LIFE OR DEBT, A One Week Plan for a Lifetime of
Financial Freedom
by Stacey Johnson 2002
Ballentine Books
$22.95
This
is an excellent book by the creator and host of "Money Talks." This is a non-DA approved book. It is well written in easy to understand
language even when presenting complicated ideas. A lot of this information I had an
understanding of before DA, but without the 12 steps and the support of a HP
and members of the group I would never have been able to implement a
program. The DA way differs in some ways
from the ideas presented in this book, but on the whole I give it a B+ to an -A
rating. (Nary a mention of underearning, and a minuscule mention of addictive compulsive behavior.)
Rather
than rewrite the book for you, I will attempt to pull a few pages of quotes out
to give you and idea what you will find.
Introduction:
Are You Free?
.
. . The sad truth is that most of us will admit we don't have the ability to
find happiness. Why? Because we're way too busy paying the bills to be free to
pursue it. . . . So how do you become
free? Your immediate response is
probably to say, "Make more money, of course!" But more money is not the path to
freedom. . . . Because financial freedom
has never been a function of how much money you make. It has always been about
how little you owe. . . . And that is what this book is all about:
making you free by removing the shackles of debt, then taking the money you
used to use to service that debt and invest it to make you financially
independent. Is it simple? Yes, as you
will soon find out. Is it easy? No,
because it requires a new way of thinking, which is never easy to bring about.
Chapter
One: My Story
Stockbrokers
were measured almost entirely by how much money they made for themselves and
for the company. Money made for the
customers was incidental. . . . To my knowledge, nobody was ever retained for
treating customers well. At the same
time, brokers whom I absolutely, positively knew to be unethical were being
heaped with recognition. . .
What
I decided to do was start over, only this time to do it in the right way. The "right way" is a choice as
unique as each of us, but for me it was to do something I enjoyed that was also
worthwhile. Something that I could feel
good about, have fun at, and still get paid for. . . .
I could take this risk because I had reined in my spending,
pretty much paid off my debts . . . Living without debt makes it much more
likely that you'll have the freedom to fulfill your destiny.
Every
person or company you owe money to owns you. Why? Because
they have a say in the most intimate details of your life. When (of if) you retire. Where (or if) your kids go to college. How you use (or if you ever
have any) leisure time. Buying
and borrowing forces you to use your time to earn money. And working, especially in an unrewarding
job, can separate you from your destiny and from happiness.
Chapter
Two: Who Wants to Be a Millionaire?
If
you want your life to resemble someone else's in some way,
then simply watch that person and do what he or she does. If you want to be financially independent, it
makes sense to see what millionaires did to get that way. . . . Accumulating wealth comes from avoiding
debt, living below your means, and investing sensibly and consistently. . . .
Becoming financially independent isn't really a function of how much
money you make. It's much more often a
function of how little money you spend.
Chapter
Three: Life or Debt?
Suppose
you'd paid cash for that $100,000 house of yours. (I know that's a stretch, but
work with me here.) And suppose that instead of paying $833 every month, you
were investing $833 every month. And
suppose that instead of paying 9.4% interest you were earning 9.4%
interest. Result? After thirty years,
you would have $1,658,222!
Now
maybe you are saying, "Okay, okay! I see how interest is costing me big
bucks, and I'll try to keep it to a minimum.
Will you get off my back already?"
Sorry, not yet. Because even if
you never borrow a dime, you are still sacrificing your financial freedom every
time you spend money anyway. Let's talk
about that next. . . . I'm sitting on a
leather chair that cost $1000. . . . But it still cost a lot more than $1000,
because that money is no longer around to work for me. If it was, and I had
invested it and earned 10% every year, twenty years from now I'd have $6,727
instead of a worn-out chair.
(There
is a work sheet to write down how much you make per year multiplied by .7 {to
account for taxes}, minus all expenses associated with your job, divided by
2000 {50 weeks X 40 hours} to come up with how little you actually make. Then
you figure how many hours of your life you spent for all the useless
"stuff" you've accumulated over the years)
Somewhere
along the line is society we've come to believe that, like spoiled children, we
deserve to have what we want, when we want it, whether or not we have the money
at the time to pay for it. . . . They used advertising to change our thought
process. They got us to stop focusing on
the price and focus on the payments instead.
So instead of a car costing $25,000, suddenly it costs $300 a month.
Our
willingness to trade our lives for things we don't really want or need comes as
a direct result of money lenders and other advertisers pandering to basic human
nature. When talking about human nature, it's important to recognize the major
role fear plays in our lives. . . . Alcoholism, drug addiction, promiscuity,
overspending, under saving: nearly every negative behavior you can think of is
related to poor self image. It happens
because beneath the surface of our minds we tend to continually hold ourselves
up against a thousand yard sticks and find that we don't measure up. . . .
Whatever the message, virtually all advertising hits us where we
hurt. . . . Result? Whether or not you know it,it's likely that at least some
of these messages that pander to your insecurity are convincing you to spend
money. And since it is totally absurd to
think that any product can boost your self-esteem, that's money you're throwing
away, because you are not getting any satisfaction in exchange. You are giving up your life and the ones
benefiting are the companies with products to sell. The solution is to recognize these messages
for the blatant manipulation they are and find your self esteem in other places
What
you are doing is waking up to the realization that you have fallen into the
"buy now, feel better" trap.
The whole concept of possessions making you happy is ridiculous, and you
know it, because happiness comes not from physical possessions, but from loving
yourself. And the only thing you need to
do to love yourself is to accept yourself.
Bottom line? Here is something that
you might already know, but if you don't, it's time you learned it. If you don't have a strong feeling of
self-worth, no amount of "stuff" is going to give it to you. And if you do like yourself just the way you
are, there is no lack of "stuff" that is going to take that away.
Chapter
Four: Financial Freedom in Seven Days
Day
one: Compute your actual hourly wage.
Day
two: Inventory your possessions.
Day
three: Add up the total cost of unwanted possessions. Multiply the cost by 6.7 and divide it by
your actual hourly wage. This is the
amount of your life you've wasted on things you didn't need.
Day
four: create a happiness list.
Day
five: Start tracking your cash expenses.
Day
six: Start reviewing where your money is going.
Day
seven: Review the steps to getting debt-free and finding financial freedom.
The
steps to getting debt-free and finding financial freedom:
1.
Stop creating new debt.
2.
Prioritize your debts for payoff.
3.
Develop a Debt Destroyer: set aside 10 per cent of your gross monthly income.
4.
Pay off your debts.
5.
When your debts are gone, invest your Debt Destroyer plus the total of all of
your old payments to build the savings that will set you free.
Chapter
Five: Taking the First Step
Stop
creating new debt. . . . You can't get
rid of old debt until you're committed to stop creating new debt.
Chapter
Six: Ranking Your Debts for Payoff
(Mr.
Johnson uses a different method to rank debts than I would. Yours would probably be different than either
his or mine. Johnson admits that there
is diversity of opinions on this matter and admits that choosing a different
ranking order will not greatly effect the outcome or payoff date. The important things are: "Dig out your
statements and list all your debts." and "Rank your debts.")
Chapter
Seven: Creating Your Debt Destroyer
(There
are a variety of places to find money in your spending plan to use towards
paying off debts. One place listed on page 81 I take exception to: Robbing
God. How could I do that, seeing that is
where my help comes from.)
Key
points from chapter 7:
Compute
your Debt Destroyer: it's 10 percent of your monthly gross income.
Where
is the money going? Keep track of it for a month and find out.
Create
a spending plan. Don't forget to plan for
irregular and emergency expenses!
When
you see where your money is going, set priorities. Make a line item in your spending plan for
your Debt Destroyer, and build it by taking away money from expense items you
can live without.
Find
the money for your Debt Destroyer without compromising your life. Some of the money you are spending now is
worth it. But some isn't. Take time to
think about how you can fine the money for your Debt Destroyer painlessly.
Chapter
Eight: Wiping Out Your Debts
(As
each debt is paid off, roll that amount into the Debt Destroyer to attack the
next debt on the list. When you get to
the point that all that is left is the mortgage, Johnson shows how the Debt
Destroyer can then be used towards savings. ) "This isn't my program, it's
yours. Design it the way you want, and
you can change your mind anytime you decide to.
Because no matter what happens, you have still achieve something
important. You have learned that the
ability to live debt-free is within your grasp, and it's yours to choose
whenever you want."
Chapter
Nine: Turning Your Debt Destroyer into a Money Machine
There
are not thousands of ways to invest money.
There are only two. Either you
lend money to someone or you become part owner of a business. In other words, you can use your savings to become
either a loaner or an owner. (Johnson
prefers mutual funds and stocks over bonds)
Chapter
Ten: 205 Ways to Save
(Nothing new here. Johnson has been
clipping these from the same periodicals that you read)
Chapter
Eleven: Repairing Your Credit
(Prospective
employers may) check your credit history.
That may sound unfair or irrelevant, but if you think about it, it makes
perfect sense. What type of people would
you rather hire. . .
Another
common examiner of your credit history is insurance companies, and for the same
reason as your employer. . . . And
(surprise!) one of the things they have figured out is people who wreck their
credit are more likely to wreck their cars.
So
even if you never borrow money again, it pays to make your credit history asappealing as possible
The
single most important thing that I can say about credit repair is this: Don't
ever pay anyone to fix your credit.
There are only two types of credit repair happening out there; outright
rip-offs and people who charge you to do what you could do for yourself for
free.
(Sample letters. Addresses to reporting
agencies. Examples
from clients. Steps in credit
repair)
Chapter
Twelve: Getting Help
In
the case of a credit counseling agency, the lender is paying the bill. (Read: CCC works for the credit card company,
not you.) (This is a good place to
mention DA. Maybe we could convince Mr.
Johnson that it is a place to find help!)
Richard