Review: Dave Ramsey’s “Financial Peace Revisited”

I decided to take Dave Ramsey’s Financial Peace University. My work was offering to pay for the course and I’m always anxious to learn something new about financial planning. As part of the class materials, I received Dave’s book Financial Peace Revisited. Having now read the book, I’d like to offer my observations.

Pros

First, if you are unfamiliar with many financial planning techniques or why you should be budgeting, saving, or getting out of debt in the first place, then this is an excellent guide. The range of topics covered are not exhaustive but an excellent start to cleaning your financial house. If you are already budgeting and investing, then consider this book a re-motivator or a little “pick me up.” I was able to find several areas where my wife and I are improving our financial situation as a result of this book.

Second, I’m a Christian and I appreciated the religious tone that Dave uses. I personally believe that we will be held accountable for our money management and Dave uses scripture frequently to illustrate his points. If you are not a Christian, don’t be scared off. He keeps the religious comments to a minimum.

Cons

First, the book was originally written in the 1990s and updated and released again in 2003. The concepts and principles that Dave teaches are certainly timeless. However, I believe that some of the techniques that he teaches are outdated. For example, all of the budgeting is completed by hand on paper. Fortunately, his book comes with convenient forms to use. However, this is 2009 and budgeting software packages are readily available and inexpensive. I can understand that many people didn’t have computers in the 1990s and that budget software wasn’t that advanced. But Quicken and Mint.com are both excellent options. Or heck, you can even use Microsoft Excel pretty effectively if you don’t mind updating your spreadsheet manually. Either way, some of the information and approaches could and should be updated.

Also, there are two chapters that in conjunction raise an issue that I have with the book. The chapters titled “Only Buy Big, Big Bargains” and “Career Choice” are good chapters touching on important points. However, they both suggest that you need to find a career where you can make lots of money and then go buy lots of nice, potentially expensive stuff with cash. I don’t think there is anything wrong with nice stuff, especially if you are paying cash and not going into debt for it. But Dave suggests that that path is the right and only one. I disagree and here is why. My wife and I are considering several graduate school options. One route would land me in a lower paying job that provides much higher satisfaction while the other option we are considering offers much more money but may be less satisfying. According to Dave, picking the satisfying career (so the first option) will generate more money. In my case, that’s just not true. Further, just because I can afford a $100k car, doesn’t mean I should buy one despite how good of a deal I get on it. I think Dave still has a focus on a lot of material things. Fortunately, he teaches you how to pay cash for those things.

Last, Dave gives a basic overview of the mechanics and fees of mutual funds. I was surprised that he didn’t cover passively managed index funds or how to construct a simple, diversified portfolio (which he could write a whole book on). Also, I personally believe that the average investor never needs to purchase a fund that has a load (fee to purchase it). Dave suggests that there are certain load bearing funds worth owning but never describes the criteria for knowing when a load bearing fund is worth owning. Again, I believe that unless you have a reasonable understanding of the market, mutual funds, and how to construct a strong portfolio, then stick with no load funds. In fact, stick to index funds from companies like Vanguard or Fidelity.

Summary

All and all, the book is a good, an easy read, and offers practical suggestions. Even though it appears that I had more negative than positive to say, my negative points are minor issues. On a scale of 1 to 5, I’d give it a solid 3.5. If you’d like to see additional reviews and comments or to purchase the book, check it out on Amazon.com.