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Speaker 1: Hello there. Can you believe that tomorrow is going to be Labor Day? Amazing how fast this whole year passes. Do you find that the older you get, the faster it goes? Oh, my goodness. So, to that end, I just want to address the stock market, the real estate market, bonds. And I want to give you my thoughts for today, which is September 1, 2019. Again, I always tell you the date, because if you listen to this in the future, you really need to know what I'm talking about here. So, let's go to Suze School. We are at a time where so many things could be going right, and it seems like so many things are just going wrong. So, the first question we have to ask and answer for ourselves is why? Why is it that President Trump wants to have Jerome Powell, who's the head of the Fed, he's the one who controls, along with his board and other Fed chairman members, whether interest rates go up, interest rates go down. So why does President Trump really want interest rates to go down so much? When interest rates go down, mortgage rates go down. When mortgage rates go down, you do two things: You either feel like, oh, now I can go out there and I have got to buy a home because I've got to take advantage of these low interest rates. And/or, oh, I financed just a few years ago and now I can get 2% less on my loan; I'm going to refinance.But what happens when you refinance? Two things happen. Normally you look at your credit cards, you look at the debt that you owe. You're thinking, oh, my goodness, I'm paying 7% on a car loan that isn't tax-deductible. I'm paying 18% on my credit cards, which isn't tax-deductible. I might even have student loan. I may have this debt, I may have that debt. I know, I'm going to take out even more money than I owe on my current mortgage, and I'm going to roll in all the debt that I have into that mortgage at a 2.5%, 3% interest rate, or whatever it may be as interest rates go down. When you do that, now you have freed up all of the debt that's on your credit cards. And you know what you end up doing? You end up going and charging them again totally up to the max. And how do you do that? You go out there and you buy more clothes, you buy this, you go on vacation, you do all these things which helps stimulate the economy.Remember this economy, the majority of it is made up of you, the consumer, and how you spend money. If you stop spending money, then we go into recession. If you continue to spend money, we will not go in to recession. It's kind of just that simple. But. If you lose your job, you have debt, you're maxed out, all those things happen, then you stop spending money, especially if you are afraid that those things may happen.The other thing is real estate. Real estate is really, in my opinion, the foundation of a strong economy. When you think about it, if you go back to 2008, the reason why everything crashed is because real estate crashed. And the reason that real estate crashed is that all these banks and mortgage companies were giving loans that you did not qualify for. And then it was just this whole big tumbled effect of what was going on in the economy at the time because of these stupid real estate loans that were out there. That's as much as I'm going to go into what happened back then because that's over, I want to talk about what's happening now.So, if interest rates go down, and now you see that you can buy a piece of real estate for 2%, 2.5% interest, you know, that's going to be tax deductible. You cannot pass that up in your head. And so, therefore, what happens is you buy property that possibly you can afford or maybe you cannot. When you buy a piece of real estate, then what happens? You either need repairs, that stimulates the economy. You decorate it, you refurbish it, you do all kinds of things. You go to Home Depot, one of my favorite stocks, by the way. Anyway, you go to Home Depot, you buy things, you restore things, you buy new furniture, you invite people over. All these things start to happen when you buy a home that continues you spending money in the economy. So, interest rates going down are key.Now, one of the biggest mistakes that you make when you refinance, and I don't want you to make this mistake. You have a mortgage and the mortgage is for 30 years. And you bought your home maybe four or five years ago and you have 25 years left on the mortgage, and you now want the lowest monthly payment possible. So why? You can free up more money to continue to spend and buy the things that you want, and that then continues to stimulate the economy, not necessarily your savings, but the economy. And what happens then is this. You refinance. You go from 4.5% or 5% mortgage down to a 2.5%, maybe 3% mortgage. But you do it for another 30 years. So, your payments are less, but you have now just added on five more years to that mortgage, and that makes absolutely no sense. And I know you say, but, Suze, I'm not going to be there that long. I'll never forget when I bought my first home and I bought it with a 30-year mortgage and I was like, I am never going to stay in this home for 30 years. And there we are 15 years later, 20 years later, 25 years later, I was still in it. Because you fall in love sometimes with the home that you're in, you love your neighbors. You look at what real estate happens to be in a, you know, a few years from now and you think, oh my God, look how little I get for about the same amount of money. Or, it's going to cost me just as much as you, just for whatever reason you end up staying. Then you're mad at yourself because you went for a 30-year mortgage versus a 15.So, let's just get this straight. If you can afford it, you are far better off getting a 15-year fixed-rate mortgage versus a 30-year fixed-rate mortgage. And when interest rates are this low, do not get, under any circumstance, an adjustable-rate mortgage, it makes no sense. Because if interest rates start to go up, your low interest rate that you're going to have in four years, five years, whatever it may be, according to the mortgage that you got, is going to start to go up again. When interest rates are this low you always get a fixed-rate mortgage. When interest rates are really high, you always get an adjustable-rate mortgage. Are we clear on that, number one?Number two, if you can afford a 15-year fixed rate mortgage, that's the mortgage you should get because a 15-year fixed rate mortgage is always a half a percent less than a 30-year mortgage. So, if a 30-year mortgage is at 3%, a 15-year mortgage is going to be 2.5%. But you make the mistake where you get a 30-year mortgage just so you can have some wiggle room, and then you pay it off as if it were 15, but you're paying a half a percent more to do that. It makes absolutely no sense. So, you need to be strong, and you need to be smart, and you need to be secure women, and you need to make the right moves, and you need to make sure that your spouse or your partner make the right moves. Do not give yourself wiggle room. Make it so that you have to make that money and you have to make that mortgage payment.The next mistake, as I said, you make, and I need you to think about this, is when you have, let's say, 25 years left on your mortgage and you refinance for 30. If you're going to refinance, OK, but you are not to do two things. Number one, you are not to go from the current mortgage you have that has only 25 years left on it, or whatever the years left on it, and go back to a 30-year. Wrong. If you have a 25-year remaining time period on your mortgage and you want to refinance for 25 years, OK. You want to refinance for 20 years? Even better. You want to refinance for 15 years? Fabulous. And then you say, but Suze, my mortgage payments are going to be the same. Who cares, you're going to be done with it in 15 years, do you have any idea the amount of money or interest you're going to save?The steak, too, under refinancing is you are not going to roll your credit card debt in to your mortgage to get rid of your credit card debt. I know you think that's a smart move, but it is not. Credit card debt is not debt that is secured by anything. It is unsecured debt. Debt that's with a mortgage is secured by the house. If you lose your job, if you get sick, if something happens to you, you're not going to make the mortgage payment. Eventually, they will take that house from you. If you can't pay your credit cards, there is really not a whole lot they can do. Got that? There's not a lot they can do cause it is unsecured debt. Sure, they can take you to court. They can sue you, but they're not going to do that in most cases if you don't have any money. So never make that mistake.Now, one thing that is possible, if you want to do it, if you have student loan debt, which as you know, in my opinion, is the most dangerous debt, bar none. If you want to roll that into your mortgage, I do not have a problem with that. Whoa, whoa, what did Suze just say? Really, seriously? Yes, you heard that right. Student loan debt, I don't have a problem if you want to roll that into the refinancing of your mortgage. Why is that? Because chances are you are paying a higher interest rate, number one, on your student loan debt. And you're saying to me, but Suze, you just said, don't do your credit cards, it's unsecured debt. My student loans are unsecured. Oh, no, they are not everyone. You have got to understand that student loan debt is the most dangerous debt that is out there because in most cases, it cannot be discharged in bankruptcy. If you get sick and all of a sudden something happens, you go into deferment, or forbearance, or default on your student loan and just continues to grow, and grow, and grow, and grow. And they can come after you even when you're in your 60s or 70s, they can garnish your Social Security checks, they can do anything. If you roll that into your home mortgage and now you're spreading out those payments, number one, they're tax-deductible, because they're part of what? Your mortgage. And now you're saying, but Suze, isn't student loan interest tax deductible? It's only tax deductible up to the amount of interest that you paid that year, and/or $2500, whichever one is more. And it's only fully tax-deductible up to that $2500 if you are making under $70,000 a year of adjusted gross income if you are single. Or $140,000 a year if you are married filing jointly. Obviously, as your income goes up just a little bit, that $2500 starts to phase down, but it's still only $2500. And a lot of you may have $100,000, or whatever, of student loan debt at a high interest rate, higher most likely than what your mortgage refinance would be at. So, it may make sense for you in that situation, so that's something that you need to think about. Got that?But most importantly, you really have to know, does it make sense also for you to refinance, because are you really going to be staying in that house long enough to recapture your new closing costs? A lot of you don't think about that. Maybe you're going to refinance simply to save $100 or $200 dollars a month on your mortgage payment. And you say, but Suze, that is so much money. And maybe, however, it's going to cost you $4000, $5000, $6000 to refinance. And let's say your savings was just $100 a month or $1200 a year. So, it might take you four years to recapture what it cost you in closing costs. Are you going to be in that house for at least four more years? Because if you're not, again, it doesn't make sense for you to refinance. Now, I just want to talk to you about where do you invest? What do you do? What are my thoughts about Treasury bills, bonds, and notes? It's going to get harder and harder if you are approaching your retirement years and you need a place to generate income that is safe and sound. Sure, I know that you're getting 2%, 2.5% right now in a savings account or in a CD, whatever it may be. But if interest rates go down and stay down, those investments will either, if it's a savings account, start to go down again. And if it's a CD or whatever, and you're only locked up for a year, two or three, it will mature. And then what are you going to do? There is a rule of thumb: If interest rates go down, the value of fixed-income investments go up, and if interest rates go up, the value of fixed-income investments go down.So, investments like Treasuries, right about now, a 30-year Treasury bond is paying approximately 2%. And you are thinking, there is no way in the world that I want to invest and lock in a 30-year Treasury bond yield at just 2%. But you also have to know that instruments like Treasury bills, bonds and notes can be sold on the open market. So, if the Fed lowers interest rates, if interest rates go down and Treasuries, a 30-year Treasury, all the sudden is only paying you 1%, it is possible that the Treasury that you currently own could go up 10%, 15% or 18% in value and you could sell that on the open market if you wanted to. So normally, when you talk about a bond that has a maturity date, you know that you are going to get that interest rate until the date that bond matures and nothing will go wrong, especially if it's a Treasury. So, you just might want to give that some thought, because if you're needing income, if you have to do something, the only place that you are going to find it will be in the stock market because certain stocks, especially if they go down, will do what? Give you a dividend yield, so, you may find it in the stock market, in dividend-paying stocks. It is a very difficult situation in retirement that we are approaching because if interest rates continue to go down and there isn't any place for you to find safe money, because when interest rates go down, everything goes down, your savings vehicles. What are you going to do?So, all of you need to start making a plan. What would I be doing? I would be taking my money and rather than necessarily investing it, I would make sure that I was totally out of debt, that my mortgage was paid off by the time I retired, that I did not have any car loans, I had no credit card debt. Obviously, student loan debt would be gone, that I had cash. I would be doing that and I've done that. That's how I have planned my retirement. I owe no money what so ever. So, it's important that you think about all of these things, and I know I'm all over the place today because there's so much I want you to know, and so much I want you to learn. And I don't want you to make certain mistakes. I want you to be smart when it comes to your money. So, I hope this quick little Suze School gave you some sense of things that you can do, things that you must not do, and things that you should at least think about. All right? Because why? Because I want you all to be the strong, smart, and secure women that I know you were born to be.In providing answers neither Suze Orman Media nor Suze Orman is acting as a Certified Financial Planner, advisor, a Certified Financial Analyst, an economist, CPA, accountant, or lawyer. Neither Suze Orman Media nor Suze Orman makes any recommendations as to any specific securities or investments. All content is for informational and general purposes only and does not constitute financial, accounting or legal advice. You should consult your own tax, legal and financial advisors regarding your particular situation. Neither Suze Orman Media nor Suze Orman accepts any responsibility for any loss, which may arise from accessing or reliance on the information in this podcast and to the fullest extent permitted by law, we exclude all liability for loss or damages, direct or indirect, arising from use of the information. To find the right Credit Union for you, visit https://www.mycreditunion.gov/. Interested in Suze's Must Have Documents? Go to https://shop.suzeorman.com/checkout/cart/index/.