Original Air Date:
Tuesday, September 23, 2008
Suze Orman on the Current Economy:
Suze and Oprah started out the show by discussing in simple terms how the economy fell into the current crisis. Suze commented that the economy is built on lies and deceit. A lack of regulation for banks, mortgage companies, etc combined with greed at the very top of the system all worked out to mean trouble for the American economy.
Main Street America is not so different from Wall Street. Families have been buying homes they couldn't afford, leasing expensive cars, putting purchases on credit and basically living off of money they don't actually have but that is borrowed.
Suze Orman on Economic Impact:
The current economy crisis is more serious than it has ever been, according to Suze. The issue isn't a corporate issue however, since corporations are made up of people - it is a people issue. Suze regularly says that people come first, then money, then things - but many of the people running these corporations in trouble put the money before the people, putting the country in this position. While the lies made the economy look good, the truth is coming out and regular Americans will have to pay the price.
Most Americans will see the impact of the struggling economy in the difficulty they will have in getting home, car and even student loans. More effects will be seen in 401K loss, high unemployment, not being able to retire, more foreclosures which will lead to less property taxes being paid and other taxes being raised to make up for the loss.
Suze Orman on What to Do:
Suze's tips for what families can start doing to protect themselves are very simple. First of all, stop living financial lies - Suze shared that if you are living an honest financial life, you will be fine no matter the state of the economy. Ways to live honestly include: don't buy something unless you actually have the money, keep cars for 10 years, downsize home size and possessions. Oprah shared that it looks like the country may return to a cash economy and Suze agreed that it is possible, and smart to base purchases on the money in the bank and not the desire for the object.
Viewers Tim and Tammy:
Viewers Tim and Tammy appeared on the show via Skype to share their story. Tim and Tammy are parents of 2 who live in Florida and are in a financial emergency. The family does not have health or life insurance, they owe more on their house than it is worth, Tim was laid off from his job in the spring and they are surviving on their credit cards which they now owe over $90,000 on.
Suze's Response to Tim and Tammy:
Suze started her response to Tim and Tammy by telling them she wishes she was able to empathize with them, but that they are living a lie and absolutely set themselves up for this situation. Tim and Tammy are $2,000 short each month for what they must have to live. They in part got to this situation by buying a home they couldn't afford, using credit, living beyond their means and not having an emergency plan in place. The couple didn't reach out for help until everything had already fallen apart. If they would have been honest 2 years ago they wouldn't be in their present situation.
As the first step to recovery, Suze told the couple that if they want to stand by being proud people, they need to start being honest - and that means selling their house. To this statement Tammy replied that they would spend approximately the same on rent that they do on their mortgage, but Suze snapped them right into place by telling her "I will not let you deceive yourself anymore!" In truth, the family needs $3,000 a month to pay for their mortgage, taxes, insurance and utilities. $3,000 a month just to be in the house. Many families don't realize what it costs to keep a home.
Suze Orman on What Else to Do:
Suze shared that the majority of the country doesn't need to worry; if your money is in an insured bank, you don't need it for 10, 15 or 20 years, you are diversified in quality funds, than you are fine and will ride out this recession.
The people that need to review their finances with a professional advisor are those that are within 1 year of retirement and have a majority of their money tied up in the stock market. People in this situation, according to Suze, will not have time to recover and need to pull out of the stocks and move into something safer.
Viewers Jill and Jose:
Oprah and Suze went outside the studio to talk to Jill and Jose who retired early to live full time in an RV. Their concern is since food and fuel costs are rising, they wonder if they can afford to stay on the road.
Suze commended the couple for doing everything right. They have plenty saved for their actual retirement years, they just didn't want to touch that money to afford to stay on the road. Suze recommended that they change some of their investments from growth to dividends so that they could use those funds to increase their income during this time.
Oprah commented how new their RV smelled and how clean it was, though they responded that they bought it in 2002. Suze shared that people who respect what money can buy, respect money itself.
Suze added that the couple was smart in planning for their retirement: living off of 1 income while investing the other. Many families in America make more money and increase their lifestyle, not increasing their savings, which is a big problem.
Will the Economy Get Worse Before It Gets Better?
Suze told viewers not to panic during this situation and to follow the guidelines provided by the FDIC to insure your money is safe. Whether the economy will get worse before it gets better depends on how honest the companies are willing to be with themselves and the country. If they continue to tell lies about where they actually are financially, it will get worse. But Suze shared that each person has the control to live honestly as individuals, protect yourself, and create change from the bottom up.
