Original Air Date:
Thursday, April 2, 2009
Handling the Recession:
Starting in October of 2007, financial planner Suze Orman issued her first warning to viewers that trouble was coming for the US economy. On March 7, 2009, President Barack Obama announced that 4.4 million jobs had been lost during this recession. With the worst economy since the Great Depression, the number of bankruptcies and foreclosures are rising and with shelters across the country full, people are resorting living in tent cities and other options. With fear taking over many families, Suze stepped in to help people save themselves with their own plan.
Suze Helps Luci and Barry from California:
2 years ago Luci and Barry had a combined income of $170,000 with no credit card debt, a manageable mortgage and money in their savings. With home equity and emergency credit cards, the couple felt they were doing everything right if the bottom were to fall out.
Everything that could go wrong did for Luci and Barry - both laid off twice, $18,000 in credit card debt, their equity reduced and credit cards cancelled, the couple have depleted their savings and are struggling just to get by. The couple has done their best to cut their expenses and are wondering how they will survive.
Suze addressed the couples budget on the show as they are still spending $6270 a month on expenses and are only receiving $3400 a month for unemployment which ends in just 3 months. Suze offered more ways the couple and viewers can cut their expenses:
Reduce or eliminate the following expenses:
- home phone
- cell phone
- internet
- cable
- electric
- gas
- haircuts
- makeup
- eating out
- new clothes
- manicures
- gifts
- daily newspaper
- satellite radio
Making changes to these expenses could save a family $500 a month or more. In these tough times, it is vital to go to bare bones to survive.
Suze's Recession Rescue Step #1 - Live On Half:
Suze's first step to making it through the recession is to live on half. Find a way to cut expenses so that a 2 income family can bank 1 income or a 1 income home can bank 1/2. This plan is necessary because the time to figure out how to cut back is not right after losing a job. The time to prepare for the recession to hit your home is right now.
Suze's Recession Rescue Step #2 - Stash Your Cash:
Relying on a home equity line of credit or credit cards to see you through the recession is not a good choice when companies are reducing credit lines or canceling accounts. If you don't find a way to keep cash on hand, losing your job without credit or cash will leave you in serious trouble.
Suze talked to Cindy from GA via Skype who was laid off and received a severance package. Cindy wondered if she should pay off her CC debt or use the money for an emergency fund. Suze changed her regular advice and told Cindy to keep the cash for this emergency and only pay the minimum due for her CC and keep saving.
Suze's Recession Rescue Step #3 - Make the Stimulus Package Work for You:
With new programs being passed in the government's stimulus package, Suze wanted to help viewers make the plan work for them.
Alison from DC asked Suze via Skype who is eligible for the COBRA subsidizing from the government. COBRA is an option for people who are laid off to continue their health insurance with their company for up to 18 months, but it is rather expensive. The plan through the government allows people to only pay 35% of the expense for the first 9 months, moving to 100% after that time. With only 60 days to enroll, the plan could save Alison $2750 in 9 months.
Elissa from NJ wanted Suze to help her decide if she should use the $8,000 tax credit for first time home buyers. The plan is for first time home buyers only who purchase in 2009 with under $75,000 income for singles or $150,000 for couples. The $8,000 credit comes off the taxes you owe and can be a great option for people who can afford to buy right now. With Elissa's budged that Suze reviewed, she could afford a $200,000 house right now and benefit from the plan.
Suze's Recession Rescue Step #4 - Make Your Home Affordable:
Lynette and Derek from TX wanted Suze's help finding out if foreclosure is an option for them. Even though they are both employed, they cannot afford their rising mortgage and have a large amount of debt.
Suze told the couple about a government program called the Home Loan Modification Program that helps people keep their home in this recession. Going to the program website, you are able to do a self-assessment to see if your family qualifies for help to move forward contacting your bank.
Suze ran the numbers for the couple and found they could save $200/month. The couple needed to save $1400 per month in their expenses to keep their home, which Suze was able to find for them when she reviewed their budget. In order to qualify for this service, the loan on your home must be held by Fannie Mae or Freddie Mac.
Unemployment Benefits:
Suze did a brief explanation of unemployment benefits for those who have recently been laid off and wonder if they qualify:
- You must be laid off, you cannot quit or be fired
- There is no time limit to apply
- You have a limited time to appeal if you are denied
- You can apply online
- You will never receive more than 50% of your income
- Benefits last for up to 26 weeks
- Some people may qualify for an extension of benefits up to 46 weeks
- Unemployment now offers an additional $25 per week
Tara in the audience was laid off and offered a severance package and wondered if it would affect her unemployment application. Suze assured Tara that it would not change her unemployment because they don't have anything to do with one another. Unemployment is, however, taxable income for the following year, but through the government stimulus package, the first $2400 are tax free.
Suze's Recession Rescue Step #5 - Look at What You Have, Not at What You Had:
Rev. Walker, 65, shared his story of financial crisis with Oprah's cameras. After retiring in 2001, Rev. Walker and his wife felt secure as the income from their investments was greater than their expenses. In October of 2007, the couple lost half of their savings when the economy turned and now fear they may outlive their resources.
Suze agreed with the couple that it's not fair that the lies and corruption from the banks and Wall Street were somewhat ignored as they were able to get away with millions of people losing their savings. But because we cannot change what's already happened, Suze's advice is to look at what we have and not at what we had. Though it is hard, Suze's suggestion is to find faith that everything happens for the best and to try to see this recession as a gift that has allowed people to find what they value in their lives again instead of material things and vanity. Having gratitude for the multitude of things in your life now will motivate you into action to create your own plan to make it through the recession with success.
