Review: Debt Free for Life

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Every Sunday, The Simple Dollar reviews a personal finance book or other book of interest.

dfflI’ve reviewed a pile of David Bach’s books over the years (Smart Couples Finish Rich, The Automatic Millionaire, and several others). Why bother reading and reviewing yet another one?

The title alone fairly well explains it. Rather than focusing on becoming rich (a la Smart Couples Finish Rich and The Automatic Millionaire), the focus here is clearly on the simple aim of debt freedom. Is it a philosophical shift away from the “latte factor” of his previous books or just a repackaging of the same old ideas for a new economic era?

1 – Who Put America Into Debt – and How You Can Get Yourself Out
The lenders made it easy, but it was still the individuals who put their name on the documents and signed themselves up for a lifetime of debt. However, just as individuals made the choice to get themselves into debt, they can also make the choice to get themselves out of debt. Debt freedom is something pretty much everyone can do for themselves as long as they choose to do it and choose to set aside elements of an overinflated lifestyle to accomplish it. Our grandparents did it, so why can’t we?

2 – Debt Math: How Lenders Keep You Broke
The biggest trick that lenders use on unsuspecting borrowers is the low low low monthly payment. If a lender has a monthly payment that just barely exceeds the accumulated interest for the month, then you’re not really reducing your debt much at all (maybe a dollar or two) by making that minimum payment. Instead, you’re going to be making that minimum payment for many, many months, paying interest to the company the whole way. When you’re just handing money to a company in the form of interest payments, it’s leaving your pocket with nothing in return except your own impatience.

3 – The Debt Free for Life Mindset
Why are you in debt? Why do you want to not be in debt? What’s the difference between these two answers? To put it simply, you have to fully understand what’s different between your life now and a life path that leads you to debt freedom. You need to know what needs to change before you can change it.

4 – If You’re in a Hole, Stop Digging
The first step in that change is to staunch the outflow of money, and the most effective and immediate way to do that is to cut back on your spending – hard. You can’t become debt free if you keep adding more debt. The way to stop adding more debt is to simply stop buying what you don’t need, then add things back in at a later time once you’ve realized that the purchases really do add enormous value to your life.

5 – The DOLP Method: How to Pay Down Your Debt in Record Time
Ramsey calls his debt repayment plan DOLP (Done on Last Payment), but it’s exactly the same as Dave Ramsey’s debt repayment plan. Just list all of your debts in order of their balance size, then focus all of your efforts in paying off the smallest debt first while making miminum payments on the rest. Coupled with some spending changes in your life, this should be doable. If it’s not, you may need a coach.

6 – Get Out of Debt Automatically with Debt Wise
This chapter greatly annoyed me. It’s essentially an ad for a service called Debt Wise which will help you manage such a debt repayment plan – for a monthly fee, of course. This seems highly out of place in a book where a big part of the plan is to cut your spending, not sign up for new services.

7 – Negotiate Your Debt Down: How to Lower the Interest Rates on Your Credit Cards
Here, Bach offers some advice on negotiating down your debts, particularly your interest rates. Mostly, it boils down to contacting the company, making it clear to them that you’re having difficulty making the payments, and requesting a rate change. Generally, it’s in their interest to cooperate with you, because that type of resolution is far better than having to deal with a defaulting customer.

8 – Your Credit Report and Score: What It Is and How to Fix It Fast
This is mostly just a summary of what a credit report is (a document detailing your history for paying back loans) and some basic methods for fixing it (get current on all of your debts, for starters). The big key is to simply be aware of what’s appearing on your credit report and, if it’s not yours, start contacting people until you can get the problem fixed.

9 – Mortgage Debt: How to Protect Your Home and Pay Off Your Mortgage Debt Early
Bach’s suggestions mostly boil down to making sure you have a thirty year fixed rate mortgage (if not a shorter term, like a twenty or a fifteen year), getting on a biweekly payment plan (paying half of your monthly balance every two weeks), and doing something about your mortgage if you simply can’t make the bills, such as using the government’s resources for mortgage relief.

10 – The Student Loan Diet: Nine Great Ways to Crush Your Student Debt and Sleep Well at Night
Much as with the previous chapter, this is just a collection of strong basic ideas for dealing with student debt: consolidating government-backed loans, focusing on paying off private loans first, looking into loan forgiveness programs that may be available to you, and understanding the specific payment options for each loan you have and choosing the one that works best with your life.

11 – Erase Your Debt with Three Simple Words: “Time-Barred Debt”
Most states have a statute of limitations on unpaid debts and, if your debt is past that time limit, you no longer have to pay it. In fact, paying it would simply harm your situation, as it would appear as a fresh entry on your credit report. If you have any debts that are far past due, find out when the statute of limitations is on that debt and, if you’ve already passed it, tell the debt collectors to take a hike.

12 – How to Get Non-Profit Credit Counseling – and a Professional to Guide You Out of Debt
Here, Bach points people towards credit counseling, which is a good solution mostly if you’ve tried to get your debt repayment under control and you’ve failed miserably at it. I genuinely believe that the best first step people should take before turning to a counselor is to try managing their debt themselves. This way, if they fail, they can at least have a chance of understanding why they failed, which can give a big clue as to the type of coaching and help that person needs.

13 – Debt Settlement: Solution or Scam?
Bach spends most of this chapter making a strong case that you should never try out debt settlement programs, and I think I agree with that assessment, even if Bach does hedge his bets a bit by the end of the chapter.

14 – How Bankruptcy Works, When to Use It, How Long It Will Take You to Recover
Mostly, this chapter offers general advice on bankruptcy (use Chapter 7 if you’re eligible, for example). One very big key that Bach mentions here is that you should never raid retirement accounts to pay off debt. If you’re in a situation where it seems that doing so is your only hope, contact a lawyer first. Often, bankruptcy proceedings will allow you to protect your retirement savings.

15 – Make It Automatic! The Automatic Millionaire 2.0
Bach begins winding down the book here, making a case for automating as much of your personal finances as you can, particularly in terms of saving for the future and investing. Direct deposit your paycheck, then have automated savings plans move some of that money out of your checking and into your savings or into your investment plan of choice.

16 – Find the Money! 7 Ways to Find Hundreds of Dollars (Maybe Thousands) in Less Than an Hour
What are these tactics? They essentially boil down to checking online resources to make sure you don’t have any unclaimed money sitting around out there. Sites mentioned here include unclaimed.org, missingmoney.com, fdic.gov, pbgc.gov, and ssa.gov, which are worthwhile visiting just to make sure you don’t have any unclaimed benefits floating around out there.

Is Debt Free for Life Worth Reading?
If you’ve never read a book by David Bach, this is the one to read and I’d recommend that you do. He offers a very solid perspective on personal finance, particularly from an angle of extracting yourself from debt and getting yourself on a good path towards retirement and the future stages of your life. Debt Free for Life is perhaps the best all-around packaging of his ideas, aside from the annoying sixth chapter.

However, if you’ve already read a book or two by David Bach, you’re not going to get too much from his book that isn’t found by supplementing what you’ve already learned from him with a bunch of personal finance blog reading. The backbone of his ideas are still the same: get your spending under control, utilize what you save from that spending to get your financial situation in a better place, and you’ll have far more resources than you had before in a few years.

The biggest difference between Debt Free for Life and Bach’s other books is in the specifics. The core idea is the same, and if you’ve already grasped that concept thoroughly, there’s nothing drastically new here other than some good specific ideas.

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14 thoughts on “Review: Debt Free for Life

  1. You’ve got a typo under step 5.
    “Ramsey calls his debt repayment plan DOLP”. Should be Bach instead of Ramsey.

  2. trent can you write a post on Time-Barred Debt. seems like a great way to keep your stuff yet get rid of your debts.

  3. There is no “great way” to keep your stuff while getting rid of the debt.

    Problems with time-barred debt. The stipulations will be different depending upon the state where you incurred the debt. Creditors, or their agents, can still harrass you to try and bait you into verbally reaffirming the debt thus starting the debt clock again. Time-barred debt will appear on your credit report and remain for years, considerably longer if you reaffirm it and renege yet again on payment.

  4. Hi Trent, let me start off my saying I really love your frequent book reviews! Your review of this book is no exception; however, I have to say I am really sick of David Bach. The first book I read of his was the automatic millionaire. I believe I was 14 or 15 at the time… I fell in love with his books and read every one of them.

    Now, roughly 8 years later, I really feel like he is a complete sell out at this point. Each one of his new books “Start Over, Finish Rich” and “Debt Free for Life” are just regurgitations of previous books. I was SO disappointed when I purchased “Start Over, Finish Rich” recently and every single chapter was basically just a SUMMARY of the chapters in “Automatic Millionaire”. Might as well just buy the “Automatic Millionaire” you get more bang for your buck by far!

    I also feel that he pushes his products way too much. First it was his “Money Manager” which was just a repackaged David Bach-branded version of Mvelopes (and he charged more for it than Finicity did!) and now it’s the “Debt Wise” system… uck. I agree with you about chapter 6, it made me actually angry. He is the last person that should be selling products to people while in the same breath telling them to reduce their unnecessary spending!

    Like always Trent, your assessment is spot on… I would recommend this book to someone that had never read another David Bach book (while giving them a heads up to avoid chapter 6) but for anyone who has read any of his other books, it is just a repeat… again…

  5. Trent, I read this book a few days ago when a download was released for free. I would not buy it myself, but for free – hey it was worth a look! I agree 100% with you about the chapter devoted to his “program” that will help you pay your debts down for a fee. I suppose he helps people, but I am sick of him and those of his ilk getting rich off of the suffering of others. Anyone can read his book (or any of the other ones out there) and figure out how to pay down debts without having to pay one dime to Bach or anyone else. So overall, I agree with your assessment. I would suggest that people completely ignore chapter 6 – which is what I did.

  6. The DOLP Method, I don’t agree. Shouldn’t it be more like paying down the highest interest rate first? Is this guy really on the right tract with that idea? We are trying to get out of student loan debt, three to be exact, and have started with the highest interest rate to over pay. Wouldn’t our method save us more money in the long run?

  7. I would like to invite you to enter the $1000.00 Most Loyal Readers Contest!

    Stop by Money, Marriage and Madness at http://moneymarriageandmadness.viviti.com/ to enter.

    Money, Marriage and Madness is a new blog started to gather information for my latest book on the new age of finances and marriage. While there, please share any financial or marriage advice you have for young couples just starting out.

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  8. Sami,
    That’s a question that’s frequently asked. If you run the numbers, you would save more money in the long run by starting with the account with the highest rate first. However, depending on the amount of debt and the interest rates involved, the amount saved may not be all that much more. By starting with the smallest debt first, you gain momentum and are able to see progress more quickly, so you are more likely to see it through. It helps with motivation.

  9. @ Sami – I agree with Michelle’s response in that if you go strictly by the numbers, yes you would save a bit by paying off highest interest debt first; however, the goal is to change your behavior. That is achieved by paying as much as you can on the smallest one, (while paying minimum on others) then when smallest one is paid off – take that amount and putting it towards the next one, and so on and so on (called the snowball). Dave Ramsey goes into this in detail in his book, he is the first to admit that it’s not about the math – he says if we were doing things by the math we wouldn’t be in this situation in the first place and suggests changing behavior. I liken it to the Albert Einstein saying about the definition of INSANITY ‘you can’t keep doing the same thing over and over and expecting different results’. Good luck Sami, hang in there!!!! TRENT thanks for review of this book, I’ll prob avoid it as I have automatic millionaire and others…as you suggest!

  10. I have been following Dave Ramsey’s plan for about 2 years and I will be 100% debt free in August of 2012. House and everything! The plan works–but only if you are focused and have self-control. I will have paid off a total of $100K in the four years. I talk about my path to debt freedom in my blog.

    Dollars Not Debt

  11. It’s funny that you mention that Bach’s DOLP plan and Ramsey’s plan are the same. It’s really all in the wording and marketing. Once you read enough of these books, it all starts to sound the same.

    I really like Jean Chatzky’s Pay It Down book. You can read it in a day. It’s very practical and she shows you how to put it in motion quickly. There’s a “workbook” built right in. You can write numbers right in the book. She helps you prioritize expenses. It’s just very easy to follow. I found that I saved so much in one shot.
    It just felt that every new chapter I covered was like another part of a financial nto do list that I checked off.

    http://www.moneysavingenthusiast.com/random-acts-of-saving.html

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