Money Interventions

This past week Oprah had Suze Orman on the show and with that the cases of two families and how much they were drowning in debt. You can read the full stories right here, but here’s the short of it:
Family one:
SAHM of 6, husband brings in $5-6K a month
Debt Tally: $135K credit card debt, $658K first and second mortgage
Spending behaviour: Wife spends about $300-400 a month at coffee shop, $60 a week on tanning and manicures, $1500-2000K a year on hair extensions, $1700 a month on their three cars. Even though she loves shopping, her kids closets are empty because she loves NEW clothes. I bet her neighbors love her garage sales!

Family two:
Dual income couple, expecting their first. Between the two of them making about $146K but broke thanks to: $230K in student loans, $60K in credit cards. Detail of mortgage is not given but payment is $1200 a month plus they pay $1300 a month on car payments and he has a nice collection of 900 DVDs plus her purse and shoe collection.

So, by now you are wondering how do they afford it all right? : For the first couple a negative amortizing loan is part of it plus the credit cards. And I am assuming the second couple used a lot of those student loans to subsidize their lifestyle.

Suze had reasonable alternatives for both couples to work through. The changes were more drastic for the first family of course: move, get a job for the wife. For the second family, sell some of your possessions, save emergency fund. Pay student loan debt down.
But my question here is, when you are used to this type of life, how likely is it that you will make such a drastic change overnight? I honestly think that’s part of the reason a lot of people give up on becoming financially responsible. I am not saying that they won’t make changes, they have to. They can’t afford that lifestyle forever. But will they be able to make all of the changes needed? I doubt it.

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