How Dave Ramsey's FPU changed my life
Dave Ramsey’s Financial Peace University changed my life.
I know that you might be thinking, “Hey Theresa, that’s a pretty big claim” or “whoop de doo, that’s great for you but it doesn’t apply to me!” And my answer back is “yes, it is” and “nice rhyme, but, yes, it does”!
So here’s my story, and I challenge you to read through to the end and imagine similar changes in your own life.
Flash back to Fall of 2010, my husband, Eric, and I saw an advertisement for Financial Peace University (FPU) at Daybreak Church in Carlsbad, CA. I thought it sounded interesting (because I felt like we had money problems). We decided not to take the class together. Eric wasn’t as interested in the class as I was so we decided he would stay home and watch the kids.
I cried a lot in the class.
I was appalled to realize just how bad our finances really were. I had suspected that they were in bad shape, but at some point during the class, the reality sunk in.
Before FPU I would have said that I kept a budget. Every month I had an idea roughly how much we needed to spend. I would balance our checkbook and then find out where our money went. But every year we spent more than we made. We developed a pattern of hoping for a tax return check, and if it wasn’t as big as we needed, then we would refinance the house or use the Home Eqity Line of Credit (HELOC).
Before FPU, I would have told you that we didn’t have any debt. I actually believed that we paid off our balance each month on our credit cards! I had somehow convinced myself that the HELOC didn’t count as debt. I remember the moment in class when I asked if a second mortgage counted as debt or as a mortgage. I was really hoping that the answer was ‘mortgage’ so I didn’t have to admit to having any debt. Spoiler alert - HELOC, second mortgages, and credit cards (and student loans) are all debt - and not the good kind of debt (like avocados are the good kind of fat!) (BTW - there really is no 'good debt'!)
So here's the full disclosure. I Love Math. I don't have any issues with numbers and I have an engineering degree to prove it. If I go out with friends for dinner, guess who gets the check to figure out tips and totals due. Me. Yea, me. Because I am that rare breed of people that find numbers [dare I say it] fun.
You would think that finances should be no more work than keeping track of numbers. But that is woefully inadequate because there is so much emotion and sense of personal worth worth tied up in how we spend money than just balancing equations.
Over the years, Eric and I took turns, "doing the bills/managing the money'. Neither one of us was happy with the results. If you don’t have money to pay the bills, that must be the fault of the person paying the bills, right? It’s certainly not because you need to start saying ‘no’ to yourself and your spending!!! Read: Learn to start saying no to extraneous spending that you don't need.
When I was the person paying the bills, it compounded our problems because whenever I told my husband that we didn't have enough money, what he heard is "you don't make enough money." Mic drop. What husband can feel good about thinking that is what his wife is saying to him?
Clearly that didn't go over very well. Even though that isn't what I said, his filtering mechanism translated it as such, and then we would fight about money. But it was never just about the money, even though it seemed like it was about the money. Like Shrek, and an onion, there are many layers - financial and emotional.
Throw in a few of these thoughts and it starts to get even messier:
‘I work hard, so I deserve it.’
‘I didn’t get these types of things in my youth and now no one can stop me from buying it for myself.’
‘I want better for my kids than I had for myself growing up.’
‘Everyone else has one, or is doing it, and I don’t want to be left out.’
‘I have appearances to keep up.’
‘If I don’t send my child to baby gymnastics they will never be an American Ninja Warrior”
And the list could go on and on - feel free to insert your own personal thoughts here that cause you to overspend but make you feel justified in doing so.
When the next class started in Spring of 2011 we enrolled together. And, wow! It was a lot of hard work.
We had to take a long objective look at how much money we were spending every year.
We had to look at the numbers and make them balance. No more excuses and reasons for overspending.
Because we both spend the money, and both live our lives, we both needed to work together to create a budget.
How to create a budget
The first step of making a budget is to find out all of your income sources and put them down on paper. This part wasn’t hard for us - I’m a stay at home mom. My mom income could double every year and it would still be a big old zip. Eric got a steady base salary and variable bonuses.
The next step is to determine and write down all of your monthly expenditures. Some things are obvious regular monthly expenses and other things require research and averaging out over the year to get a monthly cost.
When you add up all your monthly expenses they should be less than your monthly income!
It is an easy concept and easy math, but it is a lot of work to get the information compiled and listed all in one place. And, that is an important point - you MUST list all the info on one sheet of paper. You can do the work on different pages, but you need to be able to see it all in one spot. The simpler the better!
Of course when we did this exercise, which by the way took about eight hours, the numbers did not add up. We were spending way more than we were making.
So the next step is to cut the fat. We had to identify the things that were WANTS and the things that were NEEDS and trim down the budget until we could get a zero on the bottom line.
Wow, this was hard! We had to make sacrifices and change our way of thinking about spending money, the way we spent money in the past, and our habits. It helped to talk about some of the reasons that we spent the money in the past, to help us figure out some of the emotional issues that were clouding the bigger issue, keeping it from being straight forward number crunching.
During that whole process of evaluating our income and determining expenses we realized that a big portion of our monthly expenses went to paying off credit card and home-equity line of credit. When we dug deeper we realized that some months we had paid just the minimum on those things and it wasn't even enough to cover the interest for that month and so the amount was growing even though we were making payments.
That was when we agreed that we HATED the debt and we wanted to pay it all off.
The GOOD plan: Get out of debt
So when we came up with our new budgets after agreeing on cuts, we made sure to have a sizable amount of our budgets go to paying off debts.
We did this by living off of Eric's base salary and putting most of the bonus money towards the debt.
Playing with a debt payoff spreadsheet became my free hobby. I was obsessed with tracking the bonus money and estimating when we would be debt-free. It took us around 38 months to pay of $110,000!
Paying off our debt and changing our lifestyle became a bonding project for us. Doing the work and discussing everything improved our communication. My husband and I rarely have money fights now. If we start to go down that path, one of us can stop the fight by asking, “where does it fit into the budget?” That simple question removes the personal blame/shame/entitlement aspect of the conversation, which would probably spiral out messily, and refocuses the issue back ‘can we afford it?’
Because of taking Financial Peace University, we stopped living beyond our means and paid off $110,000 debt.
Because of the class, we found a wonderful financial advisor who helps us to plan for retirement and feel confident we are on the right path.
Because of the financial advisor, we have created a trust and know that our financial legacy is safe.
Because of the class, we evaluated our life and health insurance and are positive that our family is protected.
Because of the class, we refinanced our home into a 15 year mortgage and have plans to pay it off early, as well as plans to fund the kids college.
Because of the class, we have confidence in our financial status today and for our future.
We became so passionate about hating debt and living within our means that we started leading the class! This fall will be our 10th class and we've had nearly 300 students graduate from the program.
If you’d like to take Financial Peace University for yourself, or would like to see where it is being hosted in your neighborhood, use this link here. Once you’ve taken a class, you are able to take it as many times as you like with no extra cost.
Eric would say that I’m obsessed with Financial Peace University, and with financial coaching. It’s
probably true, right now especially. This year I went to Franklin, TN to Dave Ramsey’s offices and took a Financial Coaching Master Training class. Joy! And now I’m blogging about financial wellness, and working on preparing a business aimed at helping people get to where we are today: a state of financial peace!
If you have any questions about taking a Financial Peace University class in your area or scheduling a personal assessment with me, please call me at (760) 576-HOPE (4673). Or email me at firstname.lastname@example.org. Or drop me a note through the contact button above!
So what do you think? Did any of this apply to you? Can you imagine any of these changes in your life?