Suze Orman’s Last Cash Survival List

Suze Orman's Last Cash Survival List

The financial crash of 2008 that carried well into 2009 has left many in a situation where they have lost their job, don’t have any income coming in and are completely strapped for cash.  If you find yourself in that situation and don’t have an emergency fund in place, what do you do?  Luckily, Suze Orman is to the rescue!  I caught another episode of the Suze Orman show where she shared her “Last Cash Survival List”.  If you find yourself in a financial bind, follow these steps (as a last resort, of course) to tap some extra cash.  Disclaimer:  I tend to disagree with Suze more often than not, but this is pretty good advice for most.  Before you get to this point, I highly encourage you to build a decent amount of cash savings (3-8 months of monthly expenses).

1. Tap the Credit Cards First

Did Suze Orman really suggest that the #1 spot to get extra cash is your credit cards?   She sure did.  Remember, this a survival guide.  Hopefully, this is a temporary fix until you can get yourself back into financial shape.  Suze suggests only using cards for necessary items such as:

• Gas
• Groceries
• Cash Advances

If you’re going to do a cash advance, READ THE FINE PRINT.   Some credit cards are better than others.  Make sure you understand your credit cards’ rules.  If you don’t understand them, call the credit card company direct and get clarification.  Make sure you write down the person’s name and extension for your records.

2.  Roth IRA to the Rescue

Why the Roth IRA?   Simple.   Because you can pull out your contributions with no penalty.    Trust me, it hurts me to see anybody tap their Roth IRA because tax free money at retirement sounds so sweet!  But in hard times, you have to take care of today before worrying about tomorrow.

3. 401k and 55

If your 401k has a loan provision, you can could try that route first.  Keep in mind though that if you borrow from your 401k and then quit your job or get laid off, your employer could require you to pay it all back.  If you cannot repay it, you could then be taxed and penalized (if under 59 1/2).

If you are a baby boomer, retired early and a have a 401k, you might be in luck. 401k’s have a special provision that allow you to withdraw money penalty free if you retired early and are the age of 55.  Remember, you still have to pay the appropriate tax.  This provision just applies to the 10% early withdraw penalty. This is another reason why early retirees should be careful in rolling over 401k’s into their IRA’s prematurely.

4. Borrow Against Your Traditional IRA

Traditional IRA accounts don’t allow loans like a 401k, but they do have a workaround that many are not aware of.  You are allowed to withdraw from your IRA for a period of 60 days and as long as you get the money back into the IRA, there is no tax or penalty.   You are allowed to do this once only each 12 month period.  If you do this, be sure to keep track of your 60 day window.  The IRS shows no leniency on this.

Securities offered through LPL Financial, Member FINRA/SIPC.