Big Dollar Dilemmas: Jamie and Virginia
Dr. Phil checks in with the two families competing in the Ultimate Family Weight Loss Challenge.
"We are deeply in debt," says Jamie. He and his wife Virginia owe more than $75,000 to credit card companies. "We lived very well, but we're paying the price for that now."

"Credit cards are like we actually have the money, but we don't. It's like where I go to get my loan," Virginia explains. Her biggest splurges have been on extravagant trips and jewelry. "In Belgium I fell in love with all the diamonds and I got my dream ring to the tune of $22,000." Otherwise, Virginia usually spends her money in small increments, but it adds up.

Jamie has indulged in Swiss watches that cost $5,000, electronics and real estate. "I tend to buy more big-ticket items, and I buy them when I want them," he admits. For the past year they have been living paycheck to paycheck. "Regardless of whether I make $10,000 or $100,000 we spend it and we spend it and we spend it!"

When Jamie and Virginia discuss their financial situation, it usually leads to a dispute. They both know things need to change. "My greatest fear is that we'll have to move in with a relative when I'm wearing a three-carat diamond ring, and that would be absolutely humiliating," says Virginia.

Jamie's biggest fear is that they will have to file for bankruptcy, so he turns to Dr. Phil for help. "We like the good life, but how can we get out of the mess?""We ran the math with some experts, and that number is actually $120,000 in debt. You were a little off. How does it happen?" Dr. Phil asks Jamie and Virginia.

"It starts with the dysfunction of communication in the house. We more or less avoid talking about the finances," explains Virginia. "
We're talking about who caused the problem."

"Did you ever make a plan that said, 'We need to understand that our income could change. Our outgo could change. We need to have a buffer here'?" Dr. Phil asks them.

"We tried to put together a budget and it didn't work," says Jamie.

"That's a concern to me," Dr. Phil says. "How did you make it OK to say, 'I've got $5,000, I'm going to spend $10,000'?"

"For me, I think it happened that Jamie kept me out of the finances," Virginia replies. "I just used him as a bank."

"Do you not have a responsibility to be involved in the finances?" Dr. Phil asks.

Virginia admits, "As things got worse and worse and worse, and I started asking more and more questions, I got more and more scared about what we had done to ourselves."Jamie has said that he doesn't want to pay $2,500 for their child to go to preschool. "How can you say that you don't want to spend
the $2,500, but yet you'll go buy $5,000 worth of Swiss watches and a $22,000 diamond ring? When I ask you that, doesn't it get a little clear about the priorities?" Dr. Phil asks.

"It certainly does," Jamie replies.

"Is this a maturity issue?" Dr. Phil asks.

"I would say it's definitely a maturity issue," Virginia agrees.

"You've got to adjust to the point that if you got $5,000 to
spend, you've got to stop at $4,999.99," Dr. Phil tells them. You can't just decide, 'I want it, I deserve it.' Because you say you deserve an elite lifestyle, right?"

"I definitely have been working on an entitlement issue," Virginia admits.

"Entitlement is great if you can afford it, but if you can't, you've got to get realistic," Dr. Phil makes clear.
Dr. Phil introduces Elizabeth Warren, a chaired professor at Harvard Law School and co-author of two books on money including, All Your Worth: The Ultimate Lifetime Money Plan. Before the show, she met with Jamie and Virginia to discuss their finances.

Jamie and Virginia's total monthly take-home pay is $7,000, but their spending is $8,147. "At the current
rate, they're really paying off nothing because of the interest and all the new charges," Elizabeth says. She explains to them that if they make the minimum payments on their credit cards, they will be paying over $100,000 in interest alone, and will be making those payments even when they retire.

"To get them back on track, I have a three-part spending plan," Elizabeth says. "First, the must haves, the necessities: rent, food, utilities, insurance." Then they will focus on the debt reduction. "We have to get those credit cards paid off as soon as possible," she continues. The last focus is the wants. "It's time to go on a wants diet. Cash only."

If Jamie and Virginia stick to the plan, they will be out of debt in a few years and will have actually saved more than $80,000 in interest.Virginia explains that after learning how long it will take them to pay off their debt, she and Jamie are trying to pay off their credit cards.

Elizabeth tells them that they need to focus on the big picture — not one card at a time. "You can't pay off one while you're loading up on the other one," she warns. "Making a $3,000 payment just doesn't cut it if you're charging $6,000 in the same month."

"There's this idea of entitlement that we have here. You guys went on a vacation when you had money borrowed from your parents that you hadn't paid back," Dr. Phil points out. "Do you get the absurdity of that?"

"Yeah," Virginia replies.

Dr. Phil is dumbfounded by Virginia's question about if they can celebrate by making a major purchase when they pay off one of their credit cards.

"I want some short-term goals to get me to an incentive to do it," Virginia defends herself.

"Your short-term goal is financial survival, so that your family has a roof and clothes and heat. All of the things that you need," Dr. Phil tells Virginia. "Is that not incentive enough?"

Elizabeth steps in. "Let's take a look at your expenses," she says to them. The first category is the must haves. She recommends
spending 50 percent of your take-home pay in this area. The next category is wants, for which she recommends spending a maximum of 30 percent. Jamie and Virginia are obviously spending much more than that. "The consequence of that is look what happens to your savings. The goal is 20 percent. You're actually going in the whole every month by 18 percent. That's how you end up with $120,000 in debt. That's how you end up with nothing for college, no down payment for a house, and going to Mom and Dad for money." At the end of the show, Dr. Phil asks Jamie and Virginia, "If you guys are in so much trouble, why haven't you sold the $22,000 diamond ring?"

Virginia says she suggested that to Jamie, but two days later he got a new job. "It was like, we can hold onto it now," she says.

"I think your quote was 'you wear your bank on your finger,'" Dr. Phil says and Virginia agrees.

Dr. Phil asks Elizabeth, "What are the biggest mistakes these people are making?"

"People act like money is something that happens to them, instead of something that they can manage and control," she points out. "Virginia needs to go on a cash diet. She knows she's got it in cash, and when it's gone, it's gone."

"We've tried that and we've done that, except for there was a credit card that I asked him to cut up, and he put it on the desk where I could go get it if I needed it," Virginia explains.

"If you think you're overeating, don't stuff Twinkies in your purse, on the desk and in the cabinets. Just get them out of your house," Elizabeth says sternly. "You're a big girl. You're big enough to lift that credit card in order to use it for a charge, you're big enough to lift it and put it in the trash. You need to get rid of it!"