Tuesday, September 6, 2011

Financial Peace Revisited by Dave Ramsey

Financial Peace Revisited is the first of two books that I have purchased and plan to read from Dave Ramsey. Just over a week ago, I mentioned that this book is an updated copy of the original bestseller called Financial Peace. Well, that's sort of true. This book is actually updated, but it is still almost 10 years old. That fact is probably the main reason I might tell you not to read it. It seems very outdated. In a landscape of financial information that changes ever year, the illustrations in this book seemed mostly obscure to me. for instance, at the very beginning of the book, he writes about the negative financial situation of our country. If only he knew then what it is now. He writes,
"The nation's situation is only a reflection of our own personal inability to 'just say no' to ourselves. Our failure to get control of financial matters in our personal lives will have to be rectified before we can demand accountability from elected officials. Our spoiled Congress is only a reflection of our spoiled selves." (7)
As I read that, I wondered what he would write today? The good news is that we might just find out. As I was reading this book, I talked to someone with Dave Ramsey Ministries and they told me that they are working on an updated version of this book.

That's the bad. But here's the good. Here is why you should read it. While the illustrations and the numbers are probably outdated, the principles are NOT. This was Ramsey's first book that sort of put him on the market. It is mostly his story, but it can be your story as well. It is how he had everything, lost everything, and slowly gained everything back. It was how he established financial peace in his own household. And it mostly has to do with controlling your spending, eliminating debt, and saving for the future. It has to do with saying no to the present wants so you can have peace for the future needs.

What I have found in reading this book is that he is really good with the one-liners. Some of them are old sayings that he has resurrected or things people have told him in the past. They are funny and make a point. Take some of these for instance:
"Avoid the lifestyles of the rich when you are not rich." (55) 
"You must figure out what your actual income is and then proceed to live far below that mark." (55) 
"The best way to get rich quick is to not get rich quick." (60) 
"In order to get out of debt; quit borrowing more money." (90) 
"Saving is like planting an oak tree. You cannot keep pulling it by the roots to check its progress." (116) 
"The safest way to double your money is to fold it over once and put it in your pocket." (128) 
"If you cannot explain it to someone else, you should not buy it or invest in it." (139) 
"Our children are going to model our handling of money." (214)
Towards the end of the book, Ramsey gives his baby-step process on how to have financial peace.

  1. Pay minimum on everything until you get $1,000 in savings.
  2. Implement the debt snowball, and pay off all personal debt except your home.
  3. Save the rest of your emergency fund (3-6 months of your expenses)
  4. Save 15% of your gross household income in retirement plans
  5. Start college funds
  6. Pay all the extra you can scrape together to pay your house off early
  7. Save, save, save

Of course, there are caveats on each of those steps. For instance, I wonder after reading this book what he would say if your employer offers a matching retirement plan. I would probably suggest you do not wait until step 4 to take advantage of it, since it will be free money to you. Saying that though, it is too easy for us to make things too difficult. In many ways, following these steps make it easy for us. We can make things too complex when in reality we are masking our desire for more stuff. Maybe it is time for us to stop and look at our finances.

I look forward to reading Total Money Makeover, which is coming up soon on the reading plan.

Question: Have You Or Anyone You Know Ever Effectively Used This Plan?

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