Suze Orman: "We have a new perspective" - Interview

O: The Oprah Magazine, Dec, 2001 by Suze Orman

What will you teach your children--and remember yourself--this season? A lesson in abundance.

BEFORE THE ATTACKS ON THE Pentagon and the World Trade Center, we were as close to a recession as it was possible to get, and now we ask, Shouldn't we be worried about a deepening recession that will last into the foreseeable future? I do not think so. From the bottom of my heart, I believe that when we look back a year from now, we'll see that what we've been through has spurred our economy on.

Why do I think the economy will strengthen? First, Washington is going to start seriously concentrating on our nation's security which means spending more money on goods and services, especially those associated with defense. Second, although the Federal Reserve has already been trying to stimulate the economy by lowering interest rates, now it has also begun pumping billions of dollars of additional cash into the financial system, for liquidity. The last time the Fed pumped this much money into the system was in 1999, during the Y2K scare. The stock market responded by going up--way up. I think the market will respond again.

Before disaster struck, corporations were acting as if they were simply resigned to a long bout of bad economic news. They were cutting back on spending, pulling in the reins on research and development of new products, and laying people off When you stop the flow of money in this way you stop the economy from growing. Now corporations are showing at least a few signs of rallying and behaving like warriors. Heads of corporations who were hesitant to spend a dime last summer have given huge donations to the families of firefighters and rescuers working in New York and Washington, D.C. Cisco gave $6 million to the American Red Cross and other relief agencies; GE gave $10 million to a fund that will assist the families of firefighters, police officers, and emergency rescue workers.

On an individual level, I believe that for those of us who were spending ourselves into credit card-debt oblivion--and that was many of us, my friends--this has been a wake-up call. We have felt so much pain in the aftermath of the attacks on the World Trade Center and the Pentagon, and now the idea of trying to make ourselves feel better by spending money we don't have has lost its appeal. Our romance with things is over. We have a new perspective--and I think we are closer to coming out of our psychological and economic slump than we have been in many months. This December, before we start overspending again, perhaps we can each take time to remember where our thoughts and resources should be focused during the holidays.

Help--I don't want to look like a scrooge, but...

Q When I was growing up we didn't have much money, so now I overdo it for my kids. I love Christmas, and I want my kids to have what their hearts desire without spoiling them and breaking the bank. How do I show my love without looking cheap?

A You have bought into the idea that love is contained in the material value of what you give. We all need to understand that the holiday spirit doesn't come from what can be bought. Think about it: You enjoyed the holidays even though you didn't receive the gifts you feel you must give your kids.

What do you want to teach your children this holiday season? I would guess lessons of giving, of spiritual and emotional abundance -- so I would urge you not to deplete your savings by purchasing the latest, most expensive toy for your child, even if she's pleading for it. There are billions of dollars' worth of forgotten toys that seemed like hearts' desires at the time, sitting now in the backs of closets.

Here is what I want you to do: Before you buy your children a single gift, tell them about your childhood and then take them shopping for other children who do not have enough. Another important lesson I want you to teach them is that money saved today can create more money tomorrow. We are always so focused on what money can buy right now that we forget what it can do for us later. Give your children the gift of a share of stock or a savings bond -- a gift that will never be discarded, I promise you. Finally, come up with an amount you can easily afford to spend on holiday gifts, without putting purchases on your credit cards. You may not have enough to shower your children with everything on their list, but by sharing your resources with those less fortunate, you'll have taught them the real meaning of the season.

How can I stop the blizzard of debt?

Q Our credit card purchases from the past few Christmases are killing us. The presents were decently priced when I bought them, like a sweater for my mom two years ago, but the interest has added up. I don't even want to guess what that sweater is costing me! It's not just presents: we go to the tree farm to cut down the tree (and stop for dinner and dessert). we see the Christmas movies as a family (with popcorn and drinks, of course) and entertain friends at our annual open house. Before we know it there is no cash left and all the presents end up on credit cards. What should we do?