Suze Orman, good solid advice

(photo by Ted Szukalski)

Suze Orman appeared on Oprah yesterday to talk about how to survive the current financial crises.

Like everyone else, she was talking about living beyond our means. We did it, big business did it and the government did it. She connected it to a lack of consciousness and putting money before people. Lots of spending makes business look good and makes the government look good. No one stopped to ask, “Can all these people afford this money we are giving them to spend?” Spending made us feel good too, so we didn’t stop to ask ourselves this same question. Now it’s time to pay and we, the people, the businesses and the government, can’t afford it; hence our current difficulties.

What it means for us:

Lack of credit availability, not just for mortgages but for car loans, college loans and credit cards.

She predicts, due to the credit crunch, that we will be moving to a cash economy, which will force us to live within our needs.

One interesting connection she drew was that when you lose your job and can’t pay your mortgage, your house is foreclosed upon. You don’t pay your property taxes, your city and state can’t pay its employees like law enforcement, fire fighters, dog catchers and garbage collectors. Then your property taxes go up, you can’t afford to pay them and it all goes around again.

One of the couples that called in is unemployed and $90,000 in debt on 29 credit cards. They said they weren’t even aware of having balances on 29 credit cards until they did their debt worksheet. How can you not know that you have a balance on 29 credit cards? That’s pretty unconscious living. Suze pointed out that waiting until they were all maxed out and had nowhere to go was a little late to be calling for help. They should have stopped propping themselves up with credit a long time ago and faced up to their situation. Suze told them to sell their house. They weren’t happy about it but they agreed to do it. Suze also told them they were not victims. They were in a situation they created. Tough talk but true. Not thinking of yourself as a victim can really be empowering. Hopefully they will take charge of their life and dig themselves out.

The next couple was worrying about their retirement accounts. They retired early, sold their home and hit the road in a giant motor home. They wanted to know if they could afford to stay retired. Evidently they had done everything right and had a lot of money in their retirement accounts. They had a goal, lived only on the husband’s salary and banked the wife’s salary. Suze said she’d help them rebalance their investments and they would be fine.

Like a lot of financial advisors, she agreed that those of us who have time on our side would be alright. Keep investing, rely on dollar cost averaging, and be patient; you will come out on top. She recommends if you need your money within the next six months to one year you’d better go ahead and pull it out of the stock market.

She reminded us to make sure our savings were FDIC insured. No one seems to be entertaining the possibility that the FDIC might run out of money, but I guess that’s another story.

She basically is telling us to stop living a financial lie. Don’t buy things you can’t afford. Be honest. Face up to your financial situation and make the changes you need to make to fix it.

Nothing earth shattering here, just good, solid, sensible advice, which I hope we are all following.