Monday, December 21, 2009, 2:36PM ET - U.S. Markets close in 1 hour and 24 minutes.

Suze Orman Money Matters

Suze Orman, Money Matters

Get Your Financial Priorities Straight for 2008

by Suze Orman

Email this Page IM this StoryBookmark this StoryAdd to your Del.icio.us accountDigg this StoryPrint this Story
Very Good (289 Ratings)
3.609002/5
Posted on Friday, December 28, 2007, 12:00AM

Right now, your financial motivation tank is full; you're resolved to make all your New Year's resolutions stick. But I know that in a few weeks the tank is going to be running near empty as many of you get distracted or confused or frustrated about how to convert resolutions into reality.

What I hear time and time again is how hard it is to figure out how to set financial priorities. Resolutions to be more financially on top of things fall by the wayside because people don't know where or how to start. So, in my continuing series "You Asked For It," I'll review the most common questions I get on the topic of how to take control of your financial life.

Tackle Your Debt

Q: I can't afford to pay down my credit card debt and save for retirement at the same time. Which should I do first?

A: Getting your financial life in order is an exercise in multitasking. You should tackle different goals at the same time. Too often, I see people take the all-or-nothing approach; they think they need to concentrate all their money and time on just one task. I think it's wiser to take a broader approach.

For example, if you have a 401(k) or 403(b) at work and your company offers a matching contribution, there's no question that you must participate in the program and contribute enough to get the maximum match from your employer. I don't care how much you're drowning in debt, there's no bigger priority than to get what is essentially free money from your employer.

At the same time, you have to focus on the credit card debt. Often, people are flummoxed when they have multiple credit cards with unpaid balances. Here's the strategy: Pay the minimum due on each card each month, of course. That's the only way to stay in the good graces of the card company and keep your credit score healthy. But in addition to those minimum payments, add an extra payment to the card that charges you the highest interest rate.

Notice I didn't say the card with the biggest balance. Once you pay off all the debt on the card with the highest interest rate, start tackling the card with the second-highest interest rate, and so on.

Scrutinize Your Budget

Q: Where am I supposed to find the money to set aside for paying off bills and saving? I can barely get by today as it is.

A: I hear this all the time -- you're too broke to save money. I don't buy it. The majority of people who come to me with this question have all sorts of opportunities to spend less, which translates into saving more.

Look, I'm not going to tell you what's a necessity and what's a luxury. The only way to take control of your financial life is to decide that for yourself. If you really want to change your ways, just scrutinize your monthly bank and credit card statements; there are plenty of places you can scale back if you make that your priority.

A great way to get you to save more is to simply make it automatic. Set up a direct deposit from your checking account into a savings account. The reality is that once you take the plunge to automatic savings, you'll be able to adjust to having less in your checking account. Right now, you can earn more than 4 percent interest by setting up an account at online banks such as ING Direct, HSBC Direct, and EmigrantDirect.

Do the Right (Retirement) Thing

Q: I want to save for retirement, but I get lost when I try to figure out what to do. Is there a simple way to do the right thing?

A: If you're single and your modified adjusted gross income is under $101,000, or you're married and your gross income on your joint tax return is under $159,000, you can invest the maximum $5,000 in a Roth IRA in 2008. (If you're at least 50 years old, the maximum is $6,000.) By now, you know that I think a Roth IRA is the single best retirement investment after a 401(k) with a matching contribution.

If your income makes you ineligible for a Roth IRA, I recommend using a traditional IRA even if it's non-deductible. Both types of IRAs give you the benefit of having your money grow tax-deferred while it's invested. The difference between the two is that with a Roth IRA you'll owe no tax on your withdrawals in retirement assuming you pass some basic rules; with a traditional IRA, you'll owe income tax on all withdrawals in retirement. That's why a Roth is preferable if you're eligible.

On IRAs and Lifecycle Funds

So where exactly should you invest your IRA money? If you're up for making two investments, I recommend putting 80 percent or so in a low-cost broad index fund or exchange traded fund (ETF) and the remainder in an international index fund or ETF. I'm a stickler for low costs, so funds such as Vanguard Total Stock Market Index (VTSMX) and Vanguard Total International Stock Index (VGTSX) are sound choices. For ETFs, you have plenty of options with Vanguard, as well as iShares S&P 500 (IVV) and iShares MSCI EAFE (EFA).

For those of you who really want a super-easy investment solution for your IRA, check out what are called lifecycle funds, or target retirement funds. A lifecycle fund is basically a one-stop-shopping option.

You choose a portfolio with a "target date" that's close to when you expect to retire. The portfolio will then hold a mix of investments that are considered correct for your time horizon; as you get closer to that retirement target date, the portfolio will automatically move into more conservative investments. Vanguard and T. Rowe Price have a full lineup of low-cost target funds you can choose from to match your expected retirement date.

Plan Ahead

Q: We have two young children we want to start college funds for, but we can't afford to save up for their school costs and continue to build our retirement funds. What should we do?

A: Focus on your retirement. Trust me, if you love your children, you'll make securing your own retirement the priority.

There are plenty of ways for your kids to get help with college costs -- loans, scholarships, etc. -- but there's no help if you find yourself without enough money to live on in retirement. I don't want you to end up needing to ask your kids for help down the line because you didn't make saving for retirement your main priority.

Q: What are the best investments for next year?

A: Who knows? Anyone who tells you they do is just guessing. Oh, sure, they may be paid a lot of money to guess for you, and no doubt some Wall Street watchers will guess right. But plenty will guess wrong.

My point is that it's ridiculously hard to nail what the top individual investments will be, especially over a short time period of 12 months. I think one of the biggest problems investors create for themselves is thinking that investing is about making a big killing fast.

Yes, that would be ideal, but it's extremely hard to pull off, and the risk is that you end up losing a lot of money if you bet wrong. Or you never start investing in the first place because you're too scared of losing it all. That's why I recommend broadly diversified index funds and ETFs for your core portfolio.

Will you have the No. 1 investment next year? Probably not. Will you have the worst investment next year? I seriously doubt it. What you will have is a portfolio that will grow over time -- years, my friends, not months -- in line with the general markets. Over decades that's proven to be a profitable approach -- no doubt one of your biggest financial priorities.

Email this Page IM this StoryBookmark this StoryAdd to your Del.icio.us accountDigg this StoryPrint this Story

Rate This story

Very Good (289 Ratings)
3.5/5
Sign-in to rate!

68 Comments

Showing comments 6-35 of 68<< PreviousNext >>
Sort: first to last

  • Yahoo! Finance User - Friday, January 4, 2008, 10:49PM ET  Report Abuse

    • Overall: 4/5

    Excellent advice. Form 8606 is no big deal and well worth the tax advantage

  • Yahoo! Finance User - Friday, January 4, 2008, 1:17PM ET  Report Abuse

    • Overall: 1/5

    Never do a non deductible IRA unless you understand form 8606. You'll have to file this forever: good luck if you blindly take Orman's advice (as always!)

  • Yahoo! Finance User - Friday, January 4, 2008, 1:03PM ET  Report Abuse

    • Overall: 5/5

    Not sure if I can say this but here goes. Everything Suze just talked about was awesome and you can do all this and more with Primerica Financial Services. You can lower the term on your mortgage, take care of credit cards, get better "term life insurance" and start a Roth IRA with the savings. Someone who is paying PMI (Private Mortgage Insurance ) in their mortgage payment can already save money monthly. Primerica doesn't have PMI with their loans. You can also feel very safe with your loan because it is through Citicorp Trust Bank. A Daily Simple Interest loan with Biweekly payments. No one else can touch this product. I did it and all my neighbors have as well. I freed up $650 a month and now have a 15 year mortgage instead of 28. No credit card balances, no PMi and a better money market account to take care of homeowners money. Can't go wrong. Best decision I every made.

  • Yahoo! Finance User - Friday, January 4, 2008, 12:38PM ET  Report Abuse

    • Overall: 4/5

    Anyone who thinks they should pay off the smaller credit card debts first instead of the higher interest rate ones so they can see the rewards coming is charging themself interest for peace of mind. The less interest I pay, the more peace of mind I have. Be more than a kid going after candy. Do the math.

  • Yahoo! Finance User - Friday, January 4, 2008, 12:36PM ET  Report Abuse

    • Overall: 4/5

    Suze Orman is great. I am 24 and she already is leading me to where I should be. I would have never thought to save for my future if I didn't come across her show. Yes things are the obivious but now it's time to implement things.

  • Yahoo! Finance User - Friday, January 4, 2008, 12:20PM ET  Report Abuse

    • Overall: 3/5

    The focus on paying off credit cards should be to pay the one with the smallest balance first, then moving up to the next one. It is easier to pay them off this way. Ignore the higher interest card idea. Start small and move higher. You will see faster results which should inspire you to stick with it. You are already losing money on the interes.

  • Yahoo! Finance User - Friday, January 4, 2008, 12:07PM ET  Report Abuse

    • Overall: 2/5

    nothing new. you could pretty much figure all that yourself. why is she repeating obvious things?

  • Yahoo! Finance User - Friday, January 4, 2008, 4:42AM ET  Report Abuse

    • Overall: 1/5

    While there is some re-hashed advice, that is needed for those who are novice investors. The worst piece of advice here, though, is the use of Life Cycle mutual funds. These are FAR from buy-and-forget investments even though they are marketed as such. Sure they may give you an okay starting point if you are beginning to invest, but can you imagine staying with the same 2045 "target date Fund" for the next 40 years? If you don't learn anything after investing for 2-3 years and then take charge of your investments, you are in for a big (nasty) surprise when you find out after 40 years that you made 30-50% less than the next guy, all because you used a one-size-fits-all mutual fund. Each of us has different situations and you should never lump yourself into a Life cycle fund. Suze is always pushing people to take charge of their finances. So why does she push these funds that take that power away?!

  • Yahoo! Finance User - Thursday, January 3, 2008, 4:05PM ET  Report Abuse

    • Overall: 3/5

    One of the guys said he made 30% last year. Not bad for the rookie, but I made 150% last year from the ETF and mutual fund ONLY and I am rookie too. ^^

  • Yahoo! Finance User - Thursday, January 3, 2008, 2:29PM ET  Report Abuse

    • Overall: 3/5

    Suze repeats the same advice because so many people need it. My impression is her message is geared to the totally clueless and financially reckless.

  • Yahoo! Finance User - Thursday, January 3, 2008, 1:26PM ET  Report Abuse

    • Overall: 4/5

    Many of the people commenting don't seem to be able to grasp that Suze is not your personal financial advisor. This is good general advice. She is not going to write a column telling you what to invest your money in, because investing depends a lot on individual goals and needs. As for the guy saying that Suze is saying not to pay for your kids' college...she is not saying that at all. She is saying save for your retirement FIRST, then save for college, because you can borrow money for college, but you can't borrow money for retirement. The fact that many people cannot grasp basic ideas, and then complain that her advice is too general is really funny.

  • Yahoo! Finance User - Thursday, January 3, 2008, 9:55AM ET  Report Abuse

    • Overall: 2/5

    I have to give Suze credit. She always looks professional, she speaks very clearly and passionately. My mom, who is Suze's age, hasn't read a book in years and doesn't save or invest for the long-term, has bought a few of Suze's books yet hasn't read a page of any of them. Suze is very convincing at the big picture but when it's time to actually do something, most people don't know how to get started. It's a great racket for all aspiring self-help gurus out there.

  • Yahoo! Finance User - Thursday, January 3, 2008, 1:12AM ET  Report Abuse

    • Overall: 1/5

    Once again, stating the obvious, over and over and over.

  • Yahoo! Finance User - Wednesday, January 2, 2008, 11:41PM ET  Report Abuse

    • Overall: 3/5

    The problem is these experts don't educate us. They tell us what to do. Like most people, my situation is unique and she really doesn't address the financial issues that interest me. If some people are helped, that's great. I like to know inside information I don't get from an investment advisor or a CFP. Most of them are trained to beat the S & P 500. Big deal. I had a great three years with some of my money in an international fund. It was a smart risk because international markets were rising and it paid off. Last year. I made 30% using a specific investment strategy that Suze never discusses.

  • Yahoo! Finance User - Wednesday, January 2, 2008, 3:08PM ET  Report Abuse

    • Overall: 4/5

    Tech350, stop losses is not RISK MANAGEMENT. Stop losses are for LOSS MANAGEMENT. If you read financial theory, risk management is measuring correlation coefficients and building a portfolio from a basket of around 20 stocks, essentially creating an index fund. So, Suze's advice is correct based off financial theory.

  • Yahoo! Finance User - Wednesday, January 2, 2008, 2:52PM ET  Report Abuse

    • Overall: 5/5

    The best financial advice online is Suze's column. She might repeat the same things in year in and year out, but it's the advice that folks need to follow to keep out of harm's way and in financial good health. I can't say the same of some of the other columnists who advocate risky investing strategies and lifestyles......

  • Yahoo! Finance User - Wednesday, January 2, 2008, 12:29PM ET  Report Abuse

    • Overall: 3/5

    I have been saving over 1000 dollars a month, i am in my 20's now. I restrict myself the amount that I spend monthly. I always cook at home, even for breakfast. Although I have over $200K now (mainly from my stock, mutual fund, ETF, currency investment) but i still drive my 10 year old car. Do you think I am a successful investor and saver?

  • Yahoo! Finance User - Wednesday, January 2, 2008, 8:04AM ET  Report Abuse

    • Overall: 4/5

    Suze has alot more good advice than bad. You can not read what she writes, go about Your way and not try her's before you can say forsure if it was good or not. I took the leap in Feb 07 to listening to Suze's advice, applying and modifying a little to what I knew myself. Paid off two credit cards I thought I never would, Raised mine and my husbands credit scores over 100 points. We are now in a position to and are purchasing our second home. As for her advice on retirement vs Children college...I FULLY agree. Alot of baby boomers today are not fully prepared for retirement because they did not prepare early enough. You DO need to start contributions in your 20's. Simply cutting back on eating out, wait for movies to hit DVD instead of running to the theatures, invite friends to your home instead of meeting out...and wham you have your retirement savings each month. Purchase certified used vehicles instead of brand new and the difference between payments will pay down debt or provide savings for your children. I suggest Suze's book "the young, fabulous and broke".Pick the topic about your credit score...follow the advice for a year and you will see how right she is. Not everyone has every answer but she is not wrong all of the time. There is advice she gives that will work for all and some that just pertain to certain people and situations. Like anything else, you much pick and chose what is right for you. Happy New Year

  • Yahoo! Finance User - Tuesday, January 1, 2008, 8:58PM ET  Report Abuse

    • Overall: 1/5

    First she's a FICO score expert. NOW she is a stock trading genius! " I think one of the biggest problems investors create for themselves is thinking that investing is about making a big killing fast. Yes, that would be ideal, but it's extremely hard to pull off, and the risk is that you end up losing a lot of money if you bet wrong." How does one lose money if they use RISK MANAGEMENT by having a stop loss of say 5% on this hypothetical trade? I see, she does not mention that. Suze is not a stock trading expert so she should leave her opinions to herself. She is not a career expert either yet I have heard BAD advise from her on that too.

  • Yahoo! Finance User - Tuesday, January 1, 2008, 8:42PM ET  Report Abuse

    • Overall: 3/5

    same advice different year.... I understand that we need to save for retirement... but it's my personal belief that if in your 20's you should focus on paying off debt in a quicker timeframe and then save for retirement. I also don't agree about not making a priority for your children's college education (saving) does she have any kids? and if she does obviously them going to school or paying for it can be done in a blink of an eye for her??? I think the best gift you can give your children is securing their college education... give advice on buying less toys for them, and how $20 a month in toys can be used instead for a college fund??? I just take this article as a grain of salt. I could give better advice!

  • Yahoo! Finance User - Tuesday, January 1, 2008, 4:32PM ET  Report Abuse

    • Overall: 3/5

    I'd already made about 2.4 million in 2007. I am thinking about to buy some vacation homes across the country since a lot of poor people are losing their homes nowdays... haha and I like it. ^.^ Yeah! I can get a pretty good deal now. Happy new year!

  • Yahoo! Finance User - Tuesday, January 1, 2008, 10:11AM ET  Report Abuse

    • Overall: 2/5

    Same old Same old typical New Year column from so called experts. Talk about playing down to the crowd. How about a little insight. Go out on a limb. But please don't give me the typical pay down debt and save for retirements in 401Ks and IRAs. How many times will the same advice be recycled by the so called experts everywhere. I've been hearing it for 20 years from everyone I read.

  • Yahoo! Finance User - Tuesday, January 1, 2008, 2:02AM ET  Report Abuse

    • Overall: 2/5

    Suze's articles are always 50/50 or half right on some things. Anyone would agree that one should pay off debt first and keet debt down, especially now with Recession upon us. However, to save, save, save the way Suze preaches is counterintuitive in inflationary times. A saved dollar loses value each day. Better to put your $100 in purchasing a gumball machine and placing it in the lobby of your office. At least your $100 will earn an income that will hedge inflation. Saving it in a TD Ameritrade account just subjects it to demise from falling dollar values, inflation and taxation. Therein lies the rub. Suze works for TD Ameritrade doesn't she? Bless her little soul.

  • Yahoo! Finance User - Monday, December 31, 2007, 11:42PM ET  Report Abuse

    • Overall: 1/5

    Although her talk/writing is mostly not value-added. She did find a way to make money for herself.

  • Yahoo! Finance User - Monday, December 31, 2007, 11:42PM ET  Report Abuse

    • Overall: 3/5

    Great Article and Advice. I love to watch Suzy's show and column. She offers great practical advice. In regard to the comment on paying down credit card debt, I would suggest getting a low interest balance transfer credit card. A great credit card comparison site that has a category just for balance transfers where you can compare and apply online is www.CreditCardWave.com

  • Yahoo! Finance User - Monday, December 31, 2007, 11:05PM ET  Report Abuse

    • Overall: 2/5

    every time this lady's face pops up, reading the article is like deja vu. "pay credit cards, save money"... you can get this 'advice' anywhere, but most just call it common sense. Hardly worth of being in a section called 'expert advice.' A good number of the readers of this section could and do write more informative things in the comments section, which is really the best part of these articles. From the comedy that was Penelope Trunk to Rob "I'm rich! In your face!" Kiyosake, the comments are pure gold. Some of the articles here offer good insight and info which I hadn't seen elsewhere; this is not one of them. 2 stars since the advice isn't bad, just this article had little insight.

  • Yahoo! Finance User - Monday, December 31, 2007, 11:00PM ET  Report Abuse

    • Overall: 5/5

    THANK YOU Suze! 1. for your choosing to help the rest of us achieve our wealth, rather than just live and selfishly enjoying your own. So many wealthy people in our country, and so few willing to share their knowledge or resources to help others. Thank you for sharing the best of your wealth: yourself. 2. Providing a simple voice of reason in a subject area that drives most of us nuts! You have truly made my wealth grow and my life much more peaceful. May you continue to have MANY treasures in your life this NEW YEAR and forever!

  • Yahoo! Finance User - Monday, December 31, 2007, 9:29PM ET  Report Abuse

    • Overall: 4/5

    Very good advice Suze, straight forward and simple to do which has been proven for ages that SAVINGS is the only way to keep yourself financially healthy. Carry some cash all the time and leave your credit cards home so you are not tempted to buy when you go to those big sale days, make habit of window shopping !

  • Yahoo! Finance User - Monday, December 31, 2007, 8:56PM ET  Report Abuse

    • Overall: 1/5

    Wow, I am left speechless by what poor financial advise this idiot gives.

  • Yahoo! Finance User - Monday, December 31, 2007, 8:48PM ET  Report Abuse

    • Overall: 4/5

    That's an interesting approach to take rich_try, I'm a PhD, and I don't know a thing about investing, and to the others what does Ms. Ormans sexual orientation matter to how you treat her financial advice. So I guess only people that have fancy titles or letters by there name, and are hetrosexual should be have their advice heeded. Well that's just a crap suggestion, way to contribute nothing to the conversation.

Showing comments 6-35 of 68<< PreviousNext >>
The columns, articles, message board posts and any other features provided on Yahoo! Finance are provided for personal finance and investment information and are not to be construed as investment advice. Under no circumstances does the information in this content represent a recommendation to buy, sell or hold any security. The views and opinions expressed in an article or column are the author's own and not necessarily those of Yahoo! and there is no implied endorsement by Yahoo! of any advice or trading strategy.

Own the Power to Control Your Destiny

Women & Money

With her signature mix of insight and compassion, Suze Orman equips women with the financial knowledge and emotional awareness to overcome the blocks that have kept them from making more out of the money they earn.

Buy "Women & Money" now.

More from Yahoo! Sources

  • CNN Money
  • Consumer Reports
  • Kiplinger
  • The Motley Fool
  • Business Week
  • Wall Street Journal

Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI). International historical chart data and daily updates provided by Morningstar, Inc. Fundamental company data provided by Capital IQ. Quotes and other information supplied by independent providers identified on the Yahoo! Finance partner page. Quotes are updated automatically, but will be turned off after 25 minutes of inactivity. Quotes are delayed at least 15 minutes. Real-Time continuous streaming quotes are available through our premium service. You may turn streaming quotes on or off. All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.

Yahoo! Answers is provided for informational purposes only, and no Q&A is intended for trading or investing purposes. Yahoo! shall not be responsible or liable for the accuracy, usefulness or availability of any Q&A information, and shall not be responsible or liable for any trading or investment decisions based on such information. View Complete Answers Disclaimer.