Suze Orman Shares Wealth Plans, Thanks Servicemembers

By Lisa Daniel
American Forces Press Service

Aug. 29, 2008 - 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. Earlier this year, Time magazine named the best-selling author as one of the world's 100 most influential people.

Orman frequently takes calls from servicemembers on CNBC's "The Suze Orman Show," and has reached out to troops by making speaking appearances at bases and by being involved in the www.militarysaves.com campaign. Orman recently spoke to American Forces Press Service about taking her wealth-building formula – in a nutshell, to pay off debts and save more -- to military members.

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.], which happened to be March 2003 when the war broke out [in Iraq].

I walked in behind the commanding officer, and I will never forget – and I've walked next to presidents and every imaginable dignitary and movie star you can imagine – never in my life have I felt such power as when those 800 men and women snapped to attention. As I stood there with him, I thought there is such tremendous power and respect in this room, and hopefully not just in this room, but coming from everyone else from the outside toward them. The second I went on the base, I knew that I had come home.

Q: As you hear from U.S. servicemembers, 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]. Consider a high-return plan like that on www.saveyourself.com, which pays $100 after you've contributed $100 per month for 12 months.

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 going 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.