I got home from work yesterday to find my wife watching Oprah on TV. As I entered the family room, my wife exclaimed, “you’ve gotta see this… it’s right up your alley.”
“Oh yea?” I replied intrigued with my wife’s tone of voice.
“It’s all about money!” she explained knowing the keyword that would peak my interest.
While I’m not Oprah’s biggest fan, I do enjoy some of Oprah’s shows when they involve the topic of money. This episode featured Suze Orman and some regular folk who had some serious money/debt issues.
This particular couple were dressed well, from California, had a large family of 8, nice house and a decent gross income of $100k/year (~$5500/month take home). Sounds great from the outside, but that’s the end of the optimism, here’s what lies beneath the exterior:
- No medical insurance for the themselves OR the kids.
- $135,000 in credit card debt.
- Two mortgages totaling $658,000.
- Large mortgage with payments of $1800/month, but payments will increase to $3300/month in a few months.
- They have 3 cars, 2 of which are leased, the other one they own. The cost is $1700/month.
- Wife spends $300-$400/month at Starbucks (It was the wifes morning routine).
- $60/week on tanning and manicures
- $4k on hair extensions in the past 2 years.
- Constantly shopping.
- The wife would regularly buy brand new clothes for the kids, then have a garage sale a month later to sell the “used” items at pennies to the dollar. (This one blew me away)
As they explained their situation in detail, I literally cringed. How can one family be so irresponsible with money? Don’t they realize that they have kids to take care of? From watching the show, it seemed that the couple had very poor communication between them. As a result, the wife was practicing financial infidelity on a regular basis. The couple also had a bad case of the “keeping up with the Joneses” disease which can be contracted when living in an middle/upper class area.
Looking at the income to expenses, their mortgage and car payments take up the majority of their income. This is not including groceries (6 kids anyone?), car maintenance/gasoline costs, power/utility bills, insurance, clothes for the kids or credit card debt servicing. It’s easy to see how they have racked up $135k in credit card debt with their irrational spending habits.
How will they get out of this mess? You can be sure of one thing, it won’t be easy. Suze Orman explains (or demands) that they need to sell their house NOW before the payments go up or the house will be taken from them (I agree). She also suggested that they move out of California due to higher lifestyle and taxation costs and that both parents get part time jobs as it would provide medical benefits. Even with these drastic measures, it will take this family a long time to dig themselves out of this one, but the bright side is that they will be moving in the right direction.
My world now is about building wealth. Seeing that family on TV got me wondering about how other people view money and how the lack of money knowledge can destroy lives. The world really needs more financial education.
What would you suggest to fix their financial mess?If you would like to read more articles like this, you can sign up for my free newsletter service below (we will not spam you).