The Money Class: How to Stand in Your Truth and Create the Future You Deserve

by Suze Orman

Overview

The #1 New York Times bestseller, now revised and updated, filled with tools and advice that can take you from a place of financial fear to a place of financial security.

WHAT WILL YOU LEARN IN THE MONEY CLASS?
 
How to find the courage to stand in your truth and why it is a place of power.
 
What daily actions will restore the word “hope” to your vocabulary.
 
Everything you need to know about taking care of your family, your home, your career, and planning for retirement—no matter where you are in your life or where the economy is heading.
 
In nine electrifying, empowering classes, Suze Orman teaches us how to navigate these unprecedented financial times. With her trademark directness, she shows us how to tackle the complicated mix of money and family, how to avoid making costly mistakes in real estate, and how to get traction in your career or rebuild after a professional setback. And in what is the most comprehensive retirement resource available today, Suze presents an attainable strategy, for every reader, at every age.

In The Money Class you will learn what you need to know in order to feel hopeful, once again, about your future.

Product Details

ISBN-13:	9780812982138
Publisher:	Random House Publishing Group
Publication date:	01/10/2012
Pages:	320
Sales rank:	465,021
Product dimensions:	5.10(w) x 7.90(h) x 1.00(d)

About the Author

Suze Orman is a two-time Emmy Award–winning television host, #1 New York Times bestselling author, magazine and online columnist, writer/producer, and one of the top motivational speakers in the world today.

Orman has written eight consecutive New York Times bestsellers and has written, co-produced, and hosted seven PBS specials based on her books. She is the seven-time Gracie Award–winning host of the Suze Orman Show, which airs on CNBC, and of the forthcoming Money Class on OWN: The Oprah Winfrey Network. She is also a contributing editor to O: The Oprah Magazine.

Twice named one of the “Time 100,” Time magazine’s list of the world’s most influential people, and named by Forbes as one of the 100 most powerful women, Orman was the recipient of the National Equality Award from the Human Rights Campaign. In 2009 she received an honorary doctor of humane letters degree from the University of Illinois at Urbana-Champaign and in 2010 she received an honorary doctor of commercial science from Bentley University.

Orman, a Certified Financial Planner™ professional, directed the Suze Orman Financial Group from 1987 to 1997, served as Vice President—Investments for Prudential Bache Securities from 1983 to 1987, and was an account executive at Merrill Lynch from 1980 to 1983. Prior to that, she worked as a waitress at the Buttercup Bakery in Berkeley, California, from 1973 to 1980.

Read an Excerpt

THE NEW AMERICAN DREAM
 
The American Dream. As a concept, it is so ingrained in our collective imagination that it doesn’t even need to be defined, right? Think about it: Did you ever need to have it explained to you? My guess is you did not and that even from a young age, you, like me, knew it represented a promise—of opportunity, of possibility—that came with being American.
 
But on closer inspection, it is not just an American impulse that the American Dream describes, it is a human one, and it unites us. No matter your socioeconomic, ethnic, or religious background, we all aspire to the same things: We seek to provide for our family and keep them safe, no matter what shape that family takes, no matter if we are talking about our parents or our children, a blended family or a family “by choice,” not blood. We want future generations to have even more opportunity than we ourselves have, a dream that is intrinsically linked with education and the advancement that follows from it. We want to live in a home that is secure in every sense—as a haven for our loved ones and as a wise place to have spent our money. We want the guarantee that our hard work will pay off, that it will support us financially, that it will allow us to achieve our goals, and that when it is time to stop working, we will reap the benefits of those years of dedicated service and live out the rest of our lives comfortably in retirement.
 
As universal as these desires are, we refer to them as the American Dream because for centuries this country has, for the most part, been able to make good on this promise of America as the land of opportunity. This belief has played a defining role in shaping our national psyche. It is at the heart of our Declaration of Independence—that we each possess “certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness.”
 
How truly terrifying, then, to take stock of the American Dream today and to question the truth of it—to wonder if it still exists in reality or if it has become an illusion, a myth. Take a look around: As of October 2011, nearly 14 million Americans were out of work; another 8.9 million were working only part-time because they cannot find full-time employment. That is nearly 23 million people who are struggling to make ends meet. Many of those lucky enough to still be employed in their 60s are looking to hang on to their jobs as long as possible because they simply cannot afford to retire—which also means there are fewer job openings for young people entering the workforce.
 
In many areas of the country, the dream of homeownership has backfired. Real estate values have deflated to such an extent that a record number of people owe more than their homes are worth. That’s not an American Dream—it’s a nightmare.
 
Because of the dire economic conditions of recent years, many parents are unable to afford the high cost of college tuition for their children. And there is a record number of student loans in default, making people question whether they ever should have taken them on to begin with.
 
The sum total of all these facts and figures? The home, the job security, the education, the retirement—the very standard of living that all of us took for granted for so long is completely under siege.
 
Whether we speak about it or not, we are grappling with the frightening possibility, the fear, that we no longer live in a land where effort applied to opportunity produces a better life. The doors leading to more and greater things, once wide open, now seem to be closing. It is hard to move up in an economy where there has been no job or wage growth over the past decade. Once a manufacturing powerhouse—“Made in the U.S.A.” was our calling card—we have ceded that engine of growth, and the jobs that go with it, to other countries as our own economy now relies on our ability to consume, not produce.
 
The impact of these economic shifts has been felt deeply within our homes. While the median household income for adults born in the 1960s is indeed higher than the income of their parents’ generation, much of that is a function of smaller household size and the fact that there are now likely two wage earners per household. It takes more of us working more to maintain our forward progress. Even so, the pace of our growth has slowed considerably. According to a study commissioned by the Pew Charitable Trusts, family income doubled in the postwar years, between 1947 and 1973, but in the three decades since then the increase has been a mere 20%. That statistic provides important context to why household debt relative to income more than doubled over the same period: For many, borrowing was a way to keep up with our parents and grandparents. To put it in more emotional terms, it is why so many of us wonder how our parents and grandparents seemed able to enjoy a higher standard of living even though their means were so much less than ours.
 
The meritocracy that underpins our economy and culture—work hard, move up the ladder—has also been weakening, as the distribution of income has become increasingly uneven. In the 1950s and 1960s, our national economic growth trickled down across a broad spectrum of income levels. Since the 1970s it has been more fractured, with much of the economic gains benefiting upper-income households. This concentration of wealth leaves the middle class, the heart and soul of this country, struggling just to hang on.
 
The epic financial crisis—and there really is no other way to describe it—that began in 2008 may have delivered a decisive blow to the stubborn optimism that we held on to in spite of the on-the-ground reality of how our financial lives have been marked by increasing struggle. For many, the crisis was a rude awakening; for others, it was a grim confirmation of the creeping anxiety we’ve been feeling about how we are going to make it all work. Either way, it is hard to find a family that was untouched by this financial disaster. It was a galvanizing moment for us as a nation—it has forced us to reckon with our beliefs in our country and our individual ideals.
 
Is it time, then, to pronounce the American Dream dead?
 
In many ways it pains me to say this, but in my opinion the American Dream as we knew it is dead.
 
But listen to me: That is not such a bad thing. The old American Dream has been in need of revision for quite some time; we have just been very good at avoiding that truth. It’s time to take that dream back into our hands and reshape it. It’s time to create a New American Dream that is based in honesty, authenticity, good intentions, and genuine need.
 
What is important to understand is that the American Dream is not something to put your faith in, to pray for, to embrace blindly, and hope that everything turns out okay—despite its long, dependable run. Rather, it is a concept, a loose set of goals that beg for individualization. The American Dream was never one-size-fits-all. The New American Dream asks you to fashion a dream that suits you—not one based on false premises and the expectations of others. It asks you to take measure of your own needs and understand what it will take to provide for yourself and those around you—your family, your community, and those less fortunate.
 
The truth is, we are on the threshold of an important moment. We can come together, right here, right now, and each one of us can envision our own New American Dream—a dream that is rooted in reality, not superficiality; in truth and integrity, not illusion and falsehood.
 
MAKING CHANGE
 
I am a great believer in the power of perspective. Often when we find ourselves in a difficult situation we come to believe we have no options. We convince ourselves there is no way out. Despair and frustration take root and convince us that things are more desperate than they may actually be. When I’ve found myself in those situations in my own life, I have learned that a change in perspective can change everything. What seemed insurmountable can be overcome. Not without difficulty, but through ingenuity and dedication. We can make a difference when we think differently. If you have any doubt about the truth of that statement, think of any significant achievement throughout American history, from our founding as a nation built on those inalienable rights and freedoms, to the civil rights movement.
 
What we need first and foremost then, to erase the feelings of hopelessness and to ease our fears, is a change in perspective. Let us recognize what the American Dream no longer is, in order to give birth to a New American Dream.
 
We must abandon any vestige of the old dream that suggested it was delivered on a silver platter as a matter of national birthright, and that our economy would forever be the rising tide that lifts all boats. The dream I am asking you to create—this New American Dream—is a very individualistic pursuit. It calls upon you to take stock of the challenges we face as a nation with an economy that is still struggling to recover from the effects of a crippling recession. And then it calls upon you to take stock of your own life, your own needs, your own security. We must transform ourselves from dreaming society’s dreams and putting our faith in a false and misleading sense of entitlement, to being a society where each of us strives for dreams that are personal and realistic and that are in the best interests—in the truest and most honest sense—of us and our family. I am calling upon each of us to rethink the very way we dream.

Table of Contents

How to Enter The Classroom xv

Class 1 The New American Dream 3

Making Change

The Dreams of Tomorrow Reside in Today's Choices

The Money Class Curriculum

Class 2 Stand In Your Truth 11

Lesson 1 Finding Your Truth: A Personal Financial Accounting 13

Lesson 2 Living Truthfully: How To Stand Tall In Your Reality 15

Focus on What Is Real Today... and What You Will Need Tomorrow

Live Below Your Means but Within Your Needs

The Pleasure of Saving Is Equal to the Pleasure of Spending

Define Yourself by Who You Are, Not What You Have

Lesson 3 The Foundation Of All Truthful Living: The Power Of Cash 21

Debit Card Rules

The "Life Happens" Fund

Credit Unions: A Great Place to Save

Safety First with Your Savings

Saving for Big-Ticket Items

The Truth Will Indeed Set You Free

Class 3 Family 28

Lesson 1 How to Build Honest Family Relations 31

Opening the Lines of Communication

Lesson 2 How To Raise Young Children To Stand In The Truth 34

Your Priceless Legacy

Set the Right Tone

Imparting Good Values When It Comes to Money

Money Lessons for Children

Money Lessons for Tweens and Teens

Money Lessons for Teenagers Heading to College

How to Handle Money Gifts and Savings

The Three-Option Approach

Lesson 3 How To Create a Financially Honest College Strategy 48

Who Should Save for College

The Best Way to Save for College: 529 Plans

UGMA/UTMA

Coverdell Accounts

How to Invest Your 529 Plan

The College Talk Every Parent Must Have with a High School Freshman

Borrowing Rules for College Loans

The Risks of Private Loans for College

Stafford Loans

PLUS Loans

How to Choose the Right School

Lesson 4 How To Help Adult Children Facing Financial Challenges 64

How to Handle Student Loans That Are in Default

How and When to Help Independent Children Who Are in Financial Trouble

Lesson 5 The Conversation Every Adult Child Should Have With His Or Her Parents 69

Building Family Financial Security Under One Roof

Updating Legal Documents

When a Parent Remarries

Lesson 6 Advice For Grandparents: How to Build a Lasting Legacy 73

Follow the Parents' Lead

Pay It Forward

Give Experiences, Not Things

Class 4 Home 77

Lesson 1 The Truth About Home Values 81

A Decade of Extremes

A Home Is a Savings Account, Not a Hot Stock

Financing Is Cheap, but Not Easy

Lesson 2 When It Makes Sense To Rent 84

The Math of Rent vs. Buy

Advice for Owners Who Now Want to Rent

Lesson 3 The New Rules Of Buying a Home 87

Set a Budget That Satisfies Your Needs

Know Your Income Limits

Aim to Make a 20% Down Payment

A Special Note About FHA-Insured Loans

Special Rules for Buying Condos and Co-ops

Where to Come Up with the Down Payment

Opt for a 30-Year Fixed-Rate Mortgage

Understand the Risk of Distressed Property

Lesson 4 What To Do If You Are Underwater 98

If You Are Underwater and Cannot Afford Your Mortgage

Loan Modificaiton

Short Sale

Foreclosure

If You Are Underwater but You Can Afford the Mortgage

Lesson 5 How To Reduce Mortgage Costs 110

When It Makes Sense to Pay Off a Loan Ahead of Schedule

The New Realities of Refinancing

Refinancing Rules

Lower Your Mortgage Costs Without a Refinance

Lesson 6 The Dangers Of Home Equity Lines Of Credit 114

The Dangers of Rising Interest Rates and Falling Behind on Payments

Home Equity Loans

Lesson 7 Reverse Mortgages 116

Reverse Mortgage Basics

Lesson 8 Investing In Real Estate 119

What You Need to Know Before You Buy Investment Property

What to Do with an Investment Property That Is Underwater

Class 5 Career 122

Lesson 1 Advice For The Employed 125

Build Your Plan-for-the-Worst Fund

Live Below Today's Means

Grab Your Full Retirement Bonus

Make Your Case for a Raise and Promotion Through Your Work

How to Ask for a Raise

Change Your Attitude Before You Change Your Job

Lesson 2 Advice For The Unemployed 133

Cut Your Spending Immediately

Do Not Dip into Your Retirement Savings

Make Sure Your Credit Profile Remains Strong

Do Not Go Back to School to Avoid a Hard Job Market

Get to Work as Fast as Possible, Rather Than Holding Out for a Better Offer

How to Deal with a Steep Pay Cut

A Special Note for Stay-at-Home Moms

Lesson 3 Starting (And Running) Your Own Business 139

Launching a Business: Can You Afford It?

Where to Get the Money to Start Your Business

A Few Words About Micro Lending

Running Your Own Business

When to Expand

When to Close

Standing in Your Truth in Business

Closing Down a Business Responsibly

A Note About the Retirement Classes 153

The Money Navigator: A Special Offer for Readers of The Money Class 154

Class 6 Retirement Planning: Getting Going In Your 20S And 30S 155

Lesson 1 Time Is Your Greatest Asset 159

Getting Started Early

With Lower Returns, Savings Are More Important Than Ever

Lesson 2 Retirement Accounts Explained 161

Retirement Plans Offered by Employers

Retirement Plan Withdrawal Rules

Non-Workplace Retirement Accounts

Nondeductible IRAs

Roth IRAs

Retirement Plans for the Self-Employed

Lesson 3 How Much You Need To Save For Retirement 166

The Retirement Formula

The Best 401(k) and IRA Strategy

A Word on Vesting

Where to Open an IRA Account

Lesson 4 Investing Your Retirement Money 173

The Ups and Downs of the Stock Market

Dollar Cost Averaging

How Much to Invest in Stocks

Choosing the Best Options Within Your 401(k)

How to Build the Best 401(k) Investment Portfolio

Exchange Traded Funds

Bond Investments

Retirement Planning Mistakes to Avoid

What to Do with Your 401(k) When You Leave a Job

Class 7 Retirement Planning: Fine-Tuning It In Your 40S And 50S 190

Lesson 1 Deciding When It Makes Sense To Pay Off Your Mortgage 194

Questions to Ask Yourself

The Benefits of Paying Off Your Mortgage

How to Pay Off Your Mortgage Ahead of Schedule

Lesson 2 Have A Realistic Plan For Working Until Age 66-67 203

Your Work-Longer Game Plan

Lesson 3 Delay Your Social Security Benefit 207

Social Security Basics

Social Security Strategies

Lesson 4 Estimate Your Retirement Income: How Are You Doing? 214

Social Security Benefits

Retirement Accounts

Pensions

Lump Sum vs. Annuity

Lesson 5 Saving More, And Investing Strategies In Your 50S 223

How to Invest Smart

Making the Most of What You Have

Best Investments Outside Your 401(k)

Bond Investments

No Target Funds Allowed

Lesson 6 Plan For Long-Term Care Costs 234

When to Buy

Making the Financial Case for LTC Insurance

Health Insurance, Medicare, and Medicaid

LTC Basics

Class 8 Living In Retirement 248

Lesson 1 Home Finances: Stand In The Truth Of What Is Affordable For You 251

The Affordability Issue

Start the Discussion

Lesson 2 Coping With The High Cost Of Healthcare In Retirement 253

Rising Costs vs. Your Annual Retirement Income

Long-Term Care Premium Increases

Lesson 3 Stick To a Sustainable Withdrawal Rate 255

The Right Rate

How to Make Tax-Smart Withdrawals

Lesson 4 Avoid Long-Term Bonds And Bond Funds 259

What You Must Understand About Bonds

How to Build a Bond Ladder

Beyond Treasury Bonds: Municipal Bonds and Corporate Bonds

Lesson 5 Earn Higher Yields by Investing In Dividend-Paying ETFS And Stocks 264

The Case for Dividend-Paying ETFs and Stocks

Stock Dividend Basics

The Protection of a Stop-Loss Order

How Much to Invest

How to Choose a Dividend-Focused ETF

Tips for Owning Individual Dividend-Paying Stocks

Lesson 6 Double-Check Your Beneficiaries And Must-Have Documents 275

Life-Changing Events

Class 9 The Ultimate Lesson 277

Clearing My Own Roadblocks

The Road Ahead, Not the Rearview Mirror

The Legacy We Create

What People are Saying About This

From the Publisher

“Suze teaches readers how to transform their thinking and reimagine the American dream.”—O: The Oprah Magazine

Editorial Reviews

Suze teaches readers how to transform their thinking and reimagine the American dream.”—O: The Oprah Magazine

From the Publisher

With a clarion call to "stand in your truth," Orman (The Money Book for the Young, Fabulous & Broke) re-engineers much of the advice given in her previous works for her latest volume. Chock full of financial advice pertinent to the post-2008 economic landscape, the book addresses every age and stage of life. Organized into nine "classes," with each class/chapter further divided into related lessons, Orman's effort is characteristically upbeat and no-nonsense, offering lessons on family matters, homeownership, saving for college, emergencies, retirement, and more. Orman firmly guides readers when dealing with parenting issues or underwater mortgages. Orman declares herself "vehemently anti-allowance," opting instead for paying children to do household chores, and she explains how to implement such a policy. A class on careers gives honest advice for anyone facing continued unemployment or thinking of taking a lower paying position. And three of her classes focus on financial planning for the future and how readers as young as 20 can begin saving for retirement. After finishing Orman's book, and completing her exercises, readers will have a very clear sense of how they can achieve what she has rechristened the "New American Dream."
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