Saturday, February 17, 2007

Oprah's Debt Diet: One Year Later



One of my posts from a year ago discussed a little venture called "Oprah's Debt Diet."

The premise of the show, as you might recall, was to throw three well-known financial gurus (David Bach, Jean Chatzky, and Glinda Bridgforth) at three struggling families (the Egglestons, the Bradleys, and the Widlunds) and see what happens.

If you missed Oprah's follow-up show a few weeks ago, things turned out about like this:

The Egglestons

When the Debt Diet kicked off, the Egglestons were (we're told) a few signatures away from bankruptcy. Their household income was $92k, but their debts totaled around $115k.

With David Bach as their pilot, the Egglestons made some progress: They paid off $26k in debt, boosted their income by $19k, bumped their credit scores by 100 points, and finagled lower rates from their credit-card lenders.

Hooray for them, I guess. It's a start.

The Bradleys

The Bradleys household income was $102k, and their debts $170k, when author Jean Chatzky stepped in to pull the parachute.

With Chatzky's guidance, the Bradleys grew their income by $26k (second jobs and overtime) and, as Dave Ramsey would say, "sold a lot o' stuff." They paid off $50k worth of debt, got their spending under control (as best I can tell), and generally got their financial act together.

The Widlunds

Put simply, the Widlunds tanked it. Hard.

Apparently, our heroes Mark and Marnie fell off the proverbial wagon about six months in. They stopped taking phone calls from Ms. Bridgforth and generally ignored the Debt Diet Principles altogether. And now, one year later, their debt has increased by a mere $37,000.

But hey — they did have a few minute successes. They somehow managed to refi their home (now there's a scrapbook-worthy hurdle for you!). And they boosted their income by $15k. Which, in my opinion, just makes their backsliding all that much worse.

All this, despite the assistance of a recognized financial author's guidance, and whatever other "perks" came by way of the appearance on Oprah.

Congratulations, Widlunds. You were presented with the opportunity of a lifetime, and you bit it. You are, put simply, dismal.

Some Observations

One of the things that bugs me about shows like this is that we can't see the target families' financials in any decent detail. How much of their debt is mortgage debt? Auto loans? Credit cards? These things matter, and dang it, I'm nosy. I want to know. Saying that someone has $115k in debt is one thing ... and saying that someone has $115k in debt, of which $60k is on credit cards, in something else entirely.

Another thing I'd like to be honest about: Getting your financial act together when you're in an Oprah-created spotlight is commendable; I can't argue that. But doing it on your own, when only your dog and your guppies (and maybe your blog readers) are watching — that's what truly earns my respect and admiration. You see this latter progress taking place at places like Mapgirl's Fiscal Challenge, Blogging Away Debt, One Million and Beyond, and Debt Hater.

The families highlighted on shows like Oprah's "Debt Diet," while their financial positions may be appreciably awful, have access to resources that the rest of us can only dream about. I would also argue that spotlighting troubled households with annual incomes in the $80k to $120k area is a convenient way to overlook a much larger faction — those families with hefty debts who lack the sizeable income to "redistribute" to better ends. Television viewers don't want to see failure, so this is a common way that shows like this set themselves up for success. They feature "average" American families who already have certain characteristics (in this case, incomes) that aren't "average" at all.

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— Posted by Michael @ 11:40 AM








7 Comments:
 

good post.

my debt was 16 times my salary last year. however it was ALL mortgage debt. and that too mortgage that my tenants pay, since I actually rent.
It was over 20 times but I sold some properties and now my wife has started working so its a more managable 8 times our income. There is no credit card debt, no car loan, no store credit nothing.

people who do nothing but shop and put money on their credit cards need more excitement or goals in their life!

 

Thanks for the link. I didn't know how accurately I was picking name for my blog when I called it a challenge. Going cash only for two weeks after losing my ATM card was an eye opener and I think I've been much more effective at curbing my spending. (It also helps that the bad weather this winter is curbing my social life and the spending that goes with dining out all the time.)

I, too, was annoyed with the dearth of details the families shared on the TV webclips I saw. But I figure that's largely because I like to scrutinize stuff at a line-item level.

I think I'm learning that first step is to just not use a credit card at all if possible.

 

I agree with your comment about income levels. It's quite frustrating to see people with $100+ income "struggle" with covering expenses and debt. They're spoiled, plain and simple. Show me someone at a $35-40K salary making things happen and I'll sit up and take notice. Now THAT requires sacrifice! Their strict focus on upper-end salary ranges also reinforces a financially-focused society by implying that if you're not in that income range you're outside the norm of society. What about non-profit work, social work, stay-at-home moms and other very valuable professions that do not provide that level of income? The unfortunate sub-text is that while they're trying to teach people that money isn't everything, the way they frame and present it indicates they believe that it is!

 

I agree with you regarding the lack of details. I assume, however, that the debt figures do not include mortgage debt mainly because they live in the Chicago area with it's relatively high real estate values and I don't imagine they're the age or the types to have a lot of equity in their homes. It would have been nice, however, if the show could have laid that out for us!

 

You know something. I just put $100 in the bank this month. (Had to pull $20 back out to gas up the car but it will go back in when the check shows up this week.) You have to understand that I'm making about $1300 a month, husband is getting $171 a week unemployment and we pay $700 on our place. So having money in savings again is huge for me. In my other job, working overtime almost every week, I managed to put away a thousand. Income that year was $50k. I honestly think I can do it again, even making as little as I do now. Of course, I don't have any utility payments any more which helps.

We should shine the light on people of limited means who manage to save money. This woman is my hero. If she can save money on what she earned, so can I.

 

I agree with you Michael, although I have to confess I did find it more entertaining to see how these high income earners were blowing it so badly. I think it adds to the absurdity when they have the means to be financially fit and they are still screwing up royally. I think that was the angle that Oprah was after. After all, it's no secret how hard it is to live on $25-$40K per year in this society.

 

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Thoughts on my personal finances, goals, experiences, motivations, and accomplishments (or lack thereof).

My financial life began turning around when I took responsibility for it.
— Dave Ramsey


100%

Start (2005-12): ~$21,900
Currently: $0
[About Our Debt Paydown]

100%

Savings Goal: $15,000
Currently: ~$15,115
[About Our Liquid Savings Goal]