a match, don’t invest. Pay off debt instead. After the credit card is paid off, or if you have none, the next step is to do a Roth IRA.
The taxes we have now are lower than they have ever been. Most likely, tax brackets will increase. So take the tax hit now and invest money with an account that gives you many choices instead of a 401(k) that defers taxes and usually has limited choices. When you take money out of your Roth IRA after you’re 59 1/2, you can do so tax free. Your contributions (but not gains) can be taken out of the Roth IRA at any time, it is tax free and there are no penalties.
After the Roth IRA, start saving for a down payment on a home. Every single person needs to have a goal of owning a home. A home is the best investment no matter what. No one has 20% to put down anymore due to overvaluation of houses. Returns on real estate have been above normal, but assume that everything will return to normal as they tend to do. Suze is very hot on real estate and she uses some fuzzy math by ignoring mortgage debt to come up with the idea that putting down $10,000 for a $100,000 house that appreciates 4% gives you a 40% return on your initial investment.
She just now mentioned having an emergency fund, forty minutes into the program. This takes us to another pledge break. What gifts are they offering? A DVD or VHS of the program (with deleted scenes!) for $75. For $120, a copy of her new book. For $270, a “complete financial fitness kit.” That includes a copy of the show, the book, a free audio download of the book, a guide to credit reports and scores, a “talk to your kids about money” guide, and a kit for making wills and trusts.
The pledge phones aren’t ringing much, but all the volunteers seem to be talking to callers. (We all know that’s just for show, anyway.) It’s 8:50, and I’m wondering if the show will come back from the pledge drive to actual programming before I am “forced” to change the channel to watch The West Wing.
Suze is talking about mortgages during the break. Don’t get a variable rate mortgage if you’re going to be in the house for a while.
It looks like this is it for me. I hope you enjoyed the live-blogging. It’s time for me to change the channel and make some dinner.
March 9, 2005.
Updated February 6, 2012 and originally published March 9, 2005.