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FAQ

FAQs Table of Contents

 

Will your program work for me with my income or debt load?

How can I pay off my debts and save for my children's education at the same time?

Should I get a consolidation loan to pay off some of my debts, or should I just pay them off as they are now?

Should I tithe to my church while I'm trying to pay off my debts?

Should I lease a car?

Should I close my credit card accounts as I pay them off?

How can I determine my Accelerator Margin if my income is inconsistent from month to month?

What do I do if my spouse/partner is not interested in cooperating with me in implementing your plan?

What about using mortgage debt to buy investment real estate?

What about just declaring bankruptcy?

Do I need to own a home for this program to work for me?

What if I can't even make all my payments each month?

How can I possibly pay off a 30-year mortgage in 5 to 7 years?

Should I cash in my IRA or other tax-sheltered retirement account to use the money for debt-elimination?

What if my budget is so tight that I have nothing extra available to apply to debt-elimination?

How does your system compare to a bi-weekly payment schedule?

Shouldn't I pay off my debts in interest rate order...highest interest rates first?

Should I include my car lease in my debt-elimination plan?

I've been contacted by a coaching company called Prosper. Are they representing you?

What do you think of what's called an "Inverse Mortgage?"

What do you think of what's called a "Money Merge Account"Is it really a good idea to accelerate the payoff of my mortgage?

What I really need right now is an additional income stream. Can you help me?

Is your program a scam?

 

Answers:

 

Will your program work for me with my income or debt load?

Lenders lend out money based on what are called "ratios," which essentially compare your income to your debts or your income to your monthly payments. What this means is that, if you have a small income, they will lend you a comparatively small amount of money. If you have a larger income, they will lend you a larger amount of money. But the ratio of that loan, or credit card credit limit, or financed amount on a car compared to your income will be approximately the same, whether your income is high or low. For example, if your income is say $30,000 a year, a lender might offer you an $80,000 mortgage. A credit card company might offer you a $1,500 limit on a credit card. But if your income was $60,000 a year, that same lender might offer you a $160,000 mortgage, and the credit card company might up the charge limit to $3,000. The numbers get bigger, but the ratios of the incomes to the debt amounts are the same. This means your income will generally be able to pay off your debts in about 5 to 7 years no matter what that income is, because your debt load should be proportionate to your income. Bigger income, bigger debts. Smaller income, smaller debts. The program will work for you in either case. The only requirement is that you are at least able to make the minimum required monthly payments on all your debts each month. If you're not able to make your monthly payments, I suggest you check out the free Cash Flow Analysis™ at www.debtfree.com.

 

 

How can I pay off my debts and save for my children's education at the same time?

This is probably the most emotionally charged issue I deal with, but the fact is that you may have to choose between building a secure future for yourself and paying for your children's educations. What I did was to "help" my kids with college expenses, amounting to about half what it cost them to go to school. They not only worked some, but they took their classes very seriously, because they had personal dollars invested in them. The idea that we "owe our kids a college education" was started by colleges, just like Hallmark® creates holidays so they can sell more cards. What we do owe our kids is a realistic perspective on how life works. And, in life beyond mom and dad's house, no one gives you anything for nothing. So allowing them to participate or even completely underwrite their education helps "educate" them for the reality that you have to WORK for everything of value you want in your life. Am I saying that it's wrong to pay for part or all of your child's education? No. But I am saying that, if you're not wealthy enough to BOTH fully fund your retirement AND pay for their educations, then pick funding your retirement as your top priority. If you make paying for your children's educations a higher priority than funding your retirement, you'd better get your kids to sign a contract guaranteeing that they will take you in and support you in your old age. Because, if you invest your retirement into their educations, they ARE your retirement. My conviction on this is solid, because I have seen people kill themselves to put their kids through college and then end up destitute. It's heartbreaking. Help your children as much as you can, but don't sacrifice you for them...at least not after they're old enough to go to college. That's the way I see it. Feel free to disagree. :-)

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Should I get a consolidation loan to pay off some of my debts, or should I just pay them off as they are now?

Debt consolidation can be a useful tool in your debt-elimination plan, as long as the newly freed-up monthly cash flow is used to accelerate the pay off of all your debts. If it's used to just buy more current lifestyle stuff and experiences, you haven't improved your life one bit. And, I also recommend you cut up and close the accounts on all but a couple of the credit cards you paid off or you'll be tempted to charge them back up again...leaving you far worse off than before your consolidation. The important element you need is a debt-elimination PLAN. Consolidation is just a temporary monthly cash flow relief mechanism. It doesn't reduce your debt at all. You still owe the same amount of money...probably more if any fees were rolled into the new loan. The Transforming Debt into Wealth® system provides a solid, proven plan. If you use consolidation as part of a TDIW debt-elimination plan, it can be helpful. Otherwise it's likely just temporary relief.

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Should I tithe to my church while I'm trying to pay off my debts?

My wife and I tithe, and we contribute above our tithes to ministries, organizations, and individuals we feel led to help. We are happy to be a delivery system for God's blessings and support to His other children. I believe tithing is an act of worship. Abraham tithed in Genesis 14 and his grandson Jacob tithed in Genesis 28, long before there was a Mosaic Law institutionalizing tithing. I believe God inspired tithing as a way of taking our faith temperature. If we believe in God's providence at least enough to part with 10% of our precious money to worship Him, we do indeed believe. God knows that His greatest competition in our heart is our own self-serving nature. Asking for the first 10% of our income is a clever way for God to regularly see where He truly stands in our lives. But for many people the issue is that they cannot mathematically afford to tithe and make the monthly payments on their debts. This is a slightly more complicated situation to which I have given a lot of thought and prayer, and here's where it has led me. I believe that God expects us to meet our obligations and honor our commitments IF POSSIBLE (Matt 5:37, James 5:12). I interpret that to mean that, if we can at least make the payments on money we agreed (credit card application form, mortgage contract) to pay back, we should do that. God expects us to honor those commitments, if we can. If we cannot make the payments because our income is insufficient, we can then explore other options such as debt management, debt settlement, or bankruptcy with a clear conscience. But let's get back to the tithe. I believe, based on the Bible, that God would want us to honor our obligations until we've freed up enough monthly cash flow to tithe and make all our remaining debt payments. Once a person has reached that point, I would recommend they begin tithing while they continue eliminating the rest of their debts. I realize that adding the tithe in as soon as mathematically possible would evaporate their Accelerator Margin™ and they would have to begin building it anew, but this is where faith comes in. My faith tells me that God would honor their obedience to tithe while fulfilling their commitments to their creditors. I believe He would grant them financial favor, making things go better than expected so they could rebuild their Accelerator Margin and pay off their remaining debts faster than mathematics might suggest. I also realize that the issue of faith is a highly personal one, but I'm frequently asked my "personal" position, so I'm expressing it here.

 

 

Should I lease a car?

My entire money philosophy is based on a foundational belief that there are two mutually-exclusive ways for an income earner to use their income stream: To RENT a lifestyle.To build a financially independent life. In my way of seeing the world, leasing is renting. You give tens of thousands of your hard-earned dollars to the leasing company and you end up with nothing. Not even equity in the car. Nothing. When I experienced the financial crash that led me to write my first book on the subject, I was leasing a gold Corvette for me and a luxury sedan for my wife. Both payments caused us heartache when crunch time came. So I sold the gold 'Vette and got a white 'Vette...but the white 'Vette was a Chevette. It's low cost and great mileage helped me financially dig out of the hole I'd put us in by renting our fancy leased and credit-funded lifestyle. My philosophy is that a car is "Transportation," not self-image, professional image, or anything else. Of course we all want a dependable vehicle that doesn't look like a refugee from a salvage yard. But you can keep yourself in good, clean, used vehicles that will give you years of service for $10,000 or even less...leaving a lot more of your income to build a life...because you're not wasting it on renting a lifestyle.

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Should I close my credit card accounts as I pay them off?

I recommend you do not close all the accounts. The reason is that your credit score (FICO score) will actually be higher if you have a couple open credit card lines without balances on them. Today your credit score can be a factor in much more than just qualifying for more credit. It is frequently used by employers considering you for a job, phone companies in determining your deposit for phone service, insurance companies assessing your likelihood of having an accident or getting sick, and a lot more. So keeping your score in good shape can still have value for you even after you're debt free. I suggest you to set aside one Visa® card and one MasterCard®, plus one or two gasoline cards if you use them, and then I urge you to cut up all your remaining credit cards and close the accounts when you pay them off. To be clear here, a regular American Express® green, gold, or platinum card is not really a credit card. It’s a charge card, and the full balance is due every month, so you can keep one of these if you use it for business or some other necessary purpose. But the rest need to go. These accounts should be completely paid off as part of the debt-elimination plan you’ll be developing with your Transforming Debt into Wealth® System, but you’ll keep the accounts open and periodically use the cards for purchases you would make anyway… purchases you would otherwise pay for with cash or a check. Purchases that you know you can and will pay off completely as soon as they show up on the next monthly bill.

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How can I determine my Accelerator Margin if my income is inconsistent from month to month?

For planning purposes my suggestion is to average out your annual income into monthly chunks, so you can at least estimate how long it will take you to pay off your debts. Take last year's income (or this year's projected income) and divide it by 12 to come up with your average monthly income. From a practical standpoint, you'll probably need to pour extra Accelerator Margin™ into your debt-elimination payments in the months when money comes in, and then back off to maybe just making your minimum required payments when cash flow is low. In fact, you should probably look at some ratio, like 75/25, where in a month when your income is high you use 75% of the extra amount for Accelerator Margin and put the remaining 25% aside in case you have a shortfall the following month. I'd think that after a few months of this you'll be able to see what percentage you need to apply to your circumstances. Your situation makes the TDIW process a little more challenging to manage, but it will still work for you. Back to Top What do I do if my spouse/partner is not interested in cooperating with me in implementing your plan? I'm not a marriage counselor, but the issue usually revolves around "right now" thinking versus "long term" thinking. You might want to have a discussion with him or her about your relationship's long term dreams and goals. How do you want your golden years to look? Once the long term goal or vision is clear ask, "What steps do you think we'll need to take to get there?" If that doesn't bring about a useful response, you might try, "Do you think we can continue using money the way we do now and get to this vision we share for the future?" If he or she comes to a place where they too can see that continuing your current financial patterns will not get you to where you want to end up, then you could suggest they listen to the CDs as one possible alternative strategy. If that doesn't work, I'd seriously consider suggesting to him or her that you visit with a counselor, because a relationship that's incongruent on the issue of money is one that can be a time bomb ticking away. Money disagreements are one of the leading causes of divorce, so it's nothing to be trifled with. If your relationship is otherwise strong, you should need very little counseling. The problem many couples have is that they talked about a lot of things when they were courting...unfortunately, how they view and use money was probably not one of them. So they end up sharing income and expenses, but not a common philosophy on how they should be managed. You have to get to as common a money philosophy as possible or you'll continue experiencing minor and potentially major conflict in this area.

 

 

What about using mortgage debt to buy investment real estate?

My position on mortgages for real estate investing is that you can and should use debt to leverage a real estate investing business, but you should NOT mortgage your personal residence to buy investment properties. Real estate investing is a BUSINESS. It is not just a personal investing activity. If you want to invest in real estate, start a corporation or limited liability company (LLC) to house the investing activity. Creating this business entity will build a legal wall between your personal finances and your investment properties, so that if anyone gets injured or for any other reason decides to sue one of your properties, they can only get to your business, not your personal assets. But be sure of what a real estate investing business should accomplish for you before you start down that road. The purpose of any business is to flow cash over the legal wall into your personal finances. If money is flowing from the personal side into the business side, you don't have a business, you have a welfare program. The business should exist to give you life, you should not exist to give the business life. If, after the first 6 months to a year, you are supporting the business out of your personal funds, seriously consider shutting it down. It is diminishing not improving your personal financial life.

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What about just declaring bankruptcy?

Bankruptcy laws were principally written for the person who finds him- or herself in an untenable financial situation, through no fault of their own. Bankruptcy is for people who CANNOT make their monthly payments. If you CAN make your monthly payments — even if that's all you can do — bailing out on your creditors because that's an unpleasant or restrictive circumstance is not what the law is for. And if you CAN at least make your monthly payments, my Transforming Debt into Wealth® program will work for you. It will help you pay everything off as fast as it can be paid off. At that point you will have a substantial net worth, because all your assets will be YOUR assets. And your monthly cash flow will be YOUR monthly cash flow. That's the purpose of the TDIW system. If you CANNOT make your monthly payments, I suggest you check out www.debtfree.com and use their free Cash Flow Analysis™ tool. This free, no-obligation computer analysis will determine the best course of action for your individual income/debt situation. And your data is not kept on their computer, so your privacy is safe.

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Do I need to own a home for this program to work for me?

No, you don’t need to own a home for the program to benefit you. If you do not have a mortgage, you should be able to get debt-free that much faster. Then, if you wish to buy a home, you’ll have a cleaner credit rating/FICO score when you're debt-free, and you’ll be able to more quickly save up a down payment, because most of your monthly income will be available for saving.

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What if I can't even make all my payments each month?

If you truly cannot even cover the minimum requested monthly payments to all your creditors each month, I suggest you go to www.debtfree.com for a free, no obligation Cash Flow Analysis™ that will suggest the best course of action for your unique circumstance.

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How can I possibly pay off a 30-year mortgage in 5 to 7 years?

I have heard this question many times over the nearly two decades I've been teaching my system. The mortgage companies live on making people believe it takes 30 years to pay off a mortgage, "because it's so big an amount you need 360 bite-sized pieces to be able to handle them on a monthly basis." The truth is quite different. They want 360 payments, because that kind of amortization allows them to charge you total interest in the range of 1.5 times the amount of the loan. So you end up paying them back around 2.5 times what you borrowed. Let me try a simple example. Let's say you have a $100,000 mortgage with approximately a $700 P&I payment. My system first helps you pay off all non-mortgage debt. When that's gone, we'll say you could typically add $1,300 a month to your payment (formerly car and credit card payments). That would mean you'd be paying $2,000 a month on the mortgage. Now divide the $100,000 balance by $2,000 a month. The answer is 50. Fifty MONTHS to payoff. That's 4 years 2 months! Of course that simple math disregards interest costs, but because you're paying off the loan balance so fast, interest costs rapidly decline to insignificance. Of course we also disregarded the fact that, while you were paying off your cars and cards, you were somewhat reducing your mortgage balance, so it would be less than $100,000 when you began the $2,000 monthly payments. But let's be conservative and say interest charges add 10 months to the mortgage payoff, it would still be gone in just 5 years. The size of your mortgage is likely different than this example. But the size of your income would be proportionately different as well. It should work similarly.

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Should I cash in my IRA or other tax-sheltered retirement account to use the money for debt-elimination?

My standard answer on that is "No," especially for Baby Boomers or older. What I suggest is that you stop funding any investments (with the below exception) until you've paid off all your debts. The one exception to the above is that I suggest you continue funding any 401(k) up to the amount your employer will match, but no more. If you're currently funding your 401(k) above the match percentage, reduce your contribution to the maximum match percentage and use the rest for debt elimination. I also suggest that you NOT cash in or borrow from any retirement accounts to pay off debts. The problem with taking money out of a tax shelter is that you'll pay penalties AND taxes on the withdrawal. That's taking two steps backwards to take one step forward. You're better off just leaving that money in there and eliminating your debts monthly from your income. You'll probably sleep better too, knowing you haven't depleted your retirement account.

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What if my budget is so tight that I have nothing extra available to apply to debt-elimination? The program does not require any up front or any extra monthly amount (Accelerator Margin™ dollars) for it to work. Obviously, having some extra to put into the process each month will get you out of debt faster, but you don't have to have it to start. When you pay off your first debt, what used to be its monthly payment will become your starting Accelerator Margin™. And that will build, like a snowball rolling down hill, as each subsequent debt is eliminated, recovering its monthly payment. Doing the plan with zero Accelerator Margin™ can take a couple years longer, but that's still a lot sooner than just making the regular monthly payments over decades. And your budget may not be as tight as you feel it is right now. In the Transforming Debt into Wealth® course I show you many areas of life where money can tend to leak out of your finances...and how to plug those leaks so you can recover more monthly money to focus on debt-elimination. But extra money is not required to get started.

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How does your system compare to a bi-weekly payment schedule?

Biweekly mortgage plans can take several years off a 30-year mortgage, and save you several thousand dollars in interest. However, my Transforming Debt into Wealth® approach will generally take more than two decades off a 30-year mortgage, and save a typical household $150,000 or more in interest. A biweekly payment plan simply adds the equivalent of one extra payment a year. But the Transforming Debt into Wealth® plan adds a lot more. After all your other debts are paid off, which is typically what happens before the plan focuses on your mortgage, you will have recovered enough monthly payment money to be able to double, even triple your monthly mortgage payment. That kind of power chews up a mortgage's principal balance in just a handful of years.

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Shouldn't I pay off my debts in interest rate order...highest interest rates first?

The debt-elimination prioritization in the Transforming Debt into Wealth® system is based on what debts can be paid off the fastest. It puts those debts first, so that their monthly payments can be recovered more quickly and added to your Accelerator Margin™. A growing Accelerator Margin™ is the key to paying off your debts quickly. The TDIW system generally has you paying off debts so rapidly that interest rate is not a significant issue. The affects of interest rates are most onerous when you're making the minimum monthly payment, because the interest component of each payment is calculated on the remaining loan balance, which isn't going down very fast. But when you're paying down that balance in big chunks, the interest calculation has less and less unpaid balance to work with each month until it soon has nothing at all to calculate interest on. However, if you have a couple debts that have similar balances, but one has a higher interest rate, you can certainly reverse their order and pay off the higher interest rate one before the other. If their balances are substantially different, don't switch them. Back to Top

Should I include my car lease in my debt-elimination plan?

You can contact your leasing company and see if there is any provision for accelerating the payoff of your lease. If not, your choice is to simply leave it out of your debt elimination plan, pay off everything else, and when the lease is complete BUY a used car to replace it (or buy out the car you've been leasing). If you'd like to explore having someone assume your current lease, check out www.leasetrade.com, www.swapalease.com, or www.leasetrader.com.

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I've been contacted by a coaching company called Prosper. Are they representing you?

The professional financial coaches at Prosper (www.prosperlearning.com) are working with me to provide Transforming Debt into Wealth® coaching for those who would benefit from having a knowledgeable mentor lead them through the Transforming Debt into Wealth® process, and then further into investing and business-startup opportunities well beyond what's taught in the Transforming Debt into Wealth® system. Think of it like a celebrity who hires a fitness coach to help him or her get back in shape. It's not that they don't know how to eat less and exercise more on their own. It's that they know they'll be much more likely to succeed with the coach's knowledgeable advice...and their ongoing accountability to their coach. As I said, the Prosper program covers much more than debt-elimination. It's a "Personal Finance Mentoring" program that is customized to your situation and need. Your coach guides and instructs you through: Goal Setting Cash Flow ManagementRisk ReductionAccelerated Debt Elimination Emergency PlanningBuilding a Small Business (if you're interested)Investment PlanningTax ReductionRetirement PlanningCreating Wills and TrustsAnd more ... I've personally trained the Prosper coaches, and have received many favorable testimonials from Transforming Debt into Wealth® students who have worked with them. To view some Prosper Coaching Testimonials: Click Here.

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What do you think of what's called an "Inverse Mortgage?"

I do not recommend the "inverse mortgage." It is a wolf in sheep's clothing. The bottom line is that it is nothing more than a multi-level marketing scheme disguised as a mortgage reduction plan. Just put your mortgage into the Transforming Debt into Wealth® debt payoff plan and you'll get rid of your mortgage fast enough...and in a way that won't have any liabilities.

 

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What do you think of what's called a "Money Merge account?"

Money merge accounts don't get you out of debt as fast as a disciplined application of the system I teach. Plus they involve borrowing, which always adds to your costs (no loan is cost-free). The drawback to this setup is that there is literally no flexibility built in. If you should have some type of emergency arise while this program is ongoing, you will need to already have funds set aside to address the emergency. For this reason, it is absolutely necessary for you to consider ALL of the implications and plan for them before deciding to go with a money merge account. Another drawback to this type of account is the fees involved in setting one up. Typically, the lender will charge an additional $3000 in setup fees to get a money merge account going. This is added to the principal of your mortgage right at the start, which represents, at the least, an additional payment you will have to make in the long run. If you know you do not have the discipline to manage the debt-elimination process yourself, maybe a money merge account would take all options away from you so you'd have to follow the plan. But if you can do it yourself, you'll get out of debt faster just following my plan on your own.

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Is it really a good idea to accelerate the payoff of my mortgage?

I've answered this question so many times that I'll use my response to a recent email inquirer here, because he covered every common angle from which people approach this decision. Here are my answers: Your mortgage interest tax deduction, even if it’s partly a business deduction, is not a good reason to keep paying interest. As I explain in the Transforming Debt into Wealth® program, for every dollar of interest you pay, the mortgage interest tax deduction will save you about 25 to 33 cents of income tax, depending on what tax bracket you’re in. So you're spending a dollar in interest to save a quarter. That is not a good deal for you. When someone tells you that you have a "low" mortgage interest rate, like 6%, just look at your monthly payment statement or coupon. See what percentage of your payment each month is interest. It’s likely more than 90% interest! You would pay only 6% interest if you paid the entire mortgage balance off in one year. Otherwise, you are paying amortized interest that is front-loaded. But the bigger, more important issue is how much interest you are paying overall. For every $100,000 you borrow in a typical 30-year 6% fixed mortgage, you will end up paying back $216,000. That’s the $100,000 you borrowed PLUS $116,000 in interest! That’s 116% total interest! Not 6%. Forget about the annual percentage rate. Look at the dollars. That $116,000 would be much more valuable in YOUR investment portfolio than in your lender’s investment portfolio. Any arguments about how inflation will affect the “feeling” of your monthly payments is, quite frankly, financial hooey. It’s smoke and mirrors being used to keep people comfortable with their debt load. The reality is that NO personal debt is good debt, no matter how much inflation might appear to reduce the value of the dollars being paid each month. Real wealth is OWNING things, not making payments on them. The “Opportunity Cost” argument that you could better use the money somewhere other than reducing your mortgage balance is also hooey. The stock market has essentially run in place for the past decade, so – unless you’re an exceptional stock picker – you would not have done better with the money yourself than putting it into your mortgage payoff. First of all, at 6% interest, you’ll get a guaranteed after-tax ROI of 6% on your money by paying off your balance. Secondly you also realize the appreciation of the asset’s value (the value of your home) during that time. That’s way better than you’d do with any other “capital-guaranteed” investment, such as government bonds, CDs, or money market funds. You’ve finally hit the real issue for most people – choosing between building their wealth or enjoying themselves with their income right now. That is the ultimate choice in building personal financial independence. According to a government study, the number one reason Americans give when they reach retirement with insufficient resources is “The inability to delay gratification.” So, choose. Build your wealth, by transferring the equity in your home from the “Owe” side of your net worth statement to the “Own” side…or have some fun right now and just hope things will “work out.” By the way...they won’t.

 

 

What I really need right now is an additional income stream. Can you help me?

Yes, I believe I can...if you're really looking for an opportunity and not just a job. If you really want to join my team in a fun, dynamic income opportunity that is transforming the definition of a "home-based" business, click here. I will work with you and support your development in the business, as long as you take it seriously and put the energy into it that a business opportunity with this potential deserves. My team has a blast, but we work hard to see each other's dreams come true. So - with that said - if you want to join my personal team, click here.

 

 

Is your program a scam?

If you've done a web search on my name or the Transforming Debt into Wealth® name, you may have come across a web site claiming to "objectively" review other people's products or services. Anyone familiar with online marketing knows that the vast majority of these sites are simply fronts to sell the site owner's own product or service. They make theirs look good by calling most everyone else's bad...or a "scam." The reason they use this "Review other high-profile products" approach is that they can use my name and others in their web page keywords, so people searching for me will actually be led to their site and thereby raise the popularity of their site. The internet is like the wall in a roadside gas station restroom. Anyone can write anything on there. There are no referees or gatekeepers. It's the wild, wild west and veracity is often the victim. I have been teaching personal finance and selling multimedia educational products all around the world for nearly a quarter century, and I've been advertised on the radio and internet by my publishers for more than a decade. If I or any of my products was a scam, the scam police would've caught up with us a long time ago. Does that mean every customer has been totally happy without a complaint? Only undertakers can make that claim. But I can say we have always made every effort to be more than fair, often going far beyond what was required to satisfy the few customers who did have complaints. In the end, isn't that the way you want to be treated? We endeavor to provide you with a valuable product or service, and then fully honor our guarantees or be as fair as is reasonable if guarantees have expired.

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