Review: Dave Ramsey's Financial Peace University

When I turned 25, I started to think about longer-term life goals.  I determined that by the time I turned 30 I wanted to:

• Progress in my career to management

• Pay off my student loans

• Get married and start a family

• Travel to all 50 states in the US

I was working hard at my career, and that was starting to pay off in the form of promotions.  I looked at my student loans and found that they were on track to be paid by the time I was 31, so I added a small amount extra to my payments.  I regularly hung out with friends to hopefully meet the right partner, and also started to consider online dating.  My job also involved travel for a couple of projects I was working on at the time.  Check, check, and check.

Then in 2017 my company purchased a subscription to the Dave Ramsey program for all employees.  For those not familiar with the program, it contains about 5.5 hours of video lessons produced by the Dave Ramsey team, as well as some other tools to help on your financial journey.  This is available free through some workplaces (including mine), or as a standalone purchase.

Overview of Dave Ramsey's Method

The short version of Dave's plan is laid out into 7 “baby steps” as outlined below. The idea is that if you make it to step 7, you'll be in a stronger financial situation than most households in the US.

1. Save up a starter emergency fund of $1000.  You need to be able to cover life’s little surprises while you further your financial goals.  It would be counterproductive to have to put a new car battery on your credit card while you’re trying to pay it off.

2. Pay off all debt except a mortgage.  Dave advocates the “snowball” method of paying off debt where you start with the smallest balance as opposed to the highest interest rate.

3. Save up a 3-6 month emergency fund. (Typically between $10,000 and $20,000 depending on your household expenses.)  This one is also pretty straightforward - add up your monthly expenses and multiply it by 3-6 depending on your comfort level.  If you don’t have a house, Dave recommends saving up for a down payment after the emergency fund.

4. Invest 15% into retirement.  (Note that steps 4, 5, and 6 are done simultaneously.)  Chris Hogan was Dave’s retirement expert at the time, so he’s the one running most of these videos. Chris covers different tax-advantaged retirement investment options like 401Ks and IRAs, while explaining the different benefits of traditional and Roth accounts.

5. Save for college if you have kids.  Figure out what you think college will cost when your kid(s) get to college age, and then determine how you’ll get to that number.  Look for an article on this soon.

6. Pay off the house.  As there’s extra money above steps 4 & 5, throw it at your mortgage to pay it off sooner than the 15 or 30 years on the loan.

7. Invest & Give.  Once steps 1-6 are done, throw any extra money into investments.  Oh and use some of your extra money to be a generous person.

What I Like

If you’ve never sought professional financial advice, this is a solid foundation.  Dave and team cover essential personal finance concepts like budgeting, eliminating debt, saving for the future, and retirement through polished videos that are bound to stir up some emotions. I personally liked Chris Hogan the best as a presenter - his voice is exceptional, and he doesn't get as preachy as Dave can.  Too bad that he’s no longer a part of the team.

The program also includes access to EveryDollar, a budgeting solution.  I’ll compare this with a couple of other tools soon, but I used it for a few years and it’s a straightforward way to set and stick to your budget.

There's a tracker for your debt snowball as well. It's an effective way to keep track of your progress. I used this occasionally, but I found that a chart to color on the fridge was far more effective in keeping us motivated and on track. We printed out an empty thermometer, then listed each loan divided up as a part of the total.

What I Dislike

Dave tends to get a couple of catch phrases stuck in his head.  If you go through the video program and then listen to an episode or two of his radio show, you’ll hear the same phrases over and over.  This gets old after a while.  Beans and rice, anyone?

I also feel like Baby Step 7 is too vague.  Let me be clear: anyone at this phase is in an excellent financial situation, so even if you stuck to 15% retirement investments and avoided debt at this point, you’ll still be set for life.  However, a little care at this step can make a dramatic difference for your future self.  Not much is talked about with regards to non-retirement investments, for example, even though many folks at this stage would surpass the yearly IRA/401k contribution limits.  If you simply invested your old mortgage payment, after 10 years, you would likely have $150,000 or more.

My biggest gripe is that the program is $129 at the time of this writing, if it’s not paid for by your company.  That’s a big expense, especially since most people starting this program are trying to get out of debt.  You can get the same information from Dave's book, The Total Money Makeover.

Should You Buy It?

You should consider buying it if:

• You’re just starting to learn about personal finance and feel that video format is the best way for you to learn (vs. reading a book).

• You’ve looked at various budgeting programs and decided that EveryDollar makes the most sense to you.  The extra $50 on top of the EveryDollar subscription might be worth it for at least the first year.

• You are Christian and believe that personal finance based in Christian values is important.

You likely won’t see the value if:

• You’re familiar with some personal finance concepts, and knowledge of the above 7 steps is enough to help you plan your financial journey.

• You learn best by reading. Instead, buy a used copy of Dave’s book or check it out from your local library.

• You don’t like Dave’s heavily Christian approach to personal finance.