|Story & Photo by Samantha L. Quigley, American
Forces Press Service
WASHINGTON, D.C. — Personal finance expert
Suze Orman said she doesn’t hold much hope that the economy will recover
as quickly as the troops she met in September at Walter Reed Army
Personal financial expert Suze
Orman laughs at the response of an audience member Sept. 29,
during a presentation at Walter Reed Army Medical Center in
Washington, D.C. Orman’s presentation was part of a Financial
“I don’t think it will,” she told those gathered on the Walter Reed
campus for a Financial Readiness Road Show. “I’ve stood up here for too
many years and I have said, ‘If we are not careful, the rich are going
to get richer, the poor will get poorer, and the middle class will
“Welcome to 2010, where that’s about to become a reality,” she quipped.
But hope is not lost, she said. People can save themselves if they make
the right financial moves and look at their situations realistically.
Orman started her presentation by asking the crowd what questions she
could answer for them.
The queries, varied though they were, focused on investing.
Then she asked everyone in the audience who was carrying debt to stand.
The majority stood.
|The Fort McCoy
Financial Readiness program manager said his office can provide
financial information to authorized members of the installation
community about all aspects of financial planning and
Bryan Clarkin, installation Financial Readiness program manager
for Army Community Service (ACS), said he can schedule
appointments to talk about financial matters on both an
individual or group basis. The presentations can be geared to
the needs of the audience, such as an organization, or
individuals and the time they have available.
Some of the financial topics available include: credit card debt
and credit scores (Fair Isaac and Co., or FICO) management:
budgeting strategies, including debt repayment; saving/investing
strategies, including Thrift Savings Plan (TSP) and Individual
Retirement Accounts; and retirement planning.
Currently, Clarkin also provides financial presentations during
the pre-retirement and retirement briefings.
Past financial presentations or workshops have included
information about the TSP and retirement planning, financial aid
for colleges, credit scores and credit card usage, etc.
For more information about scheduling presentations, available
topics or possible future courses, such as for TSP, contact
Clarkin at ACS at 608-388-3505/6812.
“I find that very funny,” she said. “How can I talk to you about
money when you don’t have any? But you can’t talk about having (money)
until you talk about what you do have, and what you do have is debt.”
Then the floodgates opened, and Orman began laying down the law and the
path to financial freedom.
It starts with a strong financial foundation, an emergency fund equal to
eight months of basic living expenses, she said, adding that this is the
top priority, even before paying off credit card debt.
Next up was credit cards. When those balances go down, credit scores, go
up, she told the group, using the Fair Isaac and Co., or FICO,
credit-rating score in her explanation.
“(Your FICO score) is probably the most important thing for you to know,
bar none, in your personal financial history,” she said. “FICO scores go
from 300 to 850. Anything under 500 — forget about it, people. You are a
serious FICO mess.” A score of 760 or above is the goal these days, she
That score affects just about every aspect of a person’s life, from
mortgage and car loan interest rates to getting a new job, Orman said.
Good scores are the results of always paying bills on time, never going
over a credit limit and not charging credit cards up to their limit.
While that contributes to a good FICO score, 30 percent of the score
depends on the debt-to-credit-limit ratio.
“Let’s say you have five credit cards, each with a $2,000 credit limit,”
she said. “That is a $10,000 credit limit in totality. If you had
charged $2,000 on each one of these cards, you would have a $10,000
credit limit (and) $10,000 in debt. That is 100 percent
debt — (the) what-you-owe to credit-limit ratio.”
But if all but one of those cards gets paid off and the creditors allow
the cards to remain open — which is not always the case today — then the
ratio goes down and the FICO score goes up, Orman said.
“What’s so sad is that the creditors now are closing your credit cards
down for you, and that is hurting your FICO score,” she said. “When your
FICO score goes down, everything else goes up, including your car
Worse than credit card debt is student-loan debt, Orman told the
audience. Interest rates are rising on those loans, and they’re the
first ones people stop paying on when things get tight.
But that’s a big mistake, she said. Unlike credit cards, which are
unsecured debt, student loans are debts that “will follow you to your
grave.” They can’t be discharged, even in bankruptcy.
After discussing the emergency fund and elimination of debt, Orman
turned her focus to retirement, specifically the Thrift Savings Plan,
noting the difference between the plans offered to military members and
the Defense Department’s civilian employees.
“They don’t match your contribution,” she said to the servicemembers.
“If you happen to be a civilian in the military and (you) put in a
dollar, they match (the) contribution.”
Orman’s said servicemembers may be better off investing in a Roth
Individual Retirement Account (IRA), if they qualify.
The contributions are taxed once up front, and any original
contributions are eligible for withdrawal without taxation or penalty.
Another plus to the Roth IRA is that contributions are taxed under the
current tax brackets, which Orman described as the lowest in history.
“The question becomes, what sense does it make to put money away at the
lowest tax brackets possibly of your life ... to possibly and probably
take it out years from now at what might be the highest tax brackets of
your life?” she asked them.
Once the emergency fund is established, credit cards paid down and
retirement is squared away, Orman said, it’s time to look at investing,
and a down market is the time to do that.
Orman said she doesn’t understand why some long-term investors see a
down market as a bad thing.
“Rather than liking that the stock market is down, especially when you
don’t need your money right away ... you’re freaked about it,” she said.
“Wouldn’t you rather buy a great stock, mutual fund, or whatever at $5 a
share, so that if you’re investing $100 a month, you’re able to buy 20
shares versus the same stock that was at a $100 a share, so every time
you invested you were able to buy one share?”
She used General Electric stock, currently about $16 a share, down from
$30 a share a year ago, as an example. Before the market started to
rebound, she said, that stock was $6 a share.
“Think how many shares you could have purchased. You stop investing when
the market is down,” she scolded. “You start investing when the market
starts to go up and you feel better. Mistake, mistake, mistake.”
Regardless of where the market is, investment should be a regular
occurrence, whether it’s monthly, quarterly or yearly, she said.
“There’s nothing wrong with you investing some of your money ... across
the board. You should have some of your money invested overseas,” Orman
said, adding that precious metals also might be a consideration.
“Time is the most important financial ingredient in any financial
freedom recipe,” she said. “Every single day you decide to waste, every
single day you decide you don’t want to get involved with your money ...
you are changing the outcome of your financial future.”
Orman said she doesn’t think the real estate market has hit bottom yet.
According to a National Association of Realtors study, 50 percent of
first-time home buyers in the United States this year said they did so
only to take advantage of an $8,000 tax credit.
That could be the cause of the real estate market boost, she said.
She also encouraged those in the audience to plan for the unforeseen by
having a will and a living revocable trust.
“You can download over $2,500 worth of state-of-the-art documents (from
her Web site) that will protect you (and) your family in every possible
situation,” she said.
The session proved to be a learning experience for one Soldier who is
just setting out on her financial path.
“I need to work on my credit score. I’m not in that much debt,” Army
Spc. Laquinta Gray said. “I’m just starting off, so it’s not that much,
but she was telling the truth. She didn’t sugarcoat anything, which is a
Gray said she needs to focus on her credit cards to get her financial
house in order.
The wounded warriors at Walter Reed are not exempt from life’s financial
realities and need to focus on their whole financial picture, Orman
said, adding that she understands they’re still in their recovery phase
and are not really thinking about their finances.
“The problem is, that ends. They then leave. Now what happens?” she
asked. “Wealth is something that if you don’t have it, it doesn’t matter
if you’re healthy. It doesn’t matter how you’re feeling. You will feel
so financially sick inside that it will get you physically sick.”
Her advice to them: “These men and these women and these families have
got to give as much attention to their money as they do everything else,
but it’s not part of the equation for them. I’ve got to make it be part
of the equation for them, or really, they’re going to end up wishing
something that we don’t want them to wish.”
The Financial Readiness Roadshow was co-sponsored by the deputy
undersecretary of defense for military community and family policy.
The shows are designed to help servicemembers and their families make
direct contact with financial counselors to learn about budgets and
spending plans, credit management, housing loans and foreclosures,
savings and investments, financial, estate and retirement planning.