Pay It Down!

Jean Chatzky extols the power of compounding, the magical economic force touted by Benjamin Franklin in the eighteenth century, as a sure way for people to accumulate wealth. The rub is that one needs at least a minimal nest egg to initiate such a plan. Chatzky recommends saving ten dollars a day--about three hundred dollars a month--for three years, a worthy goal but one that those most requiring drastic financial rehabilitation probably have little hope of achieving.

In four successive chapters on “finding the money,” the author suggests how to increase cash flow by consolidating debts, spending less, selling assets, and increasing income by working more. She establishes a pecking order for reducing indebtedness, beginning with the obvious: first pay off credit cards with the highest interest rates. She urges her readers to obtain their credit scores, demonstrating how to interpret and use them to their financial advantage.

Chatzky urges people saddled with overwhelming debt to negotiate with organizations to which they are indebted for better terms. She writes about people--including herself--once hobbled by debt who, employing some of her tactics, have overcome their oppressive financial burdens.

Self-discipline and controlling impulsive spending are central to building wealth. Developing these virtues, however, is insufficient if one’s indebtedness stems from something like huge uninsured medical expenses. One must question whether Chatzky remembers her own early financial struggles sufficiently to inform her readers realistically about implementing her suggestions. A nagging problem with her book is oversimplification.