By Laura Scharr-Bykowsky CFP®
How the recession affected the pampered “Housewives” from the Bravo reality show.
I admit it. I am addicted to Bravo’s “Housewives of…” reality TV series that follows real life 40-something women in various cities around the US who live the high life.
Oddly enough, my husband got me hooked. We watch with fascination each week while one well-dressed and coiffed, vacuous woman after another embarrasses herself on national television. It is like watching an impending emotional train wreck.
Regardless of the locale—Orange County, Atlanta, New York, New Jersey and DC—- the theme remains the same. Well-kept housewives with overly inflated opinions of themselves overindulge in plastic surgery, host high-end dinner parties, go on multiple thousand dollar clothing sprees, all while maintaining a high level of gossip and rivalry with one or more of the other women in their circle. The antics of these adult women could make high school girl Facebook bullies blush.
My initial thought when I began watching the show was, “Wow. How much money do these women have that they are able to spend it so frivolously on materialistic things?”
On the surface, these women seemed so lucky. They were able to spend indiscriminately. In a blink of an eye they got what they wanted, when they wanted it. They lived the “good life” of fine clothes, food, travel and an endless supply of Botox. Women all around America watched with disgust, tinged with a bit of envy.
Life seemed so easy for some of these women. They had personal shoppers that delivered designer clothing to their door for their review, personal make-up artists, and hair stylists to make them up prior to evenings out. Their calendars seemed full of liquor-filled lunches.
Then, a funny thing happened on the way to the “Great Recession.” Suddenly the façade of endless spending was replaced with the grim reality of the tragic effect the economic crisis and financial irresponsibility had on many of these women.
When the California real estate market plunged, real house wife of Orange County, Jeana Keogh, a real estate agent and owner of four high end properties, is forced to consider selling her homes or modifying the loans to avoid foreclosure. Ultimately, she leaves the show to focus on her career, as she is cash poor and real estate rich.
Her plight is probably shared by many real estate agents as well as countless other Americans who believed putting all their investment eggs in the real estate basket was a smart move in the face of the skyrocketing price appreciation of the ‘90s to mid-2000s.
Also in Orange County, Tamara Barney’s marriage is ripped apart when tension builds due to the financial stress. She had worked as a real estate agent, making an ample income to supplement her husband Simon’s income from his car dealership. Her husband ends up selling the dealership and moves to other ventures, but the reduced income takes its toll on the couple. In addition, they now have the burden of a new custom home that’s worth far less than what they paid for it.
Their marriage seemed so much better when the money was flowing. When tough financial times hit, the underlying tension due to Simon’s controlling nature bubbled to the surface. Tamara seemed to delay the inevitable due to the children, and felt she couldn’t go out on her own due to her poor finances. She ultimately ends up in a small apartment with her three young children, happy to be on her own and making decisions for herself for the first time in years.
Another “housewife” of Orange County, Gretchen Rossi, receives far less than expected from the estate of her dead fiancé and finds out he was in a tremendous amount of debt. Not very surprising, considering that he supplied her with endless baubles and even a pink motorcycle.
Gretchen suffered from a loss of income due to the fact that she left her job (real estate again) to focus on taking care of her fiancée’s health. The May-December romance is fodder for much ridicule within the group of women. Gretchen is seen as a “gold digger and kept women.” Clearly her fiancée was trying his best to spoil and reward her for her loyalty to him in his last days. She learns a lesson about making sure to have her own money and career and after his death uses her inheritance to invest in a new line of makeup, among other things.
In an especially tense episode of the Housewives of Orange County, Lynne and Frank Curtain and their two daughters are evicted from their rental house for failing to pay their security deposit. After the eviction, an angry Lynn confronts Frank about his secrecy regarding their finances.
In a particularly poignant exchange, Frank tells her they need to get “real about their spending” and cut back due to the fall in his business. She tells him that she “doesn’t want to be in the dark about the finances and that she can handle the truth.” His honest reply is that she really can’t handle the truth. He was hiding the reality of the situation so that he could indulge her in the high lifestyle she was accustomed, if not addicted to, which included serial plastic surgery and indulging every whim of their teenage daughters.
Apparently the “keeping up with the Jones” mentality was alive and well in the Curtain household. Frank, wanting to be the provider for the three females in his family, had a hard time saying no and a hard time discussing the finances with the family. Ongoing family conversations about spending expectations in the face of declining income from his business would have gone a long way towards bridging the gap between their spendthrift lifestyles and their bank accounts.
The fall out list continues over on the East Coast. Atlanta housewives Sheree Whitfield and Lisa Wu Hartwell are forced to downsize their real estate holdings in the face of divorce and loss of a major League football contract.
Celebrities and athletes fall into this trap of living high on the hog, as though their income will never decline. The reality is that the high income of most of these celebrities often has a shorter life-cycle than they expect. Managing the uncertainty of income is crucial by saving aggressively for “retirement” and hopefully living a lifestyle that does not have to be altered drastically should their career be truncated by an injury or loss of a contract.
Finally, Jersey couple, Teresa and Joe Giudice, file Chapter 7 bankruptcy when several of Joe’s real estate ventures fail. Once again, most likely this was due to over-leveraged, non-diversified investments and perhaps insufficient cash reserves, among other things. Teresa, although she seems to have no household help or nanny, does not seem to understand the concept of a budget. She equips her new, spacious, custom home with over-the-top furnishings and fixtures and spends more money on designer and custom-made clothing for her kids in one outing than what most “real” housewives spend on clothing for an entire year.
What a difference a few years and a downturn in an economic cycle make. Suddenly, these women became a microcosm of what was going on in households across America. We viewers felt their pain and we could finally relate to them, at least on some level. They were not spending extra cash on hand; but in most cases, were spending more than they probably should have, putting them in a precarious state once the economy fell. They, like most Americans, regardless of their high household incomes, were not immune to the emotional catastrophe that can happen when a job or marriage is lost, serious illness occurs, or there’s a downturn in the economy.
The overarching lesson learned for all women is that regardless of income, real wealth is not what you make but what you keep. So, being inspired by the gals from Bravo, I put together a to-do list for smart housewives to follow so that their financial lives never become desperate.
Smart Housewives protect their family and their sanity by keeping a stash of cash. They keep at least six months of living expenses in a savings account (nine if there is only one breadwinner). Saving for a rainy day will help keep the family afloat if a job loss or drop in income occurs.
Smart Housewives save for the future. They know that by delaying some gratification today they can really have peace of mind and fun tomorrow. By the way, having “enough” assets to fund a profligate lifestyle in retirement can be challenging.
Consider this quick back-of-the-envelope calculation. A general rule of thumb for retirement planning is that you can safely withdraw a maximum of about 4% of your assets in retirement to avoid outliving your money. If you spend $400,000 a year after taxes, that requires retirement savings of at least $10 million. Correspondingly, if you need $40,000 in retirement income net of social security and a pension, it will require at least $1 million. Hopefully these women are setting aside enough annual savings to reach their target goal, and only then are they spending the balance on lifestyle expenses.
Smart Housewives live within their means. Being purposeful about spending allows them to align their dollars with their important values and goals.
Smart Housewives don’t rely solely on a man for their financial well- being. They keep their skills current and maintain education to protect themselves in the event of a divorce. They also pick men who see eye to eye with them on financial matters so that fights about finances are kept to a minimum. (Ed. note: See Planning for Financial Harmony.)
Smart Housewives discuss the finances and budget with their family. They aim to be good role models by showing their children that money is not something that is endless in its supply and that that living with a budget means making ongoing trade-offs with respect to their weekly spending.
Those of us who are smart housewives don’t have a closet full of designer clothes, a beautician on call to primp us for a charity event, or a plastic surgeon on speed dial. We can live vicariously through the gals of Bravo’s Housewives of series and then sleep well at night knowing that what we do have is the real wealth of an emergency fund, a growing retirement account and living expenses that won’t break our future “retirement bank.”
Laura Scharr-Bykowsky, CFP®, MBA is a desperate housewife turned financial planner. She provides fee-only financial planning at her firm, Ascend Financial Planning, LLC in Columbia, SC. For more information go to www.ascendfinancialplanning.com.