This is the 2nd installment from Les O'Dell as he discusses his journey through Dave Ramsey's Financial Peace University.
So, on a Monday night earlier this year we walked into our first Financial Peace University Class at a local church. There were about 20 people in the room: people of all colors and ages and, judging by the cars in the parking lot, of a wide range of financial status. Each session was to be led by a coordinator, himself an FPU “graduate” and consisted of watching a DVD of Dave Ramsey teach, followed by discussions among our fellow students. I learned this was to be the format of each week’s class. After a brief introduction, we dove into lesson one—Super Saving.
Save, save, save
In the lesson, Ramsey discusses the importance for, as grandma said, “for a rainy day” because, as he said, “it’s going to rain.” With the lesson on saving, Ramsey introduces the first and third of what he calls the baby steps toward financial peace. Step one is set aside $1,000 as a small emergency fund to provide a cushion for unexpected events as well as giving peace of mind. Step two (paying off debt) comes in a later lesson. Step three is to expand the emergency fund to equal three to months of household expenses.
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Throughout the lesson, Ramsey reminds that emergency funds should not be tied up in long-term investments including CDs, but rather should be easy-to-get-to such as in a simple savings account or money market account. Also, he stresses that purchases, wants and whims do not qualify as emergencies.
Let your money work for you
The DVD lesson concludes with Ramsey briefly teaching the magic of compound interest and living frugally. He uses the example of a 16-year-old who spends $3 daily on cigarettes. He says if instead, the teen invested his cigarette money and averaged a 12 percent return, by his 76th birthday, he’d have $11.6 million.
Finally, the class finishes with a quick primer on simple budgeting and a homework assignment: several chapters of reading from Financial Peace Revisited, FPU’s companion text and completion of a “quickie budget”.
My wife and I left the evening’s session fired up about working hard together on our finances. I think for couples, this might be one of the best parts of the entire program—getting it together together. We knew we had a long way to go to get our financial ship in shape, with a lot of debt to wade through as well as so many old habits to break and replace with new ones. We were eager to get started, beginning with the reading and the quickie budget while looking forward to the next twelve weeks.
Les O’Dell is a freelance writer living in Carbondale, Ill. His work can be seen in a number of newspapers, magazines, publications and websites. He is co-author of the popular “He Said, She Said” newspaper column. He can be found on the web at www.lesodell.net. Les is not affiliated or endorsed by LPL Financial.