Personal finance author, TV personality and podcaster Suze Orman says the coronavirus and its COVID-19 disease are one of the times when you have to face adversity and fear and become a “warrior”.
But the money guru says it’s not easy because jobs are disappearing, working hours are being shortened, markets are collapsing, and retirement assets are shrinking.
Still, she says that all you have to do is try to look beyond the “now” and focus on your long-term financial goals.
Here are 12 tips and tricks that she shared to help you survive the financial crisis that comes with the current health crisis.
As the corona virus financial crisis worsens, homeowners are given a break from mortgage payments, some states and communities protect tenants from eviction, and Americans with student loans can stop paying for two months without interest.
“If you can’t pay your bills or need short-term relief, call someone you owe and ask them what help is available,” Orman said in her podcast “Women & Money.”
Call your credit card company to find out what they can do for you, as some have suspended interest rates. “Are there long waiting times in customer service lines? So what? You have time,” says the money suspect.
If you use offers to postpone bill payments, this should not affect your creditworthiness. However, check your score regularly – which you can do for free – to make sure you aren’t brought to your knees.
When the corona virus crash started on the stock exchange in February, Suze Orman’s first reaction was that investors should be “happy” because they could buy great stocks at cheap prices. She said the worst thing an investor could do is panic and sell stocks.
Months later, as inventory levels are much lower in the basement, Orman may no longer be happy. But she’s still pushing people to resist selling stocks because she says patience pays off.
“Could stocks continue to fall? Of course,” she writes in an article on CNBC.com. “But since World War II, we’ve had 12 bear markets. The average loss was around 35%, and although stocks fell a little over a year on average, they usually made up for their losses in two more years and then again.” brought to new highs. “
You could get help fighting the temptation to sell by hiring your own affordable financial advisor. These services are now available online – so don’t worry about social distancing.
3. Always invest more money if you can afford it
In addition to not selling stocks, you shouldn’t stop investing more money. “If you are not yet retired, now is not the time to stop investing. Focus over the long term,” says Orman.
If you regularly automatically transfer funds from your bank account to an investment account, or if part of every paycheck goes to a 401 (k) or other pension plan, just go ahead and do what you do.
“I can’t tell you when the stocks will recover, but if you have time on your side, the focus should be on the fact that they will eventually recover,” writes the personal finance expert in the CNBC article.
When you’re retired, she says that you’ve probably invested at least half of your portfolio in bonds, and you probably have a lot of investments too. She says these accounts are “safe” and solid.
4. Don’t keep too little in your emergency savings
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She explained it in a HerMoney podcast with personal finance expert Jean Chatzky: “A bear market in recent years [that is, a 20% decline in stocks] From top to bottom, it usually takes 3.1 years to get back to the top. “
Orman says you need a financial cushion for a bear market because you don’t want to be forced to sell stocks when the markets fall, and you don’t want to rob your retirement benefits. This can trigger taxes and a severe penalty for early withdrawals.
5. Now be careful when making large purchases
Even if you have the money, now isn’t the time to buy a new car or smartphone, says Orman.
“You want to cut your expenses, okay. But stop making bigger purchases here and now because the future is unknown and this is the time for you to save in every possible way, ”she says in her podcast.
The author and financial personality has financially locked her own budget. “I asked for the absolute preservation of water, electricity and all sorts of things,” she says. “If the grass has to die, the grass will die. If your pool is not heated, your pool will not be heated. Stop it, people.”
If you are determined to spend money, you can do something really practical – like life insurance to protect the people who depend on you. Orman said that life insurance is “incredibly affordable”. It is also very easy to buy.
6. Don’t get carried away when shopping online
With so many companies closed and so many of us in the house, it could be tempting to tackle cabin fever with online retail therapy.
Suze Orman says oppose these urges. “Stop pretending everything is fine and you continue to spend even though you are in your house,” she says in her podcast.
Before you decide to shop online, you should feel better about the current situation. Think about a few difficult questions: “If you didn’t earn another cent in the next year or two, would you be financially okay? Could you pay?” All of your bills? Would everything be fine? “Asks Orman.
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7. Use credit cards, but use them wisely
Though you want to keep your spending under control during this period of financial turmoil, it is okay to use your credit cards when you are in a difficult situation.
“If you don’t have enough money in your emergency fund to cover expenses, use a credit card for important purchases,” Orman writes in the CNBC article.
“But if you do this, you’re doing everything you can to pay the minimum due every month. Keeping up to date – paying the minimum is fine in a crisis – is the key to a good relationship with the card issuer,” she says .
If you rely on a credit card, try using one with cashback rewards so that you essentially save money each time you use it.
8. Do not assume that the job market will normalize again
Suze Orman has some sobering words for people who have been fired because of the COVID 19 outbreak and are now at home: some of your jobs may not come back.
“Are we considering a total change in the jobs that come back, jobs that don’t come back, and where those jobs are run? Yeah, I think we’re going to see a total overhaul of business after that,” she said in her podcast on 26. March.
So work on your resume and try to learn some new skills during your downtime. See if you can start freelance or gig jobs that could lead to something bigger later.
“I don’t expect us to work as usual again,” warns Orman.
9. Worry about a recession
Many economists say that a coronavirus recession is on the way if it isn’t already there. Orman says that if the economy is in decline, you have to be concerned, even if you are still holding on to your job.
“Why should recession be important to you? It is important to you because when something goes back, when it goes back, everyone stops spending money. Jobs don’t come back,” she tells her podcast listeners.
She says her driver knows that very well. He became unemployed in the last recession. “My driver had a job of $ 200,000 a year in 2007 and now he’s a driver and he’s still a driver,” says the money guru.
So do a side job, save as much as you can, and take other measures to protect yourself from a COVID-19 downturn.
10. Don’t miss the chance to convert your IRA
With a traditional IRA, you make contributions to the pension account from your pre-tax income. Withdrawals are taxed as current income after the age of 59. With a Roth IRA, however, the money is taxed in advance, so withdrawals are often tax-free.
“Many of you wanted to convert from a traditional IRA to a Roth IRA,” Orman said in her podcast. “If this is the case, if the markets are declining so much, this is the right time.”
The reason is that the amount you take from your traditional IRA and put in a Roth is taxed on income.
“If the market is down and stocks are down 50%, you might have $ 10,000 instead of $ 20,000,” said Orman. “So if you convert, you only owe taxes on $ 10,000.”
11. Include dividend-paying stocks in your portfolio
According to Orman, the market crash is a good reminder of why you should have some dividend-paying stocks in your investment portfolio. Even if the market is armored, you will still have some returns to show.
She says that many good, high-quality stocks pay dividends. “There are so many currently paying 4.5%, 5% that they were knocked down for no reason. Just because the market has fallen, they have dropped,” she says in her podcast.
The dividend yield is a company’s annual dividend divided by its share price. If the company pays an annual dividend of $ 1 per share, and the current share price is $ 20, that equates to a 5% dividend yield.
Dividends are usually paid quarterly. So if you are invested in a company that pays $ 1 per share annually and you have 1,000 shares, you get $ 250 every three months that can be reinvested in the company.
12. Do not confuse “want” with “need”
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“I can afford a new car, but why should I want to waste so much money? Just because you have money doesn’t mean you should waste money. You should never waste money,” she said to Jean Chatzky at HerMoney- Podcast.
This is especially true at this moment when layoffs are increasing and incomes are shrinking.
But still “we’re wasting so much money,” says Orman. To come back to the example of a car, she says, instead of buying a new one, she’d rather spend $ 2,000 to fix her current car.