Should You Join the Dave Ramsey Financial Peace University?
We’d all like a little more peace in our lives, especially when it comes to money. Is Dave Ramsey the man who can give it to you?
August 15, 2022
This article is provided for informational purposes only and should not be construed as legal or investment advice. Always consult with a professional financial or investment adviser before making investment decisions.
Dave Ramsey is a personal finance heavyweight. From his radio show “The Dave Ramsey Show” to his book “The Total Money Makeover,” it’s hard to escape his advice in the world of debt management. If you feel you need some help with handling money, you might have considered signing up for the Dave Ramsey Financial Peace University (FPU). But what do you get from the course, and is it a good fit for you?
To help you make your decision, we’ll run through everything the program involves, along with some alternatives you may want to consider.
Dave Ramsey’s Financial Peace University program
The Dave Ramsey Financial Peace program is a course on personal finance management that contains lessons from Dave Ramsey and a few other experts, such as his daughter, Rachel Cruze.
It covers the following topics:
Creating a budget (Baby Step 1)
Managing debt (Baby Step 2)
Building an emergency fund (Baby Step 3)
Investing and saving (Baby Steps 4, 5, 6 and 7)
Spending money wisely
Understanding insurance
Building wealth
Buying, selling and refinancing your home
Being generous with your money
As you can see, the Baby Steps (Dave’s famous framework for personal finance management) are a huge feature of the program, but it also goes beyond them by covering a range of other topics. We’ll take a closer look at what the lessons involve shortly.
What you get from FPU
The content is available online. Each topic outlined above is broken up into videos that last around an hour — but they’re not all you get from the course. You may be able to attend local classes for more motivation (they’re often held at churches) and online group coaching sessions.
There are also various resources available to download, such as a workbook to help you get the most out of the sessions.
Additional perks include access to EveryDollar premium (a budgeting app), free audiobooks, access to special livestream events and one free e-file from Ramsey SmartTax (software for filing tax returns).
Plus, you’ll have access to the Dave Ramsey Financial Peace community where you can discuss your journey with others and benefit from accountability and support.
How much does Dave Ramsey's Financial Peace University cost?
The course follows a subscription model, so you won’t get access to the course materials unless you keep paying. You must choose how long you want to access the materials. It costs $59.99 to join for three months, $99.99 to join for six months or $129.99 to join for 12 months.
There’s also a free trial available, so you can test out the course for 14 days.
Is it worth it?
Dave Ramsey has been in the personal finance space for more than 25 years, and Ramsey Solutions claims that more than 10 million people have taken the course already. That’s equivalent to around 3% of the U.S. population, so Financial Peace must be doing something right.
However, the approach won’t work for everyone. Above all, if you want to prioritize the efficiency of your strategies over achieving “financial peace,” it may not be right for you.
Key principles of the program
Before you sign up for Dave Ramsey’s Financial Peace University, you probably want a better idea of what to expect. It’s also a good idea to realize the approach favored by Ramsey isn’t the only “correct” way to manage your finances. Experts in the field have differing opinions.
We’ll run through the key principles of the program and why you may find them useful, along with some potential alternatives.
Debt payoff methods
When teaching people how to tackle their debt, Dave Ramsey favors the debt snowball method. This involves comparing the total balances you have for different debts and paying the smallest first. As you build up momentum with these small wins, you’ll benefit from a snowball effect and feel more motivated to keep going, which helps a lot of people to pay off their debt faster.
However, it may not make mathematical sense. The debt avalanche method wins on this front, which involves tackling the debt with the highest interest rate first (often credit cards) and working down to the debt with the lowest interest rate. This ensures you can save as much money in interest as quickly as possible and helps you to pay off your debt faster. But some people may become discouraged due to the lack of immediate results.
At the end of the day, paying off your debt more slowly is better than not paying off your debt at all, so Ramsey’s recommended debt snowball can be a great approach. It all comes down to your personality and preferences.
Saving and investing
Although Ramsey is best known for tackling debt, he also covers other aspects of money management, such as saving and investing.
The Financial Peace program discusses the importance of building an emergency fund in a savings account, which works as a financial buffer. This is something most financial experts agree is a good idea since it ensures you can cover unexpected expenses (such as a car repair) without going into debt.
Ramsey also recommends how you can save and invest more money. He advises putting 15% of your income into a retirement fund, such as a 401(k) or IRA, but some people may prefer to dedicate more or less money to this depending on their goals. Maybe you’re aiming for early retirement and want to save more, or maybe you’d prefer to prioritize saving for your children’s education.
The program recommends using the envelope system to help you save more, which involves keeping cash in envelopes that correspond to your budget. This makes it psychologically more difficult to spend money and can make it easier to save more, but some may prefer a more flexible system over a rigid budget. Then, there’s the impracticality (and potential insecurity) of having too much cash lying around.
Ultimately, everyone’s financial situation is different, so there isn’t a one-size-fits-all plan for investing and saving. It’s best to speak with a financial adviser to figure out what’s right for you.
Spending wisely
A crucial part of paying down your debt is to overcome the marketing messages pushing you into doing precisely the opposite. Ramsey advises against offers that encourage you to spend more than you have on items you don’t need.
To avoid this, he recommends sleeping on a decision before you make a purchase and considering the opportunity cost of it (e.g., how much of your debt you could pay off instead of buying something).
Ramsey also helps with this by including The EveryDollar app with the Financial Peace program. The tool syncs across your devices and bank accounts to help you save and stick to your budget. However, it’s certainly not the only way to track your budget. There are plenty of other apps out there (such as Mint and YNAB), or you could keep things simple by using Excel or pen and paper.
Ramsey also advises against having credit cards and auto loans since they’re forms of debt. While some people need this hard-and-fast rule to stay out of debt, it may not be right for everyone; an auto loan may be necessary, and credit cards can be beneficial when used responsibly. For example, you may be able to earn perks, such as cash back or travel rewards.
Insurance
Ramsey recommends the following eight types of insurance:
Term life insurance
Auto insurance
Homeowner’s or renter’s insurance
Health insurance
Long-term disability insurance
Long-term care insurance
Identity theft protection
Umbrella policy
Nothing is more important for achieving “peace” than knowing you and your loved ones will be protected as much as possible against unfortunate circumstances, so insurance isn’t something to trim from your budget. At the very least, it’s important to educate yourself on the different types of policies out there.
Insurance can be complicated, so you may want to discuss options for your particular situation with a financial adviser.
Building wealth
Ramsey’s advice on building wealth expands on earlier principles about the importance of saving and investing. He points out that many people become millionaires simply by consistently saving small amounts over a long period, even if they earn below-average salaries.
He covers various investment types, including CDs (certificates of deposit), bonds, real estate, stocks, ways to save on income tax and the importance of diversification. Risk preferences vary by individual when it comes to investing, but the Dave Ramsey Financial Peace course provides an overview of your options.
As mentioned earlier, when deciding how to save and invest, it’s best to speak with a professional who knows your specific life goals and circumstances.
Real estate
If you have a mortgage, Ramsey advises paying it off as early as possible. Therefore, he recommends opting for a 15-year fixed-rate mortgage and spending no more than 25% of your household’s take-home income on monthly mortgage payments.
It’s important not to stretch yourself too thin financially with a large mortgage since it can result in stress and hardship. Yet, as with the debt avalanche method, prioritizing paying off your mortgage may not be the most mathematically advantageous approach.
If you have spare cash, it may be a good idea to invest it instead of focusing on paying down your mortgage — especially if your home loan has a low interest rate.
Again, it comes down to preferences and what you feel most comfortable with. Your financial adviser can guide you to what’s best for you.
Donating
Finally, Ramsey discusses the importance of using your money to give back.
This is, perhaps, the least controversial part of the program and is the last part for a reason. You shouldn’t feel guilty about not taking care of others if you can’t yet afford to take care of yourself.
Find your peace
Dave Ramsey’s Financial Peace University claims to be a proven plan for giving your finances a boost and paying off debt. It’s helped thousands (or even millions) of people to gain control of their money. But while it’s been a game changer for many, financial decisions are personal; some of the program’s approaches may not be right for everyone.
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