In one weekend, I read The Total Money Makeover and Financial Peace Revisited (Dave's other book). These are great books! I believe the information in The Total Money Makeover as well as Financial Peace (Revisited) provide a clear and concise road map to help many people get out of debt and stay out of debt. To further learn about Dave's concepts, I will be attending the Financial Peace University at a local church here in town. I believe in these concepts so much, I have begun to integrate them into my client consultations regarding refinancing or purchasing a new home.
With all of this said, I do feel the book makes some broad generalizations. First, I do not agree with Dave's assessment that all life insurance products other than term life, are bad and that no one should ever consider any life insurance product other than term insurance. This probably is the best advice for most people, including your middle-class wage earner; however, there are definitely life insurance products that may be right for some people's long-term financial objectives. I just don't believe that one investment strategy (buy mutual funds only) is applicable to all income levels. I think most would agree that investment factors such as individual net worth, annual income, cash flow needs, age, estate planning, taxation considerations, as well as other factors will help guide an individual to choose the investment that assist them in achieving their long and short term financial goals. Yes there are insurance products other than term insurance that may be prudent for someone's situation.
Dave also briefly talks (Pages 186-192) about paying off your home mortgage is always the best course of action, and that any wealth building strategy that involves maintaining your home's equity/wealth outside of the home, is a bad idea. This is probably the best advice for the average homeowner; however, this is a broad generalization. Can equity harvesting (the opposite of paying down your mortgage early) be a viable option for wealth building? Absolutely. With that being said, equity harvesting is not for everyone; therefore focusing on becoming debt-free, including paying your mortgage off early, is often times for many, the best course of action to take. Paying down your mortgage early and equity harvesting both can be viable options. It really depends on each individual's situation.
The subject of equity harvesting deserves more than a few pages written in a book. I do agree that there are many books in the market place that purely are designed to help insurance agents sell products such as EUIL policies. These books do not fully disclose the potential risk involved when strategically repositioning equity out of a home and into a life insurance product or any other investment.
When it comes to the subject of home equity and paying off your mortgage early, I don't agree with Dave's opinion that one strategy is the right way for everyone. With all of this being said, I do understand that this book was written for the average American who is drowning in credit card debt, and has no personal finance/budgeting skills; therefore, covering complex equity management strategies would be outside of the scope of Dave's book.
Two good books that are full disclosure (let you know the risk and tax laws surrounding euqity harvesting stagegies) that will give you more information regarding equity harvesting are:
The Home Equity Management Guidebook
and
Borrow Smart Retire Rich
I would NOT reccomend these two popluar books:
Missed Fortune 101
and
Stop Sitting on Your Assets: How to Safely Leverage the Equity Trapped in Your Home and Transform It Into a Constant Flow of Wealth and Security
The latter two books don't inform the reader with full disclosure.
David Lukas, CMPS
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Love this book. I read it on the hoopla app and had to have the book to reference back to. I purchased a used copy and it is like new.
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kim.foster@btinternet.com
This rocks
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