Financial Peace Revisited

Don't be one of the almost 20,000 people in Malaysia to declare bankruptcy. This summary will show you how.

Dave Ramsey has been speaking and writing about personal finance for decades. Anyone familiar with his work will know that he’s strongly against debt and credit, which is no surprise given his experience with bankruptcy.

That's right; at 26, he had built up a successful real estate business from scratch, only to see that all slowly collapse as he drowned in debt.

Since bouncing back, he’s taken the lessons learned from that time to help others avoid the same mistakes he made.

Financial Peace Revisited is an updated version of his 1999 book Financial Peace. It offers up 37 simple truths about personal finance he calls “peace puppies”

These simple truths are what many would call common sense but few would actually follow.

We can’t go through each one individually, but here are four main takeaways:

Takeaway 1 – Avoid debt

As mentioned, Dave Ramsey is anti-debt and anti-credit.

One of the reasons why his business collapsed in his late twenties was because banks had overextended credit to him, leading him down a dark road of debt.

Even when he was a millionaire, he was ultimately spending more than he was making.

The lesson?

Spending on credit can be extremely dangerous over the long haul, even when you are making good money.

Your money is meant to work for you, not the other way around. But if you get into debt, you’ll only become its servant.

A lot of financial trouble is because of our tendency to buy new things even when we don’t need it.

Once we get out of the mindset that we can buy on credit, we’ll break free of the desire to accumulate more stuff.

If you can’t avoid debt, get rid of it as soon as possible.
Our culture has taught us that debt is normal, so it’s not your fault that you might have found yourself in a financial hole.

What Ramsey suggests for getting rid of your debt is the “debt snowball”.

The debt snowball is to pay the smallest debts first, and once they’re paid off, move on to larger ones.

It sounds counter-intuitive, but because small debts will be easier to handle, you’ll feel encouraged to keep going when you see them paid off.

And with the small debts gone, you’ll also have more and more money freed up to pay off the larger debts.

At this point, momentum will be on your side.

This process might take months or even years, so don’t try to do too much too fast.

The key is consistency.

Takeaway 2 – Save and sacrifice for future peace of mind

Only people who won’t mind surviving on cup noodles after retirement aren’t saving for it now.

By investing and saving now rather than later, you can let the power of compound interest build your wealth for you.

Dave’s overall approach towards money is essentially to sacrifice now so you can have peace later.

As he puts it: Live like no one else so you can live like no one else.

This means that for now, you should live substantially below your income so that you have a strong financial foundation.

And if you’re in the process of getting rid of your debt, then do whatever you need to, whether it’s selling some of your things, or working more hours.

No more buy anything that catches your eye.

And when you do want to buy something, be patient and practice your negotiation skills.

Dave recommends comparison shopping, which involves asking around different places for the best deals.

This might take you more time, but will save you money in the long term.

And when making big purchases, don’t be afraid to negotiate on the price, ask for add-ons, and so on.

Ultimately, to get financial peace you need to develop “power over purchase,” the willpower to not buy stuff you simply don’t need.

Takeaway 3 – Plan, commit, prioritize

Having a cash management plan will be key to helping you commit to taking control of your finances.

Laying out a budget doesn’t mean that every part of your life has to be planned down to the cent, but it will show you where your money is actually going, and how you can improve.

Commit to your plan or budget for ninety days. For at least ninety days, keep track of your financial transactions, whether through an app or an excel sheet.

By ninety days, you’ll be able to see what you’re doing well and where you need to improve.
Don’t hesitate to rework your plan to find what works for you.

What’s important is that everyday, you are prioritising what is actually important to you.

If financial peace is important to you, then your actions should show that.

Dave’s advice is to keep your spiritual life healthy.

Dave is a committed Christian, but for you, having a healthy spiritual life might just mean making sure that what you do is in line with your values and beliefs.

To keep the momentum going, take baby steps!

Moving slowly is okay.

For more specifics on how to actually do that, Dave outlines his Baby Steps plan in another one of his books, The Total Money Makeover (which we have done a book summary for as well!).

Takeaway 4 – Financial peace requires accountability and support

No plan will work unless you making yourself accountable, whether to yourself or to others.

If you have written down a plan, make sure you stick to it; if you have made a shopping list, don’t give into impulse buying something that isn’t on it.

If you’re single, Dave suggests finding a mentor that you can turn to for advice and to keep you accountable.

Having experience and wisdom on your side will help you greatly on your path.

If you’re married or in a relationship, work together and listen to each other. You both might have different perspectives on money, and it’s best to carve out the time to plan your spending and saving goals.

How you handle money will affect your relationships, and vice versa.

You are in control of your financial destiny, but getting your loved ones on your side can lessen the stress of getting yourself where you want to be.

Financial Peace Revisited Recap

In this summary, we covered 4 main ideas:

The first idea is to avoid debt.

For most things, if you can't afford paying cash, then you should not be buying it.

However, for those bigger expenses such as a house, you should try paying off as soon as possible.

The second idea is to save and sacrifice for future peace of mind.

As his favorite quote goes: live like no one else so you can live like no one else.

The third takeaway is to plan, commit and prioritize.

Having a cash management plan will be key to helping you commit to taking control of your finances.

Finally, the last takeaway from this summary is financial peace requires accountability and support.

There will be days that you will let yourself make financial decisions that you normally wouldn't.

By having someone whom you can trust with supporting you and keeping you accountable, they will be able to step in and talk you out of decisions that you may regret in the future.

Our Thoughts from More Money Malaysia

Although we do not completely agree with Dave's philosophy, we do believe that his practical tips are true.

Especially when it comes to using the debt snowball method to pay off your current debt.

The philosophy that we do not agree with is related to takeaway 2 – sacrificing today in order to have a better future tomorrow.

We agree that you should not overextend yourself in this space.

However, we do not believe that the answer to the perfect life is going to come from saving.

Instead, we believe that you should be focusing on growing your income in order to really afford the life you've always wanted.

Action Steps

Now that you know what the main lessons are from Financial Peace revisited, here are the next steps.

Step 1 – if you are in debt, start using the debt snowball by paying off the lowest balance first.

Step 2 – In order to avoid getting into debt, do not purchase anything unless you can afford to pay in cash.

The only exceptions are your car and your home.