This weekend, I watched an episode of Oprah from last week with Suze Orman. It is no secret, I generally like watching the crazy that is Suze. Her advice tends to support my own conservative financial nature. But on this episode of Oprah Suze kind of jumped the shark.
On this show Suze actually recommended that everyone live on only 50% of their take home income. The logic seemed to be if you get laid off, you will have to live on even less, so we may as well all get used to living as close to the bone as possible.
WTF? Now, I am not going to argue that the economy isn’t bad. It is. I know that a lot of people are getting laid off. I know it is scary.
BUT!!!!!
MOST people are NOT getting laid off. In fact, more than 90% of people are still working. If ALL of us cut back our spending by 5o%, then a shitload of people WILL get laid off. All those retail workers, restaurant workers, people who depend on taxes from purchases to pay their salaries, and on and on and on. If everyone who watches Oprah slams closed their wallets, the economy is going to go from bad to worse!
To be clear, I am not advocating that we should be going into debt to keep the economy afloat (I will leave those proposals to the government!). But for those of us who have secure employment and steady income and are not at risk for layoffs or salary cutbacks, shouldn’t we just keep moving along at a steady and responsible financial pace? We should keep socking away some savings (with the goal of 8 months take home in the bank) and not run up any debt, but if life doesn’t go on as normal for us, how can we ever expect things to get better?
And for the record, I find Oprah’s fake concern about the economy to be patronizing and annoying. (Oprah the queen of excess who even planted a rose garden specifically so she could have roses that coordinated with the rooms in her house!) Does Oprah really think she is making us feel better by not having a real Favorite Things show this year? We all know Oprah’s favorite things are not cheap. Is OPRAH going to live on 50% of her income? I bet she isn’t.
Food Challenge: Day 15 (the day things started getting weird)
Breakfast: Mr. A let the girls choose their own breakfasts and they selected rice, dill pickles and chinese pickled vegetable. I stuck to coffee, because pickles for breakfast sounded gross to me.
Lunch: L had Malaysian ramen noodles. I ate the rest of her ramen and had beets with sour cream. Note to self: Beets and ramen not a great combination.
Snacks: Dry cereal. Apple.
Dinner: Red curry beef & veggies (carrots & potatoes) with rice.
Food Challenge: Day 16
Breakfast: The girls had cream of wheat. I had coffee.
Lunch: I took the girls out for Ethiopian for lunch. I am really afraid the only Ethiopian restaurant in town is going to go out of business due to the economy and a long term construction project that has made parking there a nightmare. I used two weeks lunch out budget (but that is OK because I only had starbucks last week.)
Snacks: I made blondies. We seem to still have plenty of flour and crisco, so cookies are an easy snack to have on hand.
Dinner: We were at my aunts house and she ordered pizza. Mr. A stayed home and had cereal.
Food Challenge: Day 17
Breakfast: The girls had oatmeal. I had coffee.
Lunch: Mr. A and the girls had macaroni w/ red sauce & frozen mixed veggies. I made myself tuna helper.
Snacks: L ate croutons.
Dinner: We cheated. After spending all day doing hard yardwork, neither Mr. A nor myself felt like trying to scrounge dinner out of the odds and ends in the cupboards. We went out for tacos.
Food Challenge: Day 18
Breakfast: The girls had cereal I think. I had coffee.
Lunch: Tater tots and hotdogs.
Dinner: Mr. A made chicken & bean burritos for us.
Snacks: I made oatmeal cookies for tomorrow too.
Well, now, actually Oprah *could* live on only 50% of her income and not notice any difference…so maybe she *is* doing it?!?! Unlike those of us who would find living on 50% of our income seriously difficult…
I’m glad you mentioned the Ethiopian restaurant in this post. Our discretionary income has definitely dwindled in the past 18 months, but we include a monthly allotment to support local businesses, and for us, this usually means a restaurant or two–the smaller independently owned restaurants are really taking a beating, so we make room in the budget for an occasional Indian dinner, or Ethiopian feast.
BTW–while I ADORE the people who run the restaurant you mentioned (so we go semi-regularly) we like the food at Abyssinia even more. We meet other Ethiohio families there once a month and the food is terrific.
I’m with you on this one. We cut back, not because we really needed to but because it was the prudent thing to do. But already, our own little family’s cutbacks are affecting people: we did not rent the house we usually rent for a week in FL and it’s sitting empty, so that lady is out some income. Add the flights and car rental, and all the food money we would have spent and that adds up. Good for my bank account, bad for the tourism industry.
We are seeing it the other way too: less people spending in our store, or spending less when they do shop. We’ll be ok, but we didn’t hire 10 workers for the summer, we only hired 6 and we’ll cover the extra hours ourselves, so that’s 4 students who won’t work this summer….
Well, that’s some irritating advice. From Suze, not you. We couldn’t live on 50% of our income, if we could, I’d be staying home with the kids. And, there’s no way we’ll ever have 8 months of living expenses saved up. Who can do that? That seems insane to me. Maybe it’s because I live in an expensive city, but with two lower-end professional incomes we have a few months morgtage payments in the bank in savings, and that’s it. And we’re lucky to have that. Okay, taking calming breaths…
I love the food experiment because I love seeing what other people eat. It’s fascinating. So, thanks for doing that.
50% of our income. FIFTY PERCENT. *@$%! It’s a shame I can’t sit on 50% of my ass, too.
I’ve heard the 50% number before. 50% is for your fixed expenses, 20% is for fun spending (clothes, vacation, eating out, cable) and 30% is saving. Although I might have the 20% and 30% swapped. So it’s really more keeping your absolutely non-negotiable expenses to 50% (like your mortgage, certain amount of food, car mataince) but using 70-80% of your income. That’s what Elizabeth Warren recommends with some flexibility.
Back when I was renting an apartment, didn’t need a car and had two incomes and no kids we could have easily lived on 50% of our income. Now to accomplish that we’d have to sell our house (in one of the hardest hit markets in the country-ha!), drop our health insurance, sell one of our two cars and somehow find free daycare for our kid to even think about getting our total expenses down to 50% of income. That sounds totally doable. No problem! I’ll get right on that.
And my guess is that Oprah lives on considerably less than 50% of her income. she made $260 million in 07. Even with her extravagance I can’t imagine she needs $130 million/year to maintain her current lifestyle.
God bless you for this post!!!!! You know this episode freaked me out. And Oprah…
“I find Oprah’s fake concern about the economy to be patronizing and annoying.”
Sing it, sister! Thanks for this. I’m feeling sooooo much better now
I’m with you on this too. Although I love Suze and Oprah, this sounds like some crazy assvice.
I’m finding your food experiment fascinating. Your family has some really amazing willpower.
I think every family situation is different, so there is no “one size fits all” financial advice. People like Suze give good advice in general, but they represent one of many valid points of view. And it may not fit very well with one’s financial situation. Take for example two single income families. One with a breadwinner who is male, and one with a breadwinner who is female. Statistically there are different inherent risks – men tend to have a higher risk of death and a lower risk of disability. It affects the financial planning (savings, different forms of insurance, …) Also look at professions. Even in this economy there are major shortages in some professions, and not enough jobs in others. That should impact financial planning as well. And what about the spouse? Do they work? Do they not? Could they work? What would they bring in net after child care costs? Does the family live in a high cost city? And the all important, do they have kids or other dependents? I think advice from financially competent friends or a good financial planner at least as beneficial too.
Well, imagine in this scenario – in January, over 40% of my company was laid off. I was one. So we will be trying to live off of 50% of the old monthly income.
Do you know what bothers me about talking heads spouting off about ideas like living off of 50% of your salary? This advice comes from such a place of privilege and really would only apply to a small proportion of the population. Most people don’t have that option. Many people are just keeping their heads above water, and they’re not living the high life – they’re barely making it with a bare bones budget as is, there is no 50% to cut for most families and I think it’s somewhat arrogant for 2 women pulling in millions of dollars each (and good for them, they’ve worked hard and they’ve been very fortunate, financially speaking) to suggest that cutting half your spending is the way to go – it is simply not a viable option for most people. I didn’t see the show, but do hope that they had other more practical and realistic advice for the audience. I also think that we can’t all stop spending because that will just lead to bigger problems. I can still afford to spend, and I do. I’m spending more wisely than I would have a year ago, but I do make it a point, to the degree that I can, to support local shops and restaurants.
Julie
We can cut things and do better at things…for instance, I’m cancelling my BLockbuster mail in thing, because we don’t use it enough to justify the money, and I’m working on our food budget by meal planning and cutting back on eating out…but I don’t know many families who can realistically live on 50% of their income. I agree with Julie above…the suggestion itself comes from a place of privilege most families don’t have. And as another comment said, I don’t think many can actually set aside 8 months living expenses, either. I just don’t think that’s a reality for most families. It might be good advice, but I’d prefer some advice for people who can’t do any of that with their salaries.
Hmmm-I’ve worked very hard to keep our fixed expenses below 40% (and that includes food and fuel at levels that we would cut if one of us was unemployed). But our savings is only 12% of income, primarily because daycare is 21%- (that’s budget, not actual until we complete the adoption-and of course we would keep the kids home if one of us was unemployed). The remaining discretionary is going toward a lot of house projects, and keeping a lot of handymen and hardware stores in business.
Our situation is that, there’s a big difference between me losing my job and j losing his. With unemployment compensation, his would be a wash with dropped daycare. Losing my income would be a serious hardship for us. And our state pays the minimum in unemployment benefits. So, I’m not paranoid, but being cautious. ~lmc