Author: Chatzky, Jean
Publisher: Portfolio Trade
Year Published: 2006
Rating:
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The average American has a decent job but $8000 in debt and no savings to speak of. Money keeps them up at night and they wonder how they’ll be paying their bills at the end of the month. Pay It Down offers a simple plan to pay off your debt in three years with only $10 a day.

Jean Chatzky is the financial editor for NBC’s Today show and writes articles for Money, Time and USA Weekend. Her book outlines the 11 steps to take if you want to become debt free.

Chatzky’s financial plan starts with the obvious: 1) tackle your credit card debt, which is probably costing you at least 15% interest and 2) start an emergency fund so that you have a security net.

Her steps are as follows:

1. Access the problem. How did you get into debt? How much debt do you actually have?
2. Break your challenge into manageable steps. You need to set a clear framework for eliminating your debt. If you have $8000 in credit card debt and you want to be debt free in 3 years, you need to set aside $10/day. If you have more debt, you’ll need to set aside more money or lengthen your time period. To help you determine what’s best for you, Chatzky provides helpful charts based on your interest rate and your total credit card debt.
3. Know and manage your credit score. Anyone that’s ever applied for credit has a credit history as monitored by a credit bureau - usually either TransUnion, Equifax, or Experian. The better your credit score, the more money you can borrow at a better interest rate.
4. Track your spending. Know how much money you’ll earn this year before and after taxes. Know what your fixed costs (your rent/mortgage, car payment, loan payment, utilities, gym, internet, phone, etc) are. Learn where the rest of your money is going (groceries, meals, gas, entertainment, books, etc).
5. Find the money. Here, you must analyze where you can cut back on spending. What can you eliminate to find your $10/day? Ideas include spending less changing your withholding, reducing your interest rates, negotiating a lower credit card interest rate, consolidating your student loans, selling assets, earning more and refinancing your mortgage.
6. Pay it down - intelligently. Pay the highest interest rates first because those are the ones costing you more. If you can’t pay off everyone, start with the necessities like your mortgage or rent, health insurance, and the IRS.

Chatzky is also aware that sometimes you’ll hit bumps in the road so she offers advice on how to face a shopping addictions, when you should seek credit counseling, how to deal with debt collectors, and avoiding foreclosure on your mortgage. She also offers a number of tips for staying out of debt like use debit cards instead of credit cards and if you do use credit cards, always pay more than the minimum and pay the bill on time.

The book is a motivational read that makes getting out of debt seem simple as long as you follow the steps religiously. Of course, it’s never that easy to stay the course. I was amazed she didn’t suggest some type of financial management system like Microsoft Money or Quicken to help you track expenses rather than doing it by hand.

Overall, it’s a good quick start guide to getting your finances in order. The types Chatzky offers are practical in their simplicity, are easy to implement, and are presented in a way that won’t overwhelm its readers.