While a book about debt isn’t what most people would want to curl up with for a good read, for those that have debt there probably isn’t a better type of book to read. The problem is finding one that puts the plain and simple truth about debt at front and center instead of repeating the often heard “rules” that may not apply in your particular case. Liz Pulliam Weston does an excellent job of avoiding black and white debt rules and covers a multitude of shades of gray regarding debt that many of us are likely to face during our lives:
I’ll never forget the father who wrote to me proudly detailing his progress at becoming financially independent. He and his wife were saving prodigiously for retirement, and they had a fat emergency fund. They decided that their next goal would be to retire their mortgage as early as possible. When he worked the numbers, though, he realized that accelerating the mortgage payments meant they’d have to cut way back on their vacation fund. They had long wanted to take a special trip with their daughter, who was 11. He asked me if I thought it was wise to put off that journey until the mortgage was retired.
If you have teenagers, you’ll probably understand my response to him. Go on the trip now, I told him, while your daughter is still delighted to spend time in your company and you can really enjoy the trip as a family. Before your know it, she’ll have all sorts of interests and friends that will make her reluctant to take a long trip with her folks, and then she’ll be off to college. Seize the moment and go now. The mortgage will still be their when you get back
Pulliam Weston also takes on a number of the money and debt myths out there which is a wonderful thing to see since so many writers throw them around without giving them a second look. For example, the often quoted $9,000 average credit card debt that Americans are supposed to have:
Carrying credit card debt is not the norm in America, despite what we’re frequently told.
Most Americans owe nothing to credit card companies, according to detailed figures compiled by the Federal Reserve Bank in its Survey of Consumer Finances. One quarter of US households don’t have any cards at all, and another 30% or so regularly pay off their balance in full.
Of the households that did carry a balance, the median amount owed was $1,900. That means half of the households with a balance owed more, and half owed less.
She then goes onto explain why the often quoted $9,000 is a skewed average that doesn’t really show the state of credit card debt for most people in the US. It’s good to see someone digging a little deeper into the numbers than merely regurgitating a figure that may not have any real meaning to most of us.
She does the same with four constant real estate myths giving a balanced and accurate view on them rather than than simply repeating them
1. Real Estate Prices Always Rise
2. A House Is A Great Investment
3. Buying Is Always Better Than Renting
4. Home Ownership Comes With Great Tax Breaks
While I have only read her pieces on MSN sparingly (note to all writers – if you’re writing to readers that may be reading in countries other than the US, don’t copy and paste your writing from Microsoft Word – I get all kinds of crazy Japanese characters in the articles that are written in that format and that is why I don’t spend more time reading MSN articles), I will be paying more attention in the future.
I guess the best praise that I can give is that it’s a book I wish I had written myself. While I normally recommend that people get a book at the library and do a read through before purchasing, if you currently find yourself struggling on how to pay down your debt, purchasing this book would be a solid investment toward your debt education.
On a side note, there was one piece in the book that made me think Pulliam Weston had talked with Jonathan over at My Money Blog. This was the piece that caught my eye:
The proliferation of 0% offers has tempted a lot of people to play some pretty interesting games with their debt.
Jonathan in Los Angeles bragged to me that he has plenty of money in his savings account to pay off his $5000 in credit card debt. But he’d been bouncing the debt from one 0% offer to the next while earning about 2% on his savings. Wasn’t that smart?
Not when you think about it. The 2% interest Jonathan earns translates into about $100 a year. Since he’s in the 25% federal tax bracket, he loses $25 of that “windfall” to federal taxes and another $8 or so to state taxes. That leaves $67, or about $5.58 a month in “profit.”
For that small return he has to pore over each deal’s fine print to make sure he doesn’t get tripped up by some gotcha like balance-transfer fees. he has to make sure he gets every payment in well ahead of the due date, or he risks triggering a sky-high penalty rate. He has to know exactly when the offer expires and search out and secure the next offer in time.
Jonathan could make the same “return” for a lot less effort by merely skipping his ritual latte-and-muffin habit one day a month, or by buying one less drink at the watering hole.
Granted, I know Jonathan would never settle for a 2% return when you can easily get 4%+ with online banks these days and I never imagined him to be a “latte-and-muffin” type of guy, but there were enough similarities that I thought I’d ask him. He replied “Hmm… I don’t think so. I’ve never heard of Ms. Weston before…besides, I’m more milk and toasted bagels at home (type of guy).”