Personal finance is a tough topic to approach, especially if you’re just getting started with it. However, if you have resources that you can use to learn the fundamentals, then it becomes much easier to handle.
Dave Ramsey is a personal finance expert and is most well-known for his 7 Baby Steps to get out of debt and take control of your money. But he’s also created a course that goes a lot more in-depth into personal finance called Financial Peace University, and in this review, I’ll cover what it's all about.
I’ll go through what you can expect from the course, who it is for, what it’s like to attend it, and what its main pros and cons are.
What Is Financial Peace University, And Who Is It For?
Financial Peace University is a course that combines that uses videos, a book, and classroom-style discussions to teach you how to pay off debt and build wealth.
The course is meant for anyone interested in personal finance, but it’s specifically aimed at beginners who are just getting started with personal finance and budgeting overall.
What Do You Get With The Financial Peace University Course?
When you sign up for the Financial Peace University class and pay your $129.99, you get the course(which lasts around 9 weeks), a membership kit, and a few extras, including:
- A subscription to Every Dollar Plus.
- Access to expert financial coaches and an online community for encouragement and accountability.
- Digital tools to help you stay motivated.
- Instant updates on content and features as they are added.
- Dave Ramsey’s six-lesson course, The Legacy Journey.
- The six-lesson course, Smart Money Smart Kids.
- Exclusive access to select Ramsey livestream events.
Every Dollar is Dave Ramsey’s budgeting app. Every Dollar Basic is free for everyone, but Every Dollar Plus allows you to connect your bank account to the app, making keeping track of your budget far easier.
One neat feature that the Every Dollar Plus app has is that you can drag and drop transactions that appear in your checking account into categories that you create yourself with the app.
How Much Does The Financial Peace University Course Cost?
The cost of Financial Peace University is $129.99 in total, including access to their online community and the Every Dollar Plus app.
A year of access to their online community costs $99.99 on its own, and the Every Dollar Plus app also costs $99.99 for standalone usage, so if you purchase the Financial Peace University course, you'd basically be saving $69.99 compared to purchasing every one of these elements on their own, so make sure you take advantage of that.
Finding A Group And Attending Class
There are two ways you can attend the course’s classes: you can either watch the classes online or find a group locally.
When you’re trying to find your group to attend, it’s useful to talk to the course coordinators to see what the group is like. Some groups are very boisterous and open, and you'll have to share a lot of financial info like how much debt you have, how much you've paid off, etc. Other groups are more private.
Also, some groups have you watch the videos at home and come in to discuss the course content, which cuts down the class time significantly. Each video is 30-45 minutes long and course content discussions tend to last about the same time, so local classes last for around 90 minutes on average.
The groups are very flexible, and one big advantage is that you can still watch the content online even if you’re attending the classes locally. This is useful if, for example, you aren’t able to attend class one week and you want to catch up with other students the following week.
The 7 Baby Steps
The course follows Dave Ramsey’s 7 Baby Steps and uses the Debt Snowball Method to pay off debt. The 7 Baby Steps are as follows:
Baby Step #1: Save $1,000 For An Emergency Fund
The first Dave Ramsey baby step consists of saving $1,000 for an emergency fund — it’s a financial goal that should take you less than a year if you save around $20 a week.
An emergency fund is money that you save in order to cover unexpected expenses that may come up in the future. These expenses could be anything from a surprise medical bill or necessary house repairs to having some spending money in case you lose your job.
Baby Step #2: Pay Off All Debt (Except Your Mortgage) Using the Debt Snowball Method
Baby Step #2 is about getting rid of bad debt. This includes credit card debt, student loan debt, car loans, and personal loan debt but doesn't include your mortgage — and you’ll be using the debt snowball method to pay it off.
The debt snowball method consists of paying your smallest debts first without taking the interest rate of each loan into consideration (but always making minimum payments on each loan as well).
For example, imagine if you had three debts to take care of:
- Student Loan: $20,000 (6% interest rate)
- Credit Card Debt: $9,000 (20% interest rate)
- Car Loan: $4,000 (15% interest rate)
Using the debt snowball method, you would first take care of your car loan. After that, you would pay off your credit card loan despite its high interest rate, and then you would pay the student loan last.
Baby Step #3: Save 3-6 Months Of Expenses In An Emergency Fund
Now that you have all of your debt paid off (besides your mortgage), it’s time to build up a fully-funded emergency fund. The objective of this emergency fund will not be to teach you how to budget, but rather, it’ll be there to cover bigger unexpected expenses that could show up while preventing you from going into debt again.
Baby Step #4: Invest 15% Of Your Income In Retirement
Baby Step #4 involves thinking a little more about the future by saving and investing for retirement.
What Dave recommends here is that you invest 15% of your income in a 401(k) and Roth IRA (or other pre-tax retirement accounts). Another thing he recommends is investing in mutual funds (specifically, growth mutual funds) as the investment vehicle of choice.
Baby Step #5: Save For Your Children’s College Fund
Once you have paid off all of your debt, built up a stable emergency fund, and started actively saving for retirement, Dave recommends saving for your children’s future education.
What's usually recommended here is that that you open a 529 College Savings Plan or Education Savings Account (ESA). These two types of accounts are tax-advantaged accounts (similar to a 401(k) or Roth IRA), but the key difference is that they have been designed to be used exclusively for education expenses.
Baby Step #6: Pay Off Your Mortgage Early
By this step, it's very likely that most (hopefully all) of your debt has been paid off, and all that's left for you to take care of is your mortgage.
There are, however, a few crucial details that you should keep in mind whenever you're paying off your mortgage early. For example, one important thing to be aware of is whether your mortgage has prepayment penalties in place or not.
However, if you are in the position to free yourself from house payments earlier than expected, then it’s better to do so.
Baby Step #7: Build Wealth And Give
After going through every step and having all of your debt paid off, kid’s college paid for, no mortgage to worry about, and your retirement planned out, you are free to do with your money as you please. Some common suggestions include:
- Max out your 401(k) and Roth IRA
- Continue building wealth in a brokerage account
- Invest in real estate
- Give money to charities
- Spend money on things you enjoy
Financial Peace University Lessons
The Financial Peace University Course is structured as follows:
|Week 1||Baby Step #1: Build your starter emergency fund|
|Week 2||Baby Step #2: Using the Debt Snowball Method to pay off debt (except for mortgage)|
|Week 3||Baby Step #3: Build your fully-funded emergency fund|
|Week 4||Baby Steps #4 through #7: Looking towards your future, wealth building|
|Week 5||Negotiating and having power over purchases.|
|Week 6||Insurance coverage and what kind you need|
|Week 7||How to invest and plan for retirement|
|Week 8||Real estate & mortgages|
|Week 9||Giving — Gratitude & Contentment|
The Cons Of The Financial Peace University Course
While the course is a great introduction to personal finance in general, it has a few cons worth considering. These are as follows:
#1 Debt Snowball
The debt snowball method focuses on paying minimum payments on all debt except for the one with the smallest balance. All extra money goes towards paying off the smallest debt, regardless of the interest rate.
Some people take issue with this because they say you should pay off the debt with the highest interest rate first (this is also known as the debt avalanche method). This helps you save more from a mathematical standpoint, but there’s a reason why Dave Ramsey goes for the debt snowball method instead.
People can be much more consistent when paying off debt if there’s the “small win” of paying off one of their debts involved. It allows them to build momentum as they head towards larger debt because paying off the smaller debts serves as positive reinforcement.
#2 Paying Off Mortgage
In Baby Step #6, Dave recommends putting all extra money towards paying off your house early. This is after you’re saving 15% of your income into retirement and putting money towards your kid’s college fund.
There are, however, people that think very differently from Dave in this regard. They say that if your mortgage rate is 4% and the stock market is doing 8%, it makes more sense to invest the extra in the stock market. Also, without a mortgage, you won’t get tax credit either.
And although this might be true, it doesn’t take risk into consideration. That strategy works if you’re able to keep the same job for 30 years and have no periods of unemployment, but that simply doesn't happen in current times.
It’s easier to build wealth without stress if you know you have a roof over your head, regardless of your job.
Also, with the recent changes to tax law, deducting mortgage interest isn’t as appealing as it once was. Even before the law changed, you were essentially trading $10,000 of interest to get a $2,500 tax credit, which doesn’t make financial sense.
#3 Saving For Kid’s College
Many people question saving money for their kids to attend college. It shouldn’t come at the expense of your own retirement, but by the time you get to Baby Step #5, there should be a possibility to save something towards that goal.
With rising college costs and astronomical student loan debts, some parents are abandoning the entire college system. Others say that they didn’t have help from their parents during their time, so they aren’t going to offer their own kids any help.
But the silver lining to this is that there’s a lot of state schools that are excellent and affordable. There are also many other options available that can help you pay for your kids’ school.
Dave Ramsey’s Financial Peace University is a great course for beginners to personal finance — it teaches you his 7 Baby Steps to build wealth and become financially stable, and it goes into greater depth than if you were studying his Baby Steps on your own.
While the course has some cons worthy of consideration, we’d say it’s an overall great chance to learn the fundamentals of personal finance in very little time.