Welcome to the updated, revised, and “even more all-new” edition of my book Debt-Proof Living. The first edition of this book rolled off the press in December 1999. It began . . .
The median income for a U.S. four-person household has just hit an all-time high of $62,228. Unemployment continues to decline while inflation is minuscule. And Americans are deeper in debt than ever before. What is wrong with this picture?
Since then the economy has gone through major upheavals as a result of the terrorist attack of September 11, 2001, the wars in Iraq and Afghanistan, the tsunami of 2004, Hurricanes Katrina and Sandy, United States presidential elections, and on and on it goes. Gasoline prices have more than tripled, the cost of food has increased by more than 60 percent, and United States residential real estate values shot skyward then crashed.
In 2005, so many things had changed that I updated, revised, and expanded this book for an “all-new” edition and posed the question, So where are we six years later? The economy was on track, and the median income for a United States four-person household had climbed to $67,019. Unemployment was on the decline, while inflation remained low. But Americans were far more deeply in debt than ever before. Revolving unsecured, non-mortgage consumer debt totaled $735.3 billion, about 31 percent higher than it had been six years earlier.
So here we are in 2014. The economy plummeted in 2008 and has struggled ever since. Promises of a recovery have not materialized. The median income for a United States four-person household is $65,000, a decrease of 4.3 percent.1 Unemployment has increased to 7.7 percent, and inflation is ticking higher. While consumer debt dropped significantly after the financial crash of 2008, it has taken a startling turn upward. As of January 2013, United States credit card debt stood at $851 billion on top of $1 trillion in student loan debt.2
Again I ask, What is wrong with this picture? You could be wondering why, given such a dismal report, I would even think about revising, updating, and republishing this book. One might conclude that, with the overall picture becoming decidedly worse since this book’s first and second releases, this book was not successful. But that would be a very wrong conclusion.
While it is important to look at the big picture, it is too general, too depressing. What matters are individual lives. I measure effectiveness and progress by the mail I receive from people whose lives have been forever changed because they learned how to manage their money following the debt-proof living principles you will find in this book.
I measure success by the thousands of people I’ve heard from who have followed the steps and repaid all their unsecured debts, are well on their way to paying off their mortgages, and have learned how to fund their own emergencies—to not depend on credit cards when the unexpected happens. They have debt-proofed their lives and continue to do so one day at a time!
So why revise and update this book if it was and continues to be effective in its prior releases?
Many things have changed over the years. Take credit scores, for example. In 1999, individuals were not allowed to know their credit scores. Lenders were sworn to keep that proprietary information secret. That’s no longer true. Not only does the law now allow us to know our credit scores, but we can also know to what extent our scores affect our lives (hint: it’s huge). In this updated edition, you will find the latest information available on what contributes to your scores and how to improve them.
You will also find other information that did not appear in the original book. And I hope that the knowledge, insight, and maturity I’ve gained over the years are reflected in the following chapters as well. Readers have taught me a lot.
Take student debt. I’ve learned it is a far bigger concern to far more people than I realized in the past. In the first edition, I gave a strong warning about the dangers of taking out student loans. Now I have added information on how to deal with and conquer your educational loans. Of course, avoiding them in the first place is most ideal, but reality is what it is, and this is a subject I cannot ignore.
Even with all the new content, let me be quick to say that some things have not and probably will never change.
The consumer credit industry will forever want us to believe that credit cards are necessary to bridge the gap between our pitiful incomes and the lifestyles we deserve. Lines of credit have become the socially acceptable means of survival in this gotta-have-it-now world. Everywhere we turn we’re told that no matter our income we deserve to be several levels higher.
We don’t need more credit or more stuff. What we need is the courage to think for ourselves, the maturity to tailor our lifestyles to fit within our incomes, and the willingness to find contentment where we are and with what we have.
We need to understand that money is not just for spending. It is for managing first and then for spending. We need to see money not as power or prestige but as provision—God’s provision for our physical and material needs.
Contrary to the financial pressures and stress we might feel from time to time, generally the problem is not that we don’t have enough money. The problem is that we don’t know how to manage what we do have. We see money as a qualifier. It is a down payment on what we want. It is the lever we use to lift ourselves to economic privileges we have not earned.
Since 1992 I have devoted my life to learning about money and personal finance. At first it was a matter of survival. It took twelve years for me to plunge my family into the pit of financial despair. It appeared there was no way out. But appearances are not always what they seem. Slowly but surely we began to fight, scratch, and work our way out.
By 1992 we’d been working on our horrendous mountain of debt for nearly ten years. About $12,000 of the debt remained. I desperately wanted to find an additional source of income so we could pay off those last remaining credit accounts. It was time to close the chapter on that part of our lives. It was time to move on.
About that time I had a wild idea. What if I created a forum? One in which I could help others help themselves, and I could help myself in the process? It seemed plausible and a way I might be able to speed the pay-back process. I had nothing to lose by trying, so I went for it.
My number one reason for starting a subscription newsletter was not a secret: I was in it for the money. I came clean in the first issue of Cheapskate Monthly (it has since undergone a name change to Debt-Proof Living and gone from a subscription newsletter to a full membership at DebtProofLiving.com). I told anyone who would listen that, for pocket change, I would provide them with information and motivation to get out of debt just as my family was doing. We would take the journey together.
Two decades later, the newsletter continues in full publication and has become a regular part of tens of thousands of people’s lives.
I am smarter now than I was in 1992. I’ve proven that teaching teaches the teacher. Naively, I thought I knew it all—at least enough to fill the few issues of the newsletter I planned to publish. But I was wrong. I never dreamed I could become so passionate about a subject I had heretofore considered hopelessly boring. And I continue to learn.
I did raise the funds we needed to reach our goal. We used the profits from the newsletter to finish repaying our whopping unsecured debt, and in a relatively short period. According to my original plan, it was time to move on. But I’d developed such a bond with so many readers that my new passion transcended that plan. I was hooked, and pulling the plug on the newsletter was not an option. It didn’t cross my mind.
I also noticed that something weird was going on. My new knowledge was intoxicating; I couldn’t get enough. I was driven to learn more and more. Every week I’d receive stacks of letters from readers. Some were filled with questions; others were cries for help. Some were testimonials about how this person or that couple was understanding for the first time the principles and specific steps they needed to follow to take charge of their finances and become effective money managers.
The more I wrote, the more I developed a burning desire to know more. As I learned, I watched as my family’s personal financial picture began to improve—significantly. As I taught my readers to anticipate the unexpected, we became better prepared. As I waded into the waters of beginning investing, our portfolio experienced amazing growth. I actually learned the definition of portfolio. I could hardly believe the confidence I felt in the knowledge I was gaining.
Often I would step back and look at myself through eyes of astonishment. “Look at you! What an unlikely development for someone who was so financially ignorant, so downtrodden by debt, and so unwilling to change.” I liked what I saw. My husband liked it too.
There is no doubt in my mind that getting out of debt is the important first step in gaining control of your personal finances. But then what? The only way to stay out of debt and keep moving toward a secure financial future is to manage your income effectively. That means adopting a new way of living. It may require giving up old ways of thinking, changing your attitudes about money, and rejecting the notion that you are entitled to more than you can afford now, even when the credit industry says you are more than qualified.
It’s only fair that I warn you: I am seriously opinionated on this matter of money, credit, and consumer debt. I refuse to pull punches or take the soft approach. I lived far too many years in financial bondage to see that condition as tolerable. I paid back more than $100,000 in unsecured debt and lived to tell about it. I’ve been there. I know what it takes. I know the temptations and challenges that hit you every day.
I am the first to admit that the countless offers of entitlement and promises of happiness that appear online and on our television screens day after day are more than just enticing. They are downright seductive. And I know the pain and personal devastation of cashing in on those promises only to find that having it now and paying for it later is not the path to contentment and peace of mind. Rather, it leads to self-centeredness and defeat.
I have written this book to present my case, in the most powerful way I know, that it is possible to live a rich, fulfilling life without consumer debt.
One of the most gratifying aspects of what I do is having readers tell me I’ve changed the direction of their lives. If that has been true for even one person, I am blessed, because I know my passion has found purpose. In that, I have found unspeakable fulfillment.
Wherever you are on your financial journey, consider this my personal invitation to join me and thousands of others on the road to a debt-proof life.