Will You Lose Your Treasuries if the U.S. Defaults on Its Debt? Suze Orman Has an Answer

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  • Suze Orman thinks the U.S. won't default on its debt.
  • No investment is 100% safe from a default, not even certificates of deposit.
  • Stay diversified and keep up with sound financial habits.

Stick to worrying about what you can control.

The U.S. has debt. A lot of debt. About $31 trillion dollars worth, which is $94,000 per U.S. taxpayer. Some members of Congress have threatened to prevent the government from lifting the debt ceiling, leaving the nation to default on its dollars.

Right now, the U.S. federal budget deficit sits at 1.4 trillion. American voters have concerns, and rightly so. A big question mark is what happens to personal savings and investments if the country defaults on debt.

Suze Orman, financial guru, recently addressed whether you will lose your Treasuries if the U.S. defaults on its debt on her Women and Money podcast.

This is what Suze Orman thinks of a U.S. default

Suze Orman said, "The short answer is there is no place to hide. If the U.S. government defaults, it would be cataclysmic. Which is why I have a high level of confidence… it just won't happen."

In other words, Orman thinks the consequences are too severe for U.S. congresspeople to follow through on threats to let the U.S. default on its debt. Everyone from foreign governments (which hold trillions in U.S. Treasuries) to insurers would be affected.

Suze Orman spoke to Sheila Blair, former chair of the Federal Deposit Insurance Corporation (FDIC), who shares Orman's opinion. They believe that despite the drama in Congress right now, the chance of the U.S. government defaulting on its debt is tiny.

While no one knows precisely what a default would entail, consumers can rest assured that their Treasuries and certificates of deposit are reasonably safe.

No money is 100% safe from a default

Orman acknowledges that no money is 100% safe from a U.S. default: "A large portion of the 24 trillion dollars is held by foreign countries… the consequences would be cataclysmic." The consequences of a default would ripple beyond North America.

At the very least, everyone in Congress is strongly motivated to raise the debt ceiling or otherwise avoid default. No one wants to be responsible for throwing a country into crisis.

Don't let anyone tell you that an investment is 100% safe -- no investment is. Systems change. But history suggests U.S. Treasuries are one of the safest places to invest your money.

Prevent and prepare for bad weather

Sticking to your financial plan is the best way to prepare for a default. Long-term savers should consider voting for rational candidates and diversifying their investments.

Vote for rational candidates

Voting is top of the list of things U.S. citizens can do to prevent a U.S. default. Vote for rational candidates who understand the terrible consequences a U.S. default would have. It's a little late for that this year, but it's something to remember during the upcoming election cycle.

Diversify your investments

In the meantime, stay diversified. Diversified investments steady your portfolio. Diversification creates a foundation that better weathers unexpected financial disasters, including a potentially earth-shaking U.S. default.

It's a good idea to save an emergency fund. Consider stashing six months of earnings in a high-yield savings account to prepare for the unexpected. You can lean on your emergency savings to avoid drawing on long-term savings during a market crash or if you lose your job.

Another way to diversify is to invest in property. Even if the market value of a property drops, a home can be lived in or rented out. Unused property can be listed on Airbnb or similar short-term rental websites to earn rental income.

Keep up with sound financial habits

Worries abound, but one of the best things you can do is maintain good financial habits. Do you have a long-term plan? Don't let the threat of a U.S. default dissuade you. There's no use in worrying about what you can't control. Continue saving money in the manner that works best for you.

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