Re: Taking our a Home Equity Loan to pay off debts

wrote:
> Hello, I've been reading this book titled, "Missed Fortune 101 : A
> Starter Kit to Becoming a Millionaire"

Joe,
This book gets criticized a lot because as another poster noted it
smells suspiciously like a scheme to sell people a lot of life
insurance. The basic idea seems to be keeping a large amount of debt on
your home and diverting the dollars that would go into repayment into
something else. The author, I believe, suggests diverting the dollars
into a life insurance policy based on the tax deferral and some other
rationales (I should mention that I haven't actually read the book but
may have read an equivalent amount of text in commentary about the book!).

I really wouldn't call that the "starter kit to becoming a millionaire"
because in effect, it's advocating that you not build up home equity,
and that you invest (or pay insurance premium with) the difference.
Essentially - investing on margin.

Now, sure, you can make money that way but "starter kit"? Come on. As
noted in an earlier thread on the recent survey of US consumer finances,
that hardly seems the recipe for getting wealthy. Home equity is the
only equity a lot of people have, with very little savings alongside it
(whether in investments or insurance policies). So it seems kind of
silly to then advocate, in a general-interest book, that people divert
dollars away from even that.

I'd put this in the category of more-esoteric ways of building wealth,
suitable for a special kind of individual...rather than the "formula for
becoming a millionaire". I mean really, if I were to write a book that
is truly a "starter kit" to becoming a millionaire, it would be three
sentences long:

Spend at least $5,000 less than you earn, year in and year out. Stick
the $5,000 in a low-cost balanced index fund. Wait.

I'd update the book every two years to adjust the "$5,000" figure.

-Tad