Saturday, March 25, 2006
"The debt diet", part 4.....
Oprah continued today with her series on middle-class debt. Three families with net incomes between $75,000 and $100,000 per year and debt of up to $170,000. Today, they got down to the nitty gritty about three major problem areas: credit cards, shopping and eating out.
To me, the shopping and the credit cards are no-brainers. That doesn't mean I'm immune from the pitfalls, it's just that I know what I ought to be doing, even if I don't always succeed at it. But what I thought was common knowledge apparently isn't. For instance, I was horrified to discover that some people are STILL being charged annual fees for credit cards! I haven't done that since I graduated from college. And some people are unaware that they are paying 30 percent interest on their cards???? AND they don't realize they're paying late fees and over the limit fees EVERY MONTH??? Holy crap! One family featured on the show had $43,000 in credit card debt. Between interest, annual fees, late fees and over the limit fees, they were paying $8000 a year in interest!! Do they not read their monthly statements??
These families were no better when it came to shopping. In one family, the daughters went out and bought new clothes every time they ran out of clean laundry. One girl had over 60 t-shirts alone. In another family, the mom went shopping EVERY DAY! As much as I love collecting music, movies and books, no way could I shop every day, even when I was healthy.
I have a bit more sympathy when it comes to the food thing. I hate cooking because it's exhausting, but I love the experience of eating. So even though it's damned difficult to find gluten-free choices, I wouldn't mind eating out once a day. But I saw today just how expensive that can be. One family was spending $700 A WEEK on eating out! Restaurant food EVERY meal, EVERY day! Mom and Dad were sent to the grocery store with a list and a cash limit.....they had not shopped with a cart since their teenage kids were toddlers! They had no clue how much cheaper food was in the grocery store until they were forced to comparison shop. This family ended up with a potential annual savings of $20,000 just from eliminating eating out. Dan and I spend a small fraction of that, but it does make me mindful of where we ought to cut back if things get dire.
I guess I should count myself fortunate that I learned the hard way about credit card debt. My ex husband was in charge of the finances when I was married to him. I didn't find out until we split up that he hadn't volunteered to manage our money out of the goodness of our heart. He did it so he could mask a compulsive spending habit. He intercepted our credit card statments so I wouldn't see what he charged in secret. So it was a total shock when we had to spell out our assets and liabilities in the divorce paperwork and I found out that WE had $32,000 in credit card debt! This was AFTER I had agreed to pay off half our debt even though he was earning twice what I was. So I had $16,000 in debt without the pleasure of having actually spending it myself. Luckily, I was owed $8000 in equity on the house, so I was able to apply that to the debt. But I still had $8000, which was mind-boggling to someone who only had a car to their name. I consolidated, traded up for better rates, whatever I could do to get a handle on this thing. I got myself down to three low-interest cards and payments as high as I could manage.
That's not too far from where I am right now. I have two cards at 9 percent and one at 13 percent (that one is usually paid off). No annual fees. Now, my rates could go up should I pay late, but I have managed to never do that. And my balance is always less than half of the credit limit, so no worries about over the limit fees. My goal is to pay these completely off, but I honestly don't know what will happen financially, so I don't worry about that too much right now. I just make sure I don't go around charging things unnecessarily and adding to the burden. No, I'm not a stellar example of credit card management, but I feel a little more confident that I'm moving in the right direction after seeing Oprah's show today.
One thing that helps me immensely is using Quicken software. I have real numbers to crunch anytime I want. So when Dan needed to know what sort of salary he would need if we moved to South Dakota, I pulled up a report on what we were currently spending, did a little research on things like home prices in South Dakota, and came up with a range. A little careful bookkeeping on my part helps us make realistic financial choices.
I guess the featured families on Oprah's "debt diet" will learn that soon enough.
To me, the shopping and the credit cards are no-brainers. That doesn't mean I'm immune from the pitfalls, it's just that I know what I ought to be doing, even if I don't always succeed at it. But what I thought was common knowledge apparently isn't. For instance, I was horrified to discover that some people are STILL being charged annual fees for credit cards! I haven't done that since I graduated from college. And some people are unaware that they are paying 30 percent interest on their cards???? AND they don't realize they're paying late fees and over the limit fees EVERY MONTH??? Holy crap! One family featured on the show had $43,000 in credit card debt. Between interest, annual fees, late fees and over the limit fees, they were paying $8000 a year in interest!! Do they not read their monthly statements??
These families were no better when it came to shopping. In one family, the daughters went out and bought new clothes every time they ran out of clean laundry. One girl had over 60 t-shirts alone. In another family, the mom went shopping EVERY DAY! As much as I love collecting music, movies and books, no way could I shop every day, even when I was healthy.
I have a bit more sympathy when it comes to the food thing. I hate cooking because it's exhausting, but I love the experience of eating. So even though it's damned difficult to find gluten-free choices, I wouldn't mind eating out once a day. But I saw today just how expensive that can be. One family was spending $700 A WEEK on eating out! Restaurant food EVERY meal, EVERY day! Mom and Dad were sent to the grocery store with a list and a cash limit.....they had not shopped with a cart since their teenage kids were toddlers! They had no clue how much cheaper food was in the grocery store until they were forced to comparison shop. This family ended up with a potential annual savings of $20,000 just from eliminating eating out. Dan and I spend a small fraction of that, but it does make me mindful of where we ought to cut back if things get dire.
I guess I should count myself fortunate that I learned the hard way about credit card debt. My ex husband was in charge of the finances when I was married to him. I didn't find out until we split up that he hadn't volunteered to manage our money out of the goodness of our heart. He did it so he could mask a compulsive spending habit. He intercepted our credit card statments so I wouldn't see what he charged in secret. So it was a total shock when we had to spell out our assets and liabilities in the divorce paperwork and I found out that WE had $32,000 in credit card debt! This was AFTER I had agreed to pay off half our debt even though he was earning twice what I was. So I had $16,000 in debt without the pleasure of having actually spending it myself. Luckily, I was owed $8000 in equity on the house, so I was able to apply that to the debt. But I still had $8000, which was mind-boggling to someone who only had a car to their name. I consolidated, traded up for better rates, whatever I could do to get a handle on this thing. I got myself down to three low-interest cards and payments as high as I could manage.
That's not too far from where I am right now. I have two cards at 9 percent and one at 13 percent (that one is usually paid off). No annual fees. Now, my rates could go up should I pay late, but I have managed to never do that. And my balance is always less than half of the credit limit, so no worries about over the limit fees. My goal is to pay these completely off, but I honestly don't know what will happen financially, so I don't worry about that too much right now. I just make sure I don't go around charging things unnecessarily and adding to the burden. No, I'm not a stellar example of credit card management, but I feel a little more confident that I'm moving in the right direction after seeing Oprah's show today.
One thing that helps me immensely is using Quicken software. I have real numbers to crunch anytime I want. So when Dan needed to know what sort of salary he would need if we moved to South Dakota, I pulled up a report on what we were currently spending, did a little research on things like home prices in South Dakota, and came up with a range. A little careful bookkeeping on my part helps us make realistic financial choices.
I guess the featured families on Oprah's "debt diet" will learn that soon enough.
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