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| Saturday, March 25, 2006 |
| Response to some Oprah's Debt Diet Comments |
Last night I posted a quick review of Oprah's Debt Diet - Episode 4. I started responding to a couple of the comments left by reader's, but my response was getting long, so figured I would post about it instead.Pete said...
One thing I don't understand is that David Bach teaches two ways to fight the debt monster. The one he mentioned on the show (debt divided by minimum payment=DOLP) is different than what he says in other websites (payoff the highest interest card first.
?????????? AND lpkitten said...
was it just me or did david bach seem like a slimy used car salesman? i can't put my finger on it; just a vibe i got from him. To be fair to all of the experts on the show, they are spending days with the families teaching them skills and lessons and on the show they have just minutes to tell Oprah what they have been up to.
Now, I am not a fan or follower of David Bach (he came on the scene long after I paid off my own credit cards and recognized my own latte factor - the term he copywrited) but he must have some good advice since he is popular and many people credit him for helping them.
OK - saying all that, I assume what he was trying to tell Oprah was the "old advice" of paying the highest interest card first (irregardless of the balance) is no longer best because the credit card companies have changed the rules of the game. The amount and variety of the fees companies are now charging are so significant that it is now important for folks to first reduce the number of cards they owe on.
The example he was working with had 12 credit cards with balances. Each of those cards were costing the couple with late fees, carrying balances over the minimum fees, and yearly "just for the privilege of having this card in your wallet" fees. So for them he felt the priority was to reduce the sheer number of cards first. That means paying off the low balance ones first. This will immediately help the family by having them go from writing 12 checks a month, to 11, then 10, then 9, etc. etc. With so many credit card bills to pay just trying to juggle that many payments was a big reason why the couple had so many late fees and charges. Secondly, the motivation and psychological relief this couple will get from "killing-off" the small balance cards will hopefully keep them on the Debt Diet Plan.
Since David Bach will continue to help and follow this couple it would not surprise me if at some point he switches the strategy for them. Once they get the credit cards down to a more reasonable number, at that point he may start focusing more on the interest rates. But that is just me guessing, so we will have to stay tuned to see what will happen... |
| posted by Boston Gal @ 11:15 AM *
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| 4 Comments: |
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::I apologize in advance for the long comment::
I agree with lpkitten, something about his presentation didn't sit well with me. I think Oprah picked up on it too. Did you see the questionable look she gave the camera when he said "that's old advice?" I was like WTF? It would have made more sense if he clarified his statement by saying that advice is valid depending on your individual circumstances; however, this method is better for XYZ family because...
This is a perfect example of why making blanket statements when dealing with personal finance is dangerous. What works for one does not work for all. What makes sense for one does not make sense for all. This is where the expertise of a financial advisor/planner comes into play...to address the unique circumstances of the individual.
Also, just because a person is popular does not mean they give good advice. He's popular because he addresses a sensitive subject that many people either choose to ignore or simply know nothing about. Anybody can present a solution that passes what I call the "logical sniff" test and everyone will take it as gospel.
However, many PF bloggers and other financially savvy people know better. I'll listen to anyone's advice but I know what to store in my mental rolodex and what to discard immediately. But if I knew absolutely nothing about the subject (ex: conversation I just had with the drywall contractor), then any and everything will sound good to me.
So in my opinion, his statements were very misleading to Oprah's viewers to say the least. There is no right way or wrong way, there is no old advice or new advice. I'm not saying this to question his credibility but I hope Oprah (and her viewers) realizes that before she co-signs it.
The creators of slimfast, south beach, weight watchers, and low carb fad diets also provide a desired end result for people who struggle with their weight. Neither is better than the other, but people do what works for them. Funny, I've never heard anybody call Jenny Craig a weight loss "expert." My point is, there are many ways to skin a cat, so he shouldn't use people's ignorance for his personal gain.
Off the set, I hope he's explaining ALL options and presenting a recommendation, so the families can understand what they're doing and why. Otherwise, they'll run up the debt again and continue to rely on him for guidance. Getting rid of the debt is fabulous, but understanding the root of the problem, how money/credit works, and self reliance should be their ultimate goal.
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I agree with Singlema when she says This is a perfect example of why making blanket statements when dealing with personal finance is dangerous. What works for one does not work for all. What makes sense for one does not make sense for all. This is where the expertise of a financial advisor/planner comes into play...to address the unique circumstances of the individual.
I would add, if you can't or won't go for a personal finance advisor/planner than at least start reading other pfbloggers. Perhaps you will come across someone who seems most like you or your circumstances. Reading what they are doing may give you some guidance. No one person has all the answers - either layman or professional. But reading and educating yourself is always a good first step.
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I did not have a chance to see the show so I wasn't able to see if he looked questionable or not.
However, David Bach's "Smart Women Finish Rich" was the first financial book I read and I felt that it's a good starter book. It's true that blanket statements are usually not good but if someone had to write a book about finance it would either have to contain 8000 pages (which I don't think I'd read) or it would have to contain some blanket statements with a disclaimer on how different situations calls for different solutions. For me, his book was a good jumping off point and certainly not the be-all-end-all personal finance book.
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I've been rading pf blogs more recently, as I prepare to really enter the workforce from grad school and I want to be prepared to manage my money after a few mistakes in the earlier years [love your blog by the way]. I saw the Oprah episode, and I think one of the benefits of paying off the lower balance cards 'for these families' is also emotional.
The families have not been doing well for so long that as they get one card down, this small victory can keep them motivated to continue to do well. Starting out with the higher balance/interest cards, while it may make more sense (maybe) it takes much longer to get that "hell yes!" feeling.
I also agree that maybe he used a poor choice of words about "old" and "new" advice.
Is it possible to comment on this topic withouht writing a book chapter!
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::I apologize in advance for the long comment::
I agree with lpkitten, something about his presentation didn't sit well with me. I think Oprah picked up on it too. Did you see the questionable look she gave the camera when he said "that's old advice?" I was like WTF? It would have made more sense if he clarified his statement by saying that advice is valid depending on your individual circumstances; however, this method is better for XYZ family because...
This is a perfect example of why making blanket statements when dealing with personal finance is dangerous. What works for one does not work for all. What makes sense for one does not make sense for all. This is where the expertise of a financial advisor/planner comes into play...to address the unique circumstances of the individual.
Also, just because a person is popular does not mean they give good advice. He's popular because he addresses a sensitive subject that many people either choose to ignore or simply know nothing about. Anybody can present a solution that passes what I call the "logical sniff" test and everyone will take it as gospel.
However, many PF bloggers and other financially savvy people know better. I'll listen to anyone's advice but I know what to store in my mental rolodex and what to discard immediately. But if I knew absolutely nothing about the subject (ex: conversation I just had with the drywall contractor), then any and everything will sound good to me.
So in my opinion, his statements were very misleading to Oprah's viewers to say the least. There is no right way or wrong way, there is no old advice or new advice. I'm not saying this to question his credibility but I hope Oprah (and her viewers) realizes that before she co-signs it.
The creators of slimfast, south beach, weight watchers, and low carb fad diets also provide a desired end result for people who struggle with their weight. Neither is better than the other, but people do what works for them. Funny, I've never heard anybody call Jenny Craig a weight loss "expert." My point is, there are many ways to skin a cat, so he shouldn't use people's ignorance for his personal gain.
Off the set, I hope he's explaining ALL options and presenting a recommendation, so the families can understand what they're doing and why. Otherwise, they'll run up the debt again and continue to rely on him for guidance. Getting rid of the debt is fabulous, but understanding the root of the problem, how money/credit works, and self reliance should be their ultimate goal.