Managing Debt For Dummies – Book Summary

In Managing Debt For Dummies, John Ventura says that to be in debt and saving at the same time is the wrong strategy for someone who wants to free debt. Why? This is because the money you pay as interest on the debt is higher than the interest you are earning from savings. The money you’re saving should go to living expenses and paying debts; this is how you slay debt expeditiously.

Pay your debt first, save later.

After reading Managing Debt For Dummies, I pulled out all my savings and used that money to clear my high-interest debts. I was paying higher interest on debt than the divided I was getting every year. Today my discretionary income is higher since I have no debt. All the money that was going to debt payment plus the interest is what I save every month.

Use recommended standard percentages to gauge your finances

Financial gurus unanimously agree that basic living expenses, the total debt you owe should equal no more than a certain percentage of a net household income. This is an income after tax deductions, in other words, your home take pay. Some percentages given in Managing Debt For Dummies are as follows;

Your monthly housing expense should take 25 percent of your net household income or 35 percent if you’re to paying homeowner’s insurance, property taxes, home maintenance, monthly mortgage principal, and all other housing expense plus monthly debt service.

Consumer debt, all credit cards, student loans, medical debts, and so on should take 10 percent of your net household income.

Utility things like water, power et al should take 15 percent of your net household income. 

For transportation use 15 percent of your net household income.

Savings at least 10 percent of your net household income.

Everything else, things to do with food, clothing, entertainment, and so on use 25 percent of your net household income

Have a flexible budget that changes with your finances. You must have a budget. A budget will help you to get out of debt faster. Sacrifice along the way and as you keep on putting an extra dollar towards debt payment the faster you will be debt-free and have money to contribute towards your financial safety net.