Free Book Friday: Financial Peace

Financial Peace

One of the most frequent causes of distress is money problems. Of course, distress manifests itself physically through a whole array of symptoms and impaired immune function. Even more staggering is the impact on our relationships. If you are married, financial problems are your single greatest risk for divorce.

Because of this reality, getting control over your money is a foundational pre-requisite to designing your dream life.

As an initial disclaimer, I have a strong bias for all of Dave Ramsey’s products, from his radio show to his books to Financial Peace University. His old fashioned (read: time-tested) advice is simple, but profound, and has changed my life.

If you haven’t been introduced to this financial guru, google “The Dave Ramsey Show” and take a listen. Don’t write-off Ramsey’s advice until you have listened to a Friday radio show when callers bask in the glory of being debt-free and share their stories of success. 

After amassing “on paper” wealth to the tune of $4 million, Ramsey lost it all and wound up bankrupt with a young family. Unlike “get rich quick” schemes, Ramsey learned his lesson the hard way and instead lays out a plan for a strong foundation of discipline, contentment, and baby steps – the crock pot of wealth (and happiness) building.

Golden nuggets from Financial Peace:

Develop a Mature Perspective of Money

“The personal, philosophical, and emotional problems and strengths that you have will be reflected in your use of money.” Money is not the root of all evil or good. Money is neutral. It’s impact is tied to it’s master, you.

Let Go of Societal Beliefs About Credit

Credit cards and other debt “products” are issued by for-profit companies. The typical credit cardholder has seven of them and carries an average combined balance of $8,367 at an rate of 18.3%. It’s a deadly cycle. Ramsey expertly points out that just because you pay off the balance each month doesn’t justify using a credit card. Research has shown that you will purchase nearly twice as much when you pay with plastic. Cash is emotional, use it to your advantage.

Get Out of Debt

Become debt-free faster and turn compounding interest in your favor by using the debt snowball method:

  1. List your debts in order of smallest balance to largest
  2. Pay off the smallest balance first (and celebrate!)
  3. Put the monthly payment from that debt toward the next one
  4. Repeat as each debt is paid off, creating an increasingly large “snowball” of cash that is applied to each until you are debt-free

The point of the debt snowball is that this is hard. You are going to need motivation and early traction to change your lifestyle long-term.

Save Money, Save Money, Save Money

The average family has less than $1,000 of cash in the bank. There are three critical purposes for saving money:

To develop an emergency fund of 3-6 months of expenses 

Want to weather the storms that will surely come without debt and relationship trauma? Put in some overtime. Pick up a few freelance gigs. Have a garage sale. Ramsey advises to do whatever you need to do to get at least $1,000 of cash saved up to ward off Murphy’s law and then work hard to build that to the 3-6 month safety net.

To save for future purchases in order to avoid debt

Tired of paying interest rather than earning it? Make payments for your next car in reverse - before you buy the car. By planning ahead you can use interest in your favor and avoid ending up “upside down.” Additionally, “flashing cash”  is a sure way to get a deal on anything, from cars to refrigerators.

To build wealth

Isn’t that what we’re all trying to accomplish, financial freedom? The ability to take an exotic trip? The freedom to choose our vocation? How about just retiring early? Ramsey explains the basics of investing in layman’s terms so that you can make your money work for your life designs.

Write a Budget

90-95% of Americans float month to month without a detailed written accounting of their income and expenses. It’s no wonder that 70% of us are living paycheck to paycheck. The written budget ensures that your money does what you want it to, rather than you wondering where it all went.

Take Baby Steps

Building wealth is difficult. You have to say “no” to yourself every day for a long time. Focus on one simple target, accomplish it, and tackle the next. Ramsey lays out his classic seven baby steps that thousands have used to achieve financial peace.

Giveaway! Enter to win Financial Peace: Revisited in two easy steps:

1) Become an email subscriber if you aren’t already. You can subscribe here.

2) What is the single best piece of financial advice you’ve benefited from? Share your thoughts on this post.

The subscriber with the best advice or story by the end of the day Monday will receive a brand new copy of Financial Peace!

MST. Contest is limited to addresses in the United States, including APO/FPO addresses with US Zip Codes. Disclosure of Material Connection: Some of the links in the post above are “affiliate links.” This means if you click on the link and purchase the item, I will receive a commission. I only recommend products or services I use personally and believe add value to you, my reader.

  • Kevin

    I listen to Dave Ramsey as often as I can. The best piece of advice I got – “sell the car!” I had a $20K vehicle in my early twenties. I still catch myself defending the purchase. It was certainly an experience to pick out every option and drive it off the lot. The sobering fact is that if I had invested $20K at the same time, I could plan on around $500K for retirement.

    • Diana

      Ha! Half the answers to the callers are “sell the car!” My husband and I fell into the same trap – feeling like you need something new and shiny every few years. Dave calls leasing “fleecing” – we got rid of the fleeces and bought 1-2 year old cars instead. Car payments were done years ago.

      • http://www.emilycapito.com/ Emily Capito

        American statistics put you in the top 15-20%, as the other 80-85% are making monthly payments on the car – great work!

    • http://www.emilycapito.com/ Emily Capito

      Kevin, thank you for sharing! We had a very similar experience with a car and your alternative paints a pretty clear picture.

    • http://www.emilycapito.com/ Emily Capito

      Congrats, Kevin! I’m sending you a new copy of Financial Peace: Revisited – your comment was spot on. Enjoy!

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