Money Makeover: Eris and Vivian

Money Makeover: Eris and Vivian
Dr. Phil speaks with couples who are resolving to get a handle on their finances.
"Every week on Friday, Eris brings home around $1,000 and by Monday we have spent all of the money because we went shopping," says Vivian. "We definitely spend money like it's going out of style. We have a savings account with all of $15 in it right now. If something comes up, like a $500 motorcycle jacket, he'll call the telephone company and tell them that I'll pay them next week, so they don't send us any shut off notices."

Eris and Vivian have four children. "People have said that my kids look like they've stepped out of the pages of a magazine," says Vivian. "My kids sleep in designer pajamas. Anything they ask for, he buys them."

"I never had any of that when I was younger, so I try to give my kids everything," admits Eris. "They might think that I don't love them anymore if I stop buying them stuff."

Eris and Vivian also like to wear designer clothing. "I want people to look at me and think that I'm doing well," says Eris. "I have to have not only the Polo sweater, but the one with the big Polo on the front. There's no reason to spend $270 on a sweater unless everybody knows you spent $270 on it. Some people borrow from Peter to pay Paul. I don't pay any of them; I pay Ralph, Tommy, Gucci," he laughs.Eris also has a taste for expensive cars. "He wanted a Lexus and he got it," says Vivian. But it broke down and they can't afford to get it fixed. "We can't get a new car because I had a 2003 Ford Escape that got repossessed," she explains.

So then Eris bought a Ducati motorcycle. "It's like the Ferrari of motorcycles," says Eris. "You can't park a cheap bike next to a Lexus."

"He handed them $13,000 cash for it," says Vivian. "He got a mile away and he wrecked it."

Eris knows they need help. "We filed for bankruptcy a little over a year now. My wife, she thinks that we're close to being in financial disaster, but the reality is, we're already there," he says.

"We came here from Ohio. Our house in Ohio is in foreclosure right now," explains Vivian. "We've had about $26,000 in credit card debt."

They turn to Dr Phil: "Our New Year's resolution is to get our spending habits under control. Can you help us?"
Dr. Phil questions whether Eris really wants things to change, or if he wants to defend his behavior.

"I go up and down, back and forth because I do work hard. What am I working so hard to get money for if not to spend it? I can't take it with me," says Eris.

"You can't keep it either," Dr. Phil points out.

Eris agrees, but says, "Right now today, if I come home tired, I mean I worked for a reason. I want to know why I worked. I want to see it. I want to feel it, touch it, eat it, spend it."

"Well, let's talk about how that's working for you," says Dr. Phil. "You got a house being repossessed in Ohio, and you're behind in the one you live in now, right? The car is in the shop. You borrow money to go get it fixed. But instead of getting it fixed, you take the money and go buy another car."

"We needed a bigger car because — for the kids," says Eris.

"You could put them on the $13,000 Ducati motorcycle that you bought with cash."

"I need that," says Eris.
Dr. Phil is incredulous. "You need that like you need a hole in the head! Are you kidding me?"

"It's a Ducati," justifies Eris. "How many people have a Ducati superbike?"

"What are you, Evel Knievel? Do you get paid for riding that motorcycle?"

"I would like to," says Eris. "It could be an investment too. It's not like I could just sell it. I can't. It's not like I can just sell it. Not for what I paid for it."

Dr. Phil brings up the fact that they've already filed for bankruptcy, and since then, have run up even more debt. "So you're back in worse debt than you were before you filed."

"Pretty much."

"And you say you won't buy clothes unless the brand shows. Tell me why."

Everybody knows you can go to Target or Wal-Mart or get a sweater that looks blue, you know, just like that jacket. But that doesn't mean that it's the same," says Eris. "You wouldn't want anyone to think you bought that at Wal-Mart."
"You are so wrong ... Do you really believe that?" Dr. Phil asks.

"Yes," says Eris. "Did you get that jacket at Wal-Mart?"

The audience roars with laughter. Dr. Phil answers. "No. I didn't get it at Wal-Mart, but you better believe that I shop at Wal-Mart." Dr. Phil turns to the camera. "We love Wal-Mart."

He turns back to Eris: "But you know what? I would rather walk into a room knowing that what I'm wearing I can afford and I paid for and I own it."
Dr. Phil shows some pictures of the house he and Robin lived in and the cars they owned when they first married. "Now I had a doctor's degree, I was young, but that was my car. And you know the most interesting feature of that car? I paid for it, I owned it. I paid $700 for that car. And Robin's car, $350. And you know what? I would drive that up anywhere and park it. I was proud of it. It had a name. We called it Clyde."
"Listen, do you have any responsibility to your children to be financially responsible?" Dr. Phil asks.

"My children are taken care of. They have good clothes and shelter, food," says Eris.

"How's their college fund shaping up?"

"We're haven't started working on that yet. We've got some other financial things we need to take care of first."

"You do not solve money problems with money," Dr. Phil tells him. "You don't. I guarantee you I could give you $30,000 right now and come back to your house in six months and you'd be back in the same debt you are in right now, wouldn't you?"

"Probably in three months," jokes Vivian.

"Because you wouldn't take that $30,000 and go pay off the $28,000 you've got in debt. You would go buy her a motorcycle so she could ride with you!"
Dr. Phil introduces Elizabeth Warren, a professor at Harvard Law School and the best-selling author of The Two Income Trap. Elizabeth explains an action plan that Eris and Vivian can start immediately:

  • Keep a roof over your head. "You guys have been through bankruptcy; you've spent your card. This is it. You're flying without a net," she warns them. "You are just away from the shelter or [living with] somebody's mom."

  • Sell the motorcycle. When Eris objects, Elizabeth tells him, "You put that thing on the market. You run an ad. And if you can't sell it in 30 days, you come back and we'll talk."

  • Repair the car or get an older one. "Sell the Lexus and buy a couple of clunkers for cash. You'll have no car payment and you'll have wheels. You can get from here to there."

  • Sell the Durango. "You're going to use that cash to pay down your bills and when you sell off that Durango, you're going to get out from underneath a huge monthly payment."
  • Prioritize your debt: 1) Student loans, 2) High interest debt, 3) Other. "You've got to stay up with those student loans," says Elizabeth. "And then high interest debts. You've talked to the payday lenders? Those people will rob you blind. If they're living in your pockets, there's never going to be a penny left over for you. Then you've got to go to the other debts that you owe."

  • $500/month cash for clothes and toys. When it's gone, it's gone. "You got to spend some money on clothes. But this one's got to be cash purchases. You take out $500 at the beginning of the month — that's in cash. Take it out of your checking account. So you go spend it however you want to spend it, but when it's gone, there's no more until the first of the next month," she says.

  • Challenge everything. "Nothing is sacred," Dr. Phil tells them. "You can get rid of a car, you can move to a smaller apartment or house. You do what you have to do. Don't tell me you've got six people in your family and a $13,000 motorcycle sitting in the garage. Those things are contradictory logic."

    When Eris objects, Dr. Phil reminds him, "You have to do what it takes to get out from under this debt or you're going to wind up living with your parents."