Suze Orman's financial survival tips until the vaccines take hold
Suze Orman's financial survival tips until the vaccines take hold
Ethan Rotberg
14 min read
COVID vaccines have arrived and have slowly started rolling out in the U.S. Meanwhile, the virus is spreading out of control and threatening Americans' health and financial well-being.
Suze Orman says consumers need to buckle down and become "warriors." But the personal finance author, TV personality and podcaster acknowledges that it's not easy, as jobs disappear amid new lockdowns, markets gyrate and retirement savings are threatened.
Still, she says you just need to try to look past the "now" and stay focused on your long-term financial goals.
Here are 17 do's and don'ts Orman has been sharing to help you keep your finances strong — at least until the COVID shots are widely available.
1. Do be careful about making big purchases right now
Even if you've got the money, now is not the time to be buying a new car or a new smartphone, Orman says.
“Stop with major purchases right here and right now, because the future is unknown, and this is the time for you to conserve in every possible way,” she says, in her podcast.
If you're determined to spend, you might pick up something really practical — like life insurance, to protect the people who depend on you.
“If you somehow have gotten this far in the pandemic without focusing on life insurance, I have one question for you: Are you crazy?” asks Orman in a December blog post.
Jason Raff / Shutterstock Hang on to your relief money, if you can.
After months of debate, Congress has finally passed a new coronavirus rescue package that includes a $600 direct payment for most Americans: "stimulus checks."
The bill also includes $300 a week in bonus unemployment benefits from the federal government. Orman says you'll want to conserve your relief money — particularly if you're out of work.
"You should seriously save every penny you can. Do not go taking that stimulus check and using it all to pay off all your credit card debt, if that's all the cash that you have," she tells NBC's Today show.
Instead, she says sort your bills into two piles: essential and nonessential. Pay only the essential ones, and pay as little as you possibly can — including on your credit card bills. You might cut the cost of that debt by rolling it into a low-interest debt consolidation loan.
3. Do refinance your mortgage, if you've got one
Have you paid attention to interest rates? Way back in March, the Federal Reserve chopped a key rate virtually to zero, helping to usher in the lowest mortgage rates on record.
If you own a home and haven't refinanced yet, shop around for a new loan that will slash your monthly payment. Currently, rates on 30-year fixed-rate mortgages are averaging just 2.67%, according to mortgage company Freddie Mac.
But "do not refinance and extend your years," Suze Orman warns, in an interview with People. In other words, if you've got a 30-year loan that you've been paying on for five years, don't take out another 30-year mortgage.
Travis Wolfe / Shutterstock Don't be too hasty to sell stocks.
When the stock market's coronavirus crash began in February, Suze Orman's initial reaction was that investors should "rejoice," because they could buy great stocks at bargain-basement prices.
"Could stocks keep going down? Of course," she writes, in an article on CNBC.com. "But since World War II, we have had 12 bear markets. The average loss was around 35%, and though stocks fell for an average of a bit more than a year, they typically had made back their losses in another two years and then rallied to new highs."
In fact, this year it took only a few months for the S&P 500 to rally to new all-time highs.
If you're ever panicking over your investments, you might get some help fighting the temptation to sell by hiring an affordable financial adviser of your own. Those services are available online now, with no social distancing issues.
5. Do try to put some bills on hold
During the coronavirus crisis, government programs have offered consumers relief from their usual financial obligations, and many creditors have been more understanding.
"If you can’t pay your bills, or could really use some short-term relief, call anyone you owe money to and ask them what help is available," Orman says, in her "Women & Money" podcast.
Call your credit card issuers to find out what they can do for you, because some have suspended interest charges. "Are there long wait times on customer service lines? So what? You’ve got time," says the money maven.
Taking advantage of offers to sideline bill payments shouldn't hurt your credit score, but check your score regularly — which you can do for free — just to be sure you're not getting dinged.
6. Don't assume the job market will snap back to normal
baranq / Shutterstock Laid off? Your job may not be coming back, Suze Orman says.
Suze Orman has some sobering words for people who've been laid off because of the COVID-19 outbreak and are now sitting at home: Some of your jobs may not be coming back.
"Are we looking at a total change in the jobs that do come back, jobs that don't come back, and where those jobs are performed? Yeah, I think we absolutely are looking at a total revamping of how business goes on after this over," she said in her March 26 podcast.
So, work on your resume and try to learn some new skills during your downtime. See if you can pick up freelance or gig work that might lead to something bigger later on.
"I do not expect us to go back to business as usual," Orman warns.
7. Do keep investing more money, if you can afford it
Not only should you not sell stocks, but you also shouldn't stop putting more money in. "If you aren’t yet retired, now is not the time to stop investing. Focus on the long term," says Orman.
If you're making regular automatic transfers from your bank account into an investment account, or if you've got a portion of every paycheck going into a 401(k) or other retirement plan, just keep doing what you're doing.
The end of the year is the perfect time to make sure you have the right mix of stocks and bonds, Orman writes in a December blog post.
“Whatever your asset allocation goal is, you need to check your retirement portfolios at least once a year to make sure you’re still on track,” she writes.
8. Don't get carried away with online shopping
Waraporn Wattanakul / Shutterstock Don't go crazy shopping online while you're sitting at home.
With so many of us still largely stuck at home to avoid getting sick, it might be tempting to combat cabin fever with some online shopping.
“Given that backdrop, retail therapy is tempting and it’s so easy to tell ourselves it is more than okay because it comes deep in our heart — we want to give to others,” she writes in a December blog post.
“I get it. And yet, I am still going to ask you to fight the urge if you’re still hard at work making sure you and your family is financially secure.”
Before you decide online shopping will make you feel better about the current situation, consider the alternatives: “Please don’t spend dollars on gifts if those dollars can be used to build an emergency fund, pay down credit card debt, or help you make more progress with saving for retirement.
For those occasions when you do need to shop online, you can download a free browser extension that will help you find better prices for what you're buying.
9. Do use credit cards, but use them wisely
Though you want to keep your spending under control during this period of financial turmoil, it's all right to fall back on your credit cards if you find yourself in a bind.
"If you don’t have enough money in your emergency cash fund to cover expenses, use a credit card for essential purchases," Orman writes in the CNBC piece.
"But if you do this, do everything possible to pay the minimum due each month. Staying current — paying the minimum is fine during a crisis — is key to maintaining a good relationship with the card issuer," she says.
If find yourself relying on a credit card, try to use one with cash-back rewards, so you’re essentially saving money each time you use it.
10. Don't keep too little in your emergency savings
Ariya J / Shutterstock Always have savings.
Right now it's probably very difficult to beef up your savings for emergencies, but Orman is hoping consumers will come away from these difficult times with a new determination to put aside even more money for when things get tough.
Most experts say you should have enough saved — maybe in a high-yield savings account — to cover three to six months' worth of expenses. Suze Orman says the coronavirus crash calls for a new standard: a three-year emergency fund.
She explained it this way, in a HerMoney podcast with personal finance expert Jean Chatzky: "In the last years a bear market (that is, a 20% decline in stocks) from where it goes from the top to the bottom, back to the top again is usually 3.1 years."
Orman says you need a financial cushion for a bear market because you don't want to be forced to sell stocks when markets are falling, and you don't want to raid your retirement money either.
11. Do leave your retirement money alone
If you have an IRA or a 401(k) or other employment-based retirement account, Orman says you shouldn't tap it unless you absolutely have to.
She tells Deadline that retirement balances may be beaten-down now, but they'll come back — and you don't want to miss out on that rebound.
"If you take the money out, you’re racking in a 20-some percent loss right now, and you’re going to pay income taxes on that money, which will be another 20% or so," she says. Not to mention that with a 401(k) or a traditional IRA, withdrawals before age 59 1/2 trigger a 10% early withdrawal penalty.
"If you take that money out and spend it, if you’re not frugal, if you’re just still living your lifestyle on some level, you will miss the best opportunity and the best time to have your money in the market that there’s ever been in about 10 years," Orman says.
12. Don't go without health insurance
Yuganov Konstantin / Shutterstock Don't go without health coverage in the current pandemic.
Orman’s own recent health scare was a wake-up call. Your physical well-being is just like your physical well-being — “you can’t just put it off,” she said during a November CNBC virtual summit.
You've been laid off? If you had health insurance, you can keep it going. You don't want to be left without coverage, especially not in the middle of a national health crisis.
"You can now take over the payments that you were making and your company was making on your behalf, to the health insurance policy that you currently have. That’s called COBRA," Orman says in the Deadline interview. "That will last for 18 months."
Depending on your income, you might qualify for a subsidy to cut your Obamacare health care premiums. If you're not eligible, you could shop for a low-cost health insurance policy outside of the marketplace.
13. Do respect the recession
Months after the pandemic started hammering the economy, experts say the U.S. is still looking like a nation in recession.
And after new lockdowns in response to spiraling COVID cases, Orman says you need to be concerned, even if you're still holding on to your job.
She says that's something her driver knows all too well — he was thrown out of work by the last recession. “My driver used to have a $200,000 a year job back in 2007, and now he’s a driver, and he’s still a driver,” the money guru says.
So, get a side hustle, save as much as you can, and keep your spending under control.
14. Don't miss out on a chance to convert your IRA
Vitalii Vodolazskyi / Shutterstock Retirement investing tools to consider
With a traditional IRA, you make contributions to the retirement account from your pretax income. Withdrawals will be taxed as current income after age 59 ½. But with a Roth IRA, the money is taxed upfront, so withdrawals are often tax-free.
"Many of you have been wanting to convert from a traditional IRA to a Roth IRA," Orman says on her podcast. "If that is the case, when the markets are down significantly like this, this is the time."
The reason is that the amount you take from your traditional IRA and put into a Roth will be taxed as income.
"When the market is down, and stocks have gone down 50% so maybe, rather than having $20,000, you have $10,000 now," Orman explains. "So, when you convert, you would only owe taxes on $10,000."
15. Do put dividend-paying stocks in your portfolio
Orman says the market crash earlier this year was a good reminder to have dividend-paying stocks in your portfolio, whether you're investing your pocket change or substantially more. Even when the market goes into a tailspin, you'll still have some returns to show.
She says many good, quality stocks pay dividends. "There are so many out there that are paying 4.5%, 5% right now, that they've been crushed for no reason. Just because the market's gone down, they went down," she says, in her podcast.
The dividend yield is a company's annual dividend divided by its share price. If the business pays an annual dividend of $1 per share and its current stock price is $20, that's a dividend yield of 5%.
Dividends are usually paid out quarterly. So if you're invested in a company paying $1 per share annually and you have 1,000 shares, you receive $250 every three months that can be reinvested into the firm.
16. Don't confuse 'want' with 'need'
pathdoc / Shutterstock Save your money.
Now is one of those times when it's particularly important to understand what you need, as opposed to stuff you just want. It's a distinction that Suze Orman often talks about.
"I can afford a new car, but why would I want to waste money like that? Just because you have money doesn’t mean you should waste money. You should never waste money," she told Jean Chatzky, in the HerMoney podcast.
That's especially true at this moment, with layoffs mounting and incomes shrinking.
But still, "we are wasting so much money," Orman says. Going back to the car example, she says instead of buying a new one she'd rather spend $2,000 to fix up her current car.
17. Do consider paying off your mortgage
If you're able to swing it, paying off your mortgage can be a smart defensive move during these uncertain times, Orman says.
"Then, the money that you are paying towards your mortgage every month, I want you to put that exact same amount of money back into your savings," she said, in the Today interview.
But she says the strategy doesn't make sense unless you've already built up eight months' worth of emergency savings. And, you shouldn't be carrying a lot of other debt.
She says once you've disposed of your mortgage, you'll want to open a home equity line of credit that you could tap for additional resources in case of a financial emergency.
