Financial whiz Suze Orman has been watching the markets and economy closely in 2023 and admits, “From one year ago, things could not be more different if they tried.” Her concern for all things financial led her to host the “Prepare for the Financial Climate Change Webinar,” offering advice on new best practices to make with your money.
“We went, in my opinion, from an inflationary environment but we still had stability in the economy, with low unemployment and things seemed like they were great, people were spending, it was a lot better than it is now. But all that changed big time just a few weeks ago, with the financial hurricane when Silicon Valley Bank collapsed,” Orman said. “Now we have a true climate […] of not being stable at all at this point in time so we have to change what we were doing and think in a whole different way.”
Here are her biggest takeaways and tips on everything from real estate, saving money and making sure your retirement is secure:
1. Keep Your Money in the Banks
“Stop freaking out, people! Stop taking money out and putting it in another bank; that’s what’s causing trouble,” said Orman. She added that the key is understanding how FDIC and NCUA insurance works with banks and credit unions, respectively.
“It’s not just that you can have $250,000 in one bank but there can be different accounts in six to eight different categories. An account for you, a joint account, etc.” She added that you can also include beneficiaries on each account — up to five people each — which ups the insurance limits.
2. Put Money in CDs, but Go for Longer Terms Now
As Orman stated, CDs are insured by the government and a great way to secure your money while reaping the benefits from current interest rates. “I used to say invest in 3- and 6-month treasuries and CDs. I wanted you to go short-term because, as they matured, you’d mature into a higher interest rate. I’m not sure that is true anymore,” said Orman. “Now I’d say go out and do 1-year terms, especially if you can invest in a CD with credit unions.”
3. Be Prepared for a Recession
Orman believes in the next four to six months that America will be in a recession. “One year ago I would’ve said it was coming but not for two years or more. Now, that timeline for a recession has moved up.” She’s also critical of the Fed’s move to keep increasing interest rates, as she expressed, “The Feds will probably continue to raise interest rates because inflation has only gone down 9% to 6% but they want to get it down to 2%. Institutions like banks and businesses it costs them more money to borrow, to do anything, which means they are forced to not hire more people and they’re forced to lay off people. The goal of the Feds to get inflation down is to get unemployment rate up, they want 2 million of you to lose your jobs because if they do that then the employment-unemployment ratio goes into sync. I don’t understand it. That brings us closer to recession than we’ve ever been.”
Related: Do You Need To Lose Your Job for Inflation To Go Down? Jerome Powell Seems To Think So
4. Retirement Account You Have Is of Utmost Importance
“A Roth account is the way to go, bar none,” she said, advising you can have both a personal Roth IRA and Roth 401(k) through your employer.
5. Stop Worrying About the Markets if You Are Far From Retirement
As Orman said, you should be prepared for the markets to still go down “dramatically” for a period of time and see your portfolio take a hit. But there’s good news behind this. “You should be thrilled about that — you are doing dollar cost averaging. […] The more the market goes down, the more shares you’re able to buy, because the price is going down. It will return, don’t worry about it. You don’t need them to go up right now if you have 10-15 years until you need the money.”
She advised not to sell, keep contributing and be diversified in your investments.
6. Remove Your Money From Stocks if You Are Retiring Soon
If you don’t have 10-15 years until retiring, “your money does not belong in the stock market, period,” said Orman. “There’s not enough time for you to see something go down and come back up.” Instead, she advised investing in dividend-paid stocks. Her favorite: Schwab US Dividend Equity Fund (SCHD), which she said is currently trading at $71 a share with a 3.5% dividend.
7. Invest in Oil, but Be Wary of Gold
Orman believes there’s good value in investing in oil stocks for the dividend pay. “Where else can you get 10% to 14%?” And she believes oil stock will go back up soon. For the most upward movement potential but not a high dividend, she said Chevron (CVX) is her number-one pick (CVX). Though there’s been a lot of talk about gold, she insisted, “Don’t go for more than a few percentage points of your portfolio […] Gold in itself is not that great of an investment.”
See: Shark Tank’s Kevin O’Leary Predicts Regional Bank Failures — How Taxpayers Could Pay
Find: 10 Finance Fixes From Suze Orman That Will Help You ‘Control Your Future’
8. Exercise Caution With Real Estate Moves Right Now
It’s not just interest rates that are on the move, but banks are being more discerning about financing. “A year or two ago, you could’ve gotten as much credit as you wanted. Money was free and easy and interest rates were low. Now, because of what’s happening with banking systems, they are going to have to come up with more money to make sure their banks are solid. They are not going to want to lend you money as freely as they did before,” said Orman.
This will also affect sellers. “It’s not like it was a year ago where buyers were waiting in a line to buy something they had never seen before. It’s far more difficult now to sell because there’s not as many buyers because they are afraid of a recession, credit is harder to get, etc.” However, Orman said if you do want to buy, you have “serious negotiating power.”
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