8/16/06

Oprah's Debt Diet

"I do not know much about being a millionaire- but I bet I'd be darling at it." Dorothy Parker, writer.

This past spring, Oprah presented a series of five shows over 10 weeks on controlling your money through a "debt diet". I watched it then and then I watched the repeated series all in one week recently.


I took notes on the discussions so I am sharing with you what they covered and then some additional reference links for you if you need them.

A few facts mentioned:
70% of all people live from paycheck to paycheck.
Base your spending on your net pay, what you actually bring home rather than your gross pay salary.
Many people don't even know what they are spending money on.
Lots of people are just sleepwalking through life.
The letter "K" after a dollar amount stands for "thousands". EX: $50K = $50,000.00.

Tips on Personal Finance, getting your house in order from the guests: Jean Chatzky, David Bach, Glinda Bridgforth, all authors of personal finance books.

1. How much do you owe? Add it all up, mortgage, car payments, credit cards, outstanding bills.

2. Track all your spending, write it down, add it up every day then every week.

3. Learn the credit card game. Check your interest rates. Double the amount of the minimium payment (decreases interest over time).
Department store credit cards are not negotiable with rates as the major issue cards are. If you owe a lot, have a major credit card, you can call and speak to the supervisor to reduce your current interest rate.
More information at Oprah's site (link below).

4. Stop spending. Don't go near your favorite store or shops. Stay away, far away. Find something else to do that does not require you to spend money like reading finance books you take out at the library.

5. Have a monthly spending plan.
Based on 50K average household income after taxes, this was the breakdown of where your money should go.
Housing (includes mortagage/rent, insurance, taxes, repairs, utilities all totalled): 35% = $1200. (remember based on the average household income of $50K)
Other (includes, life choices, clothing, vacations, eating out, groceries, medical): 25% = $800.
Car (payment, gas, insurance and repair): 15% = $500.
Debt (all credit cards, loans, notes, whatever you owe): 15% = $500.
Savings for the future: 10% = $300.

6. Prioritize your payments.

7. Improve and raise your credit score by being more responsible about payments and making payments on time.

8. Plan out your spending and savings. Write it down and review it frequently.

Mentioned also were the following figures:
If you were to invest the following amounts of money every year for 30 years and earn a compounded interest of 8%.
$,3000. over 30 years at 8% would equal $375,000.
$4,000. over 30 years at 8% would equal $500,000.
$12,000. over 30 years at 8% would equal $1,500,000.

On ABC Nightly News the same week Oprah had Debt Diet re-runs, they mentioned that those who have retirement savings have only $60K to retire on.
If you were to retire at 65 and live another 20 years, you could spend only $8.00 a day on that amount in today's dollars which do not include inflation.

Here are some other resources I have put together:

At your library you can read personal finance magazines such as
Kiplinger's, Money, Smart Money for consumer money issues.

The local Sunday paper business section usually has some consumer articles.

Oprah's Money Page -- with useful calculators.

David Bach -- Automatic Millionaire articles at Ya-hoo. David is the author of several best selling money books. You can check them out at your library too.

Suze Orman -- Money Matters articles at Ya-hoo"People first, money second, and things last." so says Suze. Catch her shows on Saturday, sometimes Sunday nights on CNBC.

Dave Ramsey -- creator of the Financial Peace University. He has helpful worksheets on his site. He also has a weekly talk radio show with listener call in questions.

Reader's Digest Money Articles

The Motley Fool -- The Motley Fool does have a syndicated weekly column usually in the Sunday newspaper, so check your business section out. Their site is full of all types of financial information in the forms of articles, message boards, and you can even sign up for a free email newsletter.

Young Money -- a magazine for college students on financial matters they face.

Interesting message board:
Savings Advice

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