Financial Peace by Dave Ramsey - Book Review (Key Lessons and Takeaways)

“Financial Peace” is widely recognized as a seminal work in personal finance, particularly in debt management and budgeting. Authored by renowned financial expert Dave Ramsey, this book has gained acclaim for its straightforward approach to achieving financial stability and freedom.

Book Details:

Title: Financial Peace
Author: Dave Ramsey
Genre: Personal Finance, Self-Help
Publication Date: Original edition published in 1992
ISBN: 9780140865486

About the Author:

Dave Ramsey is a celebrated financial advisor and radio show host known for his direct and practical advice on money management. His teachings have helped millions worldwide to eliminate debt and build wealth. Ramsey’s credibility stems from his personal journey of overcoming substantial debt, making him a trusted voice in financial education.

Summary of Financial Peace:

“Financial Peace” lays out a simple yet effective framework for managing personal finances. Ramsey emphasizes the importance of eliminating debt, budgeting effectively, and making informed financial decisions. The book is grounded in practical strategies for saving, investing, and spending wisely, interspersed with real-life examples and Ramsey’s personal experiences.

Selected Passages Randy Highlighted in the Book:

I have found that money has two properties that most people don’t acknowledge or understand….First, money is active. Finance and money are always moving. Time, interest rates, amounts, cash flows, inflation, and risk all intermingle to create a current that is ever flowing….We must learn that the current or flow of the mathematical process is always affecting our money. It never stops….Second, money is amoral. Money has no morals. That is, it is neither good nor bad. First Timothy 6:10 does not say, “Money is the root of all evil.” What it does say is “The love of money is the root of all evil.” (20)
Money is active, and you must keep managing it and moving it no matter how much you attain. (28)
You will have conflict, worry, shortages, and general lack of fun until you achieve some discipline in the handling of your funds. (28)
The last spiritual aspect you must understand is “farming.” No farmer has ever grown a crop unless he planted some seed. Personal growth requires that you give money away…. Good things that cannot be calculated or quantified are set in motion in your life and in your finances when you give…” (29)
Second Corinthians 9:7 says, “For God loves a cheerful giver.”
To think that the handling of your personal finances is merely a matter of math control is naïve. You must get better control of all aspects of your life. (30)
…you must learn to “just say no” to buying…. Proverbs 14:29 “He who is impulsive exalts folly.” (36)
The first lesson of this chapter is to avoid the life-styles of the rich when you are not rich….You must limit your style of living. You must figure out what your actual income is and then proceed to live far below that mark. (55)
Proverbs 21:20 “In the house of the wise are stores of choice food and oil, but the foolish man devours all he has.”
(Sharon) I would like to give some advice to every young person or young married couple: Don’t waste money. I wish Dave and I had learned that valuable lesson years ago. (64)
Look at it from the positive side; if you had no debt, how much money could you save every month? How much would you have to earn if you had no payments? If you look at what we have learned about compound interest and bargain hunting, with a totally freed-up budget you could be wealthy, wildly wealthy, within just a few years. But we are strapped with debt. (71)
After all that, if you must borrow money, let me give you two basic guidelines. First, borrow on short terms and only borrow on items that go up in value. That means never on anything except possibly a home, which you should pay off as soon as possible. Next, the terms are very important. If you can, buy less, so that you can pay off faster, and then make sure you get a very low interest rate. (88)
First, you should save until you have built an emergency fund. Second, you should save for purchases to avoid debt. Third, you should save for wealth-building. (110)
A good financial planner will tell you that first you should have three to six months of expenses in liquid savings just for emergencies. (110)
Money magazine states that 75 percent of families will have a major negative financial event in any ten-year period. (111)
The basic truth is that you must plan for the unexpected, because it will happen. (112)
At work on your money is a mathematical monster called compound interest. Compound interest can either be your best friend financially, if you make it work for you, or your worst possible enemy, if it works against you. (113)
The bottom line is that if Joe and Susan would sacrifice with a lesser purchase up front and save the difference, and then continue the process, they will be driving “paid for” cars and have savings the rest of their lives. (117)
I suggest for beginners with under $10,000 that you pick a growth and income fund….If you have over $10,000 to invest, I would spread it evenly across four of these fund types. But, with over $50,000 to invest I would find two or three mutual funds of each type so that you would own eight to twelve funds…The calmest type I use is the balanced fund….Next up the list is our beginner’s friend, the growth and income fund…Getting slightly wilder is the growth fund…The international fund should be in each portfolio because when the good ole U.S. isn’t doing so hot some years, many of the companies overseas are….The roller coaster of the bunch is the aggressive growth fund or small-company fund….If you are more calm, you can invest in balanced, growth and income, growth, and international. If you want to be more aggressive then you should lean toward growth and income, growth, international, and aggressive growth. (150)
So here is how to pick a fund. I use four criteria – performance, family, roller coaster, and expenses….Performance…You are looking for average annual return compounded over at least five years….[you] want one that is old enough to have seen some hard times; hard times make you wise. How did the fund do after black October 1987? If it has a great fifteen-year track record that encompasses that date, you have a good fund….The next area I look at is the family of funds….Does this family do well in most of its funds? Have they been around a while as a family?…Roller coasters…The wildness measurement is called a beta….Almost all aggressive growth funds will have over 1.0 betas like 1.5 or 1.7. If your fund’s beta is less than 1.0, then it is calmer than the overall stock market. Most balanced funds and growth and income funds will be below 1.0, at betas like .90 or .80….The last criterion I use to select a fund is expenses….The correct way to judge expenses is to look in the fund prospectus – the paperwork – for a simple chart showing average expenses per thousand dollars invested. (153)
Even if your IRA has lost its deductibility, however, you should invest anyway – because it will grow without your having to pay taxes on that growth until retirement, which is still a deal. (156)
Clarifying your goals and aspirations, and then facing financial realities, changes the way you see your situation. When you see what must be done, you will begin to move in that direction as a matter of course. (207)
Yes, I am saying get up thirty minutes earlier. When you get up, you can spend some time in the quiet of the morning assessing where you are and where you want to be….You can not only dramatically affect your financial life by having a quiet time early in the morning, but it will affect your career and your spiritual condition positively as well….If you want to have time to consciously prioritize your life daily, you will make the necessary changes in your lifestyle to accommodate that few minutes of serenity each day. You can spend your quiet time learning from your past by review, as well as thinking where you need to be in five years personally, with your family, and in your career. This time of reflection will cause you to make adjustments in all these areas of your life. (221)
Baby Step One: The first step is pay minimum on everything until you get $1,000 in savings. Go crazy and get this money in the first month of your plan. This savings is the first level of emergency fund to protect you from little emergencies. If your income is very low, you may settle for $500 or if your income is over $70,000 you might use $2,000. Remember, this first level fund is only for emergencies. (227)
Baby Step Two: Now is the time for killing all debt. Implement the debt snowball, and pay off all personal debt except your home. (227)
Baby Step Three: At this point, the only debt you have is your home. So now it should be easy to save the rest of your emergency fund. The correct amount is three to six months of your expenses. (228)
Baby Step Four: Fully fund all pretax retirement savings that you possibly can, using stock mutual funds…All 401(k) plans, deductible IRAs, SEPPs, and 403(b)s should be maxed out. At this Baby Step you should also review all your insurance to make sure you have enough coverage of all types. Also, with that emergency fund in place, it is easy to have $500 or $1,000 deductibles, which will drastically lower your premiums. (228)
Baby Step Five: Now and only now is it time to start college funds. (228)
Baby Step Six: It is now time to pay all the extra you can scrape together to pay your house off early. It may be two, three, even four years to get to this step, but when you do you will be able to knock that house debt off very quickly. (229)
Baby Step Seven: Let’s get rich, so rich that we spend our time trying to give it all away. With no payments and great basic savings plans in place, there is nothing left to do but build wealth and give it away. (229)
Personal finance is not a microwave; it is a crock pot. (229)
What will it be like to have $10,000 just for emergencies? What will it be like to have no debt? What will it be like to have your retirement adequately funded monthly?…What will it be like to give money like crazy to your church and other worthy causes? What will it be like? Financial Peace. (230)

Who Would Benefit From This Book?

This book is ideal for individuals seeking practical, actionable advice on debt reduction and financial planning. It appeals to readers interested in personal finance, such as “books for financial growth enthusiasts,” and those looking for “Christian perspectives on money management.“

Popular Quotes from Financial Peace:

“We buy things we don’t need with money we don’t have to impress people we don’t like.”
“A budget is telling your money where to go instead of wondering where it went.”
“If you will live like no one else, later you can live like no one else.”

Related Books:

“The Total Money Makeover” by Dave Ramsey
“Rich Dad Poor Dad” by Robert Kiyosaki
“The Millionaire Next Door” by Thomas J. Stanley and William D. Danko

Readers who enjoyed “Financial Peace” might also find value in Bob & Linda’s book: Simple Money, Rich Life. Find the connections between financial principles and modern financial strategies to enrich your own financial life!