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Lots of time, a lot of Americans ask questions like:
- Is financial peace university worth it?
- Is financial peace university religious?
- Or some others just search online for financial peace university review or financial peace university negative reviews by Dave.
Are you looking for an honest FPU Review? Read on…
Well, I might not have the answer to all of your questions but I can tell you this; Dave Ramsey’s Financial Peace University motivates millions to get out of debt, but his program is not perfect.
People who live in America are almost completely buried in debt. According to the Federal Reserve, the average American household has over $31,000 in student loan debt as well as over $15,000 in credit card debt, as of September 2013.
If by chance, you so happen to belong to the class of Americans looking to pay off debt and gain financial freedom you may have heard no doubt of the viral reviews about Dave Ramsey’s Peace University. Let us take an unbiased look of Ramsey’s Financial Peace University review/the FPU program.
You might choose to do online vs. classes in the FPU program. Either way, you might discover that the program isn’t right for you, or you may be ready to find the classes in your local today. On the other hand, if you like the program, you’ll gain deeper understanding of the basics of the program, its backgrounds and its outcomes.
So let’s begin with a big question….
Who is Dave Ramsey?
Dave Ramsey is a popular financial speaker and author. He has a well-known syndicated radio program and has been featured on TV shows due to his expertise in the world of finance. Dave created a financial program which he named “Financial Peace University” (FPU). FPU is an integrative program which involves a book, video teaching, live classes and small group discussions.
If you buy into the idea of what Ramsey has to offer but aren’t ready to pay fees for taking his class, his book The Total Money Makeover teaches a solid beginners’ introduction to the concept he teaches.
He uses biblical influences but financial peace university is no way religious or made for just Christians.
Dave Ramsey happens to be a Christian and his book, Financial Peace University happens to have biblical base to its teachings. Plus, there are certain pages in the materials used to teach the program are quoted.
However, it’ contents are presented in a very non-offensive kind of way that anyone from whatever religion can relate to, so you don’t have to be a Christian or Jew to benefit from the program. A co-worker in my workplace is a Buddhist and he still relates to the contents of the book very well. In Fact, he recommends the book even to his Muslim colleagues.
Financial Peace University Review: Is Financial Peace University Worth It?
Dave Ramsey’s “Seven Steps”
The program is centered on seven steps. Dave Ramsey calls it “the 7 aby Steps”. The baby steps are as follows:
- Save $1,000 to start up your emergency fund as soon as possible.
To completely save your first $1,000, you have to scale the temptation of spending cash on anything you do not need. If it makes it faster to raise, you can choose to do a garage sale, or anything (legal of course) to get that first $1,000 stashed away.
Completing this first step requires commitment, discipline and patience. Now let’s follow the rest of the steps.
- Pay off all of your debt using the Debt Snowball method.
The Debt Snowball method is the simplest method to get rid of your debt. The way it works is, you pay off the debt with the lowest amount first. Once that is cleared, apply what you would have continued to pay monthly to the next debt and so forth. Doing that creates a snowball effect and your debt becomes cleared off before you can even say DOMINOES!
- Save 3-6 months’ worth of expenses to further complete your emergency fund.
According to Dave Ramsey, a real emergency fund should have about 3-6 months’ worth of expenses. Once you set up an emergency fund you will discover that credit cards are no longer needed to be used for those “late time emergencies”.
- Invest 15 percent of your household income into a retirement account.
Investing 15% of your entire income enables you to eliminate all the money you owe except for your home mortgage. Ramsey advice readers to invest 15% of their entire income into a Roth IRA.
- If you have children, start saving for their college education now.
Begin saving for your children’s college with 529 plans and Education Savings Accounts (ESA’s). DO NOT USE pre-paid college tuition, insurance, zero-coupon bonds or savings bonds.
- Pay off your home.
Start aiming the all that extra cash into paying off your mortgage. Following his tips, this is the last debt you will ever have to pay.
- Build wealth and give!
Ensure to donate money on a regular basis and bless others with your successes.
Criticism of the debt snowball
Although it is very obvious that following the seven step taught in Financial Peace University can help you pay off your current debt and grow your savings from ZERO to SOMETHING, it’s also easier said than done. Contrary to what some people might make you believe, the Financial Peace University is not a “get rich quick scheme”; it’s more like laying brick upon brick till you get that desired house structure(slow, painful and steady).
A good number of financial advisors criticize the debt snowball method because it isn’t necessarily the quickest method to reduce debt.
According to Math’s, paying off your debt with the highest interest is actually a better idea when compared to clearing debts with the lowest interest. But, Dave claims that the debt snowball method is really effective because it is more of emotional accomplishment when individuals see their credit cards being completely paid off and therefore there is an increased chance they’d stick to the program.
Criticism of FPU and real estate
The cool idea of putting extra cash down each month to pay down your mortgage as fast as possible (once you’ve succeeded in paying off leftover debt) is super solid because it eventually gets you out of every debt trap.
However, a lot of participants in Dave Ramsey’s program have a hard time following his recommendation of only buying real estate with cash or- if completely necessary- with a 15-year fixed rate mortgage. For some, this is highly possible but for others, the idea is completely impossible for families even if they save for many years. The area you live in too plays a role in how much you can invest per month or per year.
It gets interesting:
Do you know that many Americans successfully carry mortgages at low interest while investing funds and earning bigger return on investments (ROI) and other just take on more mortgages to buy investment properties, which Dave would never recommend.
Personally, I don’t believe either approach is wrong or right. In fact, it depends on your risk tolerance and financial priorities. Are you willing to shoulder a couple of debt(and some risk) for the chance to gather wealth more faster or do you want to be debt-free at all costs?
Most of FPU is reasonable for many
If like other American citizen, you have debt to pay off, the first steps of FPU are good ones. The gap between paying the smallest debts first(as opposed to those with the highest interest rates) might suck a few hundred dollars in lost interest, but both plans should and will 100% work if you stick to them diligently.
I recommend you start a personal program for your family based on the seven baby steps principles, but tailor it to meet your current needs. Only you and you alone know and understand what will work for you 100% of the time.
If you really want to buy a home but can’t pay all the money, start saving as much cash as you possibly can. Put as much money down as you can and ensure that your monthly payments are comfortable even if you encounter unforeseen live changes.
Did you enjoy our Financial Peace University review? Have you given Financial Peace University a shot? How has that worked well for you? Share your experience and awesome tips for getting out of debt today!