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"Watch spending habits to keep debt from going bad"

Posted 2/6/2005 11:13 PM

Watch spending habits to keep debt from going bad
By Kerry Hannon, Special for USA TODAY
This is not a book about how to get out of debt, so put away your pencils. What Jon Hanson, a personal finance lecturer, offers in Good Debt, Bad Debt is a folksy guide to changing your spending habits, saving for retirement and, in general, thinking about money.
He knows how scary debt can be. In 1997, he owed nearly $100,000 to the IRS. But he recovered and is singing the praises of his saved life.

Good Debt, Bad Debt, by Jon Hanson; Portfolio, 253 pages, $21.95.

The Good Debt, Bad Debt concept is that "not all debt is necessarily bad, any more than all carbohydrates are bad."

He favors a program more liberal than total abstinence from debt, a kind of debt-light.

Hanson laments that the "stigma of debt seems nonexistent today. Credit has become abstract and anonymous. The most damaging aspect of today's culture is short-term thinking."

Credit cards, he writes, are "the crack cocaine of the credit industry."

Used prudently, though, debt can be a tool. It's about value investing.

"If what you owe can easily pay for its way by being sold, or hopefully from cash flow it produces, then it is good debt."

As he sees it, good debt is debt that eventually increases your net worth. Think of it as an affordable mortgage on a home or a college loan. Hanson is a strong advocate of investing in real estate, finding bargains and trading houses. But he wisely cautions that it takes a learning curve to understand the mechanics if you want to make it a business.

A bad debt is money owed on high-interest credit cards for trinkets and non-essential items. Bad debt gives temporary pleasure, such as driving a shiny new Jaguar off the dealer lot. "Dump the pride issues," he writes.

As much as Hanson loves investing in real estate, he despises cars. He calls borrowing to buy a new car akin to driving your retirement into the ground. A car loan is a loan on something that decreases in value.

"I cannot think of a scenario where debt for a car would be considered good debt. It only takes your money," he argues. (He relents if the car is used for business.)

The average new car loses value at a rate of $250 per month or more in the first few years of service, he writes. "Cars are the easiest area to save money in. Buy less; drive it longer. Invest the difference."

To save you his pain, Hanson wants you to think before you spend and to deal with your financial problems head-on as they arise. "It is about gaining perspective and right-sized spending and saving," he writes.

He encourages readers to "avoid the consumer entitlement mentality that can only lead to debt, regret and broken dreams — not to mention a garage and basement full of junk." The goal: Get control of emotional spending.

"No matter the amount of your income, wealth can be obtained, or maintained, only through the amount you don't spend."

Bad spending habits are most people's downfall. "The cost of a thing is the amount of life I am willing to give up to pay for it," he writes. Delayed gratification is the name of the game.

Today's actions will affect what you can do in the future. "Your spending will determine your ending," he philosophizes.

Hanson wraps up his frank approach to money matters with a chapter entitled. "You Married Who? The Ultimate Good Debt, Maybe." Unbridled emotions in any financial dealings can be dangerous, he preaches. Marriage, the ultimate financial partnership, must be entered with clarity.

To help, the author offers his checklist to help you and your spouse align your money and life philosophies before you say, "I do."

This take on personal finance is heartfelt, homey and humorous at times. Good Debt, Bad Debt won't give you all the answers, but the practical, personal approach to matters might be sweet enough medicine to make Hanson's hopeful message of financial security go down.

It will be up to readers to choose if the $21.95 cost is — as Hanson would put it — a fair trade for the amount of life they are giving up for it.

- USA TODAY


"With Wit and Insight..."

From Booklist
With wit and insight, Hanson offers advice on the pros and cons of debt while helping us develop a philosophy about it as well as one for spending and saving. He explains that good debt increases net worth and includes credit-card debt, leasing a car greater than you can afford, and buying a house with 5 percent down. If what you purchase on credit can easily pay its way by selling it, or hopefully from the cash flow it produces, then such debt is a good idea. When debt reflects greed, impatience, or seeking the appearance of wealth, it has negative consequences. Using personal stories, humor, and cartoons, Hanson explains the principles of debt and money in the first four chapters and then counsels us on the value of developing a mathematical financial plan based on these fundamentals. This is an excellent primer on a very important topic. Mary Whaley
Copyright © American Library Association. All rights reserved --This text refers to the Hardcover edition.
- From Booklist- American Library Association


"Bracing... Snappily Written..."

A Best Bet Self-Improvement Book
Good Debt, Bad Debt by Jon Hanson (Penguin 2005). Deep down, you know the difference...But Hanson’s bracing, snappily written manual (“credit cards are the crack cocaine of the credit industry”) just might help you live like you do.— People Magazine (January 10th 2005 issue)

- People Magazine


"Praise for Jon Hanson, from Covey to Tracy"

Praise for Good Debt, Bad Debt and Jon Hanson

“Jon Hanson makes the important subject of responsible debt management a little lighter with generous doses of his warm, funny, down to earth style. I found Good Debt Bad Debt to be the perfect choice to complement my college course in Personal Finance.” Professor Howard Davidoff, Brooklyn College

“Excellent, practical, tested, wise advice on the burden or benefit of financial security,” Dr. Stephen R. Covey, author of The 7 Habits of Highly Effective People and The 8th Habit: From Effectiveness to Greatness

“Jon Hanson’s clear distinction between good and bad debt is a must-know for anyone with a wallet. I even recommend it highly to today’s card-carrying, debt-building youth—the earlier they learn this information the sooner they can begin to avoid bad debt.” Brendon Burchard, CEO of The College Success Bootcamp and author of the Student Leadership Guide and Life’s Golden Ticket

“This frank, funny book shows you how to get out of debt and achieve financial independence quickly and predictably. It could save you financial life!” Brian Tracy, author of Getting Rich Your Own Way

“They say: ‘many receive good advice, yet few profit from it.’ Let this be your invitation to take advantage of Jon’s simple wisdom that will help separate you from the many who simply dream, to follow the few that actually apply and prosper. I recommend it highly.” Gregory Scott Reid, author of The Millionaire Mentor

“Who knew personal finance could have a heart? Good Debt Bad Debt is funny, warm, and right on. Jon Hanson is a newcomer to the field, but he’ll be a household name soon.” Barbara Corcoran, chairman if the Corcoran Group; author of If you Don’t Have big Breasts, Put Ribbons on Your Pigtails

“In your book, you mention that for the first three years, a saver shouldn’t worry about the rate, he should just save. Thank you so much for writing this. Simple phrases can mean a lot to those of us are just starting out on our savings path. Your book has really given me a new sense of confidence in our spending and savings habits.” Ginger Deel from Aiea, Hawaii

“There’s no piece of your financial life more important to get a grip on than debt. Good Debt, Bad Debt goes a long way toward taking you there.” –Jean Chatzky author of Pay It Down! and The Ten Commandments of Financial Happiness

Be Debt Free stress free, and set free by Jon Hanson’s great, inspiring, and helpful book.” --Mark Victor Hansen, cocreator of the Chicken Soup for the Soul series.

- Penguin 2005 & 2007


Discography

One disc Good Debt, Bad Debt

http://cdbaby.com/cd/jonhanson

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Bio

About the Jon Hanson

Hanson fits the profile discussed in Encore: Finding Work That Matters in the Second Half of Life by Marc Freedman and How to Change the World: Social Entrepreneurs and the Power of New Ideas, by David Bornstein. A baby-boomer that recently completed his MBA, now planning PhD studies beginning in 2009, with a desire to change the way the world thinks about and teaches personal finance. He was recently recruited to the board of Columbus Saves a part of AmericaSaves.org promoting personal savings and financial education to low and moderate income individuals.

"Though I am working on a new book, I do love the challenge of setting-up a story, enhancing the drama, and resolving the problem/emotion in a three minute format. Songwriting may prove to be my first love."

Author’s Education
• MBA- Franklin University, Columbus, Ohio December, 2007.
• Bachelor’s Degree, Liberal Arts—The University of the State of New York, 1994. Concentration in Sociology and Education.
• Graduate work, The Ohio State University College of Education 1995, Adult Education.
• Graduate work, Ohio University Graduate School of Journalism, 1997.
• Next! Degree Pursuit—seeking to enroll in a PhD program at the University of London, (UK) research based program mid-2008, studying Lifelong Learning and Economic Psychology. This will require at least six-weeks per year in the U.K..