Personal finance expert Suze Orman appeared on the 3rd hour of TODAY with Hoda Kotb and Jenna Bush Hager to share some important financial advice as the coronavirus pandemic continues to stir up the job market.
"You just have to save every single penny you possibly can right now. You need to stay strong," said Orman, who has spent years advising people to have at least eight months of emergency funds saved. "You need to keep calling your creditors and saying, ‘I know you gave me three months where I don’t have to pay; I need another three months.’ And you just have to be this ferocious warrior now where you don’t turn your back on this battlefield of the unknown."
Orman also took the time to answer specific questions from TODAY employees and audiences.
Should I pay off my mortgage right now?
Carrie, a 50-year old woman who said that she has an eight-month emergency fund and would still have those savings if she paid off the mortgage on her home, asked Orman if she should still pay off the mortgage in an uncertain housing and job market.
In this situation, Orman said it certainly makes sense to pay off the mortgage.
"The very first thing I want you to do is, while you still have a job, because you never know, is take out a home equity line of credit, just so you have it in case of an emergency," Orman said. "Then, I want you to pay off your mortgage. Then, the money that you are paying towards your mortgage every month, I want you to put that exact same amount of money back into your savings."
"If something happens, you can access the home equity line of credit and it would be the same thing as if you had a mortgage, really," Orman continued. "So that is your plan of action."
However, paying off a mortgage immediately isn't the best move if you don't have a lot of savings or have other debts to pay. Sarah, a woman who works in higher education and said her salary varied depending on state and city budgets, said she wasn't sure whether to start saving, pay off her credit card debt, or start making payments on her mortgage.
Orman said the first step, unquestionably, would be creating an eight-month emergency fund before thinking about paying down any debts.
"Think about it: You could be paying down your mortgage, all right, and now you no longer have a job and now you are one of the ones who are applying for unemployment but it takes three months to get it, if you even get it, and then what are you going to do?" Orman said. "Paying down your mortgage didn’t help you at all, because when you pay down your mortgage, as you’re paying it down, it doesn’t reduce your mortgage payment. So, please, that’s the last thing I want you to do."
"I want you to have an eight-month emergency fund," Orman continued. "I want you to get, then, out of credit card debt. Then, I want you to think about, if you’re going to stay in that home for a long time, to start to pay down that mortgage, but it’s in that order, my dear one."
What about student loans?
Quinn, a TODAY intern, asked Orman for any advice that college kids worried about student loans could take.
Orman said that the best thing anyone with existing federal loans can do is take advantage of the deferment period that federal loan providers are offering. No federal loans will come due or collect interest until September 30.
"If any of you are in that situation and you can afford to pay your student loan, don’t," Orman said. "Take the deferment; it’s not charging you any interest on it, and take the money that you should have been paying towards your student loan, up until September 30, and put it in your emergency fund so that you can start that famous eight-month emergency fund that Suze Orman wants everybody to have."
Orman also said that anyone taking out loans will find that most federal loans have a very low interest rate at the moment.
Is it a good time to start investing?
Sarah, a TODAY producer, said that she had started to save money separate from her 401(k) plan and was interested in potentially investing it. Orman said that now is a great time to get into the markets.
"What’s really important to understand is that the way you invest in a market like this is through a technique called dollar-cost averaging, where you take a specific sum of money every single month and you invest it into a diversified exchange-traded fund or no-loan mutual fund," Orman said. "Just keep doing that every single month, and use a discount brokerage firm where the commissions are absolutely zero, so it doesn’t cost anything more to invest, especially if you do it online."
Sarah also asked if a financial adviser is necessary.
"There are some brilliant financial advisers, and if you find one, they’re worth their weight in gold, but ... I personally think you’re never powerful in life until you’re powerful over your own money — how you think about it, how you feel about it and how you invest it," Orman said. "Nothing will make you feel more powerful (than to) learn how to invest. And then if you want to use a financial adviser, then you’ll know if he or she is doing the right thing for you. But I think once you do it on your own, you’re going to find it’s really not as hard as everybody thinks it is."
Is it time to think about learning new job skills?
Hoda asked if now might be a good time for people to start learning new skills for future job security. Orman said that now is absolutely the time to start learning but advised that people see it as an opportunity to "reshape your life."
"What is it at this point in time — since this is the great reset in your life right now — what is it that you really want to learn?" she asked. "What do you really want to do? How can you make something happen from what you feel is nothing? You have to have faith, everybody, that everything happens for the best. You have to. Because if you don’t have that faith, what do you have? ... You have to be strong."