Book Review: Debt Free for Life
There are really two steps to getting out of debt. First, cure whatever problem lead to you getting into debt. Second, pay down the debt.
David Bach's new book seems to be aimed at people for whom taking the first step is mainly a matter of exhortation — that is, people who are in debt primarily because they've been unable to resist the lure of easy credit. The right message for them is simply "don't do that," and the book does a good job of delivering that message, hitting all the right notes — how expensive credit is, how risky it is, how dangerous it is, and how it utterly thwarts your ability to build capital. (See also: Good Debt, Bad Debt)
Having delivered that message, Bach goes on to walk people through the second step — getting the debt paid down — with careful attention. He calls his procedure the DOLP method, short for Done On Last Payment. (He says that it was formerly Dead On Last Payment, but that readers suggested that Done was more motivating than Dead).
The DOLP method is a variant of the classic debt snowball, where (after making the minimum payment on each debt) you apply all your additional cash to one debt. (The name comes from the way your additional cash snowballs as you extinguish each individual debt and are able to add its minimum payment into the additional cash to apply to the next debt.)
The two main variants are:
- Pay down the highest-rate debt first.
- Pay down the smallest debts first.
Option two is often recommended as "more motivating" because you can see some early success (the first debt quickly paid off) and you get to see the snowball effect in action — that minimum payment getting added to the additional cash to apply to the next debt.
Bach's DOLP method aims to improve on option two by arranging to pay off whichever debt can be paid off most quickly (not necessarily the smallest, because different debts have different minimum payments).
Option one (highest-rate debt first) is generally the cheapest way to get out of debt, if you can manage it. But Bach makes a good case that his DOLP method may well be cheaper in practice, because the more debts you have, the more opportunities you have to miss a payment, pay the wrong amount, or have a payment go astray — and just one late fee can easily eat up all the savings from getting the high rate debt paid off first.
There's a lot to like here.
I particularly like Bach's look at student loan debt, with a careful analysis of just how pernicious that system has become in the United States (leading so easily to the wage-slave, debt-slave trap), with the bad news nicely ameliorated by a thorough look at the various alternatives for dealing with student loan debt. If you've got debt problems and any of it is from student loans, that chapter alone could be easily worth the price of the book.
Bach also has a good chapter at how to find any money that you've misplaced — forgotten bank accounts, lost tax-refund checks, savings bonds that have gone astray, etc. (See Lindsay's post on Everything You Need to Know About Unclaimed Property for a quick look at the same topic.)
The sections on credit counselors and debt-settlement companies are also very good and well worth reading if you're considering using either one. (There's nothing they can do that you can't do yourself, if you're willing to put some effort into learning how such things work.)
Two things in the book struck wrong notes for me.
The first has to do with what Bach chooses to present as unbreakable rules versus what he presents as suggestions. There are unbreakable rules in personal finance — for example, you have to live within your means — but many other things are just a matter of style. When Bach suggests — in italicized capital letters — that to succeed "you must make your plan automatic," I know that he's wrong. (I've never made an automatic payment in my life, and yet here I am: debt-free, with enough savings and investments that I can afford to be a full-time writer.) I don't doubt that he's speaking from experience, having seen many people who had failed in the past succeed once they put their bill payments on automatic, but it would work better for me if he'd just said that.
The second has to do with that first step for getting out of debt — curing whatever problem got you into debt in the first place. As I mentioned above, Bach's audience seems mainly to be people whose problem with debt comes from the fact that they overspend. All you have to do is look around to see that, even as the great recession winds down, there are a lot of people who need that message. But there are also people who don't fall into that category. For example, people who borrowed perfectly ordinary amounts of money, and then suffered a loss of income, need to take a different approach to curing the problem — as do people who are in debt because of huge medical bills.
It's worth comparing this book to Feeney and Connolly's Road Out of Debt that I reviewed last month. That book, written by a bankruptcy judge and a bankruptcy attorney, is probably a better choice for someone whose debt is so large that it cannot be paid back (although Bach's book also has an excellent chapter on bankruptcy).
For its target audience, though — people whose debt problem is mainly a result of overspending — Debt Free for Life is a great choice.
Disclosures: I received a free copy of Debt Free for Life for review. This post contains affiliate links, and I will earn a commission for any purchase made through these links.
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