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Suze Orman's 5-Step FinancialAction PlanLearn how to secure your money today and establish a strong financial future.By Suze Orman

Photo: Edwin Datoc

Step 1: Pay Off Your Credit Card DebtStep 1: Pay Off Your Credit Card Debt

Suze says the number one thing people lie about is now much credit card debt they

have. But what you don't want to know can hurt you, so it's important to dig yourself

out of debt for good. Just follow these three steps.

1. Line up your credit cards from the highest interest rates to the lowest.

2. Pay the minimum on every single card to stay current.

3. When the card with the highest interest rate is paid off, put the the amount you had

been paying on it toward the next card in line. Keep repeating this process until each

credit card has been paid off.

Step 2: Raise Your FICO ScoreStep 2: Raise Your FICO Score

In today's economy, your financial character is being determined by one thing—your

FICO score. Even landlords and employers are using it.

"FICO happens to stand for Fair Isaac Corporation, the company that created the credit

score years ago. FICO scores go from 300 to 850," Suze says. "The lower your FICO

score, the higher your interest rate. The higher your FICO score, the lower your interest

rate."

Download this chart to see how your FICO score is determined.

(http://static.oprah.com/pdf/lybl_money_fico.pdf)

Suze says there are three ways you can start improving your FICO score today:

1. If possible, pay more than the minimum every month on your credit cards.1. If possible, pay more than the minimum every month on your credit cards.

"If you're charging on your credit cards and all you're doing is paying the minimum,

the credit cards are afraid now that you're not really being very smart with your

money," Suze says. "And since you can't, it's not the FICO score that they're looking at to

choose to close down your credit cards. It's the fact that you're paying just the

minimum, and those are the cards that they're closing down."

2. Pay your bills on time.2. Pay your bills on time. "Paying your credit card bills on time essentially counts for

35 percent of your FICO score," Suze says.

3. Never go over your credit limit.3. Never go over your credit limit. "That's when they start to raise your interest

rates, close you down," Suze says.

Another thing to keep in mind: Suze says to never close down a credit card. "It will hurt

your credit score," Suze says.

Step 3: Create a Spending Action PlanStep 3: Create a Spending Action Plan

Is your spending impulsive? How much do you buy each month that you don't really

need? Reign in your spending in three steps.

1. Sit down with your expenses and separate wantswants and needsneeds.

2. Circle all expenses that are wantswants.

3. If you have debt or no savings, eliminate the wantswants.

Step 4: Create a Savings Action PlanStep 4: Create a Savings Action Plan

Once your debt is paid down and your spending is under control, it's time to start

saving. Here's how:

1. Save enough to cover eight months of expenses. 1. Save enough to cover eight months of expenses.

2. Decide how much you can save each month, then save an additional 202. Decide how much you can save each month, then save an additional 20

percent.percent. The key to saving, Suze says, is challenging yourself. "Decide that you can

save so much every single month. Whatever that figure is that you decide you can save,

I want you to stretch it. I want you to add 20 percent to it," she says. "As much as you

think you can do, I'm here to tell you, you can do more. You are all more than you really

know you are. And if you just stretched your abilities, you would grow into your

abilities."

3. Search for the savings account with the highest interest rate.3. Search for the savings account with the highest interest rate. When you start

saving money, Suze says to be a good shopper. Look for an FDIC-insured savings

account with the highest earning interest rates you can find. "Little by little, if you take

little actions, your plans will become a reality," she says.

Step 5: Create a Retirement Action PlanStep 5: Create a Retirement Action Plan

It's the day most people dream about: retirement. Here are three ways to make sure you

have enough:

1. Don't panic when the market goes down.1. Don't panic when the market goes down. Suze says the most important thing

you can do in a bad economy is to stay calm—especially if you have at least 10 years

until retirement. "There's a big difference between 29 and being 56," Suze says.

2. Keep investing monthly in your 401(k) or IRA.2. Keep investing monthly in your 401(k) or IRA. "Guess what? Your money buys

more shares. The more shares you have, the more money you're going to make by the

time you are your mother's age," she says.

3. If you need the money within five years, take it out of stock market.3. If you need the money within five years, take it out of stock market. Another

important idea Suze emphasizes is that any money you will need to spend—on a house,

on college tuition—within the next five years must be invested conservatively. "That is

not money that belongs in the stock market," she says. "It never has. It never will. The

money that's in the stock market is money that you don't need. ... Because [to be in the

(http://www.oprah.com/showinfo/Best-Life-Week-Your-Money-Plan-2009_1)

FROM: BEST LIFE WEEK: YOUR MONEY PLAN 2009(HTTP://WWW.OPRAH.COM/SHOWINFO/BEST-LIFE-WEEK-YOUR-MONEY-PLAN-2009_1)PUBLISHED ON JANUARY 15, 2009

stock market] you need time on your side so that when something like this has happens

and the market goes all the way down, it [has] time to recover."

Published 01/15/2009

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