I'm excited to review David Bach's new book entitled, Debt Free For Life! I've been a fan of David's books since his very first bestseller, The Automatic Millionaire. David writes in a very easy to understand, logical sort of way which allows readers to follow his advice easily.
I remember the first time I picked up one of his books, I was at Barnes & Nobles. I sat in a corner for an entire hour and read the book from cover to cover. Sorry David! I know I should have bought it instead, but I was practicing my frugal ways at that time in my life. Actually, I still am.
For someone who is in debt, and who has never read any of David's books, I highly encourage you to read his latest, Debt Free For Life. Given I've read practically every single one of David's books, it's hard for me to learn anything new. That's somewhat of bummer since I was hoping there would be something as innovative as the “latte factor” was 10 years ago. Still, if you've only read one or two of his books and are on a mission to pay down debt, this book is perfect for you.
One of the best things about book reviews is access to an author's mind. I ask David five burning questions to challenge him beyond the plain vanilla, and to my delight he answers most of them quite directly. Hope you guys enjoy the insight! There are three books to giveaway at the end of the interview!
FINANCIAL SAMURAI QUESTIONS FOR DAVID BACH
1) Why do you think people get into such deep debt? One of my theories on Financial Samurai is that people get into debt because it feels great to spend money you don't have. Otherwise, you wouldn't do it. Once you get into debt, it feels so great to pay down debt and get out of debt. In essence, debt provides pleasure both ways and people really like debt. Thoughts?
Personally, I don’t know anyone who “likes” debt. Even people who feel great spending money usually feel anxious and horrible when the bills come in, and people I’ve counseled out of debt certainly don’t try to get into debt again so they can feel great paying it off a second time. Two generations ago, people paid cash for everything, held mortgage-burning parties, recycled tinfoil. That philosophy and way of life has disappeared and people get themselves deep into debt because they can.
Our society has incentivized borrowing more – you can open another credit card if you need more credit, or get a tax deduction on that house you can’t afford. The good news is that I see more and more people who want to pay down debt and save money. If anything, the great recession has woken us up to the financial reality that we can’t afford to be in debt anymore.
2) You read stories about people who get into $50,000 and $100,000 levels of consumer debt. How does this happen? Isn't everything regulated and logical from a business stand point? In other words, the only way you can get into $100,000 worth of debt is if the credit card company approves your credit limit because your income is large enough to warrant it so.
Unfortunately, we were in an era that became permissive of debt and even seemed to encourage it. We have billions of dollars of advertising to get us to buy things we don’t need, a multi-billion dollar credit card industry that tells us the good life can be ours for the taking when we use their credit cards, banks that loan us money for homes they know we can’t afford, subprime lenders who tell us we’re “silly” to keep equity in our homes when we could “cash it out” to pay off our credit cards, and a tax system that promotes heavy borrowing by offering tax deductions. We’ve been sold a bill of goods, or a bill of debt, and now we have to pay.
In addition, many people who are deep in debt get in trouble by taking on multiple credit cards and spending beyond their means. The problem with credit card debt is that most people do not understand the insanity behind the minimum payment math—specifically, how long it will take you to pay off your current balance and how much it will cost you if you only make minimum payments. In Debt Free For Life (www.finishrich.com/debtfree) I reveal how the debt companies imprison you with basic math to keep you in debt for life. By learning their games, you’ll be able to fight back and win—and achieve real financial freedom.
3) One of my main recommendations for success is to stop being delusional. For example, if you are a terrible student who received a mediocre job and earn a mediocre salary, it is delusional for you to think that you should live like a person who makes much more by spending much more. Instead, recognize you are destined for a mediocre lifestyle, and spend accordingly. Hence, do you think people who go into debt are more delusional than those who don't have problems with debt? Is there a self-esteem and psychological aspect to the entire debt situation?
In my experience, it’s easy to get into debt. I can relate – I had problems with spending and credit cards in college. What set me straight was my Grandma Rose. She told me what we all know but have a hard time committing to: don’t spend money you don’t have. Each person‘s situation is different – and their reason for taking on debt will be different. Someone that believes they can spend more than what they can afford is not necessarily delusional – they may just be misinformed and as I said before they are probably mislead.
One psychological state that I can be positive about when it comes to debt is the mindset of when you are completely free of debt or on a solid path towards a debt free life. The moment you start on my Debt Free For Life (www.finishrich.com/debtfree) plan, you will begin to feel better. Just knowing you have a plan in place to pay down your debt in the right order, the right way—a plan you can carry out yourself that will save you thousands of dollars in interest fees and cut years off your indebtedness—will truly lighten your burden, however light or heavy it might be.
Debt creates fear. Not having it creates peace of mind. This may sound like a cliché, but its true. When you have less debt, you will feel more FREE. You will have fewer worries, less stress, less tension and fewer fights at home. In short you will have less fear and more serenity.
The problem is most people don’t know how or where to start. This is why I wrote my new book. To give people a step-by-step plan to get out of debt—no matter how much you owe. In addition, I have teamed up with Equifax, one of the leading nationwide credit reporting agencies to create a revolutionary online tool called Debt Wise™. What’s great about Debt Wise is that it has taken my DOLP system and made it automatic. As a result, in literally seconds you can see how much debt you have, what order to pay it off in, and how long it will be until you are debt free. Debt Free For Life includes a FREE 30 day trial of Debt Wise.
4) Your book advocates now getting completely out of debt, and not play semantics between good and bad debt. Is this a knee-jerk reaction to the economic crisis and any personal crisis you may have recently experienced? So many businesses have succeeded through the use of debt. What about the choice of going to a great school that costs $40,000 a year in tuition and
going into debt vs. going to an unknown school for only $5,000 a year. How does one weigh the choices?
Last winter, a friend asked me about ‘good debt’ vs. ‘bad debt.’ I started giving her the standard answer about how good debts are debts you incur to buy things that can go up in value (like a home, business or college education) while bad debts are things that will depreciate or go down in value (like credit card balances). But then I had kind of an epiphany and realized, this recession has changed everything. Home equity has been dropping—by trillions of dollars over the last few years and people with college degrees are looking for jobs.
The truth is, that when you’re in debt, it doesn’t matter what you borrowed money for. The only thing that matters is whether or not you can afford to pay it off. When you can’t afford to make the payments, the only difference between “good” debt and “bad” debt is that the “bad” variety can destroy your life much more quickly. Now I’m not saying all borrowing is bad. The ability to borrow money helps us function as a society and borrowing to build assets – like a business – can make sense, if you have a real plan to repay your debt.
5) Do you think there's a correlation with people who get into debt and those who have compulsive, addictive tendencies? In other words, those who go to the extreme and cut up their credit cards may have a propensity to do other unhealthy things such as over eating, watching too much TV, playing too many video games, smoking, and so forth? Is it possible to have a balance instead?
All types of people are in debt – as a country we have a debt problem. However, when you decide to get out of debt you will have to sit down and look at what behaviors got you into your financial situation, addictive or not. You see plenty of stories about people who are compulsive shoppers with thousands of dollars of credit card debt—but you do not have to have these tendencies to land yourself in excessive debt – it is all situational. If you have an addictive tendency that costs money and you do not have enough to support that habit—there will most certainly be a correlation.
With this said, it is possible to find balance – but you need the support and action plan to do so. What I recommend is that you first try and take control with my Debt Free For Life action plan. In the book you will find the tools and information necessary to take control of your finances and start your journey towards debt freedom. I also encourage everyone to join my Debt Free Challenge. Challenge participants will be automatically entered to win a debt busting $10,000! You do not have to be compulsive or have addictive tendencies to fall in the trap of debt; joining this challenge will help you keep a balance through the use of free information and support.
After taking the challenge, it’s time to stop digging yourself further into debt. Taking little steps can help – for instance, I’ve come up with something called the Latte Factor®. It’s based on the simple idea that all you need to do to build wealth is look at the small things you spend your money on every day and see whether you can redirect that spending to pay off debt or invest in your retirement. Putting aside as little as a few dollars a day for your future rather than spending it on little things like lattes, bottled water, fast food and so on can make a difference between accumulating wealth and living paycheck to paycheck.
TO WIN ONE OF THREE BOOKS
* Tweet this post. (1 point)
* Comment as to why you think people get into uncontrollable debt. (2 points)
* If you have a blog, link back to this contest. (5 points)
The contest ends one week from today on Friday, Feb 11th at 11:59pm PST!
Book description: Hard cover, 265 pages, retails for $19.99 pre-tax. That's $22 in California after tax!
For more information about David's book visit www.finishrich.com for free resources and tools.
Note: A free copy of Debt Free for Life was delivered to me by the PR firm, Jackson Spalding.