Financial Peace University Review - Lesson 5 "Dumping Debt"

You might have heard of Dave Ramsey. He's a national talk show radio host who takes calls from people like you who have questions about their finances, debt, investments, foreclosures, etc.

In addition to his radio show, he created a 13-week course called Financial Peace University. This faith-based program is designed to help you get out of debt, invest in your future and have a stress free retirement. Too many of us struggle daily with our debt. There are those who can't afford to pay the bills they incurred and those who can afford their bills but should utilize their cash better. Dave has 7 "Baby Steps" to getting out of debt and building wealth. I will mention these baby steps as I review each week in the course.

Each week as I take another course, I will provide a review of each session. My classes are held each Sunday night for the next 13 weeks.

The fifth session is titled "Dumping Debt". The class began with a video. Dave was comical in the video so time passed quickly.

The focus of the video was to explain how credit cards are used often as "emergencies" when really the usage of them can be controlled. He suggests immediate cancellation of credit card usage. Pay them off and never use them again. In previous lessons he says to build an emergency fund of $1,000.00. Do that, define what an emergency is and then plan for what you know is coming that's not really an emergency by including it in your budget. Christmas is not an emergency, it comes once a year, put that in your budget.

It is explained how to do the infamous "Debt Snowball". What you do is list your debts other than your house smallest total at the top and work your way down to the largest total. Input your monthly payments. You pay the minimum payments on all debts except for the smallest amount. Anything you have extra goes to the smallest debt. Then when that's paid off, you mark it off your list and take that payment and apply it to the minimum payment of the next smallest debt. Each time you payoff a debt, you take the monthly amount you were paying and put it to the next debt payment. This creates a snowball effect by paying a larger amount each month. You will pay this off a lot faster by doing this.

It is suggested; you don't consolidate your loans. This is because you're not really solving the problem. Most people payoff the other cards with their consolidation loan then run up the balances on the paid off cards. Use an envelope system for your groceries, eating out and spending money. There's a 12% chance you'll spend more at the store if you use credit cards instead of cash. It hurts to use cash. It's more tangible than swiping or waving a card for payment.

So, make it your goal to payoff all of your debt smallest to largest. Cut up all your credit cards and have an emergency fund. You can do this. We are one year from being debt free.

Stay tuned for my review of Lesson 6.