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Debt Free For Life: David Bach on Bankruptcy

March 28, 2011 by Lazy Man 1 Comment

A publicist for David Bach reached out to me last month to ask if I would be interested in reviewing his new book: Debt Free For Life. Usually, I pass. Reading a book and writing a quality review takes a dozens of hours for me. This request was different for a couple of reasons. One, it’s David Bach, one of the best known personal finance authors. The other was the request itself. It wasn’t to review the whole book – just one chapter.

The publicist clinched the deal when she mentioned that the chapter would be about bankruptcy. That’s one area of personal finance that I never write about here on Lazy Man and Money. The idea is keep yourself out of situations where the b-word is mentioned. Still, for the purposes of being complete, it is something that should be covered. At the risk of angering PETA, this kills two birds with one stone, metaphorically one of my favorite things to do.

The chapter on bankruptcy was a little dry – which is to be expected. A chapter on bankruptcy isn’t going to compete with Dancing With the Stars (unless you are dork like me). I don’t know about you, but if I was facing bankruptcy, I’d put a high value on the information being valuable, not the entertainment value of the information. Here are a few of the points that David Bach covers:

  • The best advice he has to those who may be considering bankruptcy – Here’s a hint, seek professional advice early – do not wait. (He couldn’t emphasize the importance of this more.)
  • The two chapters of bankruptcy applicable to individuals – Chapter 7 and Chapter 13 – Most people identify bankruptcy with Chapter 7, a total declaration of being unable to repay. Fewer people know about Chapter 13, which allows for a more flexible repayment schedule.
  • The factors to look at before applying for bankruptcy protection – Such factors include: how much you owe, your income, the types of debt, the assets you own, and what your future plans are for the next 5 years.

Much of the chapter focuses on the final point. However, I learned some really interesting things about bankruptcy such as how you can keep your multi-million dollar home in Florida and Texas. Just make sure you live there 3.5 years before you declare and make sure you talk to a lawyer. Perhaps a more relevant tip is that retirement accounts can be protected. This is no only yet another reason to max out your retirement contributions, but also a warning not to tap that money to pay down credit cards.

Finally, the chapter ends with Bach making some very important points. Briefly paraphrased, filing for bankruptcy doesn’t make you a bad person. It can cause depression and it may be wise to seek council beyond a financial and legal. He makes a great point that bankruptcy is temporary and that it too will pass.

Filed Under: Book Review Tagged With: bankruptcy, david bach

Snowforting: Snowflaking an Emergency Fund

April 4, 2019 by Lazy Man 19 Comments

snow-fort.jpgThere are lot of metaphors in the world of personal finance. If you want to be a personal financial guru, you have to have one. Robert Kiyosaki has his Rich Dad, Poor Dad. David Bach has the Latte Factor. Dave Ramsey has his Debt Snowball.

David Bach’s Latte Factor is the practice of looking at the small things you spend your money on every day and see whether you could redirect that spending to yourself. A personal finance guy defined the “debt snowball” as when you pay off the smallest debt first to create the greatest momentum in your debt snowball. Recently Paid Twice has sparked a snowflake revolution with her snowflaking primer, originally taken from an iVillage Message Board. Paid Twice explains how she snowflakes as “I also try to collect up little bits of money wherever I can and I apply those as well to my top priority debt as immediately as possible.” If you think about it, the idea is simply the combination of the Latte Factor and the Debt Snowball. Why it’s not called a Latte Snowball mystifies me to this day – it must be due to copyright issues.

Yesterday, Brip Blap coined the term wealthstreaming – or snowflaking for income. (I think he should have gone with wealthflurrying to keep with the snow theme) His idea with wealthstreaming is to have multiple income streams. A bunch of small streams is better than one large one – diversification is the key. I didn’t have a fancy word for it, but the concept was similar to the first post I’ve written for Prosper’s Blog.

I realize that Lazy Man and Money is going to nowhere if I don’t coin a term and/or champion a cause. So today, I’d like to introduce you to snowforting. Snowforting is the practice of building an emergency fund from little bits of money (snowflakes) from savings wherever you may find them. The more snowflakes that you add to your emergency fund, the stronger your snowfort becomes. Get a strong enough snowfort and you can shelter yourself from nearly any emergency.

Over the last 20 months my wife and I have built an 8-month snowfort. We are looking to build that up to a year. How strong is your snowfort?

Photo Credit: your neighborhood librarian

Filed Under: Financial Planning Tagged With: dave ramsey, david bach, emergency fund, financial guru, ivillage message board, multiple income streams, rich dad poor dad, robert kiyosaki, snowball, snowflakes, snowflaking, snowfort, wealthstreaming

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