BILL'S ANSWER
In some respects, your question is a bit like asking if the Atkins Diet will help a person lose weight. The secrets to cutting debt and losing weight are exactly the same — create a plan of action and then follow it. All wealth-building gurus, including John Cummuta, Dave Ramsey, Jean Chatzky, and Suze Orman, sound similar themes in their books and lectures. None of them are scams and their concepts are valid, but it's really what their value is to you and what do YOU do with the knowledge. I distilled their common themes to these eight points:
1. Make a budget — understand your expenses and priorities.
2. Live below your income — pretend you are poorer than you really are so you can save more.
3. Sell what you do not need — your things cost you in maintenance, storage, and depreciation.
4. Stop using credit cards — make a priority of retiring your revolving debt.
5. Make more money — get a conventional second job or start an online business.
6. Buy smart — buy sale items, used cars, and seasonal items out of season and don't buy things that depreciate on credit.
7. Save for emergencies — put cash aside so you are prepared for the unexpected.
8. Invest — let the miracle of compound interest work for you.
I do not wish to diminish these themes by summarizing them here. Each of these eight points are important and are followed by smart people who built wealth from nothing. All are common sense, and none are secret or unavailable elsewhere. What this means is that John Cummuta and other financial gurus are not scams, and they are offering real advice.
Like diet plans, different people respond to different approaches. John Cummuta and Dave Ramsey mix subtle Christian themes with their budget advice, which some may find invigorating and inspirational. Other readers, however, may find that approach off-putting. John Cummuta and Dave Ramsey created businesses out of selling their books and lectures in packages that cost hundreds of dollars. Suze Orman's books emphasize the importance of using money to serve the needs of family and friends. In other words, money is one way to measure wealth but not the only way. Jean Chatzky's writing is very approachable, but her readability comes at the expense of in-depth analysis.
John Cummuta and the five-year mortgage
Your question touches on one aspect of John Cummuta's plan that strikes me as impossible for most people — paying-off a mortgage in five to seven years. Cummuta justifies his argument by combining census and Federal Reserve statistics, and extrapolating available household income for retiring debt from these figures. I appreciate the macroeconomic approach and his reliance on government data as opposed to anecdotal data. However, Cummuta assumes all government data rests on the same assumptions, and that combining data from two sources will yield accurate results. This may not be the case, especially in states such as California where property values are significantly higher than the rest of the country. It is based on paying well more than minimum payments and rolling up all of your new found cash-flow (if you can find it in your own budget) into paying down debts.
On average, I think John Cummuta is accurate that it would be possible for the average American to pay-off their mortgage in five to seven years. I would argue that the inverse is true, too — if you are not average or have a new mortgage you will not be able to pay your mortgage in five to seven years. However, this is not to say I think John Cummuta's other lessons are less valuable.
Which is the best?
I am not panning nor endorsing the authors I mentioned above. Visit your local library and spend a few minutes reviewing the personal finance shelves. If an author writes in a manner that speaks to you and seems to convey accurate, common-sense information, then read his or her book and follow that author's advice. If you learn by listening, then consider one of the authors who sells CDs or taped lectures. If you learn best in a group, the four authors I mentioned tour the country giving seminars.
The secret is really not a secret — create a budget and work your plan.
I hope this information helps you Find. Learn & Save.
Best,
Bill
Joliet, IL | January 21, 2011
Braidwood, IL | December 06, 2010
December 06, 2010
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