I’ve mentioned before that this last fall my husband and I, along with our eleven-year-old daughter attended Dave Ramsey’s Financial Peace University. It was a 13-week program from September to December.
As we signed up, I doubted if I’d learn much. Our debt was a result of choice, not lack of knowledge, but we took the class thinking it would open up new ways to talk about money between ourselves, and how to teach our daughter about money.
I did walk away with some heavy lessons—here’s five that I’d like to share with you.
- Over 70% of Americans don’t have enough life insurance. Oh my goodness!! Can I just say; don’t get married, don’t get a mortgage and don’t have children if you don’t have good life insurance. Good term insurance is so cheap—it doesn’t make any sense at all to not be insured. Think of your insurance policy as your last words. On your way out, are you blessing those around you, or leaving them putting your funeral and estate expenses on their own bill? You have a choice—your final words can be “I love you—live long and comfortably” or “screw you, I’m done here.” Similarly, 25% of families have a negative net worth. Ouch! Topping that off, one third of car trade-ins owe more than they are worth. (Don’t do it folks! Just don’t!). Build up some net worth. If you have a sick child, a lawsuit, an injury or auto accident you’ll be over extended. Besides, you don’t want to work at Wal-Mart when you’re 86!
- Compound interest is the most powerful force in the universe. Best to be on the good side of it than the bad side. Albert Einstein is said to have replied to a question about gravity being the most powerful force in the universe by saying “surely, the most powerful force in the universe is compounding interest.” Honestly, I’ve only considered compounding interest in the negative form (as in debts compounding) but I didn’t realize how powerful interest is when it’s compounding in your favor. This made quite an impression on our daughter as well. She’s now saving at an impressive rate.
- Gourmet coffee is worth its weight in gold. Your daily trip to Fivebucks (my mythical coffee company) will cost you just $150 a month at $5 a day (no muffin, just a venti macchiato) could alternately be invested in a mutual fund at 12% from age 16-76. At age 76 you’ll have $19,371,943. Um, on second thought, brewing some Yuban at home is sounding better and better all the time. Nineteen million smackers will be big money even when I get old enough to retire.
- A written budget is powerful. Indeed, the pen is mightier than the sword! Keeping a budget, and using a cashflow plan that works will really make you feel like you got a raise. Learning to budget with my variable income was a terrific tool.
- The mortgage interest tax deduction isn’t worth it. Don’t rush into buying a house thinking it will “save you money” and don’t stretch out your mortgage payments in order to pay the IRS less. Do the math. Paying the IRS $5,000 is way better than paying the bank $10,000.
{ 7 comments… read them below or add one }
I finally stopped my daily runs to Starbucks when I noticed how much I spending there (thank you Mint.com). I still will treat myself on a rare occasion and it makes it that much better. Unfortunately, I am also too lazy to brew my own coffee at home so I generally wait to drink any until I hit the office.
As for the budget, I need to be better at not only creating one that works for my situation, but sticking to it.
Thanks for sharing!
Mint is outstanding isn’t it? I like it because I’m not a huge fan of spreadsheets. The Spreadsheet people who want to fiddle with all their data might want to look at GreenSherpa. Both are excellent!
If you’re having trouble sticking to your budget, go to cash only. Get your weekly alotted amounts (30 for gas, 80 for groceries, etc whatever is in your budget) and don’t spend a dime more. Leave the debit card at home and throw a $10 bill in your glove box in case you worry about running out of gas.
You can do it! 
(if you need to, leave a bit extra for a “kept my budget reward” at the end of the month… on the 30th if you’re in your budget, take yourself out for dinner, or buy yourself some slippers or something–a little pat on the back to yourself for a job well done. 
Agree on the written budget, having figures in your head makes them easy to change. I’ve purchased a cappucino machine, saved me the cost of starbucks in less than a month.
I participated in FPU series and a agree with you. Th compound interest thing is the one that drills the nail down the throat. I wish most people especially young can understand this concept.
Joseph
Isn’t it odd that we need to be TAUGHT the coffee lesson? I, too, didn’t realize until it was pointed out to me that I was spending $20 a week (that’s just on plain black coffee) that could easily be saved by toughing up and drinking the terrible (but free!) coffee at work. Once that occurred to me, the burned, over-strong, brand-x coffee never tasted so good.
Nice article. Before I finally picked up one of his books, I always thought Ramsey seemed like just another annoying guru, but these lessons are a good example of why I should’ve given him a chance earlier…like, say, before I went into debt.
It’s awesome to see that others have gotten so much from Financial Peace University, just as my husband and I have! We took it last April (the 13 week course), and it really turned our life around. We were just married, and started heading down the wrong path with credit cards thinking we needed everything new, and right then. Since then, we’ve paid off a bunch of debt, have a nice little emergency fund, and are working to save up and pay debt so that I can stay home when we start a family. More people out there need to take this class!!
You either live like rich people. Or you can live like poor people. Its up to you.
I will go with Ramseys advice and do what rich people do. Smart man.