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Follow the towel theory

bath and towel set behind ceramic wall
united photo studio / Shutterstock

Though she’s a role model for many today, Oprah is open about her past financial failures.

“I’ve made every salary, so I know what it’s like to be making $12,000 and think, ‘If I only made $100,000, all my problems would be solved,’” she said on The Oprah Winfrey Show in 2001. But what actually happens is “you carry the debt with you.”

She calls it the towel theory. As Oprah became more successful, she would continue to splurge on ever more luxurious towels — first from Target, later from Saks Fifth Avenue. The problem gets worse when you graduate from towels to cars and other pricey possessions.

Oprah’s rising wealth meant nothing for her pocketbook if she spent even more along the way. If you’ve run into debt for any reason, it’s time to clear it fast and start following the towel theory: live within your means and keep your earning, spending, saving and investing in balance.

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Invest in companies you know

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Before she purchased a big stake in Weight Watchers, Oprah was an avid follower of the company’s Freestyle program. The program assigns points to various foods and gives users a certain number of points to spend based on their weight-loss goals.

“I believe in the program so much I decided to invest in the company and partner in its evolution,” Oprah said in a 2015 press release announcing the deal.

Her 10% stake cost her about $6.79 per share, according to USA Today. By June 2018, Weight Watchers was worth over $100 per share. Even though the stock has fallen sharply since, sitting around $26 in July 2020, she’s still made a tidy sum on her investment.

When you’re investing, don’t just follow your instincts. Make sure you know what will make a company or product successful in the future before you put your money down.

If that sounds intimidating — maybe you’re still growing as an investor — try to start small (like $5 small) with a micro-investing app. Or you might prefer an automated solution, like a robo-advisor that selects stocks based on advanced algorithms. The important thing is to capitalize on what you know and recognize what you don’t.

Stop before you spend

Asian female accountant or banker making calculations. Savings, finances and economy concept.
pattarawat / Shutterstock

Oprah’s so rich that if she ever ran out of space for her treasures, she could just buy another home to store them in. Even so, the media tycoon says she tries not to be wasteful.

“I still think twice before I buy anything,” Oprah writes in her 2014 book What I Know for Sure.

“How will this fit into what I already have? Am I just caught up in the moment? Can it be of real use to me or is it just something beautiful to have?”

By following this advice, you can recognize and eliminate wasteful luxuries in your life — the kind that don’t bring you real satisfaction. It’s even easier if you use a budgeting app that automatically tracks your spending, so you always know exactly where your money is going and how much you have to play with.

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Diversify your income

Exterior of the building housing Oprah Winfrey's OWN network at The Lot on Formosa Avenue and Santa Monica Boulevard in West Hollywood, California
Alex Millauer / Shutterstock.com

After 25 years of ratings dominance, you would think the talk-show host wouldn’t dare mess with a winning formula. Not so.

“I became pretty comfortable with that level of success,” Oprah said at a 2013 Harvard commencement speech.

“But a few years ago I decided, as you will at some point, that it was time to recalculate, find new territory, break new ground. So I ended the show and launched OWN, the Oprah Winfrey Network.”

By leaving her show behind, Oprah took a chance on building a media empire. She’s also found success acting, wrote several books, published magazines and launched a radio channel.

A long-running stable job is a blessing, but it can also keep you from discovering new money-making possibilities. Try picking up a side gig; today’s online marketplaces make it easy to find small jobs in your field whenever you have spare time. The income boost can be substantial, and these ventures will also help support you if your main job ever goes belly up.

Keep some on the side

Investing and saving money during the rainy season concept, object on marble table top counter.
PhuShutter / Shutterstock

The rich and powerful don’t stay that way if they don’t plan ahead. Just think about all the broke sports stars out there.

Instead of spending or investing everything she has, Winfrey keeps some of her money aside in case her fortunes change. In a 2002 interview with Fortune, Oprah confessed that she had built up a rainy-day fund of $50 million cash.

You, too, need an emergency fund. It probably won’t be close to Oprah’s hoard, but it will cushion you against unexpected expenses, failed investments or a sudden job loss.

Experts suggest stashing away enough money for at least three to six months of expenses — ideally in a high-interest savings account, so your money can grow.

Learn from your losses

Glowing and broken light bulb comparison concept, problem and solution, failure and success, learning from mistake
patpitchaya / Shutterstock

Winfrey seems to turn everything she touches to gold, a phenomenon dubbed “The Oprah Effect.” Her support has launched Dr. Phil, Dr. Oz and Rachael Ray to stardom.

But Winfrey’s own first big break was deemed a failure. After a long publicity campaign, she started in 1976 as a news anchor in Baltimore alongside veteran host Jerry Turner. She was demoted to reading morning headlines after a few months.

“When you’re humiliated that way, you never forget,” Oprah said, reflecting on her early career in a 2011 Baltimore Sun interview.

But instead of fading away, Oprah brought her tenacity to a new program, People Are Talking, which ran for five years. As she told the Harvard class of 2013, “Every experience, encounter and particularly your mistakes are there to teach you.”

So don’t just try to forget your losses. For example, if you’ve ever missed a credit card payment, you probably remember the hit to your wallet and your credit score. Instead of dusting yourself off and moving on, do something proactive, like downloading an app that will manage your debt for you. That way you’ll end up in better shape than you were in before.

You can do good and do well

Measuring nature and economy on a balance scale / Sustainable development concept
wk1003mike / Shutterstock

For Oprah, philanthropy and investment go hand in hand.

In May 2020, Oprah and pop star Katy Perry joined a number of investors who put $250 million toward Apeel Sciences, a company that makes a natural coating for fruits and vegetables to extend their shelf life.

“I hate to see food wasted,” Oprah said in a press release from Apeel, “when there are so many people going without.”

Combined with her investments in Weight Watchers and True Food Kitchen, a healthy restaurant chain, Oprah has secured a stake in the future of nutritious, sustainable eating.

Even if you’re not a billionaire investor, you can make smart financial choices that also support the welfare of people around the world. For example, your bank might be using your deposits to invest in companies that cut down rainforests to drill for oil. Consider switching to a financial institution that uses your money to plant trees — while giving you tremendous cash-back bonuses to boot.

A home belongs in your portfolio

Mortgage loading and property document concept for real estate
ShutterOK / Shutterstock

Oprah Winfrey obviously knows the benefit of a strong real estate portfolio. Judging from media reports, she’s spent at least $140 million on her homes in California, Hawaii, Washington and Colorado — and that doesn’t even count the properties she previously owned in Illinois, Georgia and Florida.

Unlike most things that plummet in value once you buy them — cars are a notable example — homes tend to appreciate. That's doubly true if you improve them, like Oprah did when she completely transformed her Hawaiian homestead.

Sure, renting can make financial sense, so long as you're investing aggressively, but homeownership brings many benefits. For example, once you’ve built up equity, you can borrow against it and turn your home into a souped-up credit card. Just make sure you shop around for the best possible interest rate on your mortgage — you can find 30-year rates as low as 2.5% now — so you’re not harming your investment potential from the get-go.


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Daniel McIntosh Former Staff Writer

Daniel was formerly a staff writer for MoneyWise.


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