Be debt free for life, urges author David Bach
Best-selling author says Americans are paying off their debt
By Jen A. Miller
David Bach attended his first financial seminar when he was
only 7 years old. Since then, he has become a regular on the "Today Show,"
crafted Oprah's debt diet and written 12 personal finance books, 11 of which
have become best-sellers -- in a row.
|David Bach, author,
'Debt Free for Life'
David Bach's latest book, "Debt Free for Life," comes with a challenge
to get 1 million people to pay down $1 billion worth of debt. If you must borrow, he says, comparison shop and get the best possible deal. He talked to CreditCards.com about debt, how our attitudes toward it need to change and how to eliminate it from your life.
His latest book, "Debt Free for Life," comes with a challenge
to get 1 million people to pay down $1 billion worth of debt.
When he offered "Debt Free for Life"
as a free download on AOL in January, 78,000 people took him up on that offer.
He talked to Creditcards.com recently about debt and how to
nix it from your life.
seems to be so much part of our lives. Can we really be debt free for life?
David Bach: We
absolutely can. There is a movement across America right now where millions
desire to get out of debt like they never have before. The last time we saw
this movement was after Great Depression. My grandmother came from the Great
Depression. She grew up with values that were if you didn't have the cash, you
can't afford to buy it. If you borrow money, you need to pay it back. The
sooner you're debt free, the better
We've really gotten away from that. With the recession and
people losing their jobs, people are having record amounts of debt, whether its
mortgage debt, credit card debt, student loan debt.
The past three years, with this recession, has created a
movement in this country with two key things: Americans are saving more than
ever before. People are paying down their debt. Almost $200 billion of credit
card debt was paid off last year. I think this is going to be a long-term shift
in our country. We're living through a debt reduction economy. That is a very
healthy thing for Americans.
do credit card and mortgage debt tie into each other?
Bach: A big part
of what led me to write this book: I do this segment called "Money 911" on "The
Today Show." In the beginning, a lot of our questions were about investing. In
the last few years, I've gone from answering questions about investing to 75
percent of questions I get are related to debt -- if not more.
There used to be this belief in this country -- and I too
bought into, but I've changed my mind -- that there's good debt and bad debt. We're
trained that good debt was mortgage debt and borrowing for a college education.
Bad debt was credit card debt.
All debt is just debt. All debt can be bad if you can't
afford to pay it back.
What I teach in "Debt Free for Life": If you're going to
borrow money, get the best possible deal on where you go to borrow money.
People need to shop for a better credit card and find a
better rate. And the good news is that rates are coming down and there are phenomenal
credit cards out there and opportunities for people to switch from a bad credit
card to a helpful credit card.
the DOLP System.
Bach: DOLP is Dead
On Last Payment.
DOLP is a method of paying down debt that I've been teaching
for well over a decade. It was highlighted on Oprah's "Debt Diet" that we did a
few years back. We've had millions of people exposed to this system. It's incredibly
simple. It helps people to see in black and white, in less than 10 minutes, how
much debt they really have.
You start it by becoming honest.
The DOLP method is a debt scale. If you want to lose weight,
you go in your bathroom and step on a scale. DOLP is your debt scale.
It's a mathematical formula to quickly, in a matter of
minutes, determine what debt should be your first debt to pay off. I teach
people to pay minimum payments on all of your debt and focus extra money on
priority target debt. That usually ends up being your smallest debt and
typically smallest credit card.
What we've now created is an online program that does all
this for you it's called Debtwise.com. The program is
powered by Equifax.
There used to be this belief in this country -- and I too
bought into, but I've changed my mind -- that there's good debt and bad debt.
What Debt Wise does is takes my DOLP system and it does all
the work for you because it pulls all your debt off of your credit file that Equifax
has. It does the math for you and shows you this is your priority debt, this is
the debt you have, this is when you'll be debt free -- your Debt Freedom Day --
based on your debt payments. If you want to pay off your debt faster, it runs those
We believe with Debt Wise that the average consumer can get
out of debt 15 years sooner and save over $30,000 in interest payments.
What's exciting about Debt Wise it that it automatically
updates, too. Every time you make a payment and a payment is recorded with
credit bureau, which they are every month, it's automatically updated.
we use credit cards responsibly?
Bach: I think we
can use credit cards responsibly. I also believe we live in a world where you
need to have credit cards. You need a credit card to rent cars, check into
hotels. You can use debit cards and pre-paid cards, but most people need a
I got myself into credit card debt in college, and it took me
almost three years to get out of that debt after college.
The way I've done it is I use an American Express charge
card for business. I use a debit card for personal, and I have one personal credit
card. I've run my entire financial life with essentially one debit card and one
I teach not only how to get out of debt, but making sure
when you have a credit card that you do all the right things to use them
responsibly, that you pay them automatically, that you always pay at least the minimum
payment but ideally you pay twice the minimum payment.
The problem is not using the credit card. The problem is borrowing
the money that you can't afford to pay off every month.
did you get started in this field?
Bach: I grew up
in this field, for better or for worse. I started going to investment seminars
at the age of seven because my father was a financial adviser who taught financial
classes. By the time I was 12 years old, I was teaching my parents' friends how
to invest. After I got out of college, I went into business with [my father]
and started teaching investment seminars for women.
I was one of the youngest senior vice presidents at Morgan
Stanley. I was there for nearly a decade and managed hundreds of millions of
dollars for average Americans who make $50,000, $60,000, $70,000 a year.
First I wrote "Smart Women Finish Rich." Then I wrote "Smart Couples Finish Rich." In that
time, I created seminars and had other people teach them across the country.
From there, I made decision to retire from Morgan Stanley in 2001. Now I just
completed my 12th book. I
have 7 million books out now. "Debt Free for Life" is our 11th
consecutive best-selling book.
surprises you most about people and money?
Bach: My core
single biggest message that I have shared since day one is that the secret to
building wealth is to pay yourself first, and the only way to build your wealth
is to pay yourself first automatically.
What surprises me to this day is that people who understand
what pay yourself means don't do it. I would like to think the people who
follow me are doing it, because we hear all their success stories. The message
hasn't changed for 20 years. I'm just surprised when I meet people and they're
in their 40s and 50s and 60s, and they haven't started saving yet.
It surprises me that when I'm teaching things, it's brand
new information. I think what's unfortunate is that we still don't have a
natural curriculum in the school system on basic financial learning. To me,
basic financial planning should taught in school. Just like science and math,
we should be teaching kids in schools basic financial planning principles.
See related: Consumer credit card debt falls further in November, Poll: Two out of five parents giving adult children bailouts, 4 finance experts -- and parents -- talk teens and money, How different cultures handle credit cards, When a parents 'favor' can ruin your credit
Published: January 31, 2011