Suze Ormond

[LongPrime]

Suze Ormond, on Today Show, NBC, 05/12/14, two minute Q&A.

A young couple, the wife asks, what to do: "Should they fund college fund for their 1yo, or should they fund 401k or pay off student debt? "

SO, "Pay off student debt because sd is not dischargeable in a bankruptcy."

IMO: SO continually plays' on female insecurity on debt and ignore the tax advantages of qualified tax programs, investment, and cash flow. ,

[rodi]

I'm not sure it's female insecurity. My husband was much more anxious to pay down the mortgage. (I got on board, but he's the one that started/pushed the idea.) His best friend since grade school is the most debt averse person I know. Also male. I think in their case it's growing up in families with one income, lots of kids (DH is one of 6, his bestie is one of 12). and seeing families have to stretch the dollar till it screamed in pain. Both grew up very frugal and debt averse.

SO has lots of flaws, no contest there. But I'm not sure about her singling out females, specifically.

[Ready]

Speaking of TV personalities, I was listening to a Dave Ramsey podcast today where he told a listener they could spend 8% per year from their portfolio because that is how much a portfolio averages per year. He's said this on numerous occasions. That makes me laugh about as much as when he makes a blanket statement that nobody should have a credit card, no matter what. He won't even take credit cards on his own web site just to prove his point. As if everyone is just as irresponsible as he was when he was young.

It just demonstrates that TV personalities giving sound bites of advice must be taken with a grain of salt.

[LongPrime]

DS has student debt (stafford/direct and assumed the PLUS) of ~$55k. Should he pay off student loan, maximize 401k, or fund for future child college fund? Just entered the 28% tax bracket. ?

[Ready]

Quote:

Originally Posted by LongPrime DS has student debt (stafford/direct and assumed the PLUS) of ~$55k. Should he pay off student loan, maximize 401k, or fund for future child college fund? Just entered the 28% tax bracket. ?

Hey - were you the caller on TV that spoke with Suze? This question sounds familiar.

The reason people get frustrated with sound bite responses is that they don't take the time to analyze your entire financial situation before attempting to give out advice. The reality is, there is no one answer that is correct here. Without knowing a lot more details on your DS's finances, it would just be a random answer.

If the student loan is a relatively high interest rate, that favors paying it off first. If your DS is very young, and believes that funding his child's education is more important than his own retirement, he may favor the college fund.

Or, he may just find that spreading his extra cash across all three is the simplest way to go.

[ducky911]

I too would pay off debt first before saving for future college or retirement.

[FIGuy]

For, let's say, 95% of families, paying off all debts (sans mortgage) before investing in anything else is a good plan. People that prioritize personal finance idealize how things work out long term. "If I don't pay off my mortgage at 4.5% and get an 6% in the stock market, then I come out $43,000 ahead over 30 years". Most families don't plan like that and don't have the income security to make long term risks worth taking in my opinion.

Those 95% would be much better served by LBYM, investing in a target retirement fund to max the work 401k contribution, and paying off debt like crazy after building an emergency fund. Wait, that was actually my approach when I still had any debt! Once I found myself without debt, then I had to get smarter about investing and I suspect that's true for lots of current SO and Dave fans.

I think folks on boards like this find SO and Dave to be doing a disservice to families and I don't pay any attention to them myself, but I think it's spot on for most people and this is why they're so popular. I think they do a good thing overall and if people want to go beyond, then there's boards like this.

[Texas Proud]

There was no info on if there were matching funds in the 401(k).... if there were, no question that it would be #1...


But, if it were me and I was in the 28% tax bracket.... I would be putting money aside for retirement...

By the time college came around for a child, the finances of the family would probably be a lot different and it might not be an issue paying from current earnings... having that retirement fund growing for those extra 18 years will (should) make a big difference...


Student loan debt is last... I do not think of (nor have I ever) BK as a solution to anything.... so getting rid of debt because it cannot be forgiven in BK means zip to me... not even a thought from one brain cell...

[FIGuy]

Quote:

Originally Posted by Texas Proud Student loan debt is last... I do not think of (nor have I ever) BK as a solution to anything.... so getting rid of debt because it cannot be forgiven in BK means zip to me... not even a thought from one brain cell...

Interesting. I feel exactly the opposite. Bankruptcy is a legal option we have in this country that helps a lot of trapped people and while I've never felt the need to use it, I'm happy it's there. I didn't have much debt myself coming out of school, but I have friends with a decent mortgage worth of student loans. I will offer that student loan debts, particularly the variable interest variety, put one at higher risk of financial ruin. It would royally piss me off to have this push me over the edge and then still be there after going through bankruptcy. It's another form of risk in my book and should have some value placed on it. I decided it was worth about 2% interest (not having bankruptcy protection) back when I was deciding to pay it off. I'm happy I did as I lost money on every other investment back in those days. We humans are emotional beings and not having debts makes some folks function better. Others can be more logical about it I guess.

[Texas Proud]

Quote:

Originally Posted by FIGuy Interesting. I feel exactly the opposite. Bankruptcy is a legal option we have in this country that helps a lot of trapped people and while I've never felt the need to use it, I'm happy it's there. I didn't have much debt myself coming out of school, but I have friends with a decent mortgage worth of student loans. I will offer that student loan debts, particularly the variable interest variety, put one at higher risk of financial ruin. It would royally piss me off to have this push me over the edge and then still be there after going through bankruptcy. It's another form of risk in my book and should have some value placed on it. I decided it was worth about 2% interest (not having bankruptcy protection) back when I was deciding to pay it off. I'm happy I did as I lost money on every other investment back in those days. We humans are emotional beings and not having debts makes some folks function better. Others can be more logical about it I guess.

I did not say that I did not believe in it..... just that I have never made any decision with it being part of my thinking process.... IOW, "I will buy this house that I can barely afford because if I cannot pay it off I can file for BK" never crosses my mind...


I did have some student debt and paid it off early.... but I also was putting 16% aside in savings...

As for BK.... I had a BIL have to go through it due to the S&L crisis back in the 80s... had his loan called and could not pay... took all his real estate except his house...

[FIGuy]

Quote:

Originally Posted by Texas Proud I did not say that I did not believe in it..... just that I have never made any decision with it being part of my thinking process.... IOW, "I will buy this house that I can barely afford because if I cannot pay it off I can file for BK" never crosses my mind... I did have some student debt and paid it off early.... but I also was putting 16% aside in savings... As for BK.... I had a BIL have to go through it due to the S&L crisis back in the 80s... had his loan called and could not pay... took all his real estate except his house...

Hi Texas Proud, I'm not sure if my earlier post came across as a personal attack, but that wasn't my intent at all. I pretty much assume everyone on this site is going to be financially sophisticated.

I was thinking more about folks that aren't financially educated, which in the USA seems like most people. Picture "the cash store" here. I can't remember ever getting this education in the public school system for example. It also gets "responsible" people who get get sick, end up with huge medical bills, and without BK they would basically be modern day slaves to the banks.

[Texas Proud]

Quote:

Originally Posted by FIGuy Hi Texas Proud, I'm not sure if my earlier post came across as a personal attack, but that wasn't my intent at all. I pretty much assume everyone on this site is going to be financially sophisticated. I was thinking more about folks that aren't financially educated, which in the USA seems like most people. Picture "the cash store" here. I can't remember ever getting this education in the public school system for example. It also gets "responsible" people who get get sick, end up with huge medical bills, and without BK they would basically be modern day slaves to the banks.

Nope, it did not seem like an attack.... just stating your opinion, which I am sure is held by many...

As I said, I have had family go through it... his was a strange case that took about 10 years!!! I am not against it in the least... and I would use it if I ever needed to...


Agreed that there are a big majority of people in this country that just do not know how to handle money and it is something they need to look at...

BTW, I was against the changes they made a few years back making it harder to file....

[GrayHare]

A year ago sometimes I'd watch Suze via streaming episodes at CNBC's site but now I see that site no longer offers them. Searching suggested new episodes may be available on iTunes, but I've tried that in the past with poor results. Are full, new episodes of Orman's show currently streamable from anywhere else?

[LongPrime]

Have any one been tracking the thread: http://www.early-retirement.org/foru...ety-71899.html

[MBAVisionary]

Quote:

Originally Posted by GrayHare A year ago sometimes I'd watch Suze via streaming episodes at CNBC's site but now I see that site no longer offers them. Searching suggested new episodes may be available on iTunes, but I've tried that in the past with poor results. Are full, new episodes of Orman's show currently streamable from anywhere else?

CNBC - Watch Full Episodes | CNBC need to pick your cable company and log-in. Has a couple of recent episodes there with video.

[LongPrime]

Quote:

Originally Posted by LongPrime DS has student debt (stafford/direct and assumed the PLUS) of ~$55k. Should he pay off student loan, maximize 401k, or fund for future child college fund? Just entered the 28% tax bracket. ?

Hasn't anyone been following this thread? http://www.early-retirement.org/foru...ety-71899.html ?

No, I did not call the Today Show and asked this question. Suze Ormond, is costing a lot of people their future.

To answer my question above which is a mimick of the call-in question done on Today Show: Historically and except for the brief credit bubble, IMO, son should not pay off the student loans, which at graduation was just above $60k, 2006. His assets was UGMA $40k, tIRA/Roth $10K. Interest rate on federal guaranteed student loans 2.9% , weighted term of 22 years.

In 2006, you could get bank CD, 6 month at 3%. Why pay off the loans?

[38Chevy454]

Maybe I oversimplify and like to use a generalization, but what about the old saying "pay yourself first". Being a young couple in the orig SO question, they should maximize the 401k/403b savings so it can grow and compound over time to benefit their retirement. Even better if they get a match from employer, that is an instant 50% (or whatever the match percentage is) return on your money. 50% return is way better than any 5% (for example) student loan debt interest rate. I would next pay off the student loans and finally kids college fund last. Maxing out the pre-tax savings will also enable to pay less in taxes so they can use that money to help pay the student debt or college fund.