Suze Orman: Pay Off Mortgage Early; Never Lease A Car

I am a little hesitant of Suze's mortage advice, but it does somewhat lean towards what Dave Ramsey and John Cummuta teaches. I just wish it was a little more hard hitting, like the other 2. However, her advice on vehicles, absolutely hits the mark.

the following excerpt comes from Larry King Live - April 17, 200

KING: Victoria, British Columbia, hello.

CALLER: Hello, Suze and Larry.

KING: Hi.

CALLER: I think this is a pretty simple question. I'll get into more detail if you need it. Is it more advantageous for me to pay down my mortgage, thereby investing in myself, or to invest in mutual funds?

ORMAN: It will depend on what makes you feel more powerful. For many women out there, they get extreme power knowing that one day sooner than later they're going to own their home outright. I happen to be one of those women who -- I like knowing my house is my house, no matter what happens, nobody can take it from me.

So I don't think it has to be, however, an either/or situation.

Do you know if you have a 30-year mortgage and you just pay one extra mortgage payment a year, you will change a 30-year mortgage to 22 or a 15-year mortgage to 12. You could do that at the same time that you're invested in mutual funds.

Please don't look at your money as if you have -- this is all you can do. You can only do this, you can only do that. Do a little of it all. Diversify and pay down mortgage and diversify into a mutual fund as well. KING: Is the same true, you should buy a home that's about equivalent of if you have -- if you make $100,000 a year, you can buy a $400,000 home? Is that about right?

ORMAN: That's what they say.

KING: What they used to say. Is that still true?

ORMAN: What they say is still true. However, I have to tell you I'm not so sure I believe what they say.

KING: What is a good rule of thumb?

ORMAN: You figure out what you can afford truthfully after taxes. You do the calculations. What you can afford after taxes, after you want to live a nice lifestyle, after your vacations, after whatever it is that you want. How much money do you have left over to put toward real estate? Otherwise we become cash-poor and we start to hate the property that we bought.

KING: Is it ever intelligent to live in an apartment?

ORMAN: It absolutely is. There are some areas right now that are so overextended in real estate prices. So between the property taxes and the mortgage payments -- and most people don't have 20 percent to put down. And when they don't have 20 percent to put down, they're going to pay something called PMI, or private mortgage insurance. When it's all said and done, they totally have no money left to do anything. But yet, they can have a nice apartment that's at one-quarter. That's to live in an apartment. But save the money so that you can do it one day.

KING: If you can pay off your car, should you?

ORMAN: Absolutely. And you should not, in my opinion, in most cases, be leasing a car.

KING: Really?

ORMAN: Yes. It's, you know, it's -- a car. And what is this thing about having a car for three years and getting another one? If you have to finance a car, fine. But after you've financed it, keep it. There's nothing wrong with keeping a car for 10 years, 13 years if you take good care of it. And then take that money and invest it in your future, you'll get a lot further mileage out of that than you will your car.

KING: We'll be back with more moments with Suze Orman, the bestselling author of "The Courage to Be Rich." Don't go away.