The Four Laws of Debt Free Prosperity by Blaine Harris and Charles Coonradt with Lee Nelson is an excellent book that explains the principles of financial control necessary for enjoying a well-balanced life. I liked it so much that I added to "Books I Recommend" that are available for purchase through Amazon.com.
The book is entertaining and easy to read as it explains the laws through the story of a man named Paul Smith and his neighbor Mary Sessions (based on a true story). Paul is a man deeply in debt and on the brink of financial disaster. Mary is his elderly neighbor who befriends him and teaches him The Four Laws of Debt Free Prosperity.
Though the book was written in 1996, its financial principles are timeless and in accord with the teachings of many of today's financial gurus, such as Dave Ramsey.
Tracking - The First Law of Debt Free Prosperity
The book asserts that, "Tracking daily expenses is the first necessary step toward any kind of financial success." It goes on to explain that without record keeping, you have no way of telling how well you are doing. It suggests that you keep a record of every single expense. I started to think about this and came to the conclusion that recording only my daily earnings and savings is not giving an accurate financial picture. I think I could use some improvement in this area, so beginning in August, I am going to add a record of my expenses to my Daily Progress Report.
Targeting - The Second Law of Debt Free Prosperity
The book claims that setting targets, or goals, is necessary for financial success. It presents some guidelines on setting and achieving goals from the book The Game of Work by Chuck Coonradt. (I have added that book to my list of books to read.) He asserts that goals must be written ("goals not written down are wishes"), they must be your own, they must be measurable and specific, they must be stated in the most visible terms available, and they must contain a deadline. I figure that I've pretty much got this one covered with my clearly defined goal of paying off $44,000 by 10/01/10. And I figure that it doesn't get much more visible than on a blog!
Trimming - The Third Law of Debt Free Prosperity
"The third law is: live on less than you earn so you can have a surplus to get you out of debt and invest in assets that appreciate." Also described as trimming, as in trimming your expenses. They suggest that you pay yourself first, by using 10% of your income to pay off debts or invest, and living on the 90% that is left. In this way you will automatically adjust your spending, whereas if you try to wait and see what's left at the end of the month, there will be nothing left. (I can attest to that!)
Training - The Fourth Law of Debt Free Prosperity
The book asserts that "The people who understand money spend it on assets that generate wealth. Those who don't understand money, spend it on things that consume wealth, and thus the rich get richer and the poor get poorer." So, financial education is necessary for financial success. I think this makes sense. When I am finally out of debt, I will need to brush up on what to do with my money. (I got a good start with this from another book that I will be reviewing soon.)
So, that is a summary of the four laws. The book also explains how to pay off your debts from smallest to largest, using the "debt eliminator" strategy, which is exactly the same thing as a Debt Snowball.
It also contains several investment tables that are very encouraging. One shows how in just 6 years you could pay off $31,131 of debt AND save $51,467 by paying/saving $1,120 a month (which happens to be very close to my current debt and the amount I am currently snowballing!).
Another is titled "Save to Become a Millionaire" and shows how much money you would need to save monthly to have $1 million, $2 million, and $3 million by age 65 (invested at 15%). For someone 40 years old (I'm 39 1/2), I could have $1 million by saving $300 a month, $2 million by saving $600 a month, and $3 million by saving $900 a month. It is even more encouraging if you are younger. If you are 25 years old you could have $1 million by saving just $30 a month, $2 million by saving just $60 a month, or $3 million by saving just $90 a month!
Yes, 15% interest might be a stretch, but I find the figures very inspiring. I have two sisters who are 27 and 29. I so want the to start now!
Anyway, I found this to be a really good book. None of the Laws are really anything new. But financial success is like dieting success. We all know what to do, but we may need some encouragement to do it. I found this book to be great encouragement!