Suze Orman's action plan
January 13, 2009 "We are in dire straits and you cannot be in this kind of disastrous period and come out of it within five months, six moths, a year. It's going to take years in my opinion for us to recover."
So Suze Orman has come up with a 2009 Action Plan. Her list of "do's" include building up cash reserves or an emergency fund that you can live on for at least 8 months if you were to lose your job. The next step is to continue to invest in the stock market and your 401-K every month if you're young. And, of course, pay off your credit card debt as quickly as possible.
"What you should not be doing is taking a loan from your 401-K to pay off your credit card debt, to pay off your mortgage."
Suze said that's because if you lose your job, in most cases, you'll be required to pay that loan back within a week or two and if you can't pay it back you'll likely owe a 10-percent penalty on the amount you borrowed and you'll definitely owe income tax on it.
"And you never want to owe money to the IRS."
But what if you want to go back to school.
"Chances are you don't have a savings account so when you go back to school what do you do, you take a student loan out to go back to school."
But in most cases, student loan debt is never discharged in bankruptcy.
"So once you accumulate this student loan debt if you don't have the money to pay it back it's going to grow. Grow, grow, and grow and they have the legal authority to garnish your wages, come after you please be careful everybody going back to school in this kind of economy is not the answer in most cases."
Suze also advises against rushing to buy real estate. She doesn't expect the housing market to recover for at least another two years and even then, she doesn't expect prices to skyrocket.
And Suze anticipates interest rates will go even lower. She also warns there are certain areas where you should not cut costs.
"You don't cut back on health insurance so you can pay a credit card bill. You don't cut back on term life insurance so you can make payments to things that aren't necessities in your life."
Suze said the number one reason people end up filing for bankruptcy is they can't afford to pay their medical bills.
