By Lisa Daniel
American Forces Press Service
Personal finance expert and motivational speaker Suze Orman
created her brand of mega-success by bringing financial
planning out of the echelons of millionaires clubs and
delivering it to middle class people - and those aspiring to
middle class. Orman frequently takes calls from service
members on CNBC's "The Suze Orman Show," and has reached out
to troops by making speaking appearances at bases. Orman
recently spoke to service members about taking her
wealth-building formula - in a nutshell, to pay off debts and
save more.
Q: Why did you get involved with the Military Saves
campaign?
A: My entree into the military started a few years ago at a
base in New Mexico when [a major in the audience] stood up and
said, "You've got to come and save us. So many young people
come up and ask me their questions, and I can't help them, but
I know you can." She got the clearance for us to come to
Little Rock [Air Force Base, Ark.].
Q: As you hear from U.S. service members, what are some of
the most common personal finance concerns they face?
A: What those in the military need to be very, very careful of
is that, because you've been trained to follow orders and
because you are incredibly honorable, you're an incredibly
trusting group of people. And because you are so trusting, you
are the perfect people to be taken advantage of from
unscrupulous people [including financial advisors]. You trust
that what they are telling you is true. You, more than
anybody, must be very, very careful.
The most prevalent thing military members say to me is, "I got
into trouble because I trusted a person who told me to do X, Y
and Z, and it wasn't right." That is one of the main dangers
for military people.
Q: But not everyone knows a lot about finances. There is a
learning curve, right?
A: There's a learning curve in everything. The question
becomes how much do you want to learn? I want you to learn
that it's not that hard. Things make sense and things don't
make sense. You need to trust yourself more than you trust
anybody else. If somebody tells you to do something and it
doesn't feel right or you don't understand, just don't do it.
It's better to do nothing than to do something you don't
understand.
Q: Do people need to use financial planners?
A: No, I don't think so. People have bought the ticket Wall
Street has been trying to sell you forever in that you need a
professional financial planner. You don't.
Q: When people are living on a tight budget, what is the
smartest way to build wealth? How do you choose between paying
off debt and saving money? How do you choose between saving
for retirement and saving for college and having a general
savings account that you can tap into for emergencies?
A: That's no different for military members than anyone else.
Debt is bondage and you will never, ever experience financial
freedom if you have bondage. If you have credit card debt at
maybe 18 percent and money in savings that earns about 2
percent and is taxable, you are seriously losing money when
you [put money in savings rather than pay down the credit
card]. You always want to attack your financial future knowing
that your feet are on solid financial foundation. Enemies to
money are debt. If you would retire that debt, it would be
like a guaranteed 18 percent return on your money.
Q: What is the formula for building wealth?
A: Get rid of credit card debt and other high-interest,
short-term debt, like car loans.
Create an emergency savings fund. Six months is ideal. It can
be a bank savings account or a [certificate of deposit].
Besides an emergency fund, start saving for retirement. Start
putting money in the Thrift Savings Plan and maybe you also
start saving for a down payment for buying a home later. Once
you're out of the military, you have to decide where you want
to go to get a job and buy a house. So go rent there, and then
buy. It's OK to keep renting until you know where.
Be very careful about your children's college education. It's
so incredibly expensive, it's not even funny. Realistically
speaking, with military salaries, it's very hard to pay for
everything - a house, retirement, college. It's better to
teach your children that they have to get good grades to
qualify for scholarships, or they may need loans or go into
the military, which is what my nephew did. Here is the
problem: a kid goes to college and still doesn't know what he
wants to be and the parents are $100,000 in debt. There's
nothing wrong with community college.
Q: Today's parents are spending a lot of time and money on
their children in ways not seen in the past. What are some
ways military parents can keep from going broke?
A: Parents have gotten into spending money for their kids in a
way, not so much for the kids' sake, but in keeping up with
what other kids' parents are doing. We're all so busy worrying
about impressing people we don't know or like, that we're not
saving money. What are you teaching your children by giving
them activities you can't afford? And it doesn't create a good
environment at night by having tension between mommy and daddy
when they can't pay the bills. That backfires in the long run.
It's easier to spoil kids than to not have to deal with their
whining. Sometimes people can afford it, but their priorities
are wrong. You're in the U.S. armed forces, you've been taught
to live a life of integrity. Don't tell me you don't have what
it takes to do right by your kids - and it's not in spoiling
them. Make the same hard choices with your kids, so they
become the same integral human beings you are.
Q: For most people, their home is their best financial
asset. Given that many military people move every two or three
years, what advice do you have for buying a home and for
keeping it long enough to grow equity, and also not losing
money on relocations?
A: In markets past, yes, you could have bought a home and made
a lot of money even if you only had it for one or two years.
That's the past. The present is, you don't buy a home unless
you know that you can live in it at least four, five or six
years. If you rent it, and that renter doesn't pay, you have
to cover that. The issue is, do you have enough money saved
that if you buy the home and are relocated, and you can't sell
your home or you have to sell it for less than your loan is
for, then you absorb that cost? If you keep getting relocated,
what are you going to do? The best thing is to just rent.
For military members who bought their homes years ago, it made
sense. But the economy is different now. Everything is
expensive. The advice you're reading today is the advice for
today. In today's economy, with expenses skyrocketing and
property taxes going up, unless you have a serious sum of
money, you should be renting [if you’re still in rotations].
Q: Should long-term military members be priming themselves
for a second career?
A: You can, but maybe you just want to stay in. If you don't
have a plan for a job or education, why get out? You don't
have to leave in 20 years. If you really don't like the
military, then of course, hopefully, you will learn things
that will help you go on. But if you're not sure what else you
really want to do, stay in. In today's economy, just stay put.
Q: How should military members prepare for their higher
risk of becoming disabled?
A: Stay out of debt! My saddest moment at the Little Rock Air
Force Base was when [an airman who was about to deploy] said
to me, "I have a loan on my car. What do I do with it? Now,
this car's just going to sit here. What do I do?" Debt isn't
just about credit cards. You need to buy things you can own
outright sooner rather than later.
Q: What is your main message to servicemembers?
A: If you have what it takes to defend the United States of
America with your life, don't you dare tell me that you don't
have what it takes to defend your own financial security with
your own dedication to survive. That's the main message.
Q: Is there anything else you'd like to share with military
members?
A: Thank you from the bottom of my heart. I salute each and
every one of you. |
Military Loans Minute
