Gail Vax-Oxlade talks money management

Gail Vaz-Oxlade rarely needs an introduction in Canada. She's the face of the hit TV program "Til Debt Do Us Part" and best-selling author of such books as "A Woman of Independent Means: A Woman's Guide to Full Financial Security," "Shopping For Money: Strategies for Successful Borrowing," and her latest, "Debt-Free Forever." Her newest venture is "Princess," a program that tackles the fascinating subject of entitlement. Think you deserve that designer frock and pricey vacation? Better tune in before whipping out the cards.

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To learn more about why Vaz-Oxlade is so adept at delivering the type of harsh yet palatable advice that so many debt-ridden people need (and that gives her fans such a vicarious thrill), CreditCards.com invited her for a little chat. And she didnt hold back with us either.

CreditCards.com: I just watched about seven "Til Debt Do Us Part: episodes in a row. It's strangely addicting. Why do you think viewers enjoy watching you scold people about their unhealthy financial decisions on TV?   

Gail Vaz-Oxlade: Y'know, I've been writing about money for almost three decades. Yet in the first six and a half hours of television, I had more people paying attention than in all the years I was just writing. I think there are two reasons. First off, only the people who were interested in money would read my regular columns and money features. Let's face it, if you're a money-moron, you're not picking up a column called Dollars & Sense! Second, the fact that "Til Debt Do Us Part" puts money in the context of a story -- the story of the couple's life -- helps viewers to better understand the stakes and come to terms with how to apply the money concepts.

As for people who enjoy watching me scold others about their unhealthy financial decisions, let you who have not sinned laugh. Money makes people do the most absurd things. And being smart, well-educated or in a high-paying job is no inoculation against behaving like a money-moron.

Perhaps it is because I speak the truth -- I don't pull my punches -- that people like what they see. Perhaps it's the fact that "Til Debt" is real: we do one take, and NOBODY tells me what to say. Or perhaps it is easy to see that at heart I'm a sop. I generally care that people get it, that they see the light and find a way to walk towards financial balance. Well, I care with some couples. With some others, I just want to get the hell out as fast as I can.

CreditCards.com: You've been very successful in getting people to divulge their highly personal financial troubles. Most people prefer to keep their debt problems a secret. Why do you think some are so open to airing their problems on your show?

Vaz-Oxlade: There are two reasons people call me in. There are the folks who are desperate. They don't know what to do, and they don't know where else to turn. Sadly, our financial companies are totally ignoring this segment of the population -- and it's a huge segment -- choosing instead to focus on people who are investing lots of money. It's short-sighted on their part because once I fix these folks, they can become very good savers and investors. The other reason people call me in is because they think they'll make an "easy $5K." Ha! Not so much.

CreditCards.com: Well, you're asking cardholders to change entrenched habits, and that can be brutal -- how can people adapt to a new way of dealing with their credit cards and cash?

Vaz-Oxlade: There is no question that change is hard. And that's, perhaps, the biggest benefit to having me show up. Since I take the plastic and give a pre-determined amount of cash on which to live, the change is forced; they just have to get used to it.

If you want to make the same changes in your life, you need to force the change. That means cutting up or hiding the plastic so you can't be tempted to fill the "holes" with money you haven't earned yet. It means being prepared to feel some pain and do some hard work, so that you can figure out a plan that will actually work. If you're a wussie, if you aren't ready yet to look your s*** in the eye and do something about it, you won't change, so don't even bother to try.

CreditCards.com: So how can you tell when the people you help are really ready to stop making bad decisions?

Vaz-Oxlade: There is a cycle to people's responses to me. Usually in week one, after I've taken their plastic, beaten them up and put them on a budget, they frickin' hate me. On my second visit, some are seeing a difference, but some are still seething. By my third visit, they can see the difference the process is making in their lives. They're living within their means. They've stopped fighting about money. It's incredibly powerful to figure out exactly what you have to do to balance your life financially. And they've got money in the bank and in the jars, so now they know living within their means IS possible. That's empowering. And they're well on their way to having a plan for the future.

Now I'm starting to feel the love. By week four, some people want to build a room in the basement so I can live with them. They don't want me to leave! But they're going to find out that I didn't work the magic. They did. And they can keep working the magic as long as they're determined to keep things real and focus on what's really important. If I don't see those changes by week three, I know the process may not have taken. But I've seen big changes as late as visit four, so sometimes they pull it out of the bag just in time.

CreditCards.com: And speaking of changes, if you could alter the way banks issue cards, what would you do? Regulate more, less? Hike or lower interest rates? Anything?

Vaz-Oxlade: The credit scoring system would be gone. The credit application for a card would have to satisfy the old and reliable five Cs of credit [character, capacity, collateral, credit and capital]. Students with no income could not get a credit card and start their way down the road to debt hell when they are only beginning their lives. Every person who borrowed money would have to take a written test that demonstrated they understood the implications of what they were doing: they knew how much interest the loan would eventually cost them, they understood what would happen if they defaulted or were late on a payment. If they couldn't pass the test, they couldn't get the loan.

If we're serious about educating consumers and raising financial knowledge, these are the steps we should be taking. Not having one more "discussion" or throwing up one more website full of financial gobbledegook.

CreditCards.com: I was once asked if the world would be a better place with no credit cards. I actually thought about it for ages and decided I couldn't answer -- just too many variables. But what do you think?

Vaz-Oxlade: I actually have nothing against credit cards per se. I do object to the ease with which they are handed out and limits have been raised. That, hopefully, has changed with new rules and a new awareness. What I do abhor with a vengeance is the credit scoring system. It's a system that's been designed to make consumers into slaves. The way the score is calculated, you must behave like a money moron to get the best score. And since the score has become the be-all and end-all... used for things it has no business being used for... people willingly act like money morons to get a nice shiny score.

With all the recent changes designed to "protect consumers", shame on the guys in charge for not taking a good hard look at the credit scoring system to see just what damage it's been doing. Maybe they're afraid their scores will go down!

CreditCards.com: Hmm. Well, what's in your wallet, Gail?

Vaz-Oxlade: Usually $60-$100 in cash. A Visa on which I put all my business expenses. A Mastercard for my personal expenses, which earns me free groceries. I also have a Visa at my desk with a really low balance that I use for online purchases so I'm not over-exposed. And I have a debit card, which I pretty much use once a month to put my paycheque in the bank and get my cash for the month.

I practice what I preach. I have a spending journal into which I write every penny I spend. I have a budget spread sheet and once a month I put the info from my spending journal into the spreadsheet so I can keep track of what I'm spending my money on. I have no debt. I don't live in a big house, drive a fancy car or wear spiffy clothes (except on TV, because they make me). I love to read, love to cook and take joy from the simple things. My kids have been on allowances since they were six and they're learning how to manage money. And I don't keep secrets. When I screw up, I say so and fix what I broke. When I do good, I don't mind blowing on my finger-tips and shining ‘em on my shirt!

Above all, I believe that where we are today is not where we will be tomorrow. That means saying "thank you" for the good and not taking the wonderful things for granted. And it means knowing that everyone has crap in their lives and that the crap will pass with time.

Updated October 22, 2010

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