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Declined? How to Fight Back and Get Out of Debt

By Suze Orman

I’m all for taking credit where credit is due, but when it comes to credit cards, way too many of you are overdoing it. For Americans who don’t pay their entire credit card bill each month, the average balance is close to $4,000. And when we zoom in on higher-income folks—those with annual incomes between $75,000 and $100,000—the average balance clocks in at nearly $8,000. If you’re paying, say, 18 percent interest on an $8,000 balance, and you make only the 2 percent minimum payment due each month, you are going to end up paying more than $22,000 in interest over the course of the 54 years it will take to get the balance down to zero.

That’s absolute insanity.

And absolutely unnecessary.

If you have the desire to take control of your credit card mess, you can. It’s just a matter of choice. I am not saying it will be easy, but there are plenty of strategies that can put you on a path out of credit card hell. And as I explain in the accompanying sidebar, even those of you who can’t seem to turn the corner and become credit responsible on your own, can get plenty of help from qualified credit counseling services.


Building a Nest Egg on a Single Salary Is Hard, but Not Impossible

By Suze Orman

Whether you are a single parent, or a couple with one of you at home full-time, figuring out how to pay for the everyday expenses of being a family while also saving for retirement on just one paycheck is a tough challenge.

To pull it off you need discipline and perspective. Discipline to commit to a strategy and stick with it. And perspective to recognize what truly matters in your life. Because the bottom line is that stretching one paycheck to cover the costs of today and the savings needed for tomorrow requires making tradeoffs.


Are Your Finances Healthy or High Risk?

By Suze Orman

I know you know your SAT score.

And I bet you know your cholesterol score.

Some of you could probably rip off the phone numbers of old boyfriends and girlfriends you haven’t spoken to in 10 years.

So tell me something. If you’re so good with numbers, why don’t you know your credit score?

I recently spoke to a large audience of successful business people and asked them if they knew their FICO score. I got plenty of reassuring nods. But I know better. A few minutes later, when I mentioned how to get your FICO credit score, everyone whipped out their pens and Blackberrys to take down the info.

It never fails: no matter who’s in the audience, I typically get a 70 to 90 percent failure rate when I ask who knows their credit score and why it matters.

This has got to stop. Right now.


Everyone Deserves Some R&R, but Don’t Let Your Vacation Break the Bank

By Suze Orman

As far as I am concerned, vacations are a necessity, not a luxury. But where I see so many people take a wrong turn is when they spend money for a luxury vacation that they can’t afford.

While I think one of the best things you can do for yourself, your family, and yes, the quality of your work, is to take a break every now and then to recharge the batteries, it makes absolutely no sense to book a vacation that will blow your bank account. You end up spending one week enjoying yourself, and the other 51 weeks of the year stressing over the huge new load of debt you racked up by putting the plane tickets, hotel, and restaurant bills on a credit card you have no way of paying off any time in the foreseeable future.

Or even worse, you think it’s totally okay to pile up the credit card balance for your vacation, because you think you deserve to indulge yourself given how hard you work!

That’s the story I got the other day at the hairdresser. The woman washing my hair and I were chatting and she tells me she has just returned from the most wonderful vacation…that cost her $4,000. Now this is someone who is probably lucky to make $7 or so an hour plus tips. She then tells me she’s got it all under control; she just put it on her low-rate credit card, like all her other vacations. Turns out she thinks 12 percent is low, and, worse, seemed unconcerned about the $25,000 balance she’d rung up so far.

There’s no telling what type of reaction I might have had if it weren’t for the water hose she had aimed at my head. I remained calm and simply asked her if she could do it all over again, would she try and take less expensive vacations. I was expecting a moment of revelation when she would see the danger of what she was doing. Instead, here’s what I got:

“Suze, I work so hard I deserve to treat myself to a great vacation. I don’t care what it costs.” I asked her if she ever worried about the hole she was digging and she told me, “Only when I think about it. So I just don’t go there or I would get too stressed out.”

That approach stresses me out! Come on, people. I get that everyone deserves a vacation but here’s what you also really deserve: a secure life where you aren’t buried in credit card or home equity debt, and the confidence that you are on course to be able to retire comfortably.

If your vacation spending is compromising any of your financial goals I am sorry to say that your brain is already on permanent vacation.

In Five Signs You Should Stay Home, I spell out the major money moves you need to take care of before you start booking a big-time vacation at a five-star resort.

But here’s a great rule of thumb: if you will need to pay interest to finance the vacation—meaning if you can’t pay off the whole credit card charge when it comes in—the hard truth is that you can’t afford the vacation.


From ATM Etiquette to Allowances, How to Raise Your Children Into Financially Fit Adults

By Suze Orman

The single most important step in raising a money-wise child is simply for parents to be money-wise adults themselves. And that’s where so many well-intentioned moms and dads seriously drop the ball.

Look, we all know that kids are sponges. They don’t do as you say, they do as you do. Kids study your every move, and unfortunately I see plenty of parents imparting some pretty awful financial moves.

I will never forget the time I sat down with a class of eight- and nine-year-olds and asked them what their greatest fear was. I didn’t even say money fear—just plain old fear. One of the children stepped right up and flatly told me her biggest fear was that she would end up having to support her parents. I was of course stunned by this and asked why she felt that way. She said she constantly heard her parents arguing at night and her mother telling her father things like, “If you don’t stop buying all those expensive electronic gadgets we are going to end up in the poor house. And then who will support us?” But what truly scared me was when I asked the other kids if anybody else felt like this, nearly every one of them seemed to have a similar story.

Parents, I know you want the best for your children. So you should realize how much that means making sure you’ve got your own financial act together. Children who watch parents do stuff like ring up huge credit card bills buying goodies and vacations they can’t afford tend to dig the same financial holes themselves as adults. Whatever you may say to the contrary, a child who sees bills pile up unpaid is getting a damaging lesson in managing money—one they may struggle all their lives to overcome, just as the children of folks who don’t eat right or exercise enough so often grow up to suffer through variations on those same bad habits, even when they’ve been “taught” to know better.


A Different Spin on the Old “Location” Theory

By Suze Orman

Today’s crazy-hot housing market makes that old saying “Location, location, location” a risky rule to follow.

The conventional wisdom is that the smartest real estate move is to buy a home in the best neighborhood you can afford, in the most desirable town in your area. Home buyers are bombarded with advice to buy into the best location possible, even if it means stretching their housing budget.

In normal times I would tell you that is perfectly fine advice. But let’s face it, real estate ain’t normal these days. In some of the hottest markets the annual appreciation rates have been 10 percent, 20 percent, or even 30 percent and higher. And, no surprise, the biggest appreciation tends to be in those major metro areas that are deemed the “most desirable” locations: New York City, San Diego, San Francisco, Miami, Boston, and so on. Those markets are too hot, if you ask me. I am not suggesting that home values in those areas are going to plummet. Homes are not stocks. They won’t go into a steep swoon like you saw in the technology market a few years ago, for the simple reason that everybody has to have a place to live. Hey, when you sell a stock you never ever have to buy another one. Sell your home, however, and you either have to rent from someone else who owns one, or you have to buy another. Real estate usually serves a dual purpose, being both a home and an investment. That makes the housing market a lot more stable than the stock market—which is why, long-term, I still think real estate is a terrific investment. It’s just that I also think there’s no way it can continue at this torrid pace. So forget projecting double-digit gains out into the future. Over the long-term, you should be pleased with 4 percent or so average annual appreciation.

Moreover, there are a few reasons why I think this adjustment in the housing market is going to happen sooner rather than later. First, too many people are starting to talk about the “bubble,” “froth,” and “irrational exuberance.” When it comes to markets, if there’s enough talk about something, whether or not it’s entirely accurate to begin with, people start to believe it and end up making it come true. Next, too many people are buying homes they can’t really afford, out of fear of “missing out.” I have said it over and over again: that fear is the number one psychological obstacle to wealth. It causes you to buy at the wrong time, sell at the wrong time, and generally make moves that are losers. One particular loser move I see being made quite often today are these “interest-only” loans. I will explain more about why I think they’re losers in a moment, but first let me just say forebodingly that if the number of interest-only loans continues to grow at the current pace, I expect trouble. The reason is that when these loans convert from the smaller payments that are being made, to the true payments that are owed, the potential inability of many investors to make those payments could have a significant adverse effect on the entire real estate market—not just on the folks who can’t pay their notes. The bottom line is that we all should start being careful with our real estate investments.


Staying Financially in Synch, ‘Til Death Do You Part

By Suze Orman

You marry for love, but don’t think that love is all it takes to stay married.

For my money, not being on the same page financially is a sure ticket to marital discord, if not divorce. Based on thousands of conversations with stressed-out spouses over the years—from newlyweds to couples working on their 20th anniversary—an inability to agree on money matters is one of the leading causes of busted relationships.

And it makes perfect sense. The simple truth is that money issues are with us every day. For couples who are renting, there’s the pressure to save up fast for a down payment—which is especially intense in this hot housing market—followed by the stress of trying to choose the right mortgage. Meanwhile, couples these days that own a place are wondering if it makes sense to take advantage of the big run-up in home values and do a cash-out refi, or use their home equity to pay off credit card debt, the kids’ college bills, or a five-star vacation. Then there’s retirement to worry about. From your 401(k) to a Roth IRA, the two of you have to make all the decisions, which means plenty of opportunity to disagree with your partner. Add in the ongoing worry about being able to afford your kid’s college education, or pay off a dangerous five-figure credit card balance, and you and your significant other are surely not going to get by on love alone.

You get my point: money is front and center in our lives. So if you and your partner aren’t in financial sync, your marriage is going to be in deep trouble.


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