Q: Since filing for bankruptcy in 2007, I've opened three credit card accounts in hopes of reestablishing my credit. I always send in more than the minimum payment for each one before the due date, but my credit score recently dropped. What am I doing wrong?

Suze: I bet your score went down because your balances have gone up. One key factor in calculating your credit score is the total of all your outstanding balances relative to the amount of your available credit. The higher the ratio, the lower the score. You should really be more concerned about sticking to a budget than reestablishing your credit. It's time to stop spending more than you can afford. My free expense tracker at SuzeOrman.com can help you identify where you can save. Pay off your balances, and your score will rise. If you can learn to keep your spending in check, you can use a credit card a few times a month to rebuild your credit—but you must always pay your bill in full and on time.

Q: I'm in my early 30s, and I've been focused on repaying $65,000 in student loans rather than saving for retirement. How can I switch gears if I still have outstanding debt?

A: I love that you're meeting your loan obligations, but you need to invest in your future, too. From now on, make only the minimum monthly payments required on your student loans so you'll have cash to tackle other goals. You're young, so time is on your side. Money you put into retirement savings today will have at least 30 years to compound in value. If your employer offers a 401(k) plan with a matching contribution, set aside enough of your salary to get the maximum match. Otherwise, open a Roth IRA. You're under 50, so you can contribute up to $5,500 (about $458 a month) this year.

I also want you to set up automatic monthly deposits into an emergency savings account. You'll have to perform a balancing act, but I know a responsible person like you can make headway on three goals: reducing debt, saving for the future, and building a fund that can cover eight months of living expenses.

Q: I don't have access to a 401(k). At age 50, I have $80,000 in savings that I plan to use during retirement. Is there a low-risk strategy that will help me grow my money substantially without sacrificing what I've put away so far?

Suze: In a word? No. The safest investment vehicles out there are federally insured savings, checking, and money market accounts and CDs at banks and credit unions, but right now they generally pay around 1 percent or less.

You're clearly focused on investment risk, but there are two other critical issues you should consider. The first is longevity risk. Unless you have a serious health condition, you need to prepare to live until your late 80s. That means there should be a part of your retirement fund that you don't touch for another 25 years or more. The other risk is inflation, which is an increase in prices over time. At the moment, inflation is very low—under 2 percent annually—but it tends to average around 3 percent in the long term. If you keep all your money in a "safe" investment vehicle that yields no more than 1 percent, you're not going to earn enough to keep pace.

Historically, stocks have had the highest inflation-beating gains. Don't worry—I'm not suggesting you move all your money into the market. But if you want your savings to grow, you should consider investing a portion. (As a guideline, subtract your age from 110 and keep that percentage in stocks.) A broad, low-cost portfolio such as the Vanguard Total Stock Market Index Fund will enable you to invest in a variety of U.S. stocks. Invest via a Roth IRA, and your gains will be tax-free during retirement.

Suze Orman's latest book is The Money Class: How to Stand in Your Truth and Create the Future You Deserve. To ask Suze a question, go to Oprah.com/omagazine_talk.


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