Teaching Dave Ramsey’s Financial Peace University

by Kevin on August 27, 2009

Last night was the first of thirteen meetings of Financial Peace University at our church. I am helping teach with six other teachers. We’ve got over 70 people signed up so I’ll be working with a group of 10-15 people.

I’ve never taught a personal finance course of any kind in the past and I’m a bit nervous. I have worked one-on-one with a few friends and co-workers to go over setting up a budget, but nothing as structured as the FPU coursework.

I’ve also never been through Financial Peace University, but I understand the concepts well. Lack of knowledge is always a concern because someone can throw a curve ball question at you where you have no idea as what to say. I think that is expected, and since I’m just volunteering I don’t think anyone expects any of the co-teachers to have all of the answers.

The fact that I’m teaching a Dave Ramsey class may come as a bit of a shock to some long-time readers. I Like Dave Ramsey, But He is Still Wrong is something I posted in July 2008. The post has generated a long discussion with nearly 100 comments.

This is a brief summary of what issues I saw in the program at the time:

Flaws in the System

As with any system I think there will be flaws. It is inevitable. The same holds true for Dave’s system. My two major beefs:

  • I don’t like the debt snowball because it contradicts basic math.
  • I don’t like his anti-credit card stance because credit cards are not the problem. A spending mentality is the problem. Credit cards are the symptom in my opinion.

Become Informed Before Making a Final Decision

At the same time someone wise once told me that if you disagree with someone you should immerse yourself in articles and books that agree with them. Everyone has a bias so try to read from all sides.

For example if you love Dave Ramsey you should:

  • Read something directly from him so you understand where he is coming from
  • Read something that agrees with his point of view
  • Read something that disagrees with his point of view

You can apply this model with anything… Dave Ramsey, politics, etc.

I will be the first to admit I’ve not read one of Ramsey’s books (the The Total Money Makeover being the most popular) from cover to cover. But I’ve reviewed the baby steps, read his short The Money Answer Book: Quick Answers to Everyday Financial Questions which hits on his views on just about everything, and listened in to his radio show.

So I’ll take it one step further and fully immerse myself in the Dave Ramsey culture to help develop my point of view.

Again, I will be the first to admit his system works. Absolutely. People out of debt. I’m all for it. I just think the system could be tweaked a little bit. And I’m not trashing the man. He has changed thousands of lives and should be commended for it.

So I’ll help teach the class. I’ll see the lives changed. At the end maybe I will have changed my mind. Maybe not. I’m going in with my eyes wide open and willing to change. (I really am looking forward to it. The introduction lesson that pitched the class was really funny. The first lesson used well placed humor to drive home significant financial points. See? I like Dave. Honest.)

At the end of the day I would rather someone get out of debt the Dave Ramsey way than to not get out of debt at all.

With helping teach the course at least I’ll be able to say, hey, I’ve been through it, I’ve seen it, I like it, but I think it still has some flaws. I’ll be making an informed decision.

{ 15 comments }

Christopher J. August 27, 2009 at 8:07 am

First, you’re facilitating or coordinating the class…I’d use that “teaching” term lightly considering you haven’t even read any of his books, taken the class yourself, and aren’t whole-heartedly following the plan he’s layed out. If you’re able to answer the class participants questions how Dave would answer them without having to refer to any media, recordings, or books…I’d say you’re able to teach it.
I refused to do a FPU class of my own until I had been through one myself. I’ve of course read all of Dave’s books, so no challenge there. Listen to his 3 hour show every day, and watch the Fox news show. And as of April of this year went through FPU.
The credit card thing is your choice…he teaches no debt and no credit cards because that CC is like an open invitation to allow Visa/Mastercard to catch your slack. Your inability to plan properly. If you save right, and protect yourself with an 3-6 month emergency fund, and pay for things by planning ahead and paying cash, you should have no reason to have a credit card.
But, if you’re one of those folks that just GOTTA have it for the points or whatever other silly incentives they throw at you to use it. It’s your choice really. You can do whatever you want to do. I personally don’t want to play with snakes anymore. I turned my back on them almost 2 years ago, and haven’t regretted it one bit. Debit cards work just as well, and I love paying cash for things anyways.

Kevin August 27, 2009 at 8:22 am

You seem to assume I am completely ignorant of where Dave is coming from and thus would be unable to provide insight into what he believes and is teaching. That is incorrect. Again I’ve read through the 160 page book of Money Answers. I’ve listened to the radio show a good bit. I’ve seen the television show.

You see finance is not complicated. Dave’s system isn’t complicated. It doesn’t take a Ph.D to understand his plan.

I’ve had the credit card debate with several readers time and time again, but I’ll rehash some of the points here. (You could also read my original Dave Ramsey post and check out all the comments there.)

1. We have an emergency fund. (Baby step 1/3)
2. We are on track to pay cash for two “new” (to us) vehicles in 2012 and 2014. (Baby step 1 – purchases)
3. We are debt free except for our mortgage and a small amount of my MBA student loans that are in deferral. I’m just waiting on my last work tuition reimbursement check before paying everything off at once. (Baby step 2)
4. We are fully funding 2 Roth IRAs. (Baby step 4)
5. We are already setting aside money in preparation of having kids (just general kid expenses) and also for their college education. (Baby step 5)
6. We are making extra payments on our mortgage. (Baby step 6)
7. We’re not to the point of putting additional money into investments because we haven’t paid off the house. (Baby step 7).

I think we’ve got the steps down. They are not rocket science. Again, I like Dave. He has a great sense of humor and communicates well. He’s also made millions of dollars selling his program. Good for him. My major beef is around his illogical hatred of credit cards and the math behind paying off smaller potentially lower interest rate debts before higher interest rate debts.

Regarding credit cards: if you can use a debit card properly (not overdrafting), you can use a credit card properly. Credit cards are not the problem. Spending money is. When we buy groceries every week we budget up to $55 for the week. My wife does the calculations in her head as we go. So we spend $55, and put $55 into a different budget category called “Credit card”. We pay it off every month and have never paid a dime of interest.

Sound familiar? Sounds like we use it like a debit card.

Sure, we could use a debit card. But with credit you get: cash back (we’ve earned ~$1,200 over the last 3 years… so $400/year free money), free 1 year additional of warranty on electronics (if you buy a laptop you get an additional year on top of the manufacturer’s warranty), and if someone steals my credit card I don’t have to worry about money instantly flying out of my account.

Can you get cash back with debit cards? Very few.
Do you get automatic warranty extensions? I’ve not heard of a bank doing it.
Can someone clean out your account if they get your debit card? Yes. (And yes, banks will support you, get money back into your account, but there are likely to be delays and your bank account is empty. Now what?)

The people who are anti-credit card tend to hate them blindly. Maybe they had a bad experience due to poor choices on their part. But as I mentioned in the post, it is more wise to be open to other ideas. Every time I bring up logical points as to why credit cards are better than debit cards (when used as a debit card instead of funding your lifestyle), the points are ignored, and the commenter goes back to “CREDIT CARDS ARE BAD THEY CHARGE YOU INTEREST”.

Do I hate debit cards? Absolutely not. I’m not saying they are a terrible thing. All I am saying is if you can intelligently use a debit card — meaning not overdrafting your account — then you can use a credit card.

It’s just a piece of plastic.

kip August 27, 2009 at 11:28 am

Both of your ‘beefs’ are accuracte, but the issues are more focused on addressing the psychological barriers poeple face. Overcoming a psychological issue will probably raise the success rate because people feel they are making progress. He admits on air that the snowball approach is bad math, but that it produces the best results.

You must realize that the majority of people who get into credit card trouble are not disciplined with their money and thus removing the temptation is a good system. Credit cards are a great tool for financially responsible individuals. Again, I think it boils down to Ramsey attempting to address the acceptance of debt that we as Americans have developed – not the most mathematically sound system.

AJ August 27, 2009 at 12:13 pm

I think one of the problems of handling a CC is all the obscure rules. I just read an article about someone that was paying off their credit card each month and was digilent about it. For some reason she made a mistake in her spreadsheet and paid less that the outstading balance (about $20 less), she was hit with interests not for one month but for two months!, why? because her CC had two cycle billing.

Also some credit cards apply fees when you use then outside the US, yearly fees, etc. some are waived some are not.

I personally have credit cards but since i’m getting out of debt i’m avoiding the temptation to use them. As you say the card itself is not bad is my misuses of it. I’ve had to use it a couple of times and I had to focus very well to go ahead and pay off the amount charged almost immediately, otherwise some other thing would come up and the money to pay that balance would be diverted.

So I think the CC rule is more to avoid people going into debt again. Alcohol itself is not bad, but telling an alcoholic that one glass of wine a day is good for the heart is too much. Will he or she drink just one glass? or will they go down the drinking path again and feel miserable ?.

I’m sure Ramsey knows that CC’s are not bad themselves but it’s an easy rule to follow not to use credit cards. Once out of debt, sure if you understand how things got bad for you, then make use of the rewards, the points, the protection, etc. But know that a mis calculation can end up costing you money in interest for one or more months.

Finance Nerd August 27, 2009 at 2:42 pm

I have not done FPU, but I have led about 10 groups through Crown Financial Ministries study. The material is very similar, but Crown focuses more on the Biblical aspects, while FPU focuses more on wealth building.

I don’t agree with everything Crown says (they are similar to Dave on that one) but that hasn’t stopped me from leading.

I would also add, at least in Crown, the leader’s role is to facilitate discussion, get people talking, etc. NOT to have all the answers.

Mrs. White August 27, 2009 at 6:41 pm

I am delighted that so many financial classes are being taught in the churches. Ours had one through Crown several months ago. It was great.

Kevin,
I understand your view on credit cards and the debt snowball. However, for the general population, this aspect of Dave’s teaching may be the only way those people can ever get out of debt.

I wish someone would do a little research on this:
1. Generally speaking, how many people are in debt?
2. How many are debt-free?

My guess would be that most of them fall in category one.

Leigh August 28, 2009 at 8:01 am

Keep us updated. I really want to go through FPU with my fiance but our schedules wouldn’t work for this go around.

Roshawn @ Watson Inc August 29, 2009 at 6:23 am

Kevin,
I haven’t gone thru FPU either but think that both of your critiques are reasonable. In fact, I don’t even think Dave would argue too much except that he is dealing with the psycology of the problem instead of just the mechanics. For example, I can work out for 2 hours a day and still not see the results I want until I remove the carrot cake from the house. I think he is doing the same thing with cutting up the credit cards and paying off smallest debt first. The psychic boosts keeps you motivated long enough to pay off your debts. BTW, his plan helped me become debt free pretty rapidly.
Shawn

Bucksome August 29, 2009 at 9:40 am

I graduated from FPU in early August. I learned a lot from the class and have made many positive changes regarding my finances.

Having said that, the course is not rocket science, but the baby steps are a plan, which is really what most people lack. I don’t agree with everything Dave Ramsey says, just as I don’t agree 100% with any other financial guru/expert.

Kerri August 30, 2009 at 11:23 am

Hi Kevin,
Congratulations on the course–sounds exciting and useful.
I remember reading advice from Dave: “There’s no need for a credit card; don’t open one” was the gist. I have always been a responsible spender and managed to get by quite well in high school and college by using only checks, cash and a debit card. Dave and others had me believing that credit cards were “evil”; I never signed up for one (I didn’t really need it, either.)
Once I got out into the working world, I realized I needed to establish some credit. I had never even secured an auto loan and a house was in my mind for the big picture. I couldn’t get a card. Having no credit at 22 years old meant I had bad credit. I eventually had to write a $1000 check to a company to get a secure card after some rejections. That was a bridge to my first real card, and I’ve been successful using them since. I’ve been fortunate to carry no balances. Not establishing credit early on was problematic for me. It’s important to do so as you transition into adulthood–with the right mentality, as you note.

Jeff September 2, 2009 at 11:39 am

WOW! I am glad I saw this post. I will be (sincerely) interested to read if you still hold on to the spending on credit cards at the end of FPU.

You know, this is why I will follow this blog! Like some other’s, I appreciate the fact that you are willing to learn more about what you might not completely agree with. Looking at your first blog, I think you are about 95% Dave Ramsey follower and (like us all) 5% “this is what works for me”.

Good for you, man!

Steve September 9, 2009 at 10:33 am

So, what I want to know is: How is your teaching experience going so far? Any changes in your thinking? Or are you of the same opinion still? I like any approach that teaches no debt living, so I am not hyper one camp or another, as long as they teach strong, time-tested principles.

Kevin September 11, 2009 at 10:39 pm

You can read my article on what facilitating FPU is teaching me.

lance January 31, 2010 at 10:13 am

“I don’t like his anti-credit card stance because credit cards are not the problem. A spending mentality is the problem. Credit cards are the symptom in my opinion.”

I’ll suggest reading the first 20 pages “Switch” by Heath & Heath. Psychologists suggest that self-control is an exhaustible resource, whereas emotion is not. We agree that credit cards are not the problem, they are just a tool/benign. However, removal of the credit card takes away the temptation when our self-control runs out of gas. Like an alchoholic in a treatment center, if there is no booze around, at his weakest point… he will not have the drink around to turn to.

Same goes for credit card. It gives you a false sense of security and is in fact dangerous. Most folks in debt do not have enough self-control to keep a cc card and not use it. So, they must remove the cc from their lives.

imo

Wildwire November 1, 2011 at 2:14 pm

I have read all of Dave’s books. I have a credit card that gets paid off every month without fail. I agree with the lack of security with the loss of a debit card. The NO credit rating is almost as bad as the BAD credit rating when it comes to insurance premiums on home & auto. Dave never mentions that problem (I sell insurance, so I know). I understand why Dave preaches no credit cards – because most people will not use them responsibly. As for me, I will continue to use mine to maintain a lofty FICO score, because I still need insurance. I have also used OPM (other peoples money “bank”) to successfully invest in rental property for 20 yrs & would not be where I am w/o having done so. You would not what I own $ by the car I drive, the home I live in or the people I associate with and I like it that way

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