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Interview With Financial Planner Suze Orman

Aired March 11, 2003 - 15:22   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


HEIDI COLLINS, CNN ANCHOR: Sometimes we like to call this our good news segment. Unemployment is rising, along with gas prices. The market is falling, war is looming and your portfolio isn't looking so good. Well, what to do?
We have invited certified financial planner Suze Orman to join us today. A kind of superwoman of finances. She gave us "Nine Steps to Financial Freedom" and is the author of a new book titled "The Laws of Money, Lessons of Life." Keep what you have, create what you deserve. I like it.

Suze will take your e-mails. You can go ahead and send your questions to livefrom@cnn.com. Thanks for being here.

SUZE ORMAN, AUTHOR: Glad to be here. That was such a wonderful, uplifting introduction, wasn't it?

COLLINS: We're all drama here, Suze. But, seriously, we have a lot on our shoulders right now, an awful lot.

What should we be doing, most basically, with our money right now?

ORMAN: Here's what I find so fascinating. All the shows keep talking about how to invest money. What money? Nobody has any money. Let's just get real. What do we have? We have credit card debt. We have car loan payments. We have mortgage payments. We have student loan payments. And now we really will get depressed, because those are our old news items. So therefore, let's forget about the market for now. The market isn't going anywhere for a long time. Let's deal with what we can deal with.

Can we take our extra money, whatever that is rather than investing, possibly in a 401k plan, after the point of match, if you have a 401k that matches, let's get rid of the credit card debt. Then lets get rid of the car loan debt. Then, let's get eight months of an emergency fund. And then start saving for a down payment on a house. Then once we've bought a house, all those things are taken care of, you want to go back to your 401k plan and you have at least 10 years until you need your money, OK, no problem. Other than that, can we just stick to basics.

COLLINS: So (UNINTELLIGIBLE) what you said. I'm interested in the credit card debt and the 401k. You don't want to be doing both?

ORMAN: You don't want to be doing both right now. One thing, when you work for a corporation, 401k, 403b plan happens to be yours. You put in a dollar they give you 50 cents. That's a 50 percent return on your money go for it. But up to a certain point, they stop or some corporations don't do it at all. Forget the 401k plan for now. You want to guarantee a 18 percent return on your money, 6 percent return on your money, pay off your credit card debt. Average interest rate in the United States on credit card debt 17.49 percent. The market is not going to give you that. So let's get rid of those debts first.

COLLINS: And you talk also a lot about the buy and hold strategy, saying that, you know what, this just does not work.

ORMAN: And it hasn't worked for a long time. Isn't it true that your financial advisers have said, don't worry about it, you buy, you hold, it will come back. I don't think so. You look at where the Nasdaq is right now. We are down 74 percent from its high. Most people have losses in the Nasdaq. For it to go back to where it was in March 10, 2000. That's a 275 percent increase or at 9 percent a year, 15 years, just to break even. Just because something was a good stock -- I know, now this is really getting depressing. I'm so very sorry.

COLLINS: We're going to have to regroup. We need to take a break. We are going to take a quick break, folks and we'll be back in just a moment. Stay with us.

(COMMERCIAL BREAK)

COLLINS: We are talking with certified financial planner Suze Orman about what to do with your money if there is a war. We also have Miles O'Brien standing by at the big board because we're taking your e-mails, and you have a couple of them.

MILES O'BRIEN, CNN ANCHOR: Yes, I am sorry. I was busy cutting up my credit cards and then about to slit my wrist after that, Suze. You really depressed me.

ORMAN: Miles, you should know better. Last time I was with you we talked about that credit card debt of yours.

O'BRIEN: You gave me a tongue lashing. Did I listen to you? No, no, no, I went along with the bubble along with everybody else.

Here's Judy G., she has this for you. "With war looming and retirement close, we are afraid to invest in the stock market. My husband and I only have $70,000 saved for retirement, all in an IRA, money market. We may retire in six years."

For the sake of argument, Suze, let's assume she has no credit card debt here, OK.

ORMAN: If that's the situation that you are in, what you would do is just keep it in a money market fund or, when it comes time, you can do an IRA rollover with it. You can have it and buy individual bonds. You stay away from bond funds right now. Go into individual bonds such as treasury, bill bonds or notes within an IRA. Don't go out further than 5 or 7 years and you'll be absolutely OK in terms of your money. If you are afraid of the stock market, which you should be at this point especially since you only have a few years left, stay away from it.

COLLINS: And, you know, it brings up a good point. I'm sure you are hearing that people are, because of the situation, kind of a sign of the times, people retiring later if at all, right?

ORMAN: Now, you know, here's the sad part, again. I'm sorry to be filled with bad news. Most of us will spend more years in retirement than we ever did working, now that the average life expectancy is not until 85, 90 years of age. But here's the problem, we don't have the money since the decline in the market, to retire. But we have 8 million people out employment. So as you get older, the truth is you become less attractive for an employer to hire you. That is why you have to be out of credit card debt. That is why with any extra money, as soon as you know you're going to retire, let's pay off the house, because your house is your biggest monthly expense. And you don't want to get caught in a situation where you can't pay that mortgage, because then what your going to do?

COLLINS: All right.

Miles, I think you have another one, right?

O'BRIEN: All right, Suze, you make it all sound so simple. Why isn't?

Lets look at this one. Lynn H. says this, and you answer part of this question, but the last part I want you to address. "I invested in some mutual funds in March of 2000. I'm down about 60 percent." Who isn't? "What should I do with it, should I wait for the 15 years it will probably take to get the money back?" She had already done that math by the way. Or "Do I at least wait for the war to be over?"

That's the question I have. Should people sell out right now or will there be a little blip once things resolve themselves one way or the other with Iraq?

ORMAN: I'm one of these believers that do not believe the reason that this market is down and has stayed down is simply because of this war. We have no earnings coming in from the companies that make any sense based on increase in revenues. Or maybe their earnings reports. Why, because they are decreasing their employment and all kinds of things that. We're going into a deficit situation. We already were. Things aren't making sense.

Here is the thing that has confused me, why is it that people are so afraid to come out of the market? Are they afraid that they can never go back in?

The Market will be there if you have any money to play to go back in. If not what are you going to do? So, if your afraid come out? If you don't know what to do come out with half. But do something that makes sense. At least do something.

COLLINS: All right. We're working very hard to make it all make sense. And we appreciate you being here. Certified financial planner Suze Orman, author of "The Laws of Money, the Lessons of Life." Thanks so much for being with us today.

ORMAN: Any time, Heidi.

COLLINS: Miles.

O'BRIEN: The head of our financial security council.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired March 11, 2003 - 15:22   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
HEIDI COLLINS, CNN ANCHOR: Sometimes we like to call this our good news segment. Unemployment is rising, along with gas prices. The market is falling, war is looming and your portfolio isn't looking so good. Well, what to do?
We have invited certified financial planner Suze Orman to join us today. A kind of superwoman of finances. She gave us "Nine Steps to Financial Freedom" and is the author of a new book titled "The Laws of Money, Lessons of Life." Keep what you have, create what you deserve. I like it.

Suze will take your e-mails. You can go ahead and send your questions to livefrom@cnn.com. Thanks for being here.

SUZE ORMAN, AUTHOR: Glad to be here. That was such a wonderful, uplifting introduction, wasn't it?

COLLINS: We're all drama here, Suze. But, seriously, we have a lot on our shoulders right now, an awful lot.

What should we be doing, most basically, with our money right now?

ORMAN: Here's what I find so fascinating. All the shows keep talking about how to invest money. What money? Nobody has any money. Let's just get real. What do we have? We have credit card debt. We have car loan payments. We have mortgage payments. We have student loan payments. And now we really will get depressed, because those are our old news items. So therefore, let's forget about the market for now. The market isn't going anywhere for a long time. Let's deal with what we can deal with.

Can we take our extra money, whatever that is rather than investing, possibly in a 401k plan, after the point of match, if you have a 401k that matches, let's get rid of the credit card debt. Then lets get rid of the car loan debt. Then, let's get eight months of an emergency fund. And then start saving for a down payment on a house. Then once we've bought a house, all those things are taken care of, you want to go back to your 401k plan and you have at least 10 years until you need your money, OK, no problem. Other than that, can we just stick to basics.

COLLINS: So (UNINTELLIGIBLE) what you said. I'm interested in the credit card debt and the 401k. You don't want to be doing both?

ORMAN: You don't want to be doing both right now. One thing, when you work for a corporation, 401k, 403b plan happens to be yours. You put in a dollar they give you 50 cents. That's a 50 percent return on your money go for it. But up to a certain point, they stop or some corporations don't do it at all. Forget the 401k plan for now. You want to guarantee a 18 percent return on your money, 6 percent return on your money, pay off your credit card debt. Average interest rate in the United States on credit card debt 17.49 percent. The market is not going to give you that. So let's get rid of those debts first.

COLLINS: And you talk also a lot about the buy and hold strategy, saying that, you know what, this just does not work.

ORMAN: And it hasn't worked for a long time. Isn't it true that your financial advisers have said, don't worry about it, you buy, you hold, it will come back. I don't think so. You look at where the Nasdaq is right now. We are down 74 percent from its high. Most people have losses in the Nasdaq. For it to go back to where it was in March 10, 2000. That's a 275 percent increase or at 9 percent a year, 15 years, just to break even. Just because something was a good stock -- I know, now this is really getting depressing. I'm so very sorry.

COLLINS: We're going to have to regroup. We need to take a break. We are going to take a quick break, folks and we'll be back in just a moment. Stay with us.

(COMMERCIAL BREAK)

COLLINS: We are talking with certified financial planner Suze Orman about what to do with your money if there is a war. We also have Miles O'Brien standing by at the big board because we're taking your e-mails, and you have a couple of them.

MILES O'BRIEN, CNN ANCHOR: Yes, I am sorry. I was busy cutting up my credit cards and then about to slit my wrist after that, Suze. You really depressed me.

ORMAN: Miles, you should know better. Last time I was with you we talked about that credit card debt of yours.

O'BRIEN: You gave me a tongue lashing. Did I listen to you? No, no, no, I went along with the bubble along with everybody else.

Here's Judy G., she has this for you. "With war looming and retirement close, we are afraid to invest in the stock market. My husband and I only have $70,000 saved for retirement, all in an IRA, money market. We may retire in six years."

For the sake of argument, Suze, let's assume she has no credit card debt here, OK.

ORMAN: If that's the situation that you are in, what you would do is just keep it in a money market fund or, when it comes time, you can do an IRA rollover with it. You can have it and buy individual bonds. You stay away from bond funds right now. Go into individual bonds such as treasury, bill bonds or notes within an IRA. Don't go out further than 5 or 7 years and you'll be absolutely OK in terms of your money. If you are afraid of the stock market, which you should be at this point especially since you only have a few years left, stay away from it.

COLLINS: And, you know, it brings up a good point. I'm sure you are hearing that people are, because of the situation, kind of a sign of the times, people retiring later if at all, right?

ORMAN: Now, you know, here's the sad part, again. I'm sorry to be filled with bad news. Most of us will spend more years in retirement than we ever did working, now that the average life expectancy is not until 85, 90 years of age. But here's the problem, we don't have the money since the decline in the market, to retire. But we have 8 million people out employment. So as you get older, the truth is you become less attractive for an employer to hire you. That is why you have to be out of credit card debt. That is why with any extra money, as soon as you know you're going to retire, let's pay off the house, because your house is your biggest monthly expense. And you don't want to get caught in a situation where you can't pay that mortgage, because then what your going to do?

COLLINS: All right.

Miles, I think you have another one, right?

O'BRIEN: All right, Suze, you make it all sound so simple. Why isn't?

Lets look at this one. Lynn H. says this, and you answer part of this question, but the last part I want you to address. "I invested in some mutual funds in March of 2000. I'm down about 60 percent." Who isn't? "What should I do with it, should I wait for the 15 years it will probably take to get the money back?" She had already done that math by the way. Or "Do I at least wait for the war to be over?"

That's the question I have. Should people sell out right now or will there be a little blip once things resolve themselves one way or the other with Iraq?

ORMAN: I'm one of these believers that do not believe the reason that this market is down and has stayed down is simply because of this war. We have no earnings coming in from the companies that make any sense based on increase in revenues. Or maybe their earnings reports. Why, because they are decreasing their employment and all kinds of things that. We're going into a deficit situation. We already were. Things aren't making sense.

Here is the thing that has confused me, why is it that people are so afraid to come out of the market? Are they afraid that they can never go back in?

The Market will be there if you have any money to play to go back in. If not what are you going to do? So, if your afraid come out? If you don't know what to do come out with half. But do something that makes sense. At least do something.

COLLINS: All right. We're working very hard to make it all make sense. And we appreciate you being here. Certified financial planner Suze Orman, author of "The Laws of Money, the Lessons of Life." Thanks so much for being with us today.

ORMAN: Any time, Heidi.

COLLINS: Miles.

O'BRIEN: The head of our financial security council.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com