P R A I S E F O R S U Z E O R M A N The Road to Wealth “Suze Orman gets down to business her message is straightforward a winner.” —USA Today “Dedicated to guiding regular folks through the natural cycles of their financial life— —More from buying a first house to writing a will.” The Courage to Be Rich “Orman prods the fearful, the angry and the impoverished to dig deep into the pockets of their souls for spiritual and financial riches [A] holistic approach Orman offers sound advice on money-market funds, IRAs, estate planning and financing bigticket items such as homes and autos, but her most compelling advice hits us in the emo—USA Today tional pocketbook.” “The reigning shaman and high priestess of personal finance Orman’s new book, The —The San Francisco Examiner Courage to Be Rich, is another blockbuster.” “Very sound and practical advice.” —Chicago Tribune “People just can’t seem to get enough of financial expert Suze Orman The former Prudential Bache Securities vice president manages to help people change the way they think about money, convincing them that they can’t change their financial destiny until they learn to truly value and respect money The Courage to Be Rich covers the basics of money management—from buying a home to information on investing Savvy —The Dallas Morning News financial strategies.” “The Courage to Be Rich combines practical financial advice with an understanding of the fears a lot of people face when confronted with the bottom line.” —Good Morning America A L S O B Y S U Z E O R M A N Yo u’ v e E a r n e d I t , D o n’ t L o s e I t The Steps to Financial Freedom T h e C o u g e t o B e R i c h S u z e O r m a n’ s F i n a n c i a l G u i d e b o o k : P u t t h e S t e p s t o Wo r k S u z e O r m a n’ s P r o t e c t i o n P o r t f o l i o The Laws of Money, The Lessons of Life T h e M o n e y B o o k f o r t h e Yo u n g , F a b u l o u s & B r o k e THE ROAD TO WEALTH A C O M P R E H E N S I V E G U I D E TO YO U R M O N E Y Everything You Need to Know in Good and Bad Times INCLUDES SUZE’S U P D AT E D M AT E R I A L S F RO M POPULAR FINANCIAL LIBRARY SERIES SUZE ORMAN R I V E R N H E E W A B D Y O R O K O K S This publication is designed to provide accurate and authoritative information in regard to the subject matter covered It is published with the understanding that the publisher and author are not engaged in rendering legal, accounting, or other professional service If legal advice or other professional advice, including financial, is required, the services of a competent professional person should be sought While the author has made every effort to provide accurate telephone numbers and Internet addresses at the time of publication, neither the publisher nor the author assumes any responsibility for errors, or for changes that occur after publication Penguin Group (USA) Inc and Riverhead Books are not affiliated or connected in any way with The Suze Orman E-Newsletter or any of the information contained therein A Certified Financial Planner® is a federally registered mark owned by the Certified Financial Planner Board of Standards, Inc The term Realtor® is a collective membership mark owned by the National Association of Realtors® and refers to a real estate agent who is a member thereof RIVERHEAD BOOKS Published by The Berkley Publishing Group A division of Penguin Group (USA) Inc 375 Hudson Street New York, New York 10014 Copyright © 2001, 2003 by Suze Orman, a trustee of the Suze Orman Revocable Trust Book design by Deborah Kerner, Meighan Cavanaugh, and Claire Naylon Vaccaro All rights reserved This book, or parts thereof, may not be reproduced in any form without permission The scanning, uploading, and distribution of this book via the Internet or via any other means without the permission of the publisher is illegal and punishable by law Please purchase only authorized electronic editions and not participate in or encourage electronic piracy of copyrighted materials Your support of the author’s rights is appreciated First Riverhead hardcover edition: July 2001 Revised Riverhead trade paperback edition: December 2003 The Library of Congress has catalogued the Riverhead hardcover edition as follows: Orman, Suze The road to wealth: a comprehensive guide to your money / Suze Orman p cm Includes index ISBN: 1-4295-1351-9 Finance, Personal Investments I Title: The road to wealth II Title HG179.0758 2001 2001019100 332.024—dc21 This book is dedicated to all those who have the desire to learn more, to be more, to create more, and to leave more CONTENTS ACKNOWLEDGMENTS ix xi INTRODUCTION MANAGING DEBT FINANCIAL INTIMACY 83 HOME OWNERSHIP 213 INSURANCE PAY I N G 147 FOR COLLEGE 279 RETIREMENT PLANNING 367 STOCKS MUTUAL FUNDS BONDS AND INDEX AND 417 BOND FUNDS 489 10 ANNUITIES 11 WILLS 301 TRUSTS 577 515 453 I N D E X statutes of limitations for, 57–58 student loans, 58–66 and trusts, 549 Debt Management Plan (DMP), 45, 46 Debt set point, 4–5 Debt-to-equity ratio, 396–397 Decedent, 138 Decreasing term insurance, 251 Deductible, 216 Deferment, 62 Defined-benefit pension plan, 314–315, 333 Defined-contribution plan, 315 Deposition, 120–121 Direct Marketing Association (DMA), 21 Disability insurance, 256–259 Disabled child, 112 Discount broker, 412–414 Discount rate, 372 Discovery, 120 Diversification, 404–405, 420, 450–451, 480 Dividends, 393 Divorce, 118–133 See also Annulments; Separation and arbitration, 128–129 and collaborative law, 127 dividing assets in, 121–125 emotions of, 112–117 life after, 132–133 and mediation, 127–128 realities of, 129–132 and retirement benefits, 125–127 starting over after, 142–145 Divorce attorney, 119 Divorce decree, 132 Dogs of the Dow, 395 Dollar-cost averaging, 308, 399–401, 407, 435 Do Not Call registry, 22 581 Double indemnity, 254 Dow Jones Industrial Average (DJIA), 384–385 Down payment, 155–157 Dreyfus MidCap Index Fund, 442 DRIP (dividend reinvestment program), 401–404 Durable goods report, 371 Durable power of attorney, 572–576 Early retirement, 352–356 Earthquake insurance, 272–275 Economics 101, 370–374 Education Savings Accounts, 285–286, 287 Education tax credits, 284–285 Ways to Avoid Probate (Randolph), 535 80/10/10 loan, 174 Electronic Fund Transfer Act, 6–7 Elimination period, 242, 259 Embedded capital gains, 448 Emergency fund, 71–73 Emerging-market fund, 423 Emotions of debt, 3–5 of divorce, 112–117 and money, 85–88 Employee Retirement Income Security Act (ERISA), 304, 323, 347 Equifax, 19, 21, 28 Equipment trust certificates, 472 Equitable-distribution state, 121–122 Equity line of credit, 53–54, 198–199, 202–204 Escrow accounts, 188–189 Escrow instructions, 166 Estate, 517 Estate planning See Trusts; Wills Estate taxes, 552–555 582 I N D E X Exchange-traded fund, 427–430, 431, 450 Executor/Executrix, 138, 518 duties of, 140–142, 521–524 Expected family contribution (EFC), 59 Expense ratio, 431 Experian, 19, 21, 28 Fair Credit and Charge Card Disclosure Act, Fair Credit Billing Act, 10, 13 Fair Credit Reporting Act, 47 Fair Debt Collection Practices Act (FDCPA), 56 False diversification, 450–451 Fannie Mae, 469–470 reverse mortgages, 208 Federal Communications Commission (FCC), 23 Federal Cost of Funds index, 178 Federal Emergency Management Agency (FEMA), 271 Federal Employees’ Retirement System, 360–362 Federal Family Education Loan (FFEL), 59 Federal funds rate, 372 Federal Reserve Bank, 372 Federal Trade Commission (FTC), 36, 47, 56, 69 Federal Work-Study Program, 299–300 Fee-based advisers, 411 FHA (Federal Housing Administration) Home Equity Conversion Mortgage Program, 208 insured reverse mortgage, 207–208 mortgage, 181–182 FICO score, 29–36 bankruptcy and, 33 mortages and, 30, 157, 158, 175–176 taking control of debt, 40, 41, 42, 45 Fidelity, 412, 413, 422, 431 Fidelity 529 Rewards MasterCard, 298 15-year mortgages, 201–202 Financial adviser, 143–144, 409–412 Financial aid, 298–300 Financial intimacy, 85 annulments, 117–118 cohabitation agreements, 90–91 common-law marriages, 93–94 death of a loved one, 133–145 divorce, 118–133 and arbitration, 128–129 and collaborative law, 127 dividing assets in, 121–125 emotions of, 112–117 life after, 132–133 and mediation, 127–128 realities of, 129–132 and retirement benefits, 125–127 joint accounts, 102–104 living together, 88–90 money and emotions, 85–88 and marriage, 99–102 net worth and self-worth, 104–106 prenuptial agreements, 94–99 and debt protection, 98–99 previous marriages, 106–107 same-sex cohabitation, 92–93 separation, 107–112 starting over after death or divorce, 142–145 5/25 mortgage, 179–180 Fixed-rate mortgage, 176 Flex 97 mortgage, 182–183 Flexible spending accounts, 275 I N D E X Flight insurance, 277 Flood insurance, 271–272 Fofunds, 431 Forbearance, 63 Forced share, 101 Foreclosure, 155 Formal discovery, 120 401(k) plan, 309–313, 321, 322 exclusion from bankruptcy, 77 mortgage vs., 199–200 retirement tax credit, 335 withdrawing from, 50–52, 306 403(b) plan, 313–314, 335 Freddie Macs, 469–470 Free Application for Federal Student Aid (FAFSA), 300 Fremont Funds, 421 Front-end-load fund, 437 Full-service broker, 412–414 Fund families, 422 Funds of funds (fofunds), 431 Funeral Rule, 136 Funerals arranging, 134–137 prepaid, 134–135 veteran’s, 136–137 Gains, 408–409 General obligation bond, 469 General power of attorney, 571 General purpose corporate funds, 483 Generation-skipping tax, 555–556 Gifting, 568–571 and divorce, 124 payments to prepaid tuition plans, 289 Uniform Gifts/Transfers to Minors Act, 282–284 583 Ginnie Mae, 469–470 bond fund, 477 Global fund, 423 Gold cards, Good-till-canceled order, 382 Grace periods, 9–10 Grantor-retained annuity trust, 562 Grants, 299 Gross domestic product, 371 Group health insurance, 221 Growth funds, 422–424 Growth stocks, 374 Guaranteed bonds, 472 Guaranteed-renewable policies, 222, 251, 258 Guardianship, 533, 541 Health-care proxy, 572 Health insurance, 218–223 Health Insurance Portability and Accountability Act, 237 Health Maintenance Organizations (HMOs), 220 Hidden assets, 124 High-risk health insurance pools, 224–225 High-yield (“junk”) bonds, 473–474 Holidays and debt, Home computers and identity theft, 18, 20–21 Home equity loan, 52–54, 198–199 Home health care (HHC), 241, 243 Home Keeper reverse mortgage, 208 Home ownership, 149 buyer’s agents, 161–162 buying vs renting, 149–151 closing, 193–197 comparable market analysis, 162 contract of sale, 166–167 co-op/condominium, 160–161 and divorce, 122–124 584 I N D E X Home ownership (cont.) escrow accounts, 188–189 first steps toward buying, 151–162 investment, real estate as, 212 location, 158–160 making a bid, 164–166 mortgages, 152–155, 167–188 paying off, 204–206 reverse, 206–210, 211 playing house, 153–154 points, 187–188 refinancing, 198–204 renting to the seller, 197–198 taking title, 190–193 title insurance, 189–190 when to buy or sell, 164 Homeowner’s insurance, 154–155, 263–267 Hope scholarship, 284, 289, 297 Hospice care, 228 House inspection, 166–167 Identity theft (fraud), 17–23 Immediate annuity, 508–509 Implied agreement, 91 Incapacitated child, 112 Income annuity, 508–509 Income fund, 424–425 Income stocks, 374 Indemnity insurance, 221 Independent 529 Plan, 290–292 Independent agent, 217 Independent appraisal fee, 197 Index annuity, 505–507 Indexed mutual fund, 427 Index of leading economic indicators, 371 Individual checking account, 103 Individual health insurance, 222 Individual title, 190 Industry leaders, 387–388 Inflation, 364 Inflation option provision, 242–243 Informal administration, 544 Informal discovery, 120 Inheritance, 102 Inheritance taxes, 554 Initial public offerings (IPOs), 376–377 In pro per, 129–130 Insolvency period, 78 Institutional investors, 397 Insurance, 215 basics of, 215–218 car, 260–263 COBRA, 72, 223–225 disability, 256–259 private commercial, 258–259 earthquake, 272–275 flood, 271–272 guidelines for, 216 health, 218–223 homeowner’s, 154–155, 263–267 life, 247–256 long-term care, 228, 235–247 Managed Care Organization (MCO), 230–232 Medicaid, 225–226, 232–235 Medicare, 226–228 Medigap, 228–230 miscellaneous private, 275–277 mortgage protection, 269–270 renter’s, 264, 270–271 umbrella policies, 267–269 Interest compound, 305–308 prepayment of, 197 I N D E X Interest-only mortgages, 183 Interest rates, 370 bond, 459–460 credit card, 9, 11–12 locking in, 168–170 mortgage, 175–176, 207 Intermediate-term bond fund, 479 International bond fund, 478 International Check Services, 19 International fund, 423, 442 Interstate succession, 518–519 Inter vivos trust, 560 Invesco Funds Group, 422 Investing, 369 See also Annuities; Bond funds; Bonds; Mutual funds; Stocks online, 414–416 styles, 87 techniques, 399–405 Investment, real estate as, 212 IRA, 316–335 beneficiary withdrawals, 338–341 Education, 286–287 exclusion from bankruptcy, 77 phase-out range, 320–322 rollovers, 331–332 Roth, 156, 286–287, 323–330 SEP-IRA, 332–333, 334–335 SIMPLE, 334–335 traditional, 316–318, 324–325 converting to Roth, 326–329 IRS debt, 70–71 IRS Taxpayer Advocates Office, 23 I shares, 427–431 Job loss, debt from, 71–73 Jobs and Growth Tax Relief Reconciliation Act of 2003, 150, 210 585 Joint accounts, 102–104 Joint and survivor option, 356–358 Joint tenancy with right of survivorship (JTWROS), 138, 141, 190–193, 562–565 Jumbo loan, 171–172 Keogh plan, 333–334 Laddering, 461 Large-cap blend fund, 424 growth fund, 424 mutual fund, 424, 442 stock, 375 value fund, 424 Late fees, 10 Lawyer, finding, 546–548 Leasing cars, 66–67 Lehman Brothers Aggregate Bond Index, 441 Lender-insured reverse mortgage, 207–208 Lender’s points, 187–188, 197 Letter of intent (LOI), 439 Letters testamentary, 141, 521 Level term policy, 251 Liability coverage, 270–271 Life-estate trust, 558 Life insurance, 137, 144–145, 247–256, 358–360, 554–555 trust, 561–562 Life support, 572–573 Lifetime Learning Credit, 284–285, 289, 297 LIFO method, 512 Limit order, 381 Line of credit, 202–204, 209 Liquidity, 373 Living death benefit, 254–255 586 I N D E X Living together, 88–90 Living trust See Revocable living trust London Interbank Offer Rate (LIBOR), 178 Long-term bond fund, 479 care insurance, 235–247 Loss of use protection, 267 Managed Care Organization (MCO), 219–223, 230–232 Managed mutual fund, 426–427 Margin, 178, 383 call, 383 Market order, 380–381 Marriage common-law, 93–94 and money, 99–102 previous, dealing with, 106–107 and Social Security, 101, 102 Med/arb, 129 Mediation, 127–128 Medicaid, 206, 232–235, 544, 559 Medical debt, 68–70 Medical payments coverage, 261–262 Medical power of attorney, 572 Medical savings accounts, 222 Medicare coverage, 226–228 Part A, 226 Part B, 226–227 Medigap insurance, 228–230 Merrill Lynch, 413, 426 Mid-cap mutual fund, 424, 441–442 stocks, 375 Minimum monthly balance, 42–43 Minimum payments, 10 Miscellaneous private insurance, 275–277 Modified adjusted gross income (MAGI), 324 Modified-occupation disability policy, 259 Money attitude toward, 87–88 and emotions, 85–88 and marriage, 99–102 Money-market funds, 43–44, 483–486 Money-purchase pension plan, 316, 333 Moody’s, 459 Morgan Stanley Capital International Europe, Australia, Far East Index, 386 Mortality fee, 500 Mortgage-backed security fund, 477 Mortgage bonds, 472 Mortgage protection insurance, 269–270 Mortgages adjustable-rate, 177–179 annual percentage rate (APR), 170–171 assumable mortages, 183 balloon loan, 183 brokers, 167–168 conforming and nonperforming loans, 171–172 FHA, 181–182 FICO score and, 30, 157, 158, 175–176 15-year mortgages, 201–202 finding on Internet, 168 five twenty-five or seven twenty-three, 179–180 fixed-rate, 176 Flex 97 mortgage, 182–183 how much payment can you afford?, 152–155 interest-only mortgages, 183 length of, 184–186 locking in a rate, 168–170 I N D E X paying off, 204–206 points, 187–188, 197, 200 portable mortages, 180–181 private mortgage insurance (PMI), 172–174 reversed, 206–210 30-year mortgages, 201–202 veteran’s, 183–184 Moving average, 433 Municipal bond, 468–469 fund, 476–477 Mutual funds balanced funds, 425, 441 basics of, 419–422 buying, 435–436 changing conditions, 444–446 exchange-traded funds/I shares, 427–431, 431, 451 false diversification, 450–451 funds of funds, 430 growth funds, 422–424 income funds, 424–425 managed vs indexed funds, 426–427 open- and closed-end funds, 425–426 rating, 434–435 risk evaluation, 434, 442–443 sales charges, 436–440 selecting, 431–434 selling, 442–444 systematic withdrawal, 449–450 taxation, 446–449 when to buy and when to sell, 440–442 NASDAQ, 378, 379, 386 National Aeronautics and Space Administration (NASA), 21 National Association of Security Dealers (NASD), 384 587 National Consumer Law Center, 45 National Do Not Call registry, 22 National Flood Insurance Program, 271 National Foundation for Credit Counseling (NFCC), 44, 46, 47 Net asset value (NAV), 425, 433 Net worth, 104–106 Neuberger & Berman, 421 New York Stock Exchange, 377–378, 380 No-fault auto insurance, 261 No-load fund, 437, 440 Nonconforming loan, 171–172 Nonconvertible mortgage, 179–180 Nonforfeiture benefits, 243 Nonqualified retirement plan, 304–305 Non-tax-qualified policy (NTQ), 237–238 Nursing homes, 232–235 Odd-lot order, 382 Offer in compromise, 70 Off-premise protection, 266–267 One-time payoff, 131 Online investing, 414–416 Open-end fund, 425–426 Optional cash payment (OCP), 402 Oral agreement, 91 Original equipment manufacturer (OEM), 375 Outlook of Shiva, The (Somananda), 113 Owner’s-occupation policy, 258–259 Paine Webber, 413 Parent locator service, 68 Payable on death (POD), 540 Payday loan companies, 48 Pell Grant, 299 Pension Benefit Guaranty Corporation, 348 588 I N D E X Pension plans, 347–352 joint and survivor benefits, 356–358 monthly vs lump-sum payment, 353–356 summary plan description, 347–348 P/E ratio, 389–391 Perkins loan, 59 Personal representative, 138 Petition for divorce, 119 Pickup tax, 554 Piggyback loan, 174 PITI (principal, interest, taxes, insurance), 181–182 Platinum cards, Playing house, 153–154 PLUS loan, 59 Point-of-service (POS) plans, 220–221 Points, 187–188, 197, 200 Portfolio manager, 419–420, 444 Power of attorney, 571–576 Preapproved cards, loan, 162–163 Preclosing inspection, 193–196 Preferred Provider Organizations (PPOs), 220 Preferred stock, 376 Premium, 216 Prenuptial agreements, 94–99 and debt protection, 98–99 Prepaid tuition plans, 288–292 Preparation fee, 197 Prepayment of interest, 197 Prequalification, 162–163 Previous marriages, 106–107 Price-earnings to growth, 391 Primary market, 377 Prime rate, 372 Principal, 540 Private colleges, prepaid tuition plans for, 290–292 Private commercial disability insurance, 258–259 Private mortgage insurance (PMI), 53, 154, 172–174, 269 Probate, 141, 518, 532–536 affidavit, 535, 544 alternatives to, 535–536 costs of, 533–535 summary, 535 Processing fee, 197 Producer price index (PPI), 371–372 Profit-sharing plan, 315–316, 333 Property acquired before marriage, 101–102 community vs separate, 121–122 defined, 96 dividing at divorce, 121–125 exempt, 77 rental, and marriage, 102 taxes, 155 Prospectus, 436 QDOT trust, 542 QPRT (qualified personal residence trust), 560 QTIP (qualified terminable interest property), 560 Qualified retirement plan, 304 Quasi-community property, 124 Rated policy, 276 Reaffirmation, 77 Real estate agent, 158–159 Realized gains, 408 Redemption fee, 439–440 Reestablishing credit, 48–50 I N D E X Refinancing, 198–204 Registered investment adviser (RIA), 411–412 Rental car liability insurance, 277 Rental property, 102 Renter’s insurance, 264, 270–271 Renting, 149–151 to seller of home, 197–198 Replacement cost policy, 263–264 Required minimum distribution (RDM), 338 Residual estate, 524 Restoration of benefits, 245 Retirement plans annuity within, 492–493 beneficiary withdrawals, 338–341 benefits and divorce, 125–127 borrowing from to repay debt, 50–54 civil service retirement benefits, 360–362 early retirement, 352–356 estate and income taxes, 552–555 401(k)s, 309–313, 321, 322 403(b)s, 313–314, 335 IRA, 316–335 rollovers, 331–332 joint and survivor benefits, 356–358 vs life insurance, 358–360 list of most popular, 303–304 mandatory withdrawal from an account, 337–338 monthly pension vs lump-sum payment, 353–356 nonqualified, 304–305 not-so-well-known, 314–316 pension plans, 347–352 qualified, 304 reasons for having, 303 Roth IRAs, 323–330 conversions, 326–329 recharacterization and reconverting, 329–330 for self-employed, 332–335 Social Security, 362–366 stock options and stock purchase plans, 341–347 taxation of withdrawals, 305, 336–337 tax credit, 335 ten-year averaging, 336–337 and trusts, 549–550 Revenue, 389 bond, 468–469 Reverse mortgages, 206–210 Revocable living trust, 536–549 See also Testamentary trust setting up, 544–549 Right of accumulation, 440 Risk in bonds, 460–461 in mutual funds, 434–435, 442–443 in stocks, 373–374, 383–384 Rollover provision, 123 Roth IRA, 323–330 for college education, 286–287 conversions, 326–329 recharacterization and reconverting, 329–330 retirement tax credit, 335 withdrawing from, 156 Round-lot order, 382 Russell 2000 Index, 386, 442 Russell 3000 Index, 386 Safe-deposit box, 141, 528 Safety net, 225 589 590 I N D E X Salomon Smith Barney, 413 Same-sex cohabitation, 92–93 Savings Bond Earnings Report, 465 Savings bonds, 463–468 Scholarship, 299 School districts, 160 Schumer, Charles, Schumer Box, Schwab 1000 Index, 386 Scudder Investments, 431 SEC, 22 Secondary market, 377 Second-to-die life insurance, 255 Section 529 savings plans, 293–298 Sector fund, 424 Secured bond, 471–472 Securities Investor Protection Corporation (SIPC), 384 Self-employed retirement plans, 332–335 Self-worth, 104–106 Selling short, 405 Separate legal representation, 95–96 Separation, 107–112 See also Divorce informal, 107 legal, 107 SEP-IRA, 332–333, 334–335, 335 Series EE/E bond, 463–466, 468 Series HH/H bonds, 466–467 Series I bonds, 467–468 7/23 mortgage, 179–180 Severance packages, 72 Short-term bond fund, 479 SIMPLE IRA, 334–335 Single-premium deferred annuity, 496–498 immediate annuity (SPIA), 508–509 Sinking fund, 471 Small-cap mutual fund, 424, 442 stock, 375 Smart Money, 413 Socially responsible fund, 424 Social Security dependents benefits, 125–126 disability benefit, 257–258 and marriage, 101, 102 retirement benefits, 362–366 reverse mortgages and, 209 and separation, 111–112 Social Security Administration, 23 Social Security office, 140 Special needs trust, 559 Speculative stocks, 375 Split annuity, 507–508 Springing power of attorney, 576 Stafford loan, 59–60 Standard & Poor’s, 459 500 Stock Index, 385–386, 442, 505 Mid-Cap 400 Index, 386, 442 SmallCap 600 Index, 386 Standard car insurance, 260 Standard federal deduction, 150 Starting over, 142–145 Statutes of limitations, 57–58 Stay-at-home parent, 105–106 Stock bonus plan, 316 Stock certificates, 379–380 Stock market indexes, 384–387 Stock options blackout period, 342 cashless transactions, 343–344 exercise time, 342–343 incentive, 344–345 I N D E X non-qualified, 341–343 vested vs nonvested, 346–347 Stock purchase plan, 346 Stocks all or nothing investors, 379 American Depository Receipts, 376 basics of, 373–374 blue-chip, 375–376 and brokerage firms, 382–384, 412–416 buying on margin, 383 or selling, 378–382 common vs preferred, 376 convertible preferred, 376 cyclical, 375 and financial advisers, 409–412 gains in, 408–409 growth, 374 income, 473 industry leaders, 387–388 initial public offerings (IPOs), 376–377 investing techniques, 399–405 online investing, 414–416 pyramiding, 407 securities protection insurance, 384 small-cap, mid-cap, large-cap, 375 speculative, 375 stock market indexes, 384–387 and stock markets, 377–378 valuation of, 388–399 value, 375 when to sell, 405–408 Stock split, 406 Stock warrant, 345–346 Stop loss order, 381–382 Stop-loss provision, 222 Stop sell limit order, 382 591 Student loans, 58–66 and bankruptcy, 66 consolidation, 61–62 defaulting on, 63–64 postponing or canceling, 62 Subordinated debentures, 472 Subsidized Stafford loan, 59 Substantially Equal Periodic Payments (SEPP), 318–319 Successor trustee, 539 Suicide, 254 Supplemental Educational Opportunity Grant (SEOG), 299 Supplemental Security Income (SSI), 559 Surrender charge, 493 Survivor, duties and responsibilities, 139–140 Suze Orman Show, The (CNBC), 369 Systematic withdrawal, 449–450 Target-benefit plan, 315 Taxation annuities, 511–513 estates, 552–555 mutual funds, 446–449 retirement plans, 305, 336–337 Tax-free money-market funds, 483–484 Tax-qualified policy (TQ), 237–238 Tax-sheltered annuity (TSA), 314, 509 Technical analysis, 398–399 TeleCheck, 19 Temporary order of support, 120 Tenancy by the entirety, 190–193, 565 Tenants-in-common (TIC), 192 Ten-year averaging, 336–337 Term life insurance, 250–251 Testamentary trust, 559 592 I N D E X Testator, 518 30-year mortgages, 201–202 TIAA-CREF Managed Allocation TIMAX, 431 Title insurance, 189–190, 197 Title search, 197 Title to a home community property, 190–193 individual, 190 joint tenancy with right of survivorship (JTWROS), 190–193 tenancy by the entirety, 190–193 tenants-in-common (TIC), 192 Totten trust, 560 Traditional balanced fund, 425 Transparent trust, 549 Trans Union Corporation, 19, 21, 28 Treasury bill, 462 index, 178–179 Treasury bonds, 461–463, 468 Treasury Constant Maturity Securities, 178–179 Treasury note, 463 T Rowe Price, 421, 422, 431 Trustee, 139, 538–540 Trustor, 538 Trusts, 140 See also Wills A-B, 556–559 bypass, 558 charitable remainder, 561 and debts, 549 finding a good lawyer, 546–548 funding, 548–549 grantor-retained annuity, 562 and income tax, 551–552 inter vivos, 560 life insurance, 561–562 QPRT, 560 QTIP marital deductions, 560 and relationships, 550–551 and retirement accounts, 549–550 revocable living, 536–544 setting up, 544–549 special needs, 559 terminology, 538–540 testamentary, 559 totten, 560 who needs?, 540–544 Truth in Lending Act, 14–15, 48 Tuition average cost of, 281 insurance, 276 Turnover rate, 432 12(b)1 fees, 437–439 20-month moving average, 406 Underinsured motorists coverage, 261–262 Uniform Distribution Table, 337 Uniform Gifts to Minors Act/Uniform Transfers to Minors Act, 282–284, 297 Uniform Prenuptial Agreement Act (UPAA), 97 Uninsured motorists coverage, 261–262 reverse mortgage, 208 U.S government funds, 483 U.S mortgage-backed bonds, 469–470 U.S Treasury bond fund, 476 U.S Treasury funds, 483 Universal life insurance, 252 Unrealized gains, 408 I N D E X Unsubsidized Stafford loan, 59–60 Upfront single premium mortgage insurance, 173 Upromise, 298 Valuation, of a stock, 388–399 Value fund, 424 stocks, 375 Vanguard Balanced Index Fund, 441 500 Index Fund, 441 Group, 421, 422, 431 Small-Cap Index Fund, 442 Variable annuity, 498–505 life insurance, 252 Vesting rights, 312–314 Veteran’s burial, 136–137 mortgage loans, 183–184 Viatical settlement, 255 Volatility, 395–396 Volume, of shares traded, 391–392, 406 Wage garnishment, 65 Waiver of premium, 244–245 Wedding insurance, 276 Whole life insurance, 250–251, 253–254 Wills, 140–141, 517, 518 See also Trusts changing, 528–529 contests of, 529–530 finding a good lawyer, 546–548 holographic, 527 importance of, 518–520 joint, 520 key players, 521–527 making, 527–528 mutual, 520 pour-over or backup, 538 and probate, 532–536 alternatives to, 535–536 costs of, 533–535 and relationships, 531–532 terminology, 517–518 videotaped, 520 where to keep, 528 Wilshire 4500 Index, 386 5000 Index, 386, 441 Worker’s compensation, 256–257 Written agreement, 91 Yield, 393–395, 433–434 to maturity, 457–458 Zero coupon bonds, 474–475 Zoning laws, 160 593 S U Z E O R M A N is the author of four consecutive New York Times bestsellers, The Laws of Money, The Lessons of Life; The Road to Wealth; The Courage to Be Rich; and The Steps to Financial Freedom; and the national bestsellers, Suze Orman Financial Guidebook and You’ve Earned It, Don’t Lose It The personal finance editor for CNBC, Suze hosts her own national CNBC-TV show, which airs every weekend She is a contributing editor to O: The Oprah Magazine She appears regularly on QVC as host of her own “Suze Orman Financial Freedom Hour.” Suze has written, co-produced, and hosted four PBS specials based on her bestselling books, which are among the network’s most successful fund-raisers ever A Certified Financial Planner® professional, Suze directed the Suze Orman Financial Group from 1987 to 1997, and before that was vice president of investments for Prudential Bache Securities and an account executive at Merrill Lynch A sought-after speaker who has lectured widely throughout the United States and South Africa helping people change the way they think about money, she has been featured in Fortune, Newsweek, People, The New Yorker, Modern Maturity, The New Republic, USA Today, the New York Times, and the Chicago Tribune A former financial contributor on NBC News’ Today, Suze has also appeared on Dateline, CNN, MSNBC, Good Morning America, The View, and numerous times on Larry King Live and The Oprah Winfrey Show ... your head and your heart in agreement, you can take the necessary steps today so you arrive at your tomorrows happily and with all the wealth that is meant to be yours The Road to Wealth is a book... monthly, annual, or per-use charge for the card, and whether there’s any additional penalty for using the card at another institution’s ATM Another drawback: With a debit card, you can’t stop payment... a gold, platinum, or black card the only way to go? Actually, if you are a big spender and you pay your bills on time, you can maintain a balance on your regular credit card that approaches and