Recs

5

Oprah's Newest Diet

Move over, cheating spouses, frumpy housewives, and (washed up?) Hollywood stars: Oprah Winfrey's show has dusted off the couch to make room for a more serious subject. It seems the daytime diva wants us to go on a diet -- a debt diet.

What a wonderful and timely idea. I mean, the statistics are damning. According to Oprah's money-management experts, 70% of Americans are living paycheck-to-paycheck, and more homes are being foreclosed today than at any other time in history.

I'll add one more: The national savings rate is in the red, which means, on average, we Americans spend more than we save. To make up the difference, we borrow; and this has been a boon to credit issuers.

Oprah says we need to cut the fat. And I say we all need a healthy dose of Foolishness.

Go lean
So how do the experts recommend we ease the burden? Oprah's team uses a four-step program, and I'm going to add a fifth:

  1. Figure out what you owe. You've got to know what the debt dragon looks like before you can slay it.

  2. Track your spending. You may find a lot of wasted money. Use it to pay off the debt.

  3. Learn to play the credit card game. Negotiate better rates with your existing card company, or switch balances to lower-rate cards to begin saving interest. (Tip: Bankrate (Nasdaq: RATE  ) , the mother of credit information for businesses and consumers alike, offers a great website www.bankrate.com through which you can find balance transfer deals.)

  4. Stop spending. I don't really have to explain this one, do I? You know what you need. You know what you don't.

  5. Pay your most expensive debts first. Paying off your cards with the highest interest rates will get you a remarkable return on your money and rapidly improve your cash flow.

Three families on the show agreed to go on the debt diet. And it couldn't have happened soon enough. Between the families exists more than $360,000 in debt, or an average of greater than $120,000 each. But that's not your problem, is it?

The Yo-Yo effect
I'll admit it: Eight years ago my wife and I were $45,000 in debt. And you can read our whole story here. But I'll sum it up with this: I was so debt-obsessed that I used to take out cash advances to go blow money in Vegas. But that was before I met my wife, and she smartened me up good. Together, with a little purple notebook, we conquered the debt in three years.

In the grand scheme of things, however, I'm a lightweight. Less than two weeks ago a Fool posted to our Credit Cards and Consumer Debt board an amazing story of paying down more than $125,000 in debt. In January, a Texas couple wrote of paying down $37,000 in consumer debt. And another erased debt in October after confessing to have borrowed $19,000 on a credit card to pay for housing costs. These stories are common. Indeed, financial freedom has been spreading through Fooldom for more than a decade now. And if we Fools can do it, so can you.

But there's always risk. Living beyond your means, it seems, is commonplace. All the families on Oprah admit to spending more to keep up the facade.

I can attest to that, too. I've been self-employed for three years now, while my wife stays home with our three children. My career took a turn at the beginning of last year when I started writing more for the Fool. Doing so led to more writing gigs, but they paid less than what we had been accustomed to. We didn't cut our spending, and subsequently our bills piled up and our balances ballooned. Now, including a home equity line, we're more than $60,000 in debt. Fortunately, the fix we're in today is nothing like our situation eight years ago. My guess is that it will take three years to pay down our latest list of obligations.

Get help
For many, debt is a roadblock to a healthy, happy retirement. Don't let that be you. Take Oprah's debt diet challenge. For more advanced help, try a guest pass to Robert Brokamp's Motley Fool Rule Your Retirement service and its extensive coverage of the struggle for financial freedom. You can even find solutions that have been tried and proved true by members of the indebted public. It's free for 30 days.

The Foolish bottom line
Debt is a drag. Or maybe it's a disease. Either way, Oprah is right: It's time to loosen the shackles, get Foolish, and declare fiscal freedom. Are you up for the challenge? I am.

Bankrateis a Motley Fool Rule Breakers pick.

Fool contributorTim Beyersloves being called a complete Fool. He invites you to join the fun. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what stocks are in his portfolio by checking Tim's Foolprofile. The Motley Fool has a fulldisclosure policy.


Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 502236, ~/Articles/ArticleHandler.aspx, 11/20/2014 6:32:39 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Tim Beyers
TMFMileHigh

Tim Beyers first began writing for the Fool in 2003. Today, he's an analyst for Motley Fool Rule Breakers and Motley Fool Supernova. At Fool.com, he covers disruptive ideas in technology and entertainment, though you'll most often find him writing and talking about the business of comics. Find him online at timbeyers.me or send email to tbeyers@fool.com. For more insights, follow Tim on Google+ and Twitter.

Today's Market

updated Moments ago Sponsored by:
DOW 17,719.00 33.27 0.19%
S&P 500 2,052.75 4.03 0.20%
NASD 4,701.87 26.16 0.56%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

11/20/2014 4:02 PM
RATE $11.87 Up +0.17 +1.45%
Bankrate CAPS Rating: **

Advertisement