This post is Part One of a one-part series of financial discussions between financial experts Suze Orman and Nik Daum.
Nik: Thanks for sitting with me today, Suze. Nice jacket, by the way.
Suze: Thanks. Glad to do it, Nik.
Nik: So this has been a wild year so far in the markets hasn’t it? It makes me glad to practice what you preach: living within my means, taking charge over my money rather than my money taking charge of me, that sort of thing.
Suze: Glad to see you’ve been living within your means. How’s work going?
Nik: Well, I haven’t had a job since April. I’ve been traveling. No time better than a grave global financial crisis to go traveling.
Suze: I disagree.
Nik: Fair enough. So Suze, even though we’re both financial experts our investments have still plummeted in the past year. For instance, since January my retirement mutual funds have lost half their value. What are your thoughts in times like these? Should we take all our money and put it under a mattress? Buy MORE stock? Commit suicide? All of the above?
Suze: My first bit of advice is to calm down. We both have too much money to commit suicide. And listen, do not take your money out of a retirement account. If you are under 60 years of age, not only do you have to pay income tax on that money but also a 10% penalty. You have many years until retirement, and despite how low the value of your shares is now, it’s still better to own them in the long run. But don’t go rushing out to buy more either. We’ve weathered a lot of damage already, but the corrections still aren’t over.
Nik: It’s hard not to panic when I see all my hard earned money disappearing.
Suze: I know; it’s hard. But risk equals reward. The market is like shooting needle drugs. You might get AIDS, but not if you’re wise about it. And the highs are wonderful.
Suze: I know, I know needle drugs are expensive. A more frugal investor could freebase charcoal briquettes. But before he does that, he should pay off all his high interest credit card debt.
Nik: Did you know I don’t have any credit card debt?
Suze: Good for you. Me neither. Are you platinum?
Nik: Standard Platinum. (high fives)
Nik: Everybody my age seems to be buying houses and having kids. At some point I’ll bite the bullet and have both of these things too. Any advice?
Suze: Why are you asking me all the questions?
Nik: I just figured that you were a guest on my blog, so I’d function as more of the host.
Suze: Do you have any idea how famous I am? I’ve published numerous books and am a columnist. Plus, I have a show of my own and have hosted specials on PBS.
Nik: What’s “PBS”, some kind of woman thing?
Suze: I’m just saying that I should be at the helm.
Nik: Let’s agree to disagree.
Suze: I disagree.
Nik: That’s the spirit! So Suze, any advice about home buying?
Suze: The question you should be asking yourself is: “What can I comfortably afford?” That’s what you want to borrow. Not a penny more. These days, it’s better to think of buying a house as a place you want to live rather than an investment. I own 45 houses, and each one is only the amount of space I need.
Nik: Maybe I could just have one of your houses?
Suze: No. I need all of them.
Nik: Do you have any kids?
Suze: No. Do you?
Suze: Yes. Stillborns count too.
Nik: No living; 3 stillborn. I saved a lot of money on college costs by having stillborns.
Suze: Well, except medical expenses.
Nik: You’d be surprised how affordable hospitals are if you use a fake ID.
Suze: It’s true. Faking an identity to reduce medical costs is one of the primary ways to manage consumer debt and secure your financial future. Also start saving early. Focus on the long term. Know the difference between good debt and bad debt.
Nik: Well Suze, it’s been a great visit. Any parting words?
Suze: You still owe me 20 bucks from when you couldn’t pay the cab fare.
Nik: Be sure to check out Suze at The 7th annual Commerce Bank/Star-Ledger Road to Personal Wealth Conference, Saturday, November 15th at Rutgers University.
Suze Orman is a two-time Emmy Award-winning television host, New York Times bestselling author, magazine and online columnist, writer/producer, and motivational speaker. She is regarded as one of the most well-known faces in personal finance.
Nik Daum doesn’t have a job.