What may be holding you back from material and spiritual abundance? Financial expert Suze Orman knows the technology of money management, but just as importantly, can help you clarify your personal relationship to money and find "The Courage To Be Rich," which is, appropriately, the title of her latest book. From OPEN EXCHANAGE MAGAZINE, March-April 2000.—Bart Brodsky
Bart Brodsky: You take a unique approach to financial planning. Your books help people to articulate their own priorities—they're not just dry recipes. In your latest book, The Courage to Be Rich, you say that one should value people over money and money over things. Could you explore that?
Suze Orman: Most of us value things more than we value money, which is why most of us have more things in our closets and cupboards than we do money in our bank accounts. And those things usually end up as clutter, as things that we don't even use. Money, however, truly is a permanent presence in our lives when it is respected properly and used to purchase correct things or for retirement. But when we think that we are what we own, we tend to value things before we value money—or ourselves. Money is essential, but money can never take priority over a human being. So, people first, and then money, and then things, is the correct law of money.
Bart: Talking about valuing people, you write, "The less self-esteem you have, the more debt you create."
Suze: The reason we spend more than we have is that we feel that we are less than we truly are. The lower your self-esteem, if you can imagine a teeter-totter, the more credit card debt you usually have. And it's not until you hit rock bottom, and your credit card debt is so high, that you say, "I'm not going to go any lower or I'm going to break."
Bart: Does that include having the courage to drive an older car while you're paying off your credit card debt? Not needing the new car for your self-esteem?
Suze: That's right. Not needing the new car, the new clothes, the fancy house, the fancy jewelry, not needing to go out to fancy restaurants all the time, not needing to have a Starbucks coffee every day. Also, not needing to go out to lunch at work with everybody else, but having the courage to say, "I value who I am, and I value money over things. I'm going to honor who I am, and I'm going to get my money in order first, and then I'm going to do all the things that I want." But it's not until you raise your self-esteem that your debt will go away and stay away forever.
Bart: In the book you make an excellent point about distinguishing between good and bad debt, suggesting that good debt furthers your values, whereas bad debt may be the result of unplanned impulses or unconscious fear or guilt. My wife and I don't always agree about when to spend and when not. Can you help clarify that for us?
Suze: Bad debt is sacrificing your future day needs for your present day desires. This includes credit card debt and store payments of all kinds. The true cost of that will be your tomorrows. Good debt is when you sacrifice your present day desires to be able to fulfill your future day needs. So, good debt is student loan debt, where you're making an extraordinary investment in yourself. The mortgage on a home, or a business loan to start your dream to be an entrepreneur, is also good. When it comes to relationships and dealing with financial intimacy, we each have an internal value system that drives us to spend or not to spend. We each focus on what we're going to buy, but that's an incorrect focus. Focus instead on why you want to spend the money on this or that. What feeling in you does it satisfy?
Bart: There are couples that will have lived together all their lives and raised a family and not have talked about money. Why do you think that in this culture it's almost easier to have sexual intimacy than it is to have financial intimacy?
Suze: Because money is the last frontier. Money is a topic that touches all races, all religions, all sexes, all ages, all tax brackets. It's a universal language that truly has been held up to us in society as a thing that determines whether we are successful, worthy, whether we have contributed something to life or not. It's held up as a measure of everything. And our greatest fear in life is that maybe we aren't as great as we were meant to be.
Bart: Maybe we put too much emphasis on money alone.
Suze: Maybe. Maybe we failed. Maybe we're not doing everything that we should do. So we've shied away from the one topic that determines our success in life.
Bart: When did you find the courage to be more successful?
Suze: I'll never forget when I was a waitress at the Buttercup Bakery for seven years in Berkeley, and how afraid I was to do anything other than just be a waitress. I knew that world so well. I knew the customers. I knew the route to work. I knew what to wear. I knew what to expect, and it was comforting to me. The thought of going for more was a fearful, frightening thought, to say the least. I started to realize that there is nothing we fear more than our money. We fear opening up our bills when we don't have money to pay them. We fear walking to the mail box just to get the bills when we know we can't afford to pay them. We fear when the telephone rings that it's a creditor calling us, so we pretend to not even be home. We're afraid to go for more, because we might fail.
Bart: So you became an investment broker and changed things for yourself, and now you're helping others to find their own courage. If you were Secretary of Education, what would you change about the way kids are taught about money?
Suze: I would change the amount of money that they pay the teachers! What a travesty that we are entrusting the children of this world to these men and women, all day long, and we don't honor them enough to pay them better! What value does this pass on to children?
Bart: Isn't it incredible that prison guards get more than teachers?
Suze: And then we wonder why we have a society that isn't working, that we're raising children who don't know how to read, and who murder one another at school. Maybe it's because we do not honor those who are raising the future of America.
Bart: What advice would you give Congress on changing the tax code?
Suze: We need to give people more of an incentive to work, to save, to invest, to create a true future for themselves.
Bart: Lowering taxes? Privatizing Social Security?
Suze: Yes. Not taxing our savings or capital gains on investments at all. Not taxing our estates that we pass down from parent to child. You already taxed us once on that money when we earned it. You have absolutely no right to tax us on it again.
Bart: A little practical advice—should a person borrow on their home to fund their IRA (retirement account)?
Suze: No. That is not good debt. You need to figure out a way not to rob Peter to pay Paul. You would have to make at least 8% or 9% in your IRA account in order to break even. Today the markets aren't as hot as they were for the past few years. The 90's were a fluke. You need to fund your IRA or 401K, out of the money that you've earned, as well as letting the equity in your house build up with the goal of owning your house outright by the time you take Social Security.
Bart: With the stock market at these levels are you still an advocate of dollar cost averaging?
Suze: Absolutely. These markets are extremely dangerous. With the Dow Jones sometimes going up when the NASDAQ is down, we have diverging markets. We have an inverted rate curve in the bond markets. We have unparalleled earnings ratios. In this market I would be dollar cost averaging.
Bart: Would you recommend holding back cash?
Suze: Yes. I would not be 100% invested right now. If I were going to do an asset allocation model for somebody who has not invested before, I would probably keep 50% to 60% in cash, 25% here in the United States, maybe 10% international, and maybe 5% in Europe.
Bart: Thank you, Suze. You're certainly not afraid of getting into specifics! Now, do you have a special message for OPEN EXCHANGE readers who may come to see you at the Whole Life Expo this April?
Suze: Since this is for the Whole Life Expo, I have to ask the question: What is your "whole life" about? At the end of your life, you cannot take a penny with you. So what is the object of money if you can't take it with you? There is a far greater lesson than just creating more and more for your own personal need or playing the "money game." Money is a universal tool that I truly think has been put on this earth to help you to understand who you are.