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March 08, 2005
Suze Orman: For the Young, Fabulous & Broke
I caught a show called “Suze Orman: For the Young, Fabulous & Broke” (TiVo link) on PBS last night. In the show, financial guru (and GM flack) Suze Orman gives financial advice to people in their 20s and 30s. Though it was somewhat like an infomercial (she was hawking a product for a pledge drive, I think, and she’ll be hard to miss on TV for the next few weeks), I thought there was a lot of common sense in what she had to say.
Here were my key takeaways:
- Credit Reports: A law approved by Congress in 2003 entitles all Americans to one free credit report a year from each of the three major bureaus — Experian, TransUnion and Equifax (though they try to make it as hard as possible to get them). Thankfully, you can call (877) 322-8228 or visit http://www.annualcreditreport.com to make the process easier. You owe it to yourself to clear your credit record.
- Retirement: Go with the standard 401k (or 403b for nonprofits) savings plan if you have an employer that matches dollar contributions. Invest to the maximum that your employer will match, but no more than that. Otherwise, start a Roth IRA, since the penalties for early withdrawal are much less harsh than they are for a 401k.
- Credit Cards: Do not cancel your credit cards. Part of your credit score is based on how much you are using of your available credit lines. If you cancel a card, and you have a balance, you're going to have a larger percentage of your credit line used up and a lower credit score. She said that it is OK to carry some credit for essential items (groceries, gas, work clothes), if it's necessary to live and get by. But don't purchase frivolously or over-extend yourself. This is especially true if you are trying to break into a field on the ground floor (which I'll mention next).
- Work: If you have low responsibilities and are young, you have to try your best to get yourself noticed (I call this the “You Just Haven't Earned It Yet, Baby” rule). Do not expect to be owed anything, especially if you're in a competitive field (arts, design, publishing, etc.). You have to go to work at least one hour earlier than everyone else and work at least one hour later, just to be noticed by your supervisors. You are trying to become an indispensable element to whatever business you want to establish yourself at. Live below your means, and you will be noticed eventually. She also stressed not to ask for a raise.
- Home Ownership: Because homes average 4-5 percent appreciation per year and because you get a tax write-off on interest, you have to make saving for a down payment on your home your second savings priority (after retirement savings).
Posted by timothompson at March 8, 2005 12:34 PM