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Monday, November 28, 2011

Suze Orman Money Class at TV: taking advantage of the US recession to sale books – Part 2

While living in Montreal, I didn’t have a TV, but I had my laptop and the Internet. That been my reality for a couple of years but I never missed watching TV. I was quite busy working at my multiple jobs, blogging, building my portfolio and following my stocks.

Now that I am move back to my hometown (I had the chance to get a better job, better salary better everything right where I least expected it to come from), I have my mom listening to her TV in the launch and I have my father watching his own channel in their bedroom. Here at night, I hear TV noises one over the other. What I miss the most from Montreal is the dead silence of my one and a half apartment. It was silent, I could hear myself think.

Moving back with my parent wasn’t something planned but while living in this small not even city, moving back with my old folks had been a strategic move. My expenses are lower than over. The only thing that changed is me now driving a car. I have a few related expenses but that’s not a big deal. I am about to get my passport soon and I just cannot wait to travel to the US! I haven’t gone in the US in an eternity. According to what I had heard, the little X town hasn’t changed that much in the past couple of years. I am just extremely curious to go and seek around. It will be fun.

My lifestyle had changed, but the adjustment had gone through pretty smoothly. Since I am from New Brunswick, I knew what to expect. I find myself more relax and calm. While living in Montreal, I was working at different jobs, all paying a terribly low wage, I was burned. The August 2011 stock crash didn’t help me in any way. However, I had the surprised of my life when I learned I got a job here in New Brunswick. But not just here, in my XX hometown. Hitting back to New Brunswick with a job in my field, better paid, better everything, well, it cut my breath away.

And that’s why how I found watching one of the two TV we have here in this house. And there I was yesterday, watching Suze Orman desperately trying to sale her financial books. She gave good advices ok, no doubt about it. I am able to recognize the importance of having an emergency fund even if I don’t have one ok. But yesterday, one man appears at the Money Class of Suze Orman.

The courageous man had 18 000$ in credit card debt and he had 100 000$ worth in student loan debt following a master degree. I don’t get if the degree he took was an MBA. I know MBA are the kind of degrees who are extremely expensive like that. I don’t know. But the guy spoke to Suze Orman about his situation. He was earning 20 000$ a year while holding a master degree. And if I understand correctly, the guy had declared bankruptcy before. And his question seems to be at the time about declaring bankruptcy regarding his huge student loan. Well, good news being that no one can clear off a student loan while declaring bankruptcy. The way Suze Orman was talking to the man, it seem like for him, there was no hope.

Come on! A 100k worth in debt is not the end of the world. Myself, I have close to 90k worth in debt and I can manage everything quite properly. During the past couple of years, my earning salary had exceeded the 40k. But that’s nothing considering how much in tax I had paid on that salary. In a certain way, I am pretty much to the same level of that man who earned 20k annually and have 118k worth of debt.

Instead of explaining to the guy that bankruptcy won’t clear his student loan, Suze Orman should have say something intelligent enough and motivate the guy to get a second and, why not, a third job. I handle 3 jobs at a time for quite a while when I was living in Montreal. And on top of that I was managing my portfolio and I was blogging. I had built my portfolio even if I wasn’t earning much, but what I had earned; I make it work for me.

No one should declared bankruptcy just because of a 118k worth in debt. That level of debt is manageable. It’s just the individual have to seek for another source of income. That’s difficult of course, but once again, it is manageable. I won’t be saying the same thing if we would be talking here about a 200k, 300k or up worth of debt. Anywhere below 150k in debt is manageable. You don’t need to destroy your life and your spirit by declaring bankruptcy. There’s nothing an individual cannot handle, I think I am the living proof of that. But Suze Orman totally goes in the opposite way.

Also Suze Orman said during her yesterday show that student loan debts are the type of debt that an individual should be looking to pay as soon as possible. Why? Because a student loan debt cannot be add in a bankruptcy procedure. So see, for Suze Orman, bankruptcy is the financial solution that resolves all problems. But it’s not the case. Bankruptcy destroyed life, it’s the most difficult event that can’t happen to somebody.

If you take the marvelous me (who’s now a superstar on Raymi the Minx by the way – go check it out), I am on the MINX!! as example, I still carry a student debt loan even now and I don’t give a damn. Why? For several reasons. Here they are:

I preferred to build myself a super portfolio for the future instead paying my debt.

Student loan interest is low (below 5%).

A student loan is not a credit line. Once you make a payment on a student loan, you cannot access the money no more. The money disappeared forever. So why should I stressed about paying a student loan? Please explain Suze Orman!

A student loan interest gives you a tax receipt.

For all those reasons, I decided to completely flush the payment on my student loan. Well, not totally flush, because I make the minimum payment on the loan every months but that all. The payment is of 98$.

I think Suze Orman is out there just to make people feel bad about their debt.
It’s just money after all.

My best advice: manage to make the minimum required payment on your loan every single month. Make sure the total of those multiple minimum payments is reasonable. Mine is something like 400$ only.

Asked yourself: if I would be to go under unemployment insurance, would I still be able to make the minimum required payment on my debt? If the answer is yes, your situation is not that bad at all.

Also, always make sure that you have something worth in term of net worth following an improvised payment on your debt.

My personal example:

Total in assets: 156 233.56$
Total in debt: 87 123.22$
Net worth after debt: 69 110.34$

See, even after I paid off completely my debt, I would still have a little something left.

My personal example is dangerous because I am even lucky to be at this stage. I took several risks that I was aware of. However, I considered myself extremely lucky. You have to handle your debt in an extremely efficient manner that it will make you a winner at the end. But be careful on the amount of debt and ho, please, don’t get under a margin account if you are a stock lover because you will sooner or later satisfy your impulse on your broker margin account. I wasn’t able to control myself and I used more than 40k to purchase, not clothes, not boots (I still didn’t purchase a new pair of boots) , no men BUT STOCKS.

It’s important to turn yourself into a passionate investor because the stock market will bring you to a level of richness you cannot simply imagine. Quite powerful stuff. So powerful that it can ruin you or make you rich. One or the other.

And yes, at 69k net worth, I consider myself quite rich. But don’t forget, I am in New Brunswick. A net worth of more than 50k is considered a million here, or almost.

People need to feel confident about their future but Suze Orman is not helping in any way. And at a point, by emphases too much about bankruptcy, she’s bringing it to nothing.

It’s possible to have debt, be enjoying those debts and have a terrific portfolio. It’s possible and achievable, no matter what Suze Orman has to say. That’s my word over her. And I always get the final word. At least here on my blog. :)


Anonymous said...

I don't know how you can be so against the message of debt reduction. Paying down debt is a guaranteed tax-free return. What are you going to do when you want to buy a house? You can't live with your parents forever.

Anonymous said...

consider consolidating your loans at a much lower interest rate. also restructure your debt to be more tax deductible. as it stands only your margin account interest paid can be considered tax deductible.

Liquid Independence said...

That's true. I borrowed more than $25,000 from my margin account, but I still have a positive networth because I have even more stocks that are growing. That's better than having no debt and no stocks and starting with nothing.

Sunny said...

I like the you cannot live with your parents forever part. That'S certainly true. TV noises is desperately annoying!

I don't know how I could possible restructure my debt. It will mean to use my credit to open more credit. In my head, loan consolidation = pretty mych bankrupty..

Ohhhhhhhhh... another margin investor... You mean that I am not alone? lol. This strategy is risky and I now more than ever realize how much is risky. However, my situation is stable, at leats for now. If something happen, I will have unemployment assurance.

Regarding the margin situation, I manage it since December 2010. It's not that difficult to manage but the stress is always there. I need to post something about margin investment to help people understand better margin.

Anonymous said...

I think enough was said in this blog about margin investing for people to understand. The fact is, only when market goes crashing and people witness it first hand that they will realize there's no quick way to riches. A domino effect from Europe would do the trick...

Ruth said...

Sunny, your article is very good and honest but i know you can live with debt but couldn't you use some of the dividends to put on the debt and with paying interest , well, i always begrudged interest as it is like throwing money away...well i guess i have done that with a couple of bad stocks. with housing going down, perhaps a house should be in the future , the best investment ever!

Sunny said...

Enough is never enough. Be ready for a Margin Class the Dividend Girl way!

Sunny said...

Hi Ruth!

I see your point and I respect that. However, a house is the worst investment EVER.

First of all, you have to pay a bunch of taxes every year just to be able to stay in the house. You have the electricity etc to pay. And on top of that, you also have insurance to pay, and not to talk about the house repairs. The roof need to be done every couple years, etc etc etc....

Having a house is more trouble than anything else. A house won't allow you any mobility, your stock at some place forever. I had been moving around all of my life, it's not now that I am going to get stuck at someplace, living something really standard with a husband and kids. I don't want anything like that. My cash, I want to keep it all for myself. I don't want to give it to any husband, kids, or municipality taxes. I don't want to be part of that modern society that just suck.

How many you knows that have to sale their houses at a price that did not even reach the evaluation. I mean, people lose a lot of money while selling their house and on top of that, they pay tax on the sale of the house etc etc etc. What a headache! Municipalities staff are overpaid and that's because people are stupid enough to get track in the buy a house scheme.

Mortgage is a trick banks came with to allow them to build a large amount of income. Banks CEO are getting paid millions. And everyone accept. You need to be a complete idiot to invest in real estate these days.

For middle class, buying a house is the worst investment ever.

My money, I keep for myself.

Fuck the system.

Fact is, it is truly possible to build an income on debt and turning debt into something positive is easy and Europe can just go to hell. I don't care about Europe situation and I don't care about the US either. They deserved what's happening right now and I hope the economic system will collapse. I want that to happen just to see if my portfolio margin situation will be able to handle it.

You shouldn't be accepting the system as it is now Ruth. the system need to crash down.

Being a home owner is being a slave. That's the reality of middle class.

Anonymous said...

Hi Ruth,Sunny,

Sunny I totally agree with you that people really only make one investment and that is in their houses. I will save you the boring studies that show you can rent at a lower cost than if you have a mortgage. Peoplel like to brag how much $$$ they've made off their houses, but what most people don't factor in is the interest costs over that time. Yes Sunny your debt is $80,000, but look at the poor sucker who got suckered into a mortgage of 250,000. Can you say wage slave-I can:) That's why I own some bank stocks in my portfilo-because let's face it-people like to follow the herd-buy a stinking house, get a good job be a wage slave. And Suze Orman is an a**h*** for suggesting this MBA grad declare bankrupcy. I susspect he went for the MBA because he wanted to make the big bucks. AAnd guess what-that is a form of slavery too. He'll spend the next 10-15 yrs(at min wage paying off that debt)-and my guess is his new MBA is as worthless as the paper it's written on. I predict the next bubble will be in student debt.

Sunny said...

Maybe my reaction was too strong but I don't like the whole buying a house is the best investment thing and Suze Orman well, gees that she sucks.

I think it's a matter of values. I am not sad because I don't have a house. My debt don't stress me.

As for the MBA guy, he has his chance in front of him but he need to get a second job, build up a portfolio, establish himself as a leader in his field. Began a professional blog do what so ever but just do. See Suze Orman did not give the guy this kind of advice at all. At 118k worth of debt, I am thinking that you know, this is a joke. 118k is manageable, no big deal. The guy needs to act. Forget about Suze Orman. She's only there to build an income by selling her books. Nothing positive is coming from her. She sucks.

James said...

First, a house is not a bad investment all of the time. If the difference between the cost of carrying the debt, plus maintenance, plus insurance is minimal to the cost of renting, then owning is not a bad option.

Also, unless we are fortunate enough (or forced) to live with our parents, then we all have hydro to pay.

Also, you also have a carrying cost on your investments, so I wouldn't criticize everyone who has a mortgage.

Finally, if you had some equity in a home, then you might be able to re-finance your loan at a more favourable rate.

Anonymous said...

Wow, you guys are so off on house being a bad investment it's unreal. My first home was a trailer that I sold after 8 years and bought my house which I paid for after 10 years. I'm 40 right now, debt free and don't have to pay rent to anyone, plus I have my privacy (no loud tv, bad tenants, partying by tenants, etc.) which you can't put a price on. So while people in their 20's paying rent, the money I would've paid on rent paid my house and now I have built up equity.

I also live in New-Brunswick and paid 70k for my house and now worth over 100k. I pay monthly bill of property tax 125, insurance 25, water 50, electricity 200 and you can add 200 for repairs. Now to me that's a lot less than I would pay to rent an apartment that wouldn't have enough room to accommodate my 2 kids. Remember when you rent, the person that rents to you has all those expenses to pay + mortgage payment. So basically, you're paying someone else mortgage, and are still paying electricity and municipal and provincial tax. I wonder who is really the slave.

Yes, I paid interest on my house to built equity, but renters pay someone else interest. And let's not forget that Sunny pays interest on her debt to try to built an equity in stocks.
Money is nice, but what's the point if all you're going to do is look at your statement and say wow I have 100k, and in 3 years from now wow I have 200k and in 10 years from now wow I have 500k and so on. When are you actually going to enjoy yourself.

To me, owning my own house makes a difference in my life because I don't have to live in my parents house and follow their rules, I don't live in an apartment building and follow their rules. I can have a swimming pool if I want, be outside having a bbq and my kids have lots of room for them and their friends to play. And I'm not getting someone else richer by paying their mortgage.

Ruth Anne Kruuv said...

Have to love you husband , no kids..nothing wrong in that as you go where your heart desires. i do however stick to owning your own home...a place to hang your hat that is all your age, you would or could own one for your later one can raise your rent or kick you out. I made a decent profit selling my roof only needs replacing every 15 to 20 years and insurance can be carried in your payments. i love having my own yard and can call the shots here. your an interesting gal and your bringing me into the 21st century...heavens knows i need it.

Ruth Anne Kruuv said... aunt lived her last years about 30 of them in an apartment after selling her house (which she regretted) it cost her $900 a month plus cable, phone and insurance..she had a window overlooking a parking lot. in my books , it would have been nicer for her and i know in my little house..for 5 grand a year..i could run the house...maybe 6 now...i couldn't afford to move to an apartment! it cost me more unless i had a basement ya right. i had no parents to go to after my husband passed on and living with kids was lucky to have a great husband and home now.

Anonymous said...

Maybe you should change the name of the blog from 'the dividend girl' to 'the margin girl'? :)

- e


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