Personal finance guru and author of The Money Class: Learn to Create Your New American Dream offers advice on how to get through these tough economic times.
Personal finance expert Suze Orman
Tavis: Always pleased to welcome Suze Orman to this program. She is, of course, a perennial “New York Times” best-selling author and the host of the “Suze Orman Show” on CNBC.
Her latest text is called “The Money Class: Learn to Create Your New American Dream.” She joins us tonight from New York City. Suze, as always, good to have you on this program.
Suze Orman: Thank you, Tavis.
Tavis: Let me start by asking the obvious, at least to me – why is there a need for us to create a new American dream? What happened to the old one?
Orman: We destroyed that old American dream. We were dreaming in such a way – and I’m not so sure it’s a bad thing that we destroyed it – but the dream started to be this: “I need two, three homes, I need four, five cars, I need this, I need that,” and people started to dream of having more, more, more, bigger, bigger, bigger, and things like that.
Where we stand today, Tavis, is that one out of four people, underwater in their homes. Millions of people have actually lost their homes. People aren’t going to be able to retire when they thought they could retire. People can’t send their kids to school anymore.
So we need to learn to create a new American dream – one that is based on honesty, integrity; one that allows us to sleep at night so we don’t have to worry about things. That is what this book is all about. We go back to class to learn about money all over again, because we voluntarily in the United States of America, in my opinion, destroyed our economic system simply because of greed.
Tavis: Have the lessons changed or have we changed and forgotten those lessons?
Orman: I don’t think we ever knew the lessons that we’ve recently just learned, but obviously those of us that were old enough, and you went through the Depression, you went through everybody losing everything, you always stayed within your means there.
People were very, very ethical back then and they kind of kept that with them. As people were being born and they never experienced that, they never learned the lesson of what it was really like to lose their home, to lose their car, to lose their job, to lose their retirement account. They didn’t experience it until recently.
But here’s what I’m really afraid of, Tavis – I think in a very short period of time, and this was only happening 2008, so we’re talking three years ago – I think they’ve already started to forget what they learned just two or three years ago.
Tavis: When you said greed a moment ago, Suze, as the underlying reason why so much of this has happened, I was wondering whether or not you were talking about greed on the part of the American people, greed on the part of Wall Street or both, and if there’s greed in both arenas, what’s driving that greed in both entities, Wall Street and the everyday Americans, and is there something different driving them?
Orman: Yeah, I think the greed started with Wall Street, with real estate, with the mortgage brokers. I think the greed started with how could we make more money, leverage, leverage, leverage. I think when we then extended the ability for people who should not have been buying homes, we extended them the ability to be able to do so, because they were able to buy a home with no money down, they were able to buy a home even though they didn’t have a job, they were able to buy a home no matter what.
They could look at a home and they could say, “I want it,” and the finance people would give it to them. So I think it was the institutions that allowed everyday Americans to do things that they never thought they were going to be able to do, that then got the everyday Americans a little bit greedy, because then they wanted more and more.
Who wouldn’t want more and more money? That’s a ridiculous thing. Of course we want more money. Then altogether it came tumbling down, but it started with the corporations. It started with the SEC not overseeing things, with the real estate companies, with the mortgage companies, with bankers. That’s where it started, Tavis.
Tavis: But hasn’t there, Suze, always been greed in the world? If so, what makes this greed on the part of the American people or Wall Street any worse than greed in the past? We used to believe that greed was good, did we not?
Orman: Yeah, in the past, I’m not sure I would call it greed. In the past, I would have called it ambition to want to make more money, and there’s nothing wrong with wanting to make more money as long as you do it honestly and ethically.
As long as you care about the moves that you make to make more money, don’t hurt anybody – in fact, hopefully they enhance people by you making more money as well, because you’ve produced something that they need, that they want, so everybody is okay.
This greed was let’s sell things, let’s repackage them, let’s sell it onto Wall Street. You had derivatives, you had all these things going simply to make more and more money without caring about the ramifications of what was the underlying vehicle of the way to make that money.
Tavis: So Wall Street is making more money than ever before literally as we sit here, number one; number two, we all saw that story just days ago that CEO pay is back up at its highest now ever. What do you make of those two realities, that everybody’s back in the money again except the everyday American people?
Orman: Yeah, here’s what makes me so sad – the rich are getting richer, the poor are getting poorer. There is a highway into poverty, and we call them stickies. Once you get into poverty, you kind of tend to just stick there because there’s no way to get out.
I think it is a travesty. I think it is an absolute travesty that the bankers and everything has gone back to the way that it used to be and all those people are making millions of dollars, and still so many people are losing their homes because nobody will help them keep the home that they want, that they put money down on, that they should be able to keep.
Nobody is caring, really, about the American public, especially those that aren’t doing very well. So Sheila Bair, who’s the chairman of the FDIC, she just stepped down, and I want to say I think that’s going to cause trouble in that this woman was brilliant. This woman is brilliant. This woman, in my opinion, really cared about people, but so now she stepped down, so I can’t wait to see who comes in there, because if somebody comes in and if they don’t really care, I don’t know, Tavis, here we go all over again.
Tavis: There are a number of classes in your curriculum, shall we say, laid out in the text. Let me just throw a few classes at you and you can top line for me what we students will learn when we go to class via this new textbook, “The Money Class.” In no particular order, first of all, family. What are we going to learn about family in the text?
Orman: You’re going to learn about that it’s okay to say to your family, “We can’t afford it.” It’s okay to say to your family, “I know you want to go to college, I know you want me to co-sign a student loan for you, but honey, I can’t do so.” You have to learn how to speak to your kids about allowance and what they get and should you give them an allowance, and what you can and you cannot do.
In this chapter here we learn, in this class we learn about how to come back together as a family and what a family can and cannot do, financially speaking, so we cover everything, including student loans, in that class.
Tavis: There are two other classes where there’s obviously a symbiotic relationship. There’s a class on retirement planning and another class on living in retirement.
Orman: In this book, “The Money Class,” there are three classes on retirement. This is the most complete retirement primer you are going to find any anywhere, especially one that I’ve ever written. So if you’re in your twenties and thirties, it’s going to tell you exactly what to do. If you’re in your forties and fifties, it’s going to tell you what to do.
And if you’re in your sixties and beyond and you’re living in retirement, you’ve got to read this class, because what are you doing? Interest rates are at, like, 1 percent. You were getting 5 percent, now you’ve cut your income as your CDs are maturing. So what can you do to increase your income in order just to stay in retirement?
Tavis: Here’s the exit question, Suze – where’s the evidence that you see, at least, that suggests that the world that we live in will, perhaps, given the drama that we’ve endured, become less greedy? Because I’m not sure I see it as yet.
Orman: Yeah, I don’t know if they will become less greedy. My hopes with having written this book, Tavis, was to teach people to live below their means but within their needs, to prepare them for what I really think is coming very shortly here, especially in the year 2012.
I think you’re about to see a double dip in terms of real estate and what’s going to happen with real estate, and we have a class on real estate in this book, and so people, if they’re continuing to get greedy, if they’re going to stay that way, I think shortly you’re going to see it’s going to smack those that are not educated about what to do right in their face, and it’s going to backfire on those that are greedy.
So I don’t know if we’re going to change, really, Tavis, but I’m just hoping that good, everyday Americans learn what they need to do with their money today to protect themselves tomorrow, because again, I don’t think it’s going to be a nice scenario out there shortly.
Tavis: I love Suze Orman because she’s smart, she’s savvy, sometimes sassy, but always sensible, and for me, just real simple, and I get it. Her name, of course, Suze Orman. The new book is called “The Money Class: Learn to Create Your New American Dream.” Perennial “New York Times” best-selling author. Suze, good to have you on. Thanks for your insights.
Orman: Thanks, Tavis. See you soon.
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