The 9 Steps to Financial Freedom: Practical & Spiritual Steps So You Can Stop Worrying

suze orman best-selling author and nationally recognized financial expert is changing our relationship with money and providing new ways to achieve true wealth so let me ask you this how many of you spend more money on your credit cards than you know you should be spending or how many of you haven't start planning for retirement even though you know that day is coming quite shortly or how about a will in a trust haven't you all said that you're gonna get around to doing it have you no how come think about it all of us have time to do the things that we love we make more than enough time for that we don't do things with our money because we are paralyzed with fear fear that we're going to do something wrong so over the past 18 years I developed a systematic 9 step approach that I call the nine steps to financial freedom and in this next hour we're going to take a journey into those nine steps now this approach can essentially be divided into three parts the first part takes you back to your memories of money your very first memories and we do this in order to make sense of why we don't do that which we know we should be doing with money today the second part deals with the laws of money the must dues being responsible to those you love wills trust looking at your attitude towards your credit card and your retirement plan and I'm going to tell you about an insurance that I think is probably one of the most important that all of you should have but yet most of you probably haven't even heard about it yet in the third part we're going to look at ways to invest our money we're going to learn who is the most important person we should trust when it comes to a financial advice that we get and in the end we're going to go far beyond the realm of money into a wealth that money can't buy hide a lot of you are looking a Susy it's too late I can't make any money I can't do this it's fine financial freedom anybody but me however this is what you need to know it's never too soon to begin that's true however I am Telling You I have seen thousands of people follow this 9 step approach age 50 60 70 and they've emerged with financial freedom so even though it's never too soon to begin the truth is it is never too late to start and here's the key to that it has to be that what you do say and think has to be won but it's not good enough just to say you want financial freedom unless you think financial freedom can come your way it's not good enough to say and think that you want financial freedom but do absolutely nothing about it so we're going to learn how to become one with that but you know the first step in helping you create a secure financial future is first taking a step back to our past now most of you when you go to a financial adviser don't you arrive holding a whole bunch of financial documents with you you want them to look it over see what you got going well my clients do that as well however that's not what I look at when I first asked them to do is to create what their first memory for me of money was something happened to us when we were very young that is still operating now is we're an adult with our money and it's that memory that it's preventing us from taking the action that we want to take when it comes to our money let me give you an example of this when I was 8 years old I went to my mom and I said ma can I have a dollar I need to go to the swimming pool with my friends and she said Oh Suzie honey we don't have a dollar to give you right now but please don't tell your friends because if you tell them they're not gonna like you anymore so what did I start to do I started to go into my father's pockets at night where he kept his money it sound familiar to any of you and I started to take out a dollar here and there what do you think I did with that money spend it on myself no I took that money and started to spend it on my friends so they would continue to like me to buy them lollipops comic books that Archie comic book that I gave to Leslie so many times I can't tell you and I realized that I continued to do this for many many years do you know I was in my 20s and I was still doing this not stealing from my father but stealing from myself in the form of charging money on my credit cards to buy my friends dinners presents for their birthdays all kinds of things and one day I was standing they are buying a birthday present for somebody and I said Susie you don't have the money to pay for this you're still acting like an 8 year old child when it comes to your money and I thought oh my god that's absolutely true that's exactly what I'm doing here years later when I became a financial adviser you want to know something I realize that all of you my clients were doing the exact same thing so for instance let me try it this with you imagine maybe you're three five years old you're crawling around you find a quarter on the floor and you put it in your mouth and your mother looks at you and she says to you don't touch it it's dirty do I think that you're not touching money today because it's still dirty I not only think it's possible I am Telling You it is probable that that memory is still working and that is why you don't take the actions that you know you should be taking when it comes to your money the first exercise that I want you to do when you have time is I want you to go back into your mind and think about the time that money first meant something to you that you knew it could buy you something maybe that lollipop again maybe a present anything now don't look scared here it's not like I'm telling all of you that you need to go and get therapy this isn't about spending $50 an hour for some therapist to say now what is your first money minim or no no it's really quite simple I want the first memory that pops into your mind whether were five 10 or 15 years of age maybe for some of you what was that your parents always fought about money maybe maybe it was that you had a shop at the Salvation Army but all your friends shopped at Macy's or on the other side maybe it's that you were driven to school in a chauffeur-driven limousine but yet your friends arrived just in regular cars next I want you to think about what your greatest fear is when it comes to money what is it are you afraid that you might be a bag lady and end up on the street powerless and penniless are you afraid that you're never going to be able to buy a house that you want to live in that's your home or be able to retire when you really need to whatever that fear is for you I want you to see if there is a connection between your first memory of money and this greatest fear I've done this with thousands of people now and I can tell you if you look at this you will see and you will make that connection and once you make that connection you start to break the chain of it and you start to be able to propel yourself on into true financial freedom however you know our fears that we have about money are very deep rooted within us so in this next step we're going to learn how to silence those fears and create new truths [Music] you know back in 1980 when I was first hired as a financial advisor a stockbroker I can't begin to tell you how afraid I was I was petrified I had been a waitress at a bakery up until that time so here I find myself in a situation and I don't know how to act and I'm so afraid cuz I don't belong in fact I was so afraid and I have to tell you every day I would get into my 1967 Volvo station wagon remind you know it's 1980 and I would drive to Taco Bell because that's where I felt comfortable I would sit there and eat these tacos by myself because I belonged there I didn't belong with the other financial advisors that were going out in their three-piece suits eating at these fancy restaurants because that wasn't my frame and one day as i sat in Taco Bell in my car I was thinking you know what you are never ever going to make it here unless you can create a truth to silence your fear you have got to stop saying to yourself Suze that you don't belong because of course you do so I did create a new truth for myself and what I created was this that I am young powerful and successful producing at least $10,000 a month that was a good truth do you think I believed it well I don't think so I didn't feel powerful I didn't feel successful and ten thousand dollars a month with more than my father made sometimes in an entire year but I started to do this truth twenty-five times a day I would write it I would scream it I am young powerful and successful I would sing it and I have to tell you within about a year it became true well I realized that if this could work for me it could work for my clients as well so when my clients would come in and they would tell me about their money and their fears I would have them create a new truth so what I want all of you to do is an exercise as well in creating your truth remember this fear that we had in your head a little bit ago I want you to create a truth that totally is opposite of that fear so for instance if you're thinking to yourself oh my god I am never going to have enough money there is never anything I'm gonna have your new truth then would be something like I have more than I'll ever need so in your when you do this I want you to create something that's opposite I want it to be short one sentence so that you can repeat it over and over again I don't want it to be limiting remember I said that I'm producing at least $10,000 a month hey if the universe wanted to give me more why leave it at 10,000 all right the same is true for you and I want it to be present tense so your truth has to be I have more than I'll ever need if that's what you choose it to be once you've created this truth I want you to repeat it just like I did over and over again make a commitment to yourself to do this write it sing it say it silently and I can tell you again shortly might be six months might be two months for some of you might be a year it will start to come true so great now we're being truthful with ourselves we know what our fears are but are we honest with ourselves that's what we have to know and in the next step we're going to see what it takes to become honest everybody says they want financial freedom don't you say that yeah I want some more money you say that too don't you well I have to tell you it's not about wanting more money uh-uh it's about wanting to know more about the money that you already have when clients come into me and they look at me and they say Suzy tell me about my money I say no no I want you to tell me about your money I first asked them all right how much do you spend every month month in and month out how much do you need to live and they think oh well okay I make $3,000 a month and at the end of the month all my money is gone so I must spend 3,000 month in and month out that must be it oh you do that as well see you do do it that way don't you I knew it however when we go through all their statements all their checking accounts that's not what they spend without a shadow of a doubt I'm telling you and this will happen for you as well they spend at least 500 to 1500 dollars more per month every month than they ever had any idea that's why at the end of the year have you ever noticed you think why haven't I been able to save any money where did it all go because you don't think about the money that you're going to spend in December for Christmas presents and Hanukkah presents in June you don't think about in June the money that you're going to spend on a vacation maybe in January do you see that so we're always spending money without thinking about it and we don't plan for it so another exercise for all of you I want you to go back through the last year's of your checkbook your ATM withdrawals every statement that you have on your credit cards all of that and I want you to total everything that you spend and this is how I want you to do it I want you to make separate categories for your money so let's say you happen to go and you're buying clothes everything that you spent on clothes goes in one category your vet bills go in another category your hair expenses massages whatever it is goes in another when you've done this at the end you're going to have all these numbers for all these categories I want you to total up all those categories and then I want you to divide by 12 that number that you get is what you need month in and month out coming in the next thing I want you to do is look at your income how much income do you have coming in from interest on your savings accounts from your salary Social Security whatever it may be that's the money that I want you to total then I want you to compare those two do you have enough coming in to cover what you have going out well a few of you are laughing because chances are you don't so if you don't you only have two choices either you get another job and start making more money that's hard since most of us are already working 60 hours a week and can barely pay the money that we have right now or the bills that we have right now or secondly I want you to start to choose how you spend your money that you have now what do I mean by that you've just created an entire list of things that you spend your money on I want you to look at that list and choose which things on those lists are important to you so for instance maybe you go to the movies six times every month so great rather than going six choose to only go four now or maybe you get your haircut or things like that whatever it is I want you to choose how you should start spending your money now I am NOT talking about budgets here a budget with your money is just like going on a diet with your weight all right it's true have you ever noticed you go on a diet you lose ten pounds then you gain 20 you start budgeting with your money you'll see spending for a month or two you'll be in line but months 3 4 & 5 you will make up for it by spending more so this is about choosing how to spend your money when you do this this entire process puts you in control of your finances and when you're in control you're now starting to drive towards your own financial freedom you know we have just gone over our money memories connecting them to our fears we've also looked at how to get honest with yourself where do you really stand with your money when we come back we're going to look at the must dues the laws of money what we do to attract money to us what we do to repel it and how we can become a money magnet [Music] this next step is what I consider one of the most vital vital steps being responsible to those you love you know the first law of money is people first then money it is not nice when you leave this world and trust me every one of us is going to to leave those that we love not only in an emotional chaotic mess but in a financial one as well so the first things that I do when my clients come to see me is I look over their paperwork their will their trust do they have everything in order and I have to tell you most of them do not or if they do they don't really even know the difference between what is a will what is a trust so I'm gonna tell you right now all right let's assume that my mom has a house in the state of California valued at about two hundred thousand dollars and she wants to leave it to me and she does so via her will so great mom creates a will and she does that says Susie gets her house when she dies what's the cost of that will well it will be about a hundred dollars no big deal but here's where the problems come in let's say my mom dies the name the deed is my mother's isn't it says a Norman on her deed mom's not alive anymore to sign her deed over to me so how am I going to get the house in my name I'm gonna have to take her will down to a court it's called probate court and I'm gonna have to have a judge sign my mother's name for her first of all this whole process will take six months to two years no big deal right that's quite a long time if you ask me but secondly what do you think it's gonna cost me simply to have that signature it's going to cost ten thousand three hundred dollars that's the mandatory probate fee in the state of California think about that that is a lot of money what if I didn't have that ten thousand three hundred dollars guess what would happen everybody the court would sell my mother's house in order to get money to be able to pay those fees because those fees go to the executor to the probate person known as the lawyer was there a different way for mom to do this you betcha there was mom could have created what's called a revocable living trust works very much the same way in terms of setting it up as a will does you go to see a lawyer he or she draws it up for you the costs are a little different however the cost for a revocable living trust is about five hundred to a thousand dollars what's the difference however it's not going to cost me anything to get this house why because this is how a revocable living trust works while mom is alive she signs over the deed of her house into the name of the trust rather than its saying an Ormond on her deed that will now say an Ormond trustee for the a Norman living trust it's already in there when mom dies it goes directly to me if she names me as her beneficiary in that trust does it change what she can do with that house no she can sell it anytime she wants she could refinance it anytime she wants it doesn't change her property taxes anything so there is a tremendous difference between ten thousand three hundred dollars and nothing so for those of you who think you've taken care of your children or those you love by leaving them something via a will you might want to check this out now it's very important that you know that rules vary from state to state so for instance in the state of California of course you would have a living trust you'd almost have to be crazy if you didn't however in New Jersey it doesn't make that much sense so this is what I want you to do I want you to go into your lawyer's office and I want you to say alright if I were to die today if my husband and I were to die today or my partner and I how much would it cost my children in probate fees court costs everything to inherit everything that I'm going to leave to them then I want you to ask all right if I set up a revocable living trust then how much would it cost depending on your state these answers will vary but which ever one is cheapest that's the way you go now a lot of you may find that maybe you went to your attorney and you said I want a revocable living trust but he said or she said you don't need one please keep in mind who gets those attorney fees if all you have is a will all right now again a lot of you may say I don't particularly care Susie how much money my children are going to have to pay when I die that's their problem not mine so let me ask you this question how many of you own a house in joint tenancy with your partner or spouse your home right quite a few of you don't you let me ask you this question if you were on the way home and you were in a serious car accident and totally incapacitated would your husband be able to sell your house if he needed to mm-hmm you don't know the answer to that the answer is no he would not now why would he need to sell it well if one of you aren't working anymore and you don't have that income coming in maybe you can't afford the mortgage payment or maybe you live in a two-story house and you want to take care of somebody and you just need a one-story house to be able to do so but you can't sell it and the reason you can't sell it is that it takes two signatures on the deed if you own an and joint tenancy to be able to sell this house and he or you can't sign for it if you're incapacitated so now what are you going to have to do you're going to have to go down to the court have him or her declared incompetent oh great that'll cost you five thousand dollars and from that point on you will have a conservatorship assigned to him or her and every time you make a move with their half of the money the judge is going to have to approve your motions with that money you have now committed yourself to what I call a living nightmare was there a way around this there is in your revocable living trust forget about the kids forget about the probate fees think about yourself if you simply had a simple paragraph known as an incapacity Clause you could step in and sign immediately for your husband your children could step in and sign for both of you if something happened to both of you at once and it would take care of that all together now again a lot of you are going to say but I don't need a trust you're going to go to the lawyer's you're going to do that comparison and you're gonna see well all I really need is a will and maybe a lot of you think that you can get around this problem by having a power of attorney what you need to know is if you have a power of attorney that lets you sign for each other do you know that powers of attorney are null and void the day that an incapacity happens so if you're going to go that route rather than getting just a regular power of attorney it is essential that you get a durable power of attorney that lasts through in incapacity remember at the beginning of the show I talked to you about an insurance that I thought was very important for all of you to have the name of that insurance is called long-term care insurance now this is not a topic that a lot of people like to talk about but let me tell you this one out of three of you are going to spend some time in a nursing home after the age of 65 and you know that the average length of stay will be 2.9 years right did you know that your health insurance will not pay a penny of it did you know that did you know that Medicare will hardly pay for any of it sure Medicaid or Medicare will pay for it however to qualify for those two things you're going to have to be financially destitute right so that's what you need to know about what you already have now this is what you need to think about do you really have an extra three thousand dollars per month or five thousand dollars per month to keep your spouse in a nursing home while you're at home still living paying your mortgage and doing all those things most of you will not so there's only one person who's going to pay for these expenses and that's you out of your own pocket because those other entities are not going to do it now whenever I tell my clients about long-term care insurance they go not me I am NOT going to end up in a nursing home or I'm never going to have to use it Suze why would I want to pay for insurance then I'm never going to use let me ask you this do you ever want to use any of the insurance that you have I mean you all have fire insurance don't you I mean none of you are sitting here hoping that your house burns down are you but the fact is only one out of 1200 of you will ever use your fire insurance but you all pay for it how about your car insurance you don't hope you're in an accident but one out of 246 of you will use that insurance but long-term care insurance the one insurance that most of you don't want to have one out of three of you in your lifetime will end up using it let me give you a brief idea how it works let's say you were 55 years of age a Cadillac policy would cost you about $900 a year in a good policy the premiums are based on how old you are when you enter it and stay stable that way throughout the entire length of the policy so if average age into a nursing home is 85 you would be paying nine hundred dollars a year for those thirty years or a total of $27,000 do you know that that's less than what one year in a nursing home today would cost you let alone 30 years from now so it's something that all of you I'm serious about this need to look into what is the perfect age for you to buy such a policy between the ages of 54 and 59 right in there I've done the calculations many many times that's the perfect age now if you're older than that you should still look into it however if you're younger than that you might want to wait right because it's not worth the money at that point what's key to know here however is that if you decide to purchase a long-term care policy don't do it out of fear do it out of knowing why you're doing it and do it knowing that you could afford it for a long time it will do you no good to buy a policy like this when you're 55 and then when you're 70 find out that you can't afford it anymore and then you have to drop it you would have thrown that money away so you were better off not buying it at all but this is something that you all truly need to look into these were just a few other things that we needed to look at to be responsible to those we love but you know sometimes being responsible isn't quite enough and the next step we look at being respectful to ourselves and to our money [Music] there's another law about money and this law goes like this respect and power attract money and disrespect and powerlessness repel it you see there's things that we do in our own life that prevent money from coming our way and money will respond to you just like people do you know in your life when you're feeling powerful everything's going right and you go and look at jobs everybody wants to hire you your friends call you up everybody wants to take you out to dinner and pay for it you're everybody's best friend when you're feeling powerful and things are going great let's start to get depressed start to get sad start to lose that power and become powerless you noticed friends don't call anymore nobody wants to take you to dinner and all the job interviews totally dry up money responds to you in the exact same way and there are many things that we do in life that render us powerless when it comes to our money the number one thing that we do that renders us powerless is when we have credit card debt all right when you have debt credit card debt you become a prisoner to that debt rather than you having control over your money your money at that point that debt has control over you to see that does that make sense to you now there are fabulous reasons to have credit cards it's not just everyone to throw away their credit card that's not what this about so you can use credit cards to reserve cars for yourselves at airports you know to purchase things over the telephone for a variety of reasons collect airline miles all kinds of things so there are many good reasons to have credit cards but many of us have let that credit card that plastic money start to ruin our lives and that's why 1.3 million people are about to claim bankruptcy they're about to bite what I call the financial bullet and we don't want that to happen to anybody anymore you know when it comes to debt we have such shame don't we actually when it comes to money we should have such hidden shame most of us don't ever talk about it in fact most of us talk about our sexual affairs with one another more than we do our financial affairs isn't that true think about this imagine yourself going into a cocktail party or a dinner party and announcing to everybody in this room that you have seventeen thousand dollars of credit card debt mmm-hmm could you do it right the entire room would fall absolutely silent everybody would be horrified especially those who have more credit card debt than you right that would just go silent you have to understand that you are far far more than the negative balance on your credit card statements just cuz you owe money to somebody doesn't mean that you're a bad person it simply means that you manage money poorly so the first thing you have to do to start to erase this credit card debt is to face it to really see it and start telling your friends about it tell your husband or wife or your loved ones or your children or your friends that guess what Jane I have three thousand dollars of credit card debt she'll tell you she has some back as well that she's been hiding but start talking about it because when you talk about it you take the power out of it the next thing you have to do is to know how to handle your payments it is extremely important that when it comes to credit cards that you pay more than the minimum on these credit cards and let me give you an example of that let's say you had an $1,100 credit card debt and an 18% interest rate do you know to pay off this $1,100 in full if all you did was to pay the minimum it would take you 12 12 and a half years to do so and you would have paid a total of two thousand four hundred and eighty dollars in interest alone that's actually very fascinating if you think about that so next time you go to the stores and you buy something and you know all you can do is afford the minimum know that you're going to be paying three times for that item by the time it's done right keep that in mind let's say however you paid just ten dollars more that's thirty five cents a day if you just simply spend a little bit more money for this minimum payment this debt will be retired in six years and you will have only spent six hundred and seventy six dollars in interest and that's at just ten dollars a month more now a lot of you also may say to me but soon as I don't have an extra ten dollars a month then I'm going to show you a way that you can get not only $10 more a month but far more than that I want you to stop spending your change and only spend paper money what do I mean by that all right go into a store you buy something for four dollars and fifty cents all right and you hand the guy a five-dollar bill and he gives you 50 cents and change put it in your pocket next door you go into you buy some gum for 50 cents rather than taking the 50 Cent's out of your pocket take out another dollar give it to the person and get another 50 cents if you do that I promise you at the end of the month you are going to have 30 to 60 extra dollars that you won't have a clue of where that money came from if you take that money and apply it to the credit card debt boy that debt will be retired far quicker now there are some of you out there that are in serious trouble when it comes to credit card debt and if you are I want you to know that there's a nonprofit organization that's set up called the consumer credit counseling service if you go to them they'll help you negotiate lower interest rates for you in many cases they'll be able to take you from 18% to 0% so take advantage of them they're honest they work with you and they're throughout the entire country after you've paid off all your credit card debt then you need to go on to save for your future and another way that we're not respectful to ourselves is that we don't save enough for retirement all right whenever I tell people this they say Suze I don't have enough money to pay my bills right now how do you expect me to put money away for retirement and pay my bills that's a good point but I have a better one if you don't have enough money today to save for retirement and pay those bills how do you expect to pay those exact same bills 20 or 30 years from now when you no longer have a paycheck coming in today you have a paycheck coming in and you can't pay those bills 20 years from now you're not going to have a paycheck coming in what are you going to do you're not going to be a very happy camper so what you need to know is that time is of the essence let's say that you were 25 years of age and you took simply $100 a month and you put that in a good no-load mutual fund one without any commissions on it and you got a great return of let's say 12% a year a year in and year out do you know that by the time you are 65 that you will have 1 million dollars in this account it's a lot of money so let's say you decide to wait just 10 years you decide you want to go and maybe go to Europe or maybe buy a car with that extra payment or whatever it is so you don't start putting money away until you're 35 how much do you think you'll have at the age of 65 you'll have only $300,000 ten years at just $100 a month cost you $700,000 by the time you become 65 wait another 10 years wait till you're 45 to do the exact same thing at the age of 65 you'll have $97,000 those are tremendous differences so no matter where you are what age you are now is the time to start where is the best place to put this money all of you should first start with your retirement plans at work maybe you have a 401 K maybe you have a 403 B or if you don't maybe you have an IRA or a Keogh or a SEP IRA but all of you should be putting the maximum amount that you're allowed to into those retirement plans you know there's another law when it comes to money and that law is this that the more you make the more you spend isn't it true years ago I used to think I could get around on $5,000 a year because I used to then I start making 20 and I couldn't quite make it then I made 40 then I made a hundred and I still didn't make it what was going on it's not about making more it's about keeping more of what you already make and one of the best ways to do so is use these retirement plans because if you don't bring home that money you have the money taken out of your check before you ever see it you're not going to spend it and you're going to have it you know in these last two steps we've learned how to be responsible to those we love by creating a revocable living trust or a will we looked at long-term care insurance and a durable power of attorney we've learned how to be respectful to ourselves how to attract money to us we learned about dealing with our credit card debt and how to save for retirement when we come back we're going to learn about a way to invest your money that takes out the fear of it and we're going to learn who is the absolute single most important person to trust when it comes to investing your money [Music] step six I have to tell you is probably one of my favorite steps of all trusting yourself more than you trust others interesting concept when it comes to money isn't it each and every one of us has this little voice it resides right around here it's not a little voice this is a huge voice and if we listen to this voice it will keep us out of trouble especially when it comes to our money have you ever found that to be true you see most of us want to look for somebody else to tell us what to do with our money we want to have somebody take care of us and our money rather than us take care of ourselves but what's very strange about this is that most of us check our oil in our car more than we check the investment return uh-huh that our financial advisors have been getting for us whenever I asked my clients that come to see me new clients well what did your old advisor get for you in the past five years they go I don't have a clue so this is what I want you to know as an advisor on Wall Street what I learned was that you will never be powerful in life until you are powerful over your own money you know when I first became a stockbroker I was the only game in town you didn't have a choice you wanted to buy stocks you had to buy it from somebody like me and pay full Commission's on it you wanted to buy mutual funds you had to buy it from somebody like me and pay a 5% Commission there are only 300 mutual funds when I first became a broker do you know that there are over 8,000 mutual funds today most of them without any Commission's on them whatsoever the question you have to ask yourself is the industry has changed but have you are you keeping up with the times now again a lot of you may say but you know Suzy I hear you say this I know I should be doing it myself but I'm afraid I don't want to mess up let me show you a technique of how to get your feet wet of how to take the fear out of this all right you know most times when people invest money they usually just take it and they invest it all at once that's called a lump sum purchase there is another way to invest money and that's called dollar cost averaging and I'm going to compare the two for you right now let's say that you have twelve hundred dollars that you wanted to invest and you were going to do it like most people do in one lump sum great if you took that twelve hundred dollars and let's say you bought a mutual fund with it that's training at about ten dollars a share you would be able to purchase a hundred and twenty shares correct but let's say one year later everything's gone bad this mutual fund falls to $5 a share now what's happened is you've lost half your money you still have a hundred and twenty shares and at five dollars a share it's only worth 600 dollars that's how most people invest and that's what happens let me show you another way you could have done it let's say you took this $1,200 and rather than putting it in all at once you took it and took $200 and in January invested this money mutual fund is at $10 a share so now you were able to buy 20 shares let's say two months later you took another $200 mutual fund is starting to fall but notice you're able to buy more shares because it's costing less over the year as the price of this mutual fund Falls do you notice that you're buying more and more shares it still ends up at $5 a share that we can't prevent the differences is rather than a hundred and twenty shares in the first example you now have 208 shares and 208 shares at $5 a share equals thousand forty dollars you've hardly lost any money at all there's a tremendous difference between the two let's compare that lump sum you buy a hundred and twenty shares it's worth now $600 dollar cost averaging you buy two hundred and eight shares it's worth a thousand forty but here is the real clincher so let's say after you've done this you decide you know what I'm not investing anymore in either circumstance I don't care about dollar cost averaging I don't care about lump sum purchases I bought something that went from ten to five and I'm not doing it anymore so you're taking a year off and you decide this isn't gonna this isn't for me but over that next year the mutual fund starts to go up and it goes back up again to ten dollars a share in the lump sum approach you still have a hundred and twenty shares don't you so great you got your money back there it is and you're as happy as can be however if you had dollar cost average where you had 208 shares now you have two thousand and eighty dollars that's a sixty percent gain over where you started do you see the difference here this is a way to benefit when the market goes down to profit more when the market goes up and in times like we've been having with all these fluctuations this is a way for you to enter the market without a lot of risk and a lot of fear next question you may have is all right but I don't know which mutual fund to buy or why do I put my money into there is so much information at your fingertips today I can't even begin to tell you American line the internet morning star which rates mutual funds it's a publication that you can get at your library financial books financial newsletters it is all out there and when you start taking these steps towards your money you start to feel powerful because you're in control and when you feel powerful what happens power attracts money to you in the next step we're going to make sure though now that we're attracting money are we sure that we're attracting all that is meant to come our way [Music] would it be nice if all of us could receive more money once you like some more I don't know one person who doesn't however what are you doing to prevent that from happening and this is the answer to that question most of us go through life clutching on to the little amount of money that we have so tightly that our hands literally aren't open to receive that which is to come our way and you know it's our natural tendency to clutch we did it from the day we were born didn't we we clutched my mother daddy's finger and we're still clutching think about it if your hands were like this and you were as thirsty as could be couldn't find any glasses in the house and you go into your kitchen and somehow manage to turn on the water how much water would you a but be able to drink with your hands like this not very much but if your hands were opened you then would truly be able to quench your thirst okay so there's only one way that I have found to force the opening of the hands and that's by giving money away on a regular basis now I'm not talking about here giving to get money uh-uh that's not how it works I'm talking about giving to say thank you as a true offering thank you for that which we have and thank you for that which we don't have as well you see when you feel generous because you have enough money to give away you feel powerful and when you feel powerful once again money is attracted to you how much do I think you should give away the amount that feels respectful to you the amount that that little voice that you have inside of here tells you for some of you it might be a dollar a month for some of you it might be five fifty or ten thousand dollars but you will know what that amount and it has to be a respectful amount to you not to impress anybody but to you how often do I want you to give that away every single month on a regular basis in fact I think it should be the very first check that you write at the beginning of the month because if your hands are opened at the beginning of the month you have 30 days to follow to let more money flow in now the next question I have to tell you it's a very interesting one to whom should you give that money where should it go a lot of you are gonna have friends who need money and you're gonna say all right I'll give Jane a hundred dollars every month or maybe you have children who have a lot of credit card debt and you want to help them out so you give them money every month I'm telling you this right now if you give money to a person it's gonna render you powerless rather than powerful why because nine out of ten times that person is not going to do with that money that which you think they should do you're gonna buy a computer for your children and they're going to end up buying it and using it for three months and then they're never going to use it again and you're going to be aggravated at them or whoever you gave money to to pay off their credit card and four months later they're taking a vacation you're gonna go well wait a minute what happened to the money I gave them so there's attachments to it I do want to say there's only one person or people that it's okay to give money to and that's to your parents we owe our parents a debt truthfully for having given us birth on some level here and you never feel powerless when you give mom and dad money it's you feel grateful to be able to do so so in all the years I've never found anybody regretting giving money to mom and dad if you do so though I want you to do it in a humble way because sometimes it's very hard for mom and dad to take money from their kids but then it's okay the places I do want you to give money to are this I want you to find a fabulous nonprofit organization of your choice or a place of worship that you truly believe in you know it's kind of this this is what I'm looking for this kind of a feeling you go into a place of worship do you ever remember doing this you drop a dollar in the donation box and you light the candle and you stand there and you remember the serenity that you felt for that one minute that you were standing there that peacefulness when you feel like that you feel generous and when you feel generous you feel powerful and when you feel powerful I can't say it enough money will come your way you know however it's true more money will come your way but money has a mind of its own sometimes and in the next step we're going to learn about the ups and downs of the money cycle [Music] you know in life sometimes things just seem to go wrong don't they maybe you lose your job and then you lose your job you don't have any money coming in can't pay the bills you get into debt and everything starts to fall apart however if you can simply have faith that everything happens for the best if you can see today's events with future vision then you'll know you'll be able to be powerful when these things happen you know it's kind of like if you think about this do you remember you were one at one time in your life you were totally in love with somebody head over heels about this person and they left you and there you were you cried for months densha it you were just devastated in fact probably the only good thing that came out of it was that you lost some weight and then four years pass or a number of years passed and you think back on it and you go how nuts was I I didn't even like that person the same can be true with your money things happen and you need to be able to see it in the future rather than the effect it has on you today now a lot of you may be thinking it's great Susie standing up there a successful financial adviser and she's telling us if I'm about to go bankrupt I've just lost my job to feel happy about it but that seems to make a lot of sense what qualifies her to be able to say that well I'll tell you what qualifies me 1011 years ago I walked into my office where I have an entire financial planning firm and a very trusted associate totally wiped me clean of every single penny I had to say I was penniless at that moment was putting it mildly because you know we had legal fees and things to fight that afterwards however I what changed that event for all the money in the world and let me tell you why for years I identified myself by my money identified myself by my car Jay watch by my BMW by my designer clothes and the kind of home that I lived in that's what I thought made me important I probably would have thought that for the rest of my life if this hadn't happened and I would have been missing out on the most important thing in life which is I was more than my money i defined my money my money didn't define me and it actually made me a better financial adviser I have to tell you it gave me compassion for people to see them as a whole and help develop these steps so what I want all of you to do right now is I want you to think of a time when something in your life seriously went wrong in your eyes and today sitting here I want you to think about that how did it help you did it give you more courage did it give you more strength more stamina and in the future when something goes wrong financially with you I want you to think back to this exercise and I want you to remember what we did here and most of all I want you to have faith that everything really does happen for the best you know over this past hour we've taken a very brief journey into the nine steps to financial freedom we've gone back to our first memories of money we've looked at some of our fears we've learned how to create new truths to silence those fears we've learned how to get honest with ourselves be responsible to those we love and be respectful of what money can and can't do we've learned how to stay open to receive all that we're meant to have and how to trust ourselves more than we trust others and we've learned how to have faith that everything really does happen for the best but I have to tell you what's so ironic about all these steps is that in the end when we leave this world there's not one of us that's going to leave with a penny we're all going to be leaving empty-handed now I can promise you there is not one person in this room or who's watching this who's going to be wishing that they had bought IBM when it was at 40 or this little red convertible that they had always wanted that Mercedes while they're lying on their deathbed that is not what you're going to be thinking about so it's important that we learn what true financial freedom is right now before we're there you have to understand that true financial freedom is when you realize and you understand that your self-worth is far far greater than your net worth that you are perfect with or without money you are perfect regardless of the car you drive the schools you send your children to the clothes you wear your job title or the homes that you happen to live in you know I'm not going to stand up here and profess to all of you that I know the meaning of life because I don't but I can tell you I know an awful lot about money what it can do and what it can't do and each and every one of you could know about money as well if you believed in yourselves that you had the ability to do so if you would simply treat money as a cherished friend as a living entity which it is and bring it closer to you rather than pushing it away and not wanting to deal with it if you were to do that then your money would take care of you for years to come and live on long after you've gone to take care of the generations of those that you love may financial freedom bless each and every one of your doorsteps and I wish you all abundance joy and true wealth of all kinds thank you for taking these steps with me and now please stay tuned for a special question-and-answer session with Suzy Orman Tirol price associates an investment management firm providing mutual funds brokerage services and retirement plan services Tirol price invest with confidence t rowe Price investment services incorporated additional funding is provided by annual financial support of viewers like you [Music] so here's your chance now you get to ask any and every question you'd ever want to know and I'll hopefully be able to answer it for you so limit it to nothing you want to know now it's your time to ask anybody have a question there's one over here how do you pick a good financial advisor that's a good question um the the best place to find one is looking in the mirror and I'm very serious my whole goal of everything I do is to make people like you there's independent from people like me as possible when you're dealing with a financial advisor you have to ask some very serious questions to begin with and the first question you have to ask is how do they make their money if they make their money based on Commission's on sales you have to really think twice if that advisor has your best interests at heart or theirs you know just a very quick story when I was first hired as a stockbroker back in 1980 they sat me for six weeks in a cold calling class I had a call about a hundred people a day and I learned how to get people like you to say yes to me when I would call you and ask you to buy something give you an instance rather than saying to you do you want to buy a hundred shares of IBM I would say to you do you want to buy a hundred or 500 shares of IBM you see in the first example you could say no to me and then what was I going to say in the second example you didn't have a yes-or-no answer I had you I was a professionally trained salesperson so more than any recommendation because I tell you you may have word of mouth from some of these people that say this person is fabulous well I have to tell you something else you'd have to be a real loony to have not done well in this market over the past ten years so the people that are giving your advice and saying my stockbroker did fabulous for me how do they know you know everything did fabulous you need a good advisor if you're going to have one at all who does as well down markets as they do in up markets and nobody even has those returns anymore it'll be very fascinating for you to all watch now what happens with these mutual funds and their 10-year average return now that October of 1987 is off the charts you see a lot of these funds just date back 10 years and now 10 years is not going to include the stock market debacle of that time so you can't just go Unruh turns you can't just go on reputation of what other people tell you because most of them don't even know if you want to be powerful I'm telling you you can do it yourself when you continuously look outside for financial advice you're at somebody else's mercy now if you have large sums of money then that can start to be another case then you look for what I call an investment advisor somebody who manages your money for a fee that's very different than a fee based financial adviser where you go to somebody and they say I'll charge you $300 and give you a financial plan great what are you going to do with the financial plan it'll sit and you'll never take action on it an investment advisor takes your money maybe they charge you 1% a year of the amount that you gave them with no commissions and this is why it's a good thing to do let's say you give them a hundred thousand dollars and their fee is one percent great they're getting $1,000 a year to manage your money if they take that hundred thousand dollars to two hundred thousand dollars now they're getting one percent of two hundred thousand or two thousand a year if they take it from a hundred to fifty now they're only getting five hundred dollars a year they're on the same side of the fence as you are they make money for you they make money for themselves so and don't be fooled by the way by going to a brokerage firm and they go oh I can do that for you we have what's called a wrap account we wrap our commissions and we do all of this in one thing yeah they're paying the broker to to get paid them commissions they're paying the advisor and they're taking their cut so if you use an investment advisor and you're paying more than one and a half percent I think you're paying too much and go to find somebody else look on your own look within use the sources like the internet American online read books and I have to tell you start little by little and you'll be the best financial adviser around thank you my question my question has to deal with the Roth IRA can you explain the benefits of those I can in 1998 we're going to be given the option of either keeping or having a regular IRA which is an individual retirement account which allows you to put two thousand dollars a year into it and when you take put this two thousand dollars in you get to take that two thousand dollars off of your taxable income so if you're in the fifty percent tax bracket that will save you a thousand dollars on your taxes as the years go on that money will grow for you tax deferred when you go to take that money out though you will pay ordinary income tax on it now this is a regular IRA on first explaining after you pay regular income tax on it how much will you have left it will depend on your income tax bracket at the time that you're taking this money out number one number two with a regular IRA you cannot touch that money before you are fifty nine and a half years of age or if you do so you're going to pay a ten percent penalty to the federal government by the age of seventy and a half if you haven't need needed the money up until then you have to start taking money out that's how a regular IRA works let me tell you about the new Roth IRA the Roth IRA allows you to put two thousand dollars in however you don't get a tax write-off for it so that thousand dollars may be that it was saving you on taxes here you don't get that you get to simply put your money in however it grows all these years when you go to take it out you could take it out tax-free there are no taxes on it when you withdraw it all so you don't have to take it out when you're 70 and a half you can let it keep growing and growing and growing and if you need money prior to the age of fifty nine and a half you can take out your original contributions without any penalty any growth that those contributions have received has to stay in there for five years and again have to be 59 and a half but you can have access to some of your original money without penalty so it will depend for you which is the best way to go are you in a high tax bracket now and expect to be in a very low tax bracket when you retire so that that thousand dollar benefit or whatever that write-off would be on your IRA a regular one you could take that money invest it and do things like that with it or are you in a very low tax bracket right now where the write-off really doesn't mean a lot for you in a regular IRA so as time goes on maybe you're better off doing a Roth IRA because the regular IRA isn't helping you that much anyway and then in the future you may be in a higher income tax bracket and then the Roth will pay off and I can tell you I've compared at most ways I like the Roth that's the way I would go because most people don't want to be at the mercy of what the government is going to say what their tax brackets going to be 20 or 30 or 40 years from now I would want to know that what I have is mine and I don't have to worry about it here's another thing I want you to think about in a regular IRA when you die it's going to pass down to your children your children have essentially five years to wipe that clean and they're going to pay ordinary income tax on it as well in a Roth IRA and this is still being cleared up in legislation there's controversy about this but in a Roth IRA it's very possible that that money will pass down to your children tax-free as well and given the state of the economy and things happening a lot of you may have that desire to truly want to take care of your kids that way by leaving them money without having to worry about it but there's also the possibility that you have of taking your IRAs that you already have and converting them to a Roth IRA and what you need to know is if you do that when you take the money out the government isn't going to charge you a ten percent penalty if you're under the age of fifty nine and a half but you will pay ordinary income tax on the amount of money you withdrawing and if you do it in nineteen ninety eight you have four years to pay that tax and so now you've taken your money out from here it's now in the Roth IRA then it will continue to grow tax-free if you have a lot of money in your IRAs and you're in a high tax bracket it's not worth doing the conversion if you're just starting out and you have a few thousand dollars in there then it's worth converting to a Roth IRA but that's essentially how they work it's named after standard or Roth by the way and it takes effect in 1998 anybody else right here I'm very interested in REITs real estate investment trusts can you give me any information I can I have to tell you real estate investment trusts are simply in essence a mutual fund that gathers all kinds of real estate properties in it so rather than you buying a real estate limited partnership or real estate on its own it's a way for you to invest in the real estate market it's known as REITs REITs have been fabulous as of late last year they had a wonderful run-up they're still going well today most REITs pay a very nice interest rate if you find a good one could be five or six percent so if you're looking for income along with moderate growth not aggressive growth but where your money will just chug along REITs can be a fabulous way to go I'm still myself looking into a few and looking at them I can also tell you just briefly there are all kinds of REITs and there are ones out there now that specifically invest in golf courses so everything that they own is you know is a golf course think about the baby boomer generation we're starting to mature we're starting to get up there golf courses might be something you want to look into inspires a rico's thank you what about real estate improvements like home improvements assuming that the neighborhood can support the appreciation in the house valuing those type of things what are your thoughts on that I have to tell you very seldom when you invest in your own real estate in your own home with improvements will you get the growth out of it that you're looking for investments in the home shouldn't be looked at as a retirement plan they should be looked at as a comfort zone for yourself that's how you want to live so don't mix up improving a home that you live in with taking money that you're in testing for your future years to come they're very very separate things because you see when you invest in a home you've improved it let's say you live there 20 years and you totally wear out your new improvements and before you know it 20 years from now everything that you designed is out of date so really that money could be very well thrown out and I know very few people who are able to truly do an improvement on their home and not go over budget by at least two or three times when you invest in the stock market or in bonds or whatever it may be you have twenty thousand dollars you invest it that's it you may have less you may have more but it's because of the movement not because it's costing you something do you see so I wouldn't mix those two up if you're looking to invest for your future don't consider the money you're putting into your home in that way thank you you're welcome yes we have one over here I work for a company that has an excellent 401k plan and I've acquired a lot of company stock over a number of years and I have a lot of trust and I have a lot of value in that stock and I'm wondering if it's a good idea to hang on to it or should I be just distributing that stock over some other mechanisms so it will depend there are many companies all your eggs are in this one stock I have to tell you I don't care how fabulous that stock is I can't tell you how much risk you're taking think about IBM let's say the company that you worked for was IBM years ago IBM was in the hundreds IBM MB was 80 IBM was then 60 IBM was then 40 the people who needed their money right then and there for retirement started to get so nervous that they sold out now of course iBM has come back but there's never a guarantee that it would have or that the stock that you're talking about will so you need to diversify it can be a fabulous stock everything can be going right but I've seen many fabulous stocks before you know it be off the charts gone and you don't want to do that at this time in your life how old are you I'm 45 now at 45 I'm even though you have a good 20 years left to go I truly would be diversifying because we're all if you were in your 20s I'd say all right take a risk for now but into your 40s now entering your 50s diversification needs to be there okay thank you you're welcome besides the bank savings accounts the equity markets a bond market or a real estate does any other and investment vehicles you could recommend you see I'd be very hard-pressed to recommend something just because it's out there whenever you get a recommendation from a financial advisor more than the investments that they know about what they need to know about is you and if you're married and your wife's comfort letter level or your partner's comfort level because how you feel about an investment seriously if you feel strong about it has a lot to do with how much you make on it now what do I mean by that if I tell you to do something and I say buy a stock and you go okay and you're not secure about it as soon as that stock goes down just a little or maybe a lot you're out of it you know you would have been out of IBM when it went from 80 to 60 because you would have been afraid because you were afraid to begin with and then you would have missed out when it went all the bay way back up into the hundreds so I'm very hesitant to recommend or to even talk about other kinds of investments and this is something you should all be listening to because that's how your advisors should approach you rather than just as a salesperson that says oh we have stocks we have bonds we have real estate we have this we have that they should say what's your comfort level I call it the emotion quotient how do you feel about investing will you get afraid if the market starts to go down but another way to answer your questions just to give you a little bit more broader things when you're talking about stocks you have international markets emerging markets you have mutual funds individual stocks you have the options market you have the commodities market then you have precious metals then you have bonds corporate bonds municipal bonds government bonds Treasury bonds so within all the areas that you just named such as real estate you have REITs limited partnership pers no you know real-estate apartments income property within each of the areas that you just named there is a variety of other types of investments so you listed the main categories but if you branched out within those categories they would go on forever so the truth is you don't have to look much further than the area's you already know just look deeper into those areas okay thank you you're welcome please stay tuned for some additional thoughts from Suze Orman unfound money in which she explains how you can create extra money in your everyday life have you ever noticed that you're walking down the street you see a quarter what do you do pick it up or let it sit there pick it up don't you well if you bend down to pick up that quarter why is it that you leave all other kinds of money on the table that you don't even know about there are all kinds of ways for you to find money within your own money that you already have that you're just leaving set there let me give you a few examples how many of you get a tax refund and aren't you happy to get this tax refund at the end of the year well here's the clue when any of you give me an interest-free loan for one year would you know well if you're not willing to give it to me why are you willing to give it to the IRS when you get a tax refund you have essentially given the IRS an interest-free loan for one year it's an interesting thing if you think about it so none of you should be getting a tax refund you should all be figuring out exactly how much do you owe and if they have to take it out of your paychecks great schedule it so at the end of the year you don't owe any but you don't get any back as well for those of you who are self-employed it's very important to pay taxes quarterly rather than monthly don't keep doing that or let's say you're retired for instance don't have them take the money out of your paycheck or out of your pension check because again you're not making interest on that money you only have to pay if you're not employed by somebody else so again if you retired or self-employed quarterly so once every three months you have to send in a check to the IRS but that money is sitting in your account making interest for you rather than them now we're all driving around and we all think we're doing great in the driver's seat don't you and you pull into these gas stations and how many of you don't want to get your little hands dirty and we go to full serve rather than self-serve do you know that the difference between full serve and self serve is about 18 cents a gallon - 25 cents a gallon but you know that if you used self-serve for the next 40 years do you know that if you had taken the difference between what it would cost you for full serve and had invested it at 8% do you know that you would have had saved $42,000 it's a little bit more than a quarter isn't it right how about calling cards don't have change in your pocket go into the payphone dial up push all the numbers it's about 75 cents to use that instead of using your calling card once a day if you were to take that money invest it and let's say all you got was an eight percent return for it do you know over the next forty years that that would add up to seventy five thousand dollars that's a lot of money another way that you can find money is don't have your mortgage company withhold your property taxes or your insurance for you now they say we'll give you a mortgage that we need to have this escrow account where all that money has to go in again they're not paying you interest on this money so don't let them hold it you should be taking this money and putting it in an account for you you are in the interest and then when the time comes to pay your property taxes you write the check and you keep the interest so don't let these mortgage companies talk you into that also when you do go to invest let's say you don't want to invest on your own and you want to you an investment advisor or a broker look around don't necessarily pay full commissions do you know that even though you're using a full-service broker that you can negotiate with that person rather than 40 cents a share or $1 a share whatever they're charging you to buy stock you said to them guess what I only want to pay you ten or fifteen cents a share they'd probably say okay so think about that negotiate with them because they will do so also if you're going to invest in a mutual fund especially if you're using a broker you have to ask them why do I need to pay you a five percent commission to buy this mutual fund when I could buy a no load mutual fund one that I don't pay any Commission's on to begin with do you understand that the role of the broker is to make you broker on some level but seriously do you understand that when a financial advisor sells you a mutual fund and they get that five percent they have nothing to do with that investment from that point on it is the portfolio manager within the mutual fund is the one who is buying and selling everything not the advisor so if you buy a loaded mutual fund one with the Commission you are already five percent down before you even started it has to go up five percent in value just for you to break even so look into some good no-load mutual funds one without a commission and you'll be far ahead of the game a lot of you especially as you're getting older and maybe you know nearing retirement you might want to try to speed up your mortgage a lot of you may have a 30-year mortgage and you may find depending on your tax situation that it can save you considerable sum of money paint it off in fifteen years rather in 13 and 30 now I'm not talking about getting rid of your 30-year mortgage and going to get a 15-year mortgage what I'm telling you to do is call up your mortgage company and ask them how much do you have to pay starting this month in order to have that mortgage paid off in 15 years they will tell you if you start doing that it could save you hundreds of thousands of dollars in interest rate now a lot of you want to pay off your mortgage in fifteen years but you decide Oh what if I can't do it so you apply for a 30-year mortgage as a cushion and then you pay it off in fifteen years anyway do you know that a 30-year mortgage will charge you more interest for that mortgage than a fifteen year so rather than let's say a fifteen year you could get at seven and a half percent interest a thirty year might be at seven and three quarters so don't apply for the thirty year mortgage don't give yourself that cushion have more faith in yourself that you can do it and take advantage of that lower interest rate I have to tell you if you don't care about how you spend your own money nobody else will and not only can you find more money within yourself but you truly will find a sense of security they can go on and on and on let your money take care of you as hard as you work to take care of it thanks [Music]

Channel: Simple Tradist

Views: 5,444

Keywords: Suze Orman, financial planner, money, obstacle, million, revolutionary, 9 Steps, Freedom, Spiritual, Practical, Stop Worrying, bestselling

Id: fBqoWuiKB4c

Length: 86min 40sec (5200 seconds)

Published: Fri Sep 14 2018