We are now three weeks into Dave Ramsey’s Financial Peace University (FPU) and I wanted to provide a recap of both the content and the format of the class. We are taking FPU at a local church, and the class consists of the coordinator(s) (a couple) and one other couple, so it is more one-on-one than a classroom setting. Each week consists of a recap of the prior weeks, a check in with your coordinator, and a Dave Ramsey video. The videos go with the workbook, which is a part of the class materials. You fill in the blanks while Dave Ramsey is lecturing. After the video, the coordinator takes us through talking points and group exercises. If this format doesn’t work for you, or doesn’t sound like something you like, you can also do it at your own pace and watch the videos online. However, I find that it’s better to be accountable to others, even without disclosing financial information, and it keeps us on track.
Our story is probably very similar to yours. I have maintained an Excel spreadsheet budget for the last 10+ years. Unfortunately, it’s not so much a budget as it is just a mechanism to make sure all the bills get paid. I don’t have late payments on our bills, but we also don’t have any savings and are drowning in debt. We are fully paycheck to paycheck. I didn’t fully understand what I was supposed to be doing…or rather, could be doing with my money. I just know that I needed to make sure all bills were paid, and on time. Three weeks into Financial Peace University, I now know that if you don’t give your money a home, it will wander away. Meaning if you don’t earmark it for something specific, it will get spent and disappear, and you will not know where it went. Knowing this massively important piece of information, and doing mock budgeting exercises in class tonight make all of Ramsey’s “Baby Steps” seem very doable.
Financial Peace University outlines seven Baby Steps to financial security and the course itself goes in depth into all of the steps. The steps are to be done in order and are as follows:
Baby Step 1: $1,000 in an emergency fund.
Baby Step 2: Pay off all debt using the debt snowball.
Baby Step 3: 3 to 6 months of expenses in savings.
Baby Step 4: Invest 15% of income into pre-tax retirement.
Baby Step 5: College funding for children.
Baby Step 6: Pay off the house early.
Baby Step 7: Build wealth and give.
So far, we have only gone into the first three steps and are focusing on creating and sticking to a monthly budget. The importance of which is communicating with your partner, either your spouse, or if you are single, your accountability partner. It is so important to be on the same page as your spouse and is the major reason everyone is in the class. As Ramsey also likes to point out, not being on the same page financially is also the number one cause of divorce. Financial Peace University teaches a Budget Committee Meeting each month so that couples can be on the same page. I think this is very important because I know as the person who handles the money, it’s easier for me to spend money knowing I am watching the accounts, but if my husband spends money and I see it, I tend to get resentful because he doesn’t know if we have it before he spends it. In reality, we don’t have the room for any frivolous spending because we haven’t budgeted for it.
A major facet of Dave Ramsey’s Financial Peace University is the use of the envelope system. You have probably heard of it in some shape or form. Basically, it is budgeting amounts for certain categories each month, taking out that money in cash, and putting it in an envelope labeled for that category. That cash is the only money you have to spend on that category. For instance, if you budget $500 a month to feed your family, then at the beginning of each month you withdraw $500 and put it in your food envelope. That’s it. Spend wisely. Using cash is a great way to actually see where your money goes and see what you have left. If you continuously swipe your ATM/Debit card at the grocery store, you will likely spend much more than $500 because you are much more likely to overspend when you are less likely to notice the total. You will notice the total more when you have to part with cash.
The other major takeaway that I loved, and plan to incorporate, is that if you plan for emergencies, they won’t be financial emergencies or a family crisis.
If you write out your budget to include a category for car maintenance, or have your Baby Step 1 fully funded, then it’s not going to be an issue to have to pay $700-800 for a major vehicle repair (or in our case, new brakes on the truck). This are things that come up for us, and other people I know, that cause us to continually think that we cannot catch a break. Does that sound familiar? “It’s always something.” “If it’s not one thing, it’s another.” “We’re never going to get ahead.” But Dave Ramsey points out that if we expect the unexpected, then there is no unexpected and we are prepared for events and expenses to pop up. If we have the money available, then there is no emergency, no figuring out which bills not to pay, which person to borrow money from, which credit card company will extend credit, or who will give me another card? You will have the money, and you can just pay it. End of story, crisis and drama avoided. I personally can’t wait for that. I know it’s not going to be easy, but it’s a challenge and I am up for it.
Three weeks in, I already have a couple of hundred dollars set aside in a brand new account so we can fully fund our $1,000 emergency fund. I have all of our debt listed out for our debt snowball, which will be our next step after funding the emergency account. I know we may have our ups and downs with our finances, but I am hoping that taking this course as a couple and being on the same page, will be the catalyst for our relationship to grow and prosper without the constant stress and worry of finances.
This post is the first in a three part series.
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