Wednesday, April 8, 2015

Book Review: Financial Peace Revisited

I've been reading through Dave Ramsey's Financial Peace Revisited, trying to understand the motivational speaker's personal finance style. If you're not aware of the name, he is a financial literacy expert from Nashville, Tennessee. He has gained a solid following over the years and has been praised considerably for his work.

Dave Ramsey was in his 20s when he became a real estate hotshot. He accumulated a wealth that supported a lavish lifestyle. But then the real estate bust hit in the 80s and Dave found himself bankrupt. A lot of that has to do with his borrowing methods, which included convincing banks to extend lines of credit on his borrowed assets. When the industry clamped down on such practices, borrowing on what you already owe, Dave Ramsey was unable to keep up with his payments and he lost his fortune. This experience influenced his new career as a financial expert, where he started off giving advice to friends and family who found themselves in hard financial times.

There is plenty to adapt from his philosophy. Dave recommends frugality, smart and simple investing tools, the importance of budgeting and negotiating the purchase of any product. He overreaches however when he expects his followers to aggressively negotiate everything. But Ramsey is a southern Nashville boy, where haggling is very typical in that part of the country. Another issue I encountered was his advice to forgo credit cards and to only save enough cash for purchases. He goes as far to encourage using cash to buy large priced items, such as a house and a car, because allegedly one finds a better deal. How many of us can actually save enough cash to buy large items, and how many of us are willing to carry that much money around? As I stated in prior posts, it's a copout to keep blaming creditors for our personal debt problems. Endangering our welfare and raising the risk of loss or theft by carrying cash is not the solution to spending problems. Accountability and self-discipline is.

Ramsey's use of religious text throughout the book in explaining away financial woes had my blood boiling over several times. I have nothing against religion, but his focus on scripture led me to believe that only the devout were either capable or worthy of financial health. Given that he is from a region where religion plays a central role in the lives of his followers, he is naturally focusing on this audience. But Ramsey has become such a huge success that it's impossible to believe he has not attracted a few agnostics along the way. Besides, financial well-being should be available to everyone, and not favor one group over the other. My problem with the use of scripture takes me back to my own conservative upbringing, where it was believed that those who turned from faith deserved whatever hardship they faced, even financial problems. The financial literacy industry is nondenominational and unbiased. Most of its advocates volunteer their time and resources to help those in need. And most are willing to reach out to anyone from any background to raise these individuals out of debt.

In general, Dave Ramsey offers sound advice although his tips on frugality and cash are a bit too outlandish. If you're into a one size fits all method to financial health, then Financial Peace is for you. If you'd rather stick be exposed to several methods you can pick and choose from to meet your specific needs, look elsewhere.

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