And by the way, if you want to ask a question, all you have to do is go to the app, download the app, and that is where you ask questions. And if your question is chosen, it will be on the podcast. This one is from Jessica, and she says, hi, Suze. I'm a year-old single mother of an eight-year-old. I wanted to know if I should pay off my remaining student loan debt from my savings.
I also want to know how much should I invest in a car when I turn in my car lease? Any other recommendations on how I can make the most out of my savings to help it grow would also be great advice. Thank you. Well, Jessica, let me start here for you. So, my question to you would be, is that eight months of expenses? It might be because I don't want you to be using up your savings or your emergency money, especially in the economic environment that we're in right now, simply so that you can pay off your student loan debt.
That's it. I do not want you to go, oh, but I'm not making any money on my savings, and I could save all this money if I just paid off my student loan debt. You're probably paying a 6. Because your savings are there to save you if something goes wrong, if you lose your job, if you get sick. So I don't want you to do that. And what's interesting is you say I also want to know how much should I invest in a car.
A car is never an investment. A car is the worst investment any money could make, bar none. And I'm not talking about the old cars that people fix up and they make all this money off of, that's a whole business, but just going out and buying a car is not an investment. So you have been leasing your car. You might, if you took really great care of that car and you like that car, you might want to ask the lease company how much would you have to come up with in order to buy that car?
And then I would finance it over three years. I would not be using my savings for that, either. And if you don't want to do that, then what you might want to do is look for a car that's new for you but that's a used car. And you're going to find a lot of used cars out there right now because there's a lot of people that aren't going to be able to keep their cars because they don't have a job anymore.
So, this is the perfect time for you to stop leasing because leasing is the biggest mistake you could ever make, bar none, in my book. Go out there and see if you could find a used car, but one that's new for you, but finance it, but only over a three year period of time.
Because if you need more than three years to make the payments affordable, you're buying too expensive of a car. So use that as a guideline, OK? All right, the next question is from Mini. She says, hi, Suze. I love your podcasts and your app. Yeah, Mini. My only debt right now is my mortgage at 2. Where should I invest this? Should I put it all to my mortgage?
Should I put it in VTI? What should I do? Thanks for reading my question and looking forward to your response. So, Mini. I love that you have a month emergency fund because you know, forever I've been telling people to have at least an eight-month emergency fund. And really, after this COVID thing, I think I'm going to up that to, a one-year emergency fund, especially because it would just drive all the other financial pundits crazy, who say all you need is three to six months.
I might just do it for that reason alone, but no, but truthfully, everybody, I think that really given what's happened here, I think a one-year emergency fund is probably going to be the new rule of thumb for Miss O.
But, you have extra money, you're fully funding everything, and it's hard for me to answer your question because I don't know what else you're invested in. So you have investments there, but you didn't tell me what you invested in. So, it's hard to say are you diversified, are you not, are you in individual stocks, what are you doing?
And really, what you also might want to do Mini is you might want to start picking individual stocks that you really like and open up another account at like Fidelity, or TD Ameritrade, or Charles Schwab, where you could buy fractional shares or little amounts of money every single month. One share here, two shares there, and build your own portfolio and see how that goes for yourself. And have you all noticed what's happening in the stock market lately? Have you noticed that we're starting to have a rotation out of stocks like Amazon and Netflix and you know, Shopify and all these stocks that have gone so crazy now it's not even funny?
And that money is starting to funnel into more traditional stocks, everyday stocks that didn't go crazy over these past few months. So the reason that I like the Vanguard Total Stock Market Index Fund or ETF is that it's made up of about different stocks, and as these rotations go from technology to other things, you're covered. You have diversification and your life is very simple, and that's essentially why I like the Vanguard Total Stock Market Index Fund for those of you who want to just start investing and have true diversification.
So Mini, I hope that answered your question. The next one is from Joan. I think Joan asked a few questions actually, I see this name a lot. Anyway, hi, Suze is it too late to refinance in this market? I'm looking to go into a lower interest rate, shorter-term mortgage.
No way is it too late my dear Joan. Interest rates are down here, they're going to stay down here. So, if you want to refinance, go girl, do it and do it now. Just that simple. I always made my minimum payments electronically, never missed a payment. I want to start paying my credit card debt off.
How do you recommend me to do that? So, first of all, Gloria, before I did that, if I were you and you always made your payments on time, which means probably you have a good FICO score, I would see what my FICO score is and if your FICO score is like or , you might want to do a balance transfer on all of these cards to the lowest possible interest rate that you could find.
So, that's the very first thing I would do if I were you and check it out. However, let's just say you screwed up your FICO score. You don't have a good FICO score, so, no way that anybody is going to give you a lower interest rate or allow you to do a balance transfer and you are stuck with these three cards. Here's what I would do if I were you.
Found out if he traded it in every 6 months he could get around having to get a plate. In CA, plates stay with the car, not the owner, so he got a new set of plates for every new car, which meant the little piece of paper on the front for a while, which let him get around some of the rules….
Yep, everyone has their own situation and knowledge base. For every hakcr here leasing a dollar Q50 or QX60, there are probably five posters talking about being 10k miles over their a month Encore lease with accidents on the Carfax.
I work with a lot of average Americans daily including reviewing finances. I think the big thing is leasing is complicated, really complicated. For the average American, if they go to lease a car they are going to get robbed. Totally - was just going to say this. Buying a used car, cash, is ONE number to worry about.
In which case, they will get robbed blind. I think one major aspect of leasing that people miss out on is safety. Driving a car that is 12 years old is not nearly as safe as one that is 3 years old plain and simple. To get value out of a purchase you typically need at least 10 years of usage out of it. If you have to finance it for longer than that, then "you can't afford the car that you're going to buy.
Orman also suggests buying used, because unlike a home, a car will never increase in value. While owning a car is non-negotiable for many people, the vehicle itself doesn't need to be flashy or expensive.
It's a utility that should be driven as long as it remains safe and reliable. In fact, Orman herself chooses to keep her cars for 12 years or more.
It's also smarter to go with a model you can afford than one that looks impressive.
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