Why do you accept credit cards in payment on a site devoted to living without debt?


We accept credit cards in payment for the products sold on this web site because credit cards are an accepted, secure and convenient way to do business online. Buying with a credit card gives the purchaser certain protections with regard to canceling a purchase. It allows the transaction to be completed immediately which expedites receipt of the product.


Credit card use does not necessarily mean a debt is incurred if the purchaser has the money on hand at the time of the purchase to pay off the charge within the grace period of the billing cycle in which it occurs. Credit card use in this case is for convenience rather than for access to money one doesn’t have.


If a purchaser does incur debt by the use of a credit card to obtain our products, it will be a small debt, indeed, and well worth the trouble as the value of the information contained in our products is many times the purchase price.


Which credit cards do I pay off first, the ones with the highest interest rates or the ones with the lowest balances?


There is no correct answer to this question. It depends on your situation and your temperament. If you hate paying interest on your debt, then pay off the cards with the highest interest rates first. If you want to see rapid progress, reduce the number of payments you have to make, and increase your cash flow quickly, then pay off the cards with the lowest balances first.


Ideally, you may have some cards with high interest rates and low balances. Always pay those off first.


What is the recommended distribution of income into the various budget expense categories?


The government publishes tables that show what the American consumer spends on average for various living expenses such as food, shelter, clothing, and so forth. In 1992, according to government sources, the average American family spent 28% of their pretax income for housing, 13% for food, including eating out, 5% for clothing and so on. But what do those figures mean to you? In reality, not much. First of all, if you are not average, meaning of average income, then these figures are virtually worthless. Lower income families will likely spend a higher percentage of income on housing, food, and clothing. Families with higher incomes may spend a lower percentage on these items, but they may not. They may simply purchase more expensive houses, eat out more often and at more expensive restaurants, and buy brand name or designer clothes.


What are more important than national averages are your financial goals and your desired standard of living. These will determine how much you spend in each category. In other words, your spending priorities will dictate how much you spend for housing, food, clothing, transportation, recreation, etc.. Those priorities will reflect your goals. So if you place a high priority on accumulating savings and on living in a good neighborhood, then your spending as a percentage of your income will reflect this, and this spending may exceed the average in these categories. Consequently, you may spend less than average on food, transportation, clothing, and entertainment in order to fund your priorities of housing and savings. An appropriate distribution of income among expense categories is one which allows you to realize your goals through the adequate funding of your priorities. If you aren’t achieving your goals, then some of your spending may need adjustment, but only you can determine where to cut and add.


You may need to sharpen your goals and spending priorities. Clearly defined goals and spending priorities will make it easier to make decisions about how much to set aside for this or that expense.


Should I pay off my debt first and then start accumulating savings, or should I start saving now and pay off my debt later?


The reason you are in debt is because you have spent money you didn’t have. You have used credit as a substitute for savings. To change this situation, you need to accumulate money so you have it when you need it and no longer have to rely on credit. If you wait until you pay off your debts to accumulate money, you will continue to have to rely on credit. You will remain in a cycle of debt.


If you make regular payments on your debt and take on no new debt, you will eventually get out of debt. It is very difficult to avoid new debt, however, unless you have money over and above your normal monthly expenses and debt service. This money is savings. So saving must occur while debt is being paid off. Savings replaces credit as a means for paying for things, eliminating the need for new debt. This makes it possible to get completely our of debt and to stay out of debt.


Start by accumulating an emergency savings account equal to three to six months take home pay. Once you have that in place, take advantage of your company’s 401K to the extent that you can, especially if your employer matches your contributions. As you pay off your debt, use the money you were putting toward monthly debt payments to add to your savings. Keep making those payments, only make them to yourself.


Is the book True Prosperity: Your Guide to a Cash-Based Lifestyle published in 1996 still relevant today?


The book True Prosperity: Your Guide to a Cash-Based Lifestyle is based on a time-tested approach to personal finance: living within one’s means. Subsequent to the Great Recession of 2007 which was brought on by excessive debt at all levels of the economic structure: private, corporate, and governmental, True Prosperity is more relevant than ever. The illusion of prosperity that mortgage and consumer debt purchased prior to the housing bust became painfully apparent as large numbers of people saw their assets wiped out when housing prices collapsed and other asset markets tumbled, leaving them with a mountain of debt and little money with which to pay it back. Many lost their homes, their retirement savings, and their jobs. People want the financial security and freedom that comes from being truly prosperous. True Prosperity describes a path to genuine prosperity based on accumulated savings and no debt.


Some of the statistics referenced in True Prosperity are dated. In most cases, updated statistics make a better case for a cash-based lifestyle today. Take the amount of consumer debt at a level of $ 2.45 trillion as of August of 2009 according to the Federal Reserve. This is approximately three times the level of consumer debt that existed at the time that True Prosperity was written in 1996.


The terms of some savings vehicles discussed in True Prosperity have changed, specifically Savings Bonds and government Treasuries. See Updates to True Prosperity noted on this web site for current Savings Bonds and government Treasuries terms.