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 T H IS B OOK BE LONGS TO

S TA RT DATE
THE DAY YOU DECIDED TO CHANGE

MON T H DAY YEAR

We've all done stupid. I did
stupid with zeros on the end.
I started from nothing. But by the time I was 26 I had a net worth of a
little over a million dollars. And then it all came crashing down.

The short story? I had a lot of debt. And it caused me to lose

everything. That was the bottom for me.

You might be on your way to the bottom. You might already be

there. Or maybe you were the smart one who didn’t borrow money
at all. No matter where you are, you can always do better.

And you’re not alone.

I discovered God’s and Grandma’s ways of handling money and

learned that the only way to change my situation was to change
the guy in my mirror. So, I changed. It was a long, painful process,
but it worked. And it will work for you too.

For more than two decades, over five million people have found
success with the same proven plan that you’re about to follow.
Stick with us, stay focused, and follow each step, and I promise,
you will change your life.

If you’ll live like no one else now, later you can live and give like no
one else.

You got this! It’s game on.

 OUR  Proven PLAN
If you want to win with money, you can’t do what you’ve
always done. You need a plan that works. That’s why
Dave created the 7 Baby Steps. It’s a clear path to know
where you are and where you’re headed next. This isn’t
a get-rich-quick scheme, and you haven’t won the lottery.
But if you follow each step—in order and with great focus
and intentionality—you will change your life.

4 // Introduction
BABY STEP 1
Save $1,000 for Your
Starter Emergency Fund

BABY STEP 2
Pay Off All Debt (Except the House)
Using the Debt Snowball

BABY STEP 3
Save 3–6 Months of Expenses in
a Fully Funded Emergency Fund

BABY STEP 4
Invest 15% of Your Household
Income in Retirement

BABY STEP 5
Save for Your Children’s
College Fund

BABY STEP 6
Pay Off Your Home Early

BABY STEP 7
Build Wealth and Give
COURSE OVERVIEW
You’ve learned the Baby Steps, but that’s not the whole course!
You’ve got nine video lessons ahead of you. The first four
will walk you through our proven plan, the 7 Baby Steps.
And the last five lessons will teach you how to
tackle life on the plan. Let’s break it down.

Page 58

Page 44

Page 28
03

02
&BUDGETING
Page 12

The PLA N

Lessons 1–4 walk you through the 7

Baby Steps. This is your proven plan to
win with money. In these lessons, you’ll
learn how to do more than just treat
the symptoms of your money problem.
You’ll get to the root of the problem:
your behavior!
BUYER RETIREMENT OUTRAGEOUS
BEWARE PLANNING GENEROSITY
Page 76 Page 100 Page 126

05 06 07 08 09
THE ROLE OF REAL ESTATE
INSURANCE & MORTGAGES
Page 86 Page 112

Life O N T H E PLAN

Lessons 5–9 keep you on track with the

Baby Steps. Learn to navigate spending,
insurance, real estate, and investing, so
you don’t ruin your progress! And protect
yourself from everything trying to get at
your money, so you can start fighting for the
things you want.

Introduction // 7
MEET
theTEAM
Whether you’ve done stupid with zeros on the end or you’re
just trying to do a little better, we know that money is a big deal
in your life. You may feel ashamed. You may just feel stressed.
And if you’re not scared, you’re probably a little unsure of
what to do with your money and where it can take you.

That’s why we have a team who’s been where you are right
now, knows how to win with money, and will help you get
there too.

Dave Ramsey, Chris Hogan, and Rachel Cruze are all

#1 best-selling authors who speak to sold-out venues
across the country. Their books, podcasts, and shows
have helped millions of people change their lives.
And today, they’re going to help you change yours.
After battling his way out of bankruptcy and
millions of dollars in debt, Dave Ramsey started on
a mission to make sure other people discovered
the way out. That’s why he created Financial
Peace University. Today, over five million people
have experienced life-change through this course.
And he’s helped millions more through his seven
best-selling books, countless live events hosted
across the nation, and his radio show, The Dave
Ramsey Show, heard by more than fifteen million
listeners each week. Dave’s biblical, commonsense
advice is for anyone ready to win with money.

Introduction // 9
 Chris
HOGAN
While helping clients at a well-respected mortgage
company, Chris Hogan felt powerless as he watched people
throw away their financial futures. That’s when he met
Dave Ramsey. For the last decade, Chris has been
on our team, on a mission to help millions like
you make their money dreams a reality.

Chris is an expert on retirement and wealth

building. He’s a #1 national best-selling
author, dynamic speaker, and financial
coach—which means he’s seen it
all! His newest book is Everyday
Millionaires: How Ordinary People
Built Extraordinary Wealth—And How
You Can Too.

ANYONE IN THIS COUNTRY CAN

I CAN SHOW YOU HOW.

10 // Introduction
CRUZE
Rachel Cruze grew up learning how to win with money.
As Dave Ramsey’s daughter, she was taught from an
early age how to give generously, spend wisely, and
save for the future. She understands the dangers
of debt, and she’s seen firsthand the damage
it can do. But as she’ll tell you, she’s also
a spender and hated budgeting until she
learned what a budget can really do!

Rachel has authored three best-selling

books, is a #1 New York Times best-selling
author, and is host of The Rachel Cruze
Show. But what is she most known for?
Fun! Rachel is an energetic, personable
speaker who wants you to handle your
money with wisdom, so you can live a
life you love.
 The PLA N

&BUDGETING
KEY POINTS
The 7 Baby Steps focus on changing your behavior
toward money through a proven, step-by-step plan.

Baby Step 1 is saving $1,000 for your starter

emergency fund.

A zero-based budget is the tool that helps you take

control of your money.

Lesson 1 // 13
 Save $1,000 for Your
Starter Emergency Fund
Your first goal is to save $1,000 for your starter emergency
fund as fast as you possibly can. Saving has to become
a priority. Focus all of your energy on getting this Baby
Step done—fast! An emergency is going to happen, so
you have to be ready when it hits. We’re talking no credit
cards, but real cash in the bank to cover it.
LESSON 1 //
BABY STEP 1

BABY STEP 1
Save for your starter emergency fund.

If you will live like no one else now, later you can live
and like no one else.
GU I DE
Dave Ramsey

“
NO DISCIPLINE SEEMS PLEASANT
AT THE TIME, BUT PAINFUL. LATER ON, HOWEVER, IT PRODUCES A

harvest of righteousness and peace ”

FOR THOSE WHO HAVE BEEN TRAINED BY IT.

HEBREWS 12:11 (NIV)

BUDGETING
Give it to get into
a rhythm.

GU I DE
Rachel Cruze
The enjoys doing the budget.

The feels controlled by

the budget.

ANSWER KEY
$1,000
Give
Three Months
Nerd
Free Spirit

Lesson 1 // 15
LESSON 1 //
BUDGETING

In the Budget Committee , you will meet

with your spouse to review the next month’s budget.

The budget gives you you

never knew you had.

“
SUPPOSE ONE OF YOU WANTS TO BUILD A TOWER.

WON’T YOU FIRST SIT DOWN

AND ESTIMATE THE COST
TO SEE IF YOU HAVE ENOUGH MONEY TO complete it ? ”
LUKE 14:28 (NIV)

Notes

ANSWER KEY
Meeting
Control

16 // Lesson 1
LESSON 1 //
BUDGETING

It must be a zero-based budget. That means your income

minus expenses equals .

The are food, utilities,

shelter, and transportation.

BUDGET WITH EVERYDOLLAR

Watch Rachel create a sample
zero-based budget!

You’ll have a One-Minute

Takeaway at the end of
every lesson! Wait here
until the video ends.

ANSWER KEY
Zero
Four Walls

Lesson 1 // 17
LESSON 1 //
ACTIVITY

WHAT TO DO:
NERD & Free Spirit QUIZ
Take this fun quiz to figure
out if you’re more of a Nerd PERSON 1 PICK THE ONE THAT SOUNDS PERSON 2
or a Free Spirit! If you’re A B MOST LIKE YOU! A B
married, this will help you
identify your role in the
Budget Committee Meeting. A: You’re prepared for Tax Day months in advance.
If you’re single, this will B: Tax Day? That’s in October, right?
help you determine your
strengths in creating your
budget, and where you’ll
A: Rules are important and should always be followed.
need some accountability.
B: Rules are more like suggestions.

A: You are always on time. Always.

B: You show up “on time,” give or take 15 minutes.

A: You make a plan for each day of your vacation.

B: Vacations are more fun with no schedule.

A: You read the introductions of books.

They’re in there for a reason!
B: You skip introductions—only chapters count.

A: Your life’s motto: “A place for everything

and everything in its place.”
B: You live by the phrase, “It’ll all work out!”

A: You organize your shirts by color. Doesn’t everyone?

B: You’re doing good just to get your shirts off the floor.

A: You can’t wait to create your EveryDollar budget!

B: You’re considering faking an illness for the
Budget Committee Meeting.

TOTAL YOUR SCORES AND

A B CIRCLE THE HIGHEST ONE A B

18 // Lesson 1
 IF YOU HAD A
HIGH SCORE OF: A IF YOU HAD A
HIGH SCORE OF: B
SCORE SCORE
4–5: NERD-ISH 4–5: FREE SPIRIT-ISH
You have a pretty good idea of how You’ve got a budget somewhere.
much money is in your account. You could find it if you needed to.

6–7: NERD 6–7: FREE SPIRIT

Budgets are for awesome people. Budgets are for boring people.

8: ULTRA NERD 8: ULTRA FREE SPIRIT

You canceled your plans with friends Budgets are like putting on a
so you could start drafting next straitjacket. Why would you ever do
month’s budget. that to yourself?

O F F I C IA L RULE S O F T HE

BUDGET COMMITTEE
ME E T ING

FOR THE NERD FOR THE FREE SPIRIT

1. Create the budget. 1. Come to the Budget Committee

Meeting.
2. Thank the Free Spirit for being there!
2. Be realistic and don’t use the phrase
3. Show the budget to the Free Spirit.
“whatever you think.”
Then be quiet.
3. Have an opinion and change
something.

Lesson 1 // 19
LESSON 1 //

Spending
ACTIVITY
SEE WHAT
WHAT TO DO:
Fill out your estimated
YOU’RE
monthly expenses for
the following categories. Now that you know whether you’re more of a Nerd or a
Then add up the total for
Free Spirit, it’s time to take the first step into budgeting.
all categories.
Don’t panic; this first step is simple! 

THE BUDGET IS YOUR MAP FOR THE MONTH

Rachel taught you how to create a zero-based budget with
EveryDollar. But to get to where you want to go, you have to know
where you are.

It’s just like driving: if you don’t know your starting point, it’s
impossible to get to your destination! That’s why you do a
Quick-Start Budget.

IT’S TIME TO FILL OUT THE QUICK-START BUDGET

This activity is a simple way to put pen to paper and get you
thinking about how much you’re currently spending in each
category, each month. You’ll notice there are a few categories
missing, like income and debt. That’s okay! Remember, this is just
your starting point.

Nerds,
Free Spirits, ☐ ☐ STEP 1 this is where you get to work with numbers!
Write down what you’re spending for the month in each item of
make sure there is each category. If you don’t know exact numbers, just make your
fun in the budget! best guess!

☐ ☐ STEP 2
Add up each item in each category and write the TOTAL at
the bottom.

☐ ☐ STEP 3
Add up the numbers in all of the TOTAL boxes and write that
number in the TOTAL FOR CATEGORIES box.

20 // Lesson 1
YOUR QUICK-START BUDGET
Follow Steps 1–3 on the previous page to list and add up your monthly expenses.

GIVING Planned TRANSPORTATION Planned

Church Auto Insurance

Charity Gas & Oil

TOTAL Maintenance

TOTAL
FOOD Planned

Groceries HOUSING Planned

Restaurants Mortgage/Rent

TOTAL Utilities

TOTAL
PERSONAL Planned

Clothing
TOTAL FOR CATEGORIES

Phone

Fun Money Remember, this total does

not include every category
that will be in your
Gifts
monthly budget–just a few
of the big ones!
TOTAL

You’ve taken the first step to creating

Great Start! your monthly budget. In the Action Steps,

you’ll create a zero-based budget with
EveryDollar—just like Rachel showed you!

Lesson 1 // 21
LESSON 1 //
BABY STEP 1 &
BUDGETING
DISCUSSION
This is where change happens—in a safe space where you can
talk about real life. This is where you start connecting with other
people and stop believing you’re in this alone. Whether you’re in
a class or online, be honest with your answers and remember to
encourage the people around you!

Think about a time when an emergency stressed you

1 out. How would a starter emergency fund have made
that a stress-free emergency?

What are some categories that you think might bust

2 your budget? What can you do to keep those categories
under control? 

Cashing out your budget can help you stay ahead of

3 problem categories. Which categories could you use
envelopes or clips for to help you stick to your budget? 

Based on your results from the Nerd & Free Spirit

4 Quiz, what strengths can you bring to the Budget
Committee Meeting?

KEEP THE
CONVERSATION
GOING!

Answer these questions

online in the Financial Peace
community!
financialpeace.com
LESSON 1 //
BABY STEP 1 &
BUDGETING
ACTION STEPS
Personal finance is 80% behavior. It’s only 20% head knowledge.
So it’s time to live out what you just learned! Complete each of the
Action Steps before the next lesson. (If you’re married, do this with
your spouse.) You got this!

☐ ☐ KNOCK OUT BABY STEP 1

It’s time to draw a line in the sand! This is when you decide
to change. Head over to financialpeace.com and identify
which Baby Step you’re on! If you’re on Baby Step 1, use the
Emergency Fund Planner to get $1,000 in the bank as fast as
you can. If you’ve already got your $1,000, well done! Move on
to the next Action Step.

☐ ☐ CREATE A BUDGET WITH EVERYDOLLAR

Your Quick-Start Budget was a great way to get the hang of
budgeting. Now, create a zero-based budget with EveryDollar.
Married couples, don’t forget the Budget Committee Meeting.
And singles, show your budget to your accountability partner
and ask for feedback. If you have an irregular income or
want to budget weekly, use the Irregular Income or Allocated
Spending forms on financialpeace.com. Examples of these
forms are on pages 140–145.

☐ ☐ COMPLETE YOUR FINANCIAL SNAPSHOT

Use the Financial Snapshot tool at financialpeace.com to list
your debt, savings, and active credit cards. If you’re in a class,
transfer that information to the Financial Snapshot card (page
24) and turn it in to your coordinator at the start of Lesson 2.   

☐ ☐ READ  THE POWERFUL ZERO-BASED BUDGET ON THE

NEXT PAGE   
The only way to control your money is with a budget—a
zero-based budget. Want a quick refresher on how to easily
make one with EveryDollar? Read on!

Lesson 1 // 23
LESSON 1 //

Powerful
DEEP DIVE

THE
ZERO-BASED
BUDGET
Whether you’re on Baby Step 1 or 7, you need a budget. It’s your
map for every month. And it puts you in control of your money.

Want to pay off debt? You need a budget. Want to build your
emergency fund? You need a budget. Already investing? You’re not
off the hook—you still need a budget. And not just any budget—
that’s right, a zero-based budget.

A zero-based budget simply means your income minus your

expenses equals zero. One more time: Your income minus
everything else equals zero. That means you give every dollar
a job to do—every month. Hint: That’s why we named our tool
EveryDollar. Plan on purpose for every dollar, every month!

START WITH YOUR INCOME

LIST ALL YOUR EXPENSES

SUBTRACT EXPENSES FROM INCOME

TRACK YOUR EXPENSES

BE FLEXIBLE!

24 // Lesson 1
 HOW TO DO A MONTHLY BUDGET
1 START WITH YOUR INCOME LIST ALL YOUR EXPENSES
Write down all the income you expect
2 Remember what Rachel said: This is
for the month. everything under income, from giving to
miscellaneous!

INCOME
EXPENSES
Paycheck $3,500
Giving $350

Saving $450

Rent $875

SUBTRACT EXPENSES Utilities $350

3
FROM INCOME
If your income minus your expenses Groceries/Restaurants $525
equals zero, you did it! You’ve just made a
Transportation $350
zero-based budget. If it doesn’t, you’ve got
some work to do! Adjust some categories Insurance $500
and get to zero.
Miscellaneous $100
INCOME
_ EXPENSES TRACK YOUR EXPENSES
4
Track your expenses every day during
= $0 the month to make sure you’re sticking to
your budget. If you’re overspending, make
adjustments in your categories and then
learn to say no!
5 BE FLEXIBLE!
Planning for payments shows you just how much debt steals your income! Let’s say you
have a car payment of $325 and a student loan payment of $150. You need to include
those debts in your budget and adjust other categories to account for those expenses.
Remember, your income minus everything else has to equal zero.

Updated
DEBTS EXPENSES Totals
Car Payment $325 Saving $200

Student Loan $150 Groceries/Restaurants $300

 As soon as you get $1,000 in the bank, come back to this page
and mark the date you officially knocked out Baby Step 1!

GOA L

$1,000

DAT E COMPLE TE D

MON T H DAY YEAR

26 // Lesson 1
 The PLA N

KEY POINTS
Baby Step 2 is paying off all debt (except the
house) using the debt snowball.

Debt is not a tool used to build wealth, and

payments don’t have to be a way of life.

It takes gazelle intensity to get out of debt.

Lesson 2 // 29
 Pay Off All Debt
(Except the House) Using
the Debt Snowball
You’ve got $1,000 in the bank and you’re ready for Baby Step 2:
paying off all your debt except your house using the debt snowball!
Attack the smallest debt first while making minimum payments on
the others. Once you pay off the first one, you’ll move to the next
smallest debt, taking your freed-up money, newfound motivation,
and momentum with you—until you pay off the last, largest debt!
LESSON 2 //
BABY STEP 2

BABY STEP 2
Pay off all (except the house) using the
debt snowball.

“THE RICH RULE OVER THE POOR,

GU I DE
Dave Ramsey

AND THE BORROWER

IS SLAVE TO THE lender. ”
PROVERBS 22:7 (NIV)

MYTHS & TRUTHS

MYTH: I need a credit card to rent a car and make
purchases online.

TRUTH: You can do both of these things with a

card.

MYTH: Car payments are a way of life. You can’t live without a
car payment.

TRUTH: You can stay away from car payments by paying cash
for reliable used cars.
ANSWER KEY
Debt
Debit

Lesson 2 // 31
LESSON 2 //
MYTHS & TRUTHS

MYTH: I need to take out a credit card to build up my

credit score.

TRUTH: The FICO score is an “I love ” score.

MYTH: I pay my credit card off every month. And I can earn
points and airline miles.

TRUTH: When you use a credit card instead of cash, you

actually spend because you don’t feel it.

MYTH: A credit card is more secure than a debit card.

TRUTH: Debit cards and credit cards have the

amount of protection.

MYTH: My teenager needs a credit card to learn how to be

responsible with money.

TRUTH: More students drop out of school because

of trouble than from academic failure.

MYTH: Leasing a car is smart. You should always lease things

that go down in value. There are tax advantages.
ANSWER KEY
Debt TRUTH: Consumer Reports and a good calculator will tell you
More
that a car is the most expensive way to operate
Same
Financial and finance a vehicle.
Lease

32 // Lesson 2
LESSON 2 //
MYTHS & TRUTHS

MYTH: I can get a good deal on a new car.

TRUTH: A new car loses of its value in the first

five years.

MYTH: A home equity loan is a good option for consolidation

and a great substitute for an emergency fund.

TRUTH: You don’t go into debt when you’re in the middle of

an emergency. You’ll make the emergency a .

MYTH: Debt consolidation is smart. It saves interest and gets

you a smaller payment.

TRUTH: Debt consolidation does nothing to change

the that got you into debt. So, many actually
end up with more debt.

MYTH: Cosigning a loan is okay if I’m helping a friend

or relative.

TRUTH: The bank requires a cosigner because the person

isn’t likely to .

ANSWER KEY MYTH: You can’t go to college without taking out

60%
Crisis student loans.
Behavior
Repay TRUTH: of millionaires with a college degree never
68%
took out student loans.

Lesson 2 // 33
LESSON 2 //
MYTHS & TRUTHS

BIGGEST MYTH OF ALL

MYTH: Debt is a tool and should be used to create prosperity.

TRUTH: Debt is proof that the borrower is to

the lender.

“
GIVE NO SLEEP
TO YOUR EYES, NOR
TO YOUR EYELIDS.
slumber
DELIVER YOURSELF
like a gazelle ”
FROM THE HAND OF THE HUNTER,
AND LIKE A BIRD FROM THE HAND OF THE FOWLER.

PROVERBS 6:4-5 (NKJV)

Notes

ANSWER KEY
Slave

34 // Lesson 2
LESSON 2 //
DEBT SNOWBALL

HOW TO GET OUT OF DEBT

• Quit borrowing more !

• You must money.

• something.

• Take a part-time .

• really works.

DEBT SNOWBALL
List your debts smallest to largest. Make minimum payments
on all of them and attack the smallest one with a vengeance.

ANSWER KEY
Money
Save
Sell
Job
Prayer

Lesson 2 // 35
LESSON 2 //
ACTIVITY

Remember, your situation will never change until you do! So, grab
the scissors and slash your lifeline to stupid. You’re done with debt,
and you’re never going back, which means you’re done with credit
cards. That’s right. It’s time for a plasectomy.

We get it, this step is hard. But debt has taken too much from you
already. And it’s the biggest thief of your financial future. So get the
cards out of your life and start attacking debt with a vengeance!
Goodbye, credit cards. Hello, freedom.

Whether you cut them up in your class or at home on your own,

write down the card information first! Once you pay them off,
you’ll have to call and cancel the account.

CRE DI T CA R D N A M E PLAS E C TO M Y CA N C E L
DAT E DAT E

7
36 // Lesson 2
HOW TO CLOSE OUT YOUR
CREDIT CARDS
The plasectomy is a mental and physical sign that you’re done
with debt—forever. No more. No way. No how. But there are
three steps to breaking up with your credit cards for good!

1 PAY OFF THE BALANCE

Go ahead and cut up the cards. But before you can cancel the accounts,
you’ll need to pay off the balance. No matter how much you have to pay
off, just list the payments in your debt snowball and attack them with
gazelle intensity when it’s time to pay them off!

2 CALL THE CREDIT CARD COMPANY

Once you pay off the balance, call the credit card company and say,
“I’m calling to close my account.” Spoiler alert: They’re going to say
whatever they can think of to keep you from leaving. Don’t fall for
their gimmicks or counter offers. Just repeat, “I’m calling to close my
account.” Be firm and remember, you’re done with debt.

3 GET IT IN WRITING
When you call to cancel your account, keep a record of the conversation
details. You’ll want written proof from the company that your account is
clear and closed. It’s also a good idea to check your credit report later in
the year to verify that these accounts are actually closed.

Lesson 2 // 37
LESSON 2 //
BABY STEP 2
DISCUSSION
Whether you’re in a class or online, be honest with your answers
and remember to encourage one another!

Look over the list of myths and truths Dave covered in

1 the video. Which myths have fooled you in the past?
How can you make sure you don’t get duped again?

What fears or concerns do you have about living

2 without credit cards?

Proverbs 22:7 says, “ . . . the borrower is slave to the

3 lender” (NIV). What would your life look like if you were
totally debt-free? What could you do that you can’t
afford to do now?

Dave says, “You can wander into debt, but you can’t
4 wander out.” You’ll have to make some tough decisions
and sacrifices moving forward. What’s one area you can
cut back—or cut out—to reach your money goals?

You need serious passion and motivation to get out

5 of debt. What’s one thing you can do to kick-start and
keep up your gazelle intensity?

KEEP THE
CONVERSATION
GOING!

Answer these questions

online in the Financial Peace
community!
financialpeace.com
LESSON 2 //
BABY STEP 2
ACTION STEPS
It’s time to live out what you just learned! Complete each of the
Action Steps before the next lesson.

☐ ☐ CUT UP YOUR CREDIT CARDS

If you didn’t do it as part of the Activity, gather the family, grab
some scissors, and host a plasectomy party! This should be a
celebration because it’s the moment you decided to stop the
crazy cycle of debt. Just remember that cutting up the cards
isn’t enough. You also need to call each credit card company
and close those life-sucking accounts once and for all.

☐ ☐ COMPLETE THE DEBT SNOWBALL

Enter your non-mortgage debts in the Debt Snowball Tool
on financialpeace.com. The tool will automatically sort your
debts from smallest to largest so you can start attacking the
smallest debt first. Then set a target date for paying off your
last, largest debt! Don’t have any debt? Great. You’re crushing
it. Head to Baby Step 3!

☐ ☐ SELL EVERYTHING IN SIGHT

That old VCR? It’s out. The bicycle you haven’t ridden in years?
Gone. Old books, old clothes, old furniture? Sell. It. All. Have a
garage sale, post everything online—get whatever money you
can to knock out your current Baby Step!

☐ ☐ READ  THE DEBT SNOWBALL ON THE NEXT PAGE 

Need a reminder on how the debt snowball really works?
We’ve got you covered! Check out how this method is the
fastest way to get rid of every last debt payment.

Lesson 2 // 39
LESSON 2 //
DEEP DIVE

What could you do if you didn’t owe anyone your paycheck? That
means no student loans, no credit card bills, no car payments—no
debt. With the debt snowball, you’ll pay off the smallest debt first
and work your way up to the largest. But wait. Doesn’t it make sense
mathematically to pay off the debt with the highest interest rate first?
Maybe. But if you’d been paying attention to math, you wouldn’t be in
debt. It’s time to pay attention to your behavior. Enter the debt snowball.

Attack!

$
700 $
1,200 $
2,300 $
14,600 $
36,530

1 LIST YOUR DEBTS FROM SMALLEST TO LARGEST.

Don’t worry about the interest rates! Seriously—smallest to largest.

2 ATTACK SMALLEST DEBT WITH A VENGEANCE!

Make minimum payments on all your other debts while you pay off
the smallest debt as fast as you can!
 3 REPEAT THIS METHOD AS YOU
PLOW YOUR WAY THROUGH DEBT.
Once that debt is gone, take its payment and apply it to the next smallest
debt. The more you pay off, the more your freed-up money grows and
gets thrown on the next debt—like a snowball rolling downhill.

0000
00
0 0000 000
0

JOHN
J OHN
N Q PUBL
UBL EXP 01/
01/2
1/2

0
$
$
0
$
0

$
$

$ $

14,600
$

$
$

$
$

$
36,530

TRACK YOUR PROGRESS

ON FINANCIALPEACE.COM.
Use our Debt Snowball Tool to keep up
with your attack plan for debt!

Lesson 2 // 41
 Take the total number from your debt snowball and write it
below. Then, once you pay off that very last debt, celebrate and
come back to this page to mark the day you became debt-free.

GOA L

DAT E COMPLE TE D

MON T H DAY YEAR

42 // Lesson 2
 The PLA N

KEY POINTS
Baby Step 3 is saving 3–6 months of expenses in a fully
funded emergency fund.

The emergency fund is Murphy repellent. It keeps you from

living in fear of the next emergency.

Your emergency fund is insurance, not an investment! It

prevents you from going back into debt.

Lesson 3 // 45
 Save 3–6 Months of
Expenses in a Fully
Funded Emergency Fund
Baby Step 3 is all about building your full emergency
fund with 3–6 months of expenses. After the momentum
and intensity of Baby Step 2, it’s easy to let your foot
off the gas. Don’t let that happen! Keep your intensity
through Baby Step 3. In the same way your $1,000 starter
emergency fund kept you from going into debt because
of emergency expenses, your fully funded emergency
fund will protect you when life’s bigger surprises hit.
LESSON 3 //
SAVING

SAVING

“ DEBT STEALS YOUR FUTURE.

Saving secures it.
”
GU I DE
Rachel Cruze
WITH DEBT, YOU OWE. WITH SAVING, YOU OWN.

–RACHEL CRUZE

Nearly 80% of Americans live paycheck to paycheck. They

use to cover emergencies.

The emergency fund gives you to cover

emergencies so you stay out of debt.

You can save money if it’s your .

“
THE WISE MAN saves FOR THE FUTURE,

BUT THE FOOLISH MAN

ANSWER KEY
spends WHATEVER HE GETS. PROVERBS 21:20 (TLB)
”
Debt
Cash
Priority

Lesson 3 // 47
LESSON 3 //
SAVING

The for comparisons is contentment.

will lead you to contentment.

“ I AM NOT SAYING THIS BECAUSE I AM IN NEED, FOR I HAVE

LEARNED TO BE content ”
WHATEVER THE CIRCUMSTANCES.
PHILIPPIANS 4:11 (NIV)

BABY STEP 3
Save of expenses in a fully
funded emergency fund.

G UID E
Chris Hogan Murphy’s Law states: Anything that can go wrong
go wrong.

Notes

ANSWER KEY
Cure
Gratitude
3–6 Months
Will

48 // Lesson 3
LESSON 3 //
BABY STEP 3

If your income is unstable, you should rely more on a six-

month emergency fund. If you have a stable income, you can
lean more toward a three-month emergency fund.

An emergency fund is . It’s not

an investment.

When you use it, it back up.

“
AN INTELLIGENT heart
ACQUIRES KNOWLEDGE, ”
AND THE EAR OF THE WISE SEEKS KNOWLEDGE.

PROVERBS 18:15 (ESV)

ANSWER KEY
Insurance
Build

Lesson 3 // 49
LESSON 3 //

STAY
ACTIVITY

GAZELLE Intense!
Let’s look at two couples. We’ll call them Will & Claire and
Joe & Kate.

Both couples were gazelle intense and made extreme sacrifices

to pay off their debt. They’re finally debt-free! Baby Step 2—check!
They take a few weeks to breathe and celebrate before they dive
into Baby Step 3.

But now, they’re ready to get their fully funded emergency fund up
and running! They look at their current savings and expenses and
decide on their emergency fund goal.

HERE ARE THEIR Numbers

$
1,000 CURRENT
EMERGENCY FUND

$
2,000 CURRENT
MONTHLY EXPENSES
Both couples are
single-income
households and
$
12,000
need a 6-month FULLY FUNDED
emergency fund! EMERGENCY FUND
GOAL

50 // Lesson 3
HOW TO SAVE FOR BABY STEP 3
With $1,000 already in the bank from Baby Step 1, how many months
will it take each couple to reach their $12,000 goal?

WILL & CLAIRE JOE & KATE

Will and Claire continue Joe and Kate stay gazelle intense
celebrating and let off the gas. and put the $1,000 per month
They only put $300 per month that was going toward debt right
into their emergency fund. into their emergency fund.

MONTHS MO NTHS

Moral of the story? Don’t let off the gas! Take what you were throwing
at debt and save it in your fully funded emergency fund. Keep up your
gazelle intensity through Baby Step 3!

Respond to the following questions:

1 Remember to stay gazelle intense in Baby Step 3. But what’s
the one way you’ll celebrate being debt-free before you kick
it back into high gear?

2 If these couples asked you about investing or paying off

their mortgage before completing Baby Step 3, what
advice would you give them? Why?

Lesson 3 // 51
LESSON 3 //
BABY STEP 3
DISCUSSION
Whether you’re in a class or online, be honest with your answers
and remember to encourage one another!

By now, you’ve seen and experienced the power of

1 the debt snowball. How can its momentum help you
knock out your emergency fund? Why is that important
to know?

When have you wished you had Murphy repellent in

2 your life? How would a full emergency fund have turned
that crisis into a simple inconvenience?

In building your emergency fund, consider the

3 suggested savings range of 3–6 months of expenses.
Which amount makes the most sense for your life and
gives you the most peace?

Once you’re debt-free, it can be tempting to let your

4 foot off the gas and taper off the intensity. But we want
you to move through the first three Baby Steps as fast
as you can! What are some practical things you can do
to maintain your gazelle intensity in Baby Step 3?

KEEP THE
CONVERSATION
GOING!

Answer these questions

online in the Financial Peace
community!
financialpeace.com
LESSON 3 //
BABY STEP 3
ACTION STEPS
It’s time to live out what you just learned! Complete each of the
Action Steps before the next lesson.

☐ ☐ CALCULATE HOW MUCH YOU NEED FOR

YOUR FULLY FUNDED EMERGENCY FUND
It’s time to outwit Murphy! The first step to saving 3–6 months
of expenses is figuring out how much you really need. You’ll
have to answer two questions: How stable or unstable is your
income? That helps you determine whether you need closer
to three or six months of expenses saved. What are the main
expenses in your budget? Crunch some numbers, and you’ve
got a Baby Step 3 goal.

☐ ☐ ROLL THAT SNOWBALL TOWARD BABY STEP 3

When you reach Baby Step 3, you will have spent months—
maybe even years—rolling your debt snowball with gazelle
intensity. But now, every cent goes to you, not Sallie Mae or
credit card companies. When you’re ready for Baby Step 3,
create an emergency fund category and just redirect those
hard-working snowball dollars right into that fund.

☐ ☐ READ WHERE TO SAVE BABY STEP 3 ON THE

NEXT PAGE
A money market account is a smart Baby Step 3 choice. Why?
These accounts keep your cash safe and accessible. Read on
to learn about the account options available to you.

Lesson 3 // 53
LESSON 3 //
DEEP DIVE

WHERE TO SAVE

You’re going to throw all your debt snowball dollars into savings,
you’ve convinced yourself rice and beans aren’t all that bad,
and you promise to keep the second job you’re dying to quit—all
for Baby Step 3. This is insurance after all. This is what will keep
you from going back into debt. This is your protection from
life’s emergencies!

So, how do you keep it safe?

Three words: money market account.

Because you need to protect your hard-earned cash (security)

and still get to it when you need it (liquidity), you’ll keep your
emergency fund in a money market account.

Money market accounts offer security, liquidity, and a little bit of

interest. It won’t earn you much, but we aren’t concerned with
making money here! Remember, Baby Step 3 is insurance,
not an investment.

Insurance
­—NOT AN INVESTMENT

54 // Lesson 3
 THREE OPTIONS WHEN OPENING
A MONEY MARKET ACCOUNT:

1 LOCAL BANK MONEY MARKET ACCOUNT

Most of these accounts offer higher interest rates for larger balances,
along with debit cards or check-writing privileges. Some even let you move
money electronically. Finally, bank deposits are insured by the Federal
Deposit Insurance Corporation (FDIC) for up to $250,000.

2 ONLINE BANK MONEY MARKET ACCOUNT

In general, these types of accounts offer better interest rates and still offer
the liquidity and security of a local bank. But like everything else with your
money, you need to do plenty of research first. Check out what’s available
and get what works best for you.

3 MUTUAL FUND MONEY MARKET INVESTMENT ACCOUNT 

These accounts might give you a higher return—but there’s more
risk. Rates can fluctuate, and you may lose money in the short term. While
they aren’t insured by the FDIC, they are designed to be secure—though
you may have more restrictions on using the money.

Don’t let the options confuse you. The important thing is to get
your money in a secure, accessible account. You’re saving up for an
inevitable emergency, which means doing nothing is not an option.
So, do your research, open an account, and keep up your intensity!

Lesson 3 // 55
 Write your Baby Step 3 goal below and bookmark this page.
On the day you save your last dollar in Baby Step 3, you’ll see
how all your hard work paid off!

GOA L

DAT E COMPLE TE D

MON T H DAY YEAR

56 // Lesson 3
 The PLA N

KEY POINTS
Baby Step 4 is to invest 15% of your household income
in retirement.

Baby Step 5 is to save for your children’s college fund.

Baby Step 6 is to pay off your home early.

Baby Step 7 is to build wealth and give.

You’ll do Baby Steps 4–6 in order, but at the same time.

Then, Baby Step 7 is where you’ll have the most fun!

Lesson 4 // 59
 Invest 15% of Your
Household Income in
Retirement
You’ve finished paying for the past; now it’s time to start
paying for your future! On Baby Step 4, you’ll invest 15%
of your household income into tax-favored accounts
for retirement. There is no quick-fix, snap-your-fingers
way to build wealth, but you can become an everyday
millionaire. The key is to start investing early, consistently,
and let compound interest work its magic!
LESSON 4 //
BABY STEP 4

BABY STEP 4
Invest of your household income in retirement.

Investing every month from age 25 to 65 (at 11%

GU I DE
rate of return) gets you to $1.3 million.
Chris Hogan

Have a with your spouse. If

you’re single, talk with your accountability partner.

“ IT DOESN’T MATTER WHERE YOU’VE BEEN.

where you’re going.

IT MATTERS

–CONDOLEEZZA RICE ”
Numbers change when do.

When you invest 15% of your income every month, you can
become an millionaire.

ANSWER KEY
“
15%
$150
Good planning AND HARD WORK LEAD TO PROSPERITY,
Dream Meeting
People
Everyday
BUT HASTY SHORTCUTS LEAD TO POVERTY.
P R O V E R B S 2 1 : 5 ( N LT )
”

Lesson 4 // 61
LESSON 4 //
DEEP DIVE

JACK BLAKE
AND THE POWER OF COMPOUND INTEREST

JACK
Jack started investing at the age of 21. He invested
$2,400 every year for nine years and then he stopped.
At age 30, Jack put in zero dollars—zero! That means he
stopped but his money didn’t.

BLAKE
Blake didn’t start investing until age 30. He invested
$2,400 every year until the age of 67—that’s 38 years!

Jack starts saving

money at 21 years old.

0
$ 0
$ 0
$ 0
$ $0 0
$ 0
$ 0
$ 0
$ 0
$ 0
$ 0
$ 0
$

$0 0
$ 0
$ 0
$ 0
$ $0 $0 0
$ $ 0

21 30 40
Blake starts saving
money at 30 years old.

62 // Lesson 4 
 Total invested over 9 years: Return:
JACK $21,600 $2,547,150

He never caught up!

Total invested over 38 years: Return:
BLAKE $91,200 $1,483,033

0
$ 0
$ 0
$ $0 0
$ 0
$ 0
$ $0 0
$ $ 0 0
$ 0
$ 0
$ 0
$ $ 0 0
$ $0 0
$ 0
$ 0
$ 0
$ 0
$ 0
$

50 60 67
Blake saves $2,400 a year until
age 67—almost his entire life.

THE MORAL OF THE STORY IS

 Save for Your Children’s
College Fund
By this step, you’ve paid off all your debt except the
house and you’ve started saving for retirement. Now it’s
time to save for your children’s college expenses using
an Education Savings Account (ESA) or a 529 plan. Help
your children go to college the right way—without debt.
It can be done!
LESSON 4 //
BABY STEP 5

BABY STEP 5
Save for your children’s fund.

You have two options for college savings—an and

GU I DE
a plan.
Rachel Cruze

“
TRAIN UP A child IN THE WAY HE SHOULD GO,
AND WHEN HE IS OLD HE WILL NOT
depart
FROM IT.
PROVERBS 22:6 (NKJV)
”

Three ways to go to college debt-free:

1. Select an school.

2. for things like scholarships, grants, and

work study.

3. Get a .

ANSWER KEY
College
“ COLLEGE IS A BLESSING, NOT AN

entitlement. ”
ESA
529
Affordable
Apply
Job

–RACHEL CRUZE
Lesson 4 // 65
 Pay Off Your Home Early
Baby Step 6 is the big one! There’s only one more thing
standing in the way of your complete freedom from debt—
your mortgage. This part of paying off debt is a little more
like a marathon. But any extra money you can put toward
your mortgage will help save you tens of thousands of
dollars in interest. And the grass will truly feel different
under your feet once it’s yours.
LESSON 4 //
BABY STEP 6

BABY STEP 6
Pay off your home .

100% of foreclosures occur on a home with

a .
GU I DE
Dave Ramsey

Should you PAY OFF

INTEREST VS. TAXES

The interest you pay on your mortgage is deductible on your taxes.
Are you saving more money by taking this deduction or should you
just pay the taxes? Let’s take a look.

MORTGAGE INTEREST

$ 200K x 5% = $10,000
MORTGAGE AMOUNT INTEREST RATE ANNUAL INTEREST PAID

TAXES WITH PAID HOME

10K
$ x 22% = $2,200
TAXABLE AMOUNT TAX BRACKET TAXES PAID

SO, WHAT MAKES MORE SENSE . . .

ANSWER KEY
Early
PAYING $10,000 TO A BANK OR
Mortgage PAYING $2,200 TO THE IRS?

Lesson 4 // 67
 Build Wealth and Give
You know what people with no debt and no payments can
do? Anything they want! Now you can truly live and give
like no one else by building wealth, becoming insanely
generous, and changing your family tree. Your focus and
sacrifice got you here. You made it. You lived like no one
else, and now you get to live and give like no one else!
LESSON 4 //
BABY STEP 7

BABY STEP 7
Build wealth and be outrageously !

Giving is possibly the most you will ever have

GU I DE
with money.
Dave Ramsey

“ EACH OF YOU SHOULD

GIVE WHAT YOU HAVE DECIDED

IN YOUR HEART TO give, ”
NOT RELUCTANTLY OR UNDER COMPULSION, FOR GOD
LOVES A CHEERFUL GIVER.
2 CORINTHIANS 9:7 (NIV)

ANSWER KEY
Generous
Fun

Lesson 4 // 69
LESSON 4 //
ACTIVITY

Dream FOR YOUR FUTURE

You wake up to silence and sun. There’s no alarm clock
ringing in your ear. In fact, there’s no clock in your bedroom
at all. You reach for your phone out of habit and put it back
on your nightstand before rolling over in bed. There’s a lot
you used to do that you don’t have to do anymore.

You don’t check your inbox—you couldn’t even if

you wanted to. You retired years ago, long before
your coworkers.

You don’t check social media when you first wake up.
You quit the comparison game back when you learned the power
of contentment. Plus, you’re living your dream. You don’t want
someone else’s life—you love yours.

You don’t check your bank account. You know how much you
have because you know what you’re worth—it’s somewhere in the
ballpark of seven figures.

You don’t check the list of what you must do. You get to list what
you want to do. So, what do you want to do?

WHAT’S YOUR DREAM RETIREMENT?

Get specific! Want to travel? Write where you want to go.
Want to live closer to your kids? Jot down what your dream
home looks like. Want to start a business? Put it on paper!

70 // Lesson 4 
S.S. GAZELLE
IT’S TIME TO LIVE AND GIVE
LIKE NO ONE ELSE.
You’re living your dream retirement! You’re traveling the way
you always wanted. You’re spending more time with your kids—
and maybe even your grandkids. You own your home—and not
just any house on the block, your dream home.

You’ve worked hard for years and years to get to where you
are today. And it was all worth it.

YOU’RE ON BABY STEP 7!

Now you get to have some serious fun with money.

You just heard Dave tell the story of his friend who took his entire family
1 on a cruise. How will you have fun spending your money?

You also heard Dave tell the story of this same friend taking his entire
2 family to give bikes away to kids in need. How will you have fun giving
your money?

Lesson 4 // 71
LESSON 4 //
BABY STEPS 4, 5, 6 & 7
DISCUSSION
Whether you’re in a class or online, be honest with your answers
and remember to encourage one another!

What has been your plan for retirement up to this point?

1 How has this lesson changed the way you think about
saving for and dreaming about retirement?

If you’re a parent, how do you feel about investing for

2 retirement before saving for your children’s college
fund? Based on the ages of your kids, what is your plan
to send them to college debt-free?

If you’re currently paying a mortgage each month, how

3 would paying off your home early change your life?
What would you be able to do that you can’t do now?

When is a time that generosity has impacted your life?

4 Were you the giver or the receiver?

KEEP THE
CONVERSATION
GOING!

Answer these questions

online in the Financial Peace
community!
financialpeace.com
LESSON 4 //
BABY STEPS 4, 5, 6 & 7
ACTION STEPS
It’s time to live out what you just learned! Complete each of the
Action Steps before the next lesson.

☐ ☐ SCHEDULE A BUDGET COMMITTEE MEETING

You’re coming up on your next budgeting cycle! Remember,
it takes about three months to get the budget right, so don’t
get frustrated. If you’re married, schedule your next Budget
Committee Meeting. Singles, don’t forget to review your
budget with your accountability partner.

☐ ☐ MAKE SURE GIVING IS AT THE TOP OF YOUR BUDGET

When you hold money with an open hand—not a clenched
fist—you’re able to give generously and receive graciously.
No matter which Baby Step you’re on, giving is your priority,
whether that’s a tithe to your church or contributions to charity.

☐ ☐ CONTACT A SMARTVESTOR PRO

If you’re ready for Baby Step 4, check out our list of
SmartVestor Pros near you at financialpeace.com. These
investing professionals will help you invest the right way!

☐ ☐ RESEARCH ESAS OR 529 PLANS AND SCHOLARSHIPS

You can also connect with a SmartVestor Pro to start an
Education Savings Account (ESA) or a 529 plan. If your teen
is closer to college, help them find scholarships to apply for
instead. Remember, debt-free college is the only option!

☐ ☐ READ IN ORDER, BUT AT THE SAME TIME ON THE

NEXT PAGE
The Baby Steps work when you do them in order. But Baby
Steps 4–6 are done at the same time! We know that sounds
confusing, but this deep dive tells you exactly what we mean.

Lesson 4 // 73
LESSON 4 //
DEEP DIVE

IN ORDER, BUT AT THE SAME TIME

You do Baby Steps 1, 2, and 3 one at a time. Check. You do Baby
Steps 4, 5, and 6 at the same time. What?

Baby Steps 1, 2, and 3 require laser focus and gazelle

intensity—and they each have a specific dollar goal. After
Baby Step 3, however, the plan changes gears. You’ll do
Steps 4, 5, and 6 in order, but at the same time.

Here’s what we mean:

Meet the Campbells.

This average American family has a household income

of $5,000 per month. They used the debt snowball to
send $1,500 per month to pay off all their debt. Then
they used the same gazelle intensity and saved
$1,500 per month to finish their emergency fund.

The Campbells celebrate! They get to ease up on

their intensity some, but they’re ready to attack
Baby Steps 4, 5, and 6—in order, but at the
same time.

74 // Lesson 4
 IF THEY SET ASIDE $1,000 FOR THESE BABY STEPS,
WATCH WHAT WOULD HAPPEN:

1 START BABY STEP 4

The Campbells save 15% of their gross income in retirement. So, they
open a Roth 401(k) and start investing $750 every month.

Roth 401(k):
$750

$250 left to budget

2 START BABY STEP 5

They open an ESA for their 3-year-old and contribute $166 per month.
(That’s the ESA contribution limit as of 2018.)

Roth 401(k): ESA:

$750 $166

$84 left to budget

3 START BABY STEP 6

The Campbells still have $84! They go ahead and add it to their mortgage
payment knowing they could find more money in the budget to throw at their
home if they wanted to.

Roth 401(k): ESA: Extra on home:

$750 $166 $84

$0 left to budget!

There you have it. Baby Steps 4, 5, and 6—IN ORDER, BUT AT THE SAME TIME.

Lesson 4 // 75
BUYER
BEWARE
KEY POINTS
There are a million marketing tactics trying to get at
your money and bust your budget.

You can have power over your purchases.

Contentment keeps your stuff from owning you.

Lesson 5 // 77
LESSON 5 //
BUYER BEWARE

CAVEAT EMPTOR
Companies use every angle to aggressively compete for
your .

We live in the marketed-to culture in the

G UID E
history of the world.
Dave Ramsey

MAJOR WAYS COMPANIES MARKET TO US

1. selling

2. and
payment methods as a marketing tool

3. TV, radio, magazines, and

other media

4. Product

• Brand recognition
• Color
• Shelf position and packaging

SIGNIFICANT PURCHASES
A “significant purchase” is normally anything over .
ANSWER KEY
Money
Most Our bodies go through physiological
Personal when making a significant purchase.
Financing
Convenient
Internet
Positioning
$300
Changes

78 // Lesson 5
LESSON 5 //
BUYER BEWARE

Notes

POWER OVER PURCHASE

• Wait before making a significant
purchase.

• Carefully consider your buying .

• Never buy anything that you do

not .

• Consider the “ cost” of

your money.

• Seek the of your spouse.

“ QUIT CHASING HAPPINESS

with stuff. ”
ANSWER KEY
Overnight
Motives
Understand
Opportunity
Counsel
–DAVE RAMSEY

Lesson 5 // 79
LESSON 5 //
BUYER BEWARE

7 TIPS FOR NEGOTIATING

1. Always tell the absolute .

2. Use the power of .

3. Understand and use -

G UID E power.
Rachel Cruze
4. Learn to .

5. Say, “That’s not good !”

6. Identify the guy,

guy technique.

7. Master the “if I away” technique.

ANSWER KEY
Truth
Cash
Walk-Away
Shut Up
Enough
Good
Bad
Take

80 // Lesson 5
LESSON 5 //

NEEDS &
ACTIVITY

QUIZ
W H AT TO D O :
If you’ve ever messed up Need Want
the budget, you probably
overspent on wants by
Movie/TV streaming subscription
convincing yourself they Groceries
were needs. In the quiz,
mark each item as a want New shoes
or a need. If you’re married,
discuss the items where you A place to live
and your spouse disagree.
Another car
Utilities: electricity, gas, water, etc.
New clothes
A cruise vacation
Lawn care service
Car wash
Childcare/day care
Going out to eat every day
Concert or game tickets
Auto insurance
Newest cell phone available
Premium pet food
Current cell phone plan
Gym membership

Respond to the following questions:

1 What is one item on this list that you thought was a need,
but is actually a want?

2 How does identifying something as a want versus a need

change your spending habits?

Lesson 5 // 81
LESSON 5 //

DISCUSSION
BUYER BEWARE

Whether you’re in a class or online, be honest with your answers

and remember to encourage one another!

When was the last time you bought something because

1 of a compelling ad on TV or social media? What about
the ad made you dip into your wallet?

What’s the danger of not talking with your spouse

2 before making a major purchase?

What’s the worst impulse purchase you’ve ever made?

3 Why was it so bad? How would you do things differently
next time?

Think about the idea of opportunity cost: If I spend

4 money on this, then I can’t spend it on that. How does
opportunity cost help you prioritize your spending?

On a scale of 1–10, with 1 being “terrified” and 10 being

5 “energized,” how would you rank your feelings about
negotiating? Why?

KEEP THE
CONVERSATION
GOING!

Answer these questions

online in the Financial Peace
community!
financialpeace.com
LESSON 5 //

ACTION STEPS
BUYER BEWARE

It’s time to live out what you just learned! Complete each of the
Action Steps before the next lesson.

☐ ☐ DEFINE YOUR MAJOR PURCHASES

What’s a “major purchase” in your world? Put a number to it!
Singles, run this by your accountability partner to get their
feedback. Married couples, decide on this number together.

☐ ☐ GET A BETTER DEAL

Don’t just settle for regular retail outlets. Get creative and find
some places where you could get the same thing cheaper:
flea market, discount store, scratch/dent store, or resale shop.
Identify five things you regularly purchase. How could you find
them cheaper?

☐ ☐ SET SOCIAL MEDIA LIMITS

Wise spending has a lot to do with contentment, and
contentment can have a lot to do with what you see on social
media. This week, take some practical steps toward limiting
social media’s negative impact. Try to avoid social media when
you first wake up and choose one day to completely unplug.

☐ ☐ READ NEGOTIATE A WIN-WIN ON THE NEXT PAGE

If you’ve never tried to wheel and deal before, negotiating
can seem intimidating—but it doesn’t have to be! Now that
you’re armed with our seven negotiating tips, read on for the
confidence boost you need to get the deal you want.

Lesson 5 // 83
LESSON 5 //
DEEP DIVE

NEGOTIATE
A WIN-WIN
Everybody wants to get a good deal. That’s the
happy ending to the spending story, right?
But it can be hard when it seems like everyone is trying to
sell you something, and they’re just out to get your money.
So how can you get the things you need, the things you
really want, and still stay on track and on budget?
You negotiate.
If you’re immediately intimidated or offended by that word,
check out this negotiation story from one of our Financial
Peace University members! She hits at least four of the
seven tips Rachel talks about.

“
BETHANY WHEELS AND DEALS
For the past several years, my jobs had always included a
company car. When we decided to move to Nashville, that
meant giving up the company car and getting my own—super
intimidating since neither my husband nor I had ever negotiated
anything, let alone a car.

84 // Lesson 5
USE THE POWER OF CASH. SAY, “THAT’S NOT GOOD ENOUGH!”
We had saved up money to pay cash We came up to $8,000 and the manager
for the car and our budget was around offered to give it to us for $12,000 if we
$10,000. We went to a local car lot (known financed—big nope. We reiterated that we
for great prices and quality cars) and were were paying cash and told them the $500
immediately approached by a salesperson off wasn’t good enough. After a couple
who asked us what we wanted and what more go-rounds, we made a final offer of
our budget was. We hadn’t looked at any $9,800, fees and licensing included.
particular cars before we got there so we
were open to most anything. USE WALK-AWAY POWER.
He said no, so we thanked him, and with
UNDERSTAND WALK-AWAY POWER. a little grit, walked away. As we were
We weren’t jazzed about anything on the approaching our car, the manager ran out
lot, and then I eyed a black SUV that was and we hear, “$10,000 if you finance!”
listed at $12,500—clearly over budget. I
test-drove it and loved it but tried my best We were mainly just annoyed at that point,
not to get too excited. The biggest key to so we had no trouble driving away in the
negotiating is being content to walk away. car we showed up in. 

IDENTIFY THE GOOD GUY, We let it go and planned on going to another

BAD GUY TECHNIQUE. lot once we moved. But we got a text the
We noticed that the tires were going to need next morning from the salesperson asking
to be replaced soon, and it would need the us to come back. They offered us $9,100
usual 100,000-mile maintenance. With that plus licensing and fees. We accepted. Total
in mind, we lowballed and made an offer cost: $10,101. BOOM!
of $7,500—in cash. The salesperson was
“on our side” but said he couldn’t take that We wrote the check, drove it off the lot, and
offer to the manager. moved to Nashville the next morning. And
that’s what we call the power of negotiation.
— bethany

You may not always get a bargain like Bethany.

Sometimes, the seller won’t budge. Sometimes, when

Score a dea l!
you walk away, the seller will let you. But most times,
if you want to negotiate, the seller is willing! Because
when you buy a deal and they leave with a sale, that’s
what we call a win-win.

Lesson 5 // 85
THE ROLE OF
INSURANCE
KEY POINTS
The purpose of insurance is simply to transfer risk—this is
your defensive game plan.

There are seven basic insurances you actually need.

No exceptions and no excuses, everyone eighteen and

older needs a written will.

Lesson 6 // 87
LESSON 6 //
THE ROLE OF
INSURANCE
AUTO INSURANCE
If you have a full emergency fund, raise
your .

Carry adequate .
G UID E
Dave Ramsey
Consider dropping your on older cars.

HOMEOWNER’S AND RENTER’S INSURANCE

Homeowner’s coverage should be guaranteed
cost if at all possible.

If you’re in an apartment or other rental arrangement, you

need insurance.

An liability policy is a good buy once

you begin building wealth.

“ THE PURPOSE OF INSURANCE IS

ANSWER KEY
Deductible
Liability
Collision
to transfer risk.”
Replacement –DAVE RAMSEY
Renter’s
Umbrella

88 // Lesson 6
LESSON 6 //
THE ROLE OF
INSURANCE

Notes

HEALTH INSURANCE
Increase your deductible and/or coinsurance amount to
bring down.

Increase your - but never

decrease the pay.

The HSA (Health Savings Account) is

ANSWER KEY a - savings account for medical
Premiums
Stop-Loss expenses that works with a high-deductible insurance policy.
Maximum
Tax-Sheltered

Lesson 6 // 89
LESSON 6 //
THE ROLE OF
INSURANCE
DISABILITY INSURANCE
Disability insurance replaces lost due to a
short-term or permanent disability.

Try to buy disability insurance that pays if you cannot perform

the job that you were educated or trained to do. That is
called , or “own occ,” disability.

Beware of -term policies covering less than

five years.

Your coverage should be for of your current income.

A elimination period will

your premium cost.

“
WHEREAS YOU DO NOT KNOW WHAT WILL

HAPPEN TOMORROW. ”
ANSWER KEY
For what is your life?
Income IT IS EVEN A VAPOR THAT APPEARS
Occupational FOR A LITTLE TIME AND THEN VANISHES AWAY.
Short
65%
JAMES 4:14 (NKJV)
Longer
Lower

90 // Lesson 6
LESSON 6 //
THE ROLE OF
INSURANCE

Notes

LONG-TERM CARE INSURANCE

Long-term care insurance is for home,
assisted living facilities, and in-home care.

This is a must-have for anyone years old or older.

IDENTITY THEFT PROTECTION

Don’t buy ID theft protection that only provides credit
ANSWER KEY report .
Nursing
60
Monitoring Good protection includes services
Restoration
that assign a counselor to clean up the mess.

Lesson 6 // 91
LESSON 6 //
THE ROLE OF
INSURANCE
LIFE INSURANCE
Life insurance is to replace lost income due to .

insurance is for a specified period, is

substantially cheaper, and has no savings plan built into it.

insurance is normally for life

and is more expensive in order to fund a savings plan.

You need about times your income. Invested at

a 10–12% rate of return, the growth would replace your
lost income.

Don’t forget your .

Children only need enough for expenses.

Notes

ANSWER KEY
Death
Term
Cash Value
10
Spouse
Burial

92 // Lesson 6
LESSON 6 //

“
THE ROLE OF
INSURANCE

insurance. ”
NEVER DO INVESTMENT-TYPE

–DAVE RAMSEY

INSURANCE TO AVOID
• Credit life and disability
• Cancer and hospital indemnity
• Accidental death
• Prepaid burial policies
• Mortgage life insurance
• Policies with fancy options: return of premium
and waiver of premium

Get a written .

ANSWER KEY
Will

Lesson 6 // 93
LESSON 6 //
ACTIVITY

BUY THE RIGHT

Coverage
AUTO INSURANCE POLICY
Whether you drive a nice car or a beater, you want to make sure
you’re covered in case life decides to hit you . . . or your car. This
is not the time to go cheap on your insurance policy! Work through
Luke’s scenario to find out why.

Luke’s working the Baby Steps and wants to save

money wherever he can. So, he gets the state minimum
25/50/15 liability policy.

COVERS INJURIES TO INDIVIDUALS

The maximum amount (in thousands of dollars)
per person that will be covered

COVERS THE TOTAL OF ALL

INJURIES TO PEOPLE
The maximum amount (in thousands of dollars)
per accident that will be covered

COVERS DAMAGE TO PROPERTY

The maximum amount (in thousands of dollars)
per accident that will be covered

94 // Lesson 6
ON HIS WAY TO WORK, LUKE HITS A CAR.
The driver of the other car experiences $30,000 in injury costs and the passenger experiences
$75,000 in injury costs. Luke totals his car and the $50,000 car of the other driver. Determine
how much Luke will have to pay after his insurance pays their portion for each of the following.

25/50/15 DRIVER PASSENGER DRIVER’S CAR

TOTAL COST
OF ACCIDENT $ 30,000 $ 75,000 $ 50,000
Maxes at 50k
$
25/50/15
INSURANCE PAYS – $ 25,000 – $ 25,000 – $ 15,000

LUKE PAYS = $ 5,000 = $ 50,000 = $ 35,000

LUKE HAS TO PAY: $

And this doesn’t even include the cost to replace his own car!
Now, work the same scenario, but this time Luke has a good 100/300/100 insurance policy.

100/300/100 DRIVER PASSENGER DRIVER’S CAR

TOTAL COST
OF ACCIDENT $ 30,000 $ 75,000 $ 50,000
Maxes at $300k
100/300/100
INSURANCE PAYS – $ – $ – $

LUKE PAYS = $ = $ = $

LUKE HAS TO PAY: $

(Of course, he still has to replace his own car.)

Respond to the following questions:
1 Was the cheaper liability policy (25/50/15) a good choice for Luke? Why or why not?

Lesson 6 // 95
LESSON 6 //

DISCUSSION
THE ROLE OF
INSURANCE

Whether you’re in a class or online, be honest with your answers

and remember to encourage one another!

When have you let the cost of insurance dictate how

1 much insurance you get in a certain policy? How does
this lesson challenge you to think differently?

How do you see your fully funded emergency fund

2 fitting into your insurance plan? How can you make sure
you have the right balance between the two?

Everyone eighteen and over needs a will. Do you have

3 a will? If not, what has been holding you back from
getting one?

Can you imagine building wealth to the point where you

4 can self-insure? Why or why not? How have the Baby
Steps moved you closer to making that a reality?

KEEP THE
CONVERSATION
GOING!

Answer these questions

online in the Financial Peace
community!
financialpeace.com
LESSON 6 //

ACTION STEPS
THE ROLE OF
INSURANCE

It’s time to live out what you just learned! Complete each of the
Action Steps before the next lesson.

☐ ☐ REVIEW ALL OF YOUR COVERAGE

Take our 5-minute Coverage Checkup on financialpeace.com
to see where you need to make adjustments to your insurance
plan. We’ll give you a prioritized list of what to add, drop, or
tweak. This includes your will! Then we’ll connect you with the
service providers we recommend to knock out each item on
the list—one and done!

☐ ☐ LOOK INTO GETTING AN HSA

A good Health Savings Account (HSA) can become a “medical
envelope” for you and your family. But you need to do a little
research to make sure it fits your situation. Talk with your
employer about what your company might offer.

☐ ☐ READ TERM LIFE INSURANCE—THE WAY TO GO ON

THE NEXT PAGE
You know we’re not too big on whole life insurance. In fact,
we hate it. But we do recommend you get term life insurance.
Read on to learn what you need and why!

Lesson 6 // 97
LESSON 6 //
DEEP DIVE

Term Life
INSURANCE THE WAY TO GO
Life happens, and without being too morbid, so does unexpected
death. We want you to have peace of mind knowing your family will
be taken care of when you’re gone.

It doesn’t matter if you’re newly married or heading into retirement.

If someone depends on your income, you need life insurance. Plain
and simple.

WHOLE LIFE   vs.  TERM LIFE INSURANCE

There are several types of life insurance—term, whole life, or
any kind of cash value life insurance. Term is straightforward,
inexpensive, and protects your family. The other ones?
Total rip-offs.

1 Whole life insurance often costs hundreds of dollars more

a month and includes a “savings” plan with a terrible return.
Instead, opt for term life. You’ll pay a fraction of the price.
Then just invest the difference in what you would have paid
for whole life insurance.

2 Term life insurance is the easiest and least expensive way

to protect your family’s finances after you’re gone. Simply
put, here’s how term life insurance works: if you or your
spouse passes away at any time during this term, your
beneficiaries will receive a payout from the policy.

98 // Lesson 6
HOW LONG DO I NEED COVERAGE?
Dave’s general rule is to buy based on when your kids will be heading off to
college and living on their own. Typical terms are 10, 15, 20, or 30 years. We
recommend a 15- or 20-year term.

Have a newborn in the house? Pick up a 20-year plan. If you have a 10-year-old, a
15-year plan would be a better option for you.

HOW MUCH COVERAGE DO I NEED?

That small policy you’re getting through work, which might be one year’s worth
of coverage, isn’t near enough. Always buy a policy that covers 10–12 times your
annual pretax income.

With a good term life policy, by investing the insurance proceeds, your
beneficiaries can earn a rate of return that replaces your lost earnings and
provides security for your family after you’re gone.

Here’s what we mean. Let’s say you make $40,000. That means you should carry
at least $400,000 in coverage.

If your surviving spouse invests that $400,000 in good mutual funds with an
average 11% return, they could peel off $44,000 a year from that investment to
replace your income without ever cutting into the original investment amount.
That’s what we call real security.

Get  t he Right Coverage Today

Simply put, life insurance has one job: it replaces your income when you die.

We hope you’ll never have to use it, but the truth is we can’t see the future and
we aren’t promised tomorrow. So the ideal time to buy life insurance is today!
Take our 5-minute Coverage Checkup on financialpeace.com to get the best
term life insurance policy for your family.

Lesson 6 // 99
RETIREMENT
PLANNING
KEY POINTS
Investing doesn’t have to be complicated. Use the
KISS rule: Keep It Simple, Stupid.

Never invest in things you don’t understand.

The best way to build wealth is slowly and

consistently over time.

Lesson 7 // 101
LESSON 7 //
RETIREMENT
PLANNING
GROUND RULES FOR INVESTING
Baby Step 4 is to invest of your household income
into Roth IRAs and pretax retirement plans.

The KISS Rule of Investing: Keep it , stupid.

G UID E
Dave Ramsey
Diversification risk.

“
INVEST IN SEVEN VENTURES, YES, IN EIGHT;

YOU DO NOT KNOW

WHAT DISASTER MAY COME UPON the land. ”
ECCLESIASTES 11:2 (NIV)

MUTUAL FUNDS
are where investors
pool their money to invest.

Your return comes as the of the fund

is increased.

ANSWER KEY Mutual funds are good for -

15% investments.
Simple
Lowers
Mutual Funds
Value
Long-Term

102 // Lesson 7
LESSON 7 //
RETIREMENT
PLANNING

Notes

USE TAX-FAVORED PLANS

Tax-favored means the investment is in
a or has a
special tax treatment.

QUALIFIED PLANS
• Individual Retirement Arrangement (IRA)
• 401(k)
• 403(b)
ANSWER KEY • 457
Qualified Plan
• Simplified Employee Pension Plan

Lesson 7 // 103
LESSON 7 //
RETIREMENT
PLANNING
INDIVIDUAL RETIREMENT ARRANGEMENT (IRA)
Remember, an IRA is the tax on
virtually any type of investment. It is not a type of investment
at a bank.

ROTH IRA
The Roth IRA is an after-tax IRA that grows tax- .

“ IF YOU WANT TO BE A MILLIONAIRE, FIGURE OUT

WHAT MILLIONAIRES DO AND START DOING IT.

Then you’ll get to be one.”

—DAVE RAMSEY

401(K), 403(B), AND 457 RETIREMENT PLANS

Some companies are now offering the 401(k),
which grows tax-free.

You should be funding your plan whether your

company or not, but the plans that have
ANSWER KEY company matching provide great returns.
Treatment
Free
Roth
Matches

104 // Lesson 7
LESSON 7 //
RETIREMENT
PLANNING

Notes

ROLLOVERS
You should roll all retirement plans to an
IRA when you leave a company.

Don’t bring the money home! Make it a

transfer.

RETIREMENT LOANS
ANSWER KEY Never on your retirement plan.
Always
Direct
Borrow

Lesson 7 // 105
LESSON 7 //
RETIREMENT
PLANNING
OUR SUGGESTION FOR INVESTING 15%
Fund a 401(k) of other employer plans if they match. Fund an
amount to the match.

Above the match amount, fund IRAs. If there

is no match, start with Roth IRAs.

Complete the 15% of your income by going back to

the or other company plans.

BUILDING WEALTH
The wins every time.

So, 15% of your income going into retirement isn’t for one
month or one year. It’s for the rest of your .

ANSWER KEY
Equal
Roth
401(k)
Tortoise
Life

106 // Lesson 7
LESSON 7 //
ACTIVITY
WHAT COULD YOUR
MONEY Turn Into?
Your most powerful wealth-building tool is your income—until your
investments start earning more than you do. That’s why you want
to get to Baby Step 4 as fast as you can!

Take your current monthly gross income and calculate how much
you would invest if you were on Baby Step 4 right now.

ON BABY STEP 4, I WOULD NEED TO INVEST:

$ X .15 =
MONTHLY GROSS INCOME 15 PERCENT MONTHLY CONTRIBUTION

Before the next lesson, you’ll go to financialpeace.com

and use the Investment Calculator to see exactly
what your monthly investment could look like in
20, 30, and 40 years at an 11% rate of return!

For now, check out the table below to get ballpark numbers.

MONTHLY 20 30 40
CONTRIBUTION YEARS YEARS YEARS

700 $ $611,501 $1,981,159 $6,075,272

$800 $698,858 $2,264,182 $6,943,168

$900 $786,215 $2,547,205 $7,811,067

Respond to the following questions:

1 What comes to mind when you see what your monthly
investment could turn into?

2 How do you feel knowing that if your income increases,

you’ll get to invest even more each month?

Lesson 7 // 107
LESSON 7 //

DISCUSSION
RETIREMENT
PLANNING

Whether you’re in a class or online, be honest with your answers

and remember to encourage one another!

If the stock market goes up, keep investing. If the stock

1 market goes down, guess what? You keep investing!
Dave says the only people who get hurt on a roller
coaster are the ones who try to jump off midway. What
has always made you nervous about investing? How
has what you learned in this lesson calmed some of
those fears?

What are some of the big problems with investments

2 like gold, certificates of deposits, single stocks, and
bonds? What should you do if you’re investing in them
right now?

Investing is the key to building wealth, and building

3 wealth is the key to creating a legacy that will outlive
you. How do you want to set your family up for success
after you’re gone?

Right now, are you the tortoise or the hare? What

4 should you be doing to make sure you always win
with investing?

KEEP THE
CONVERSATION
GOING!

Answer these questions

online in the Financial Peace
community!
financialpeace.com
LESSON 7 //

ACTION STEPS
RETIREMENT
PLANNING

It’s time to live out what you just learned! Complete each of the
Action Steps before the next lesson.

☐ ☐ USE THE INVESTMENT CALCULATOR

In the Activity, you calculated 15% of your monthly income that
will go into retirement savings. Ready to see what that number
could become in 20, 30, and 40 years? Use the Investment
Calculator at financialpeace.com to see what your monthly
investment could turn into!

☐ ☐ SPREAD THAT MONEY AROUND

In this lesson, you learned about diversification—spreading
money around so it will grow. You want to keep your risk low
and your reward high! If you’re ready for Baby Step 4, go to
financialpeace.com to connect with a SmartVestor Pro in your
area and start investing the right way.

☐ ☐ CHECK YOUR GAZELLE INTENSITY

You’re seven lessons into Financial Peace University, and
you’re doing great. How are you feeling about your progress?
Use the scale below to gauge your gazelle intensity.

1 2 3 4 5 6 7 8 9 10

RUN N I N G S LOW STARVI N G T H E C H E E TAH !

If you’re at a 10, great work! If you’re running a little

slow, what’s one thing you can do this week to amp up
your intensity?

☐ ☐ READ MUTUAL FUNDS 101 ON THE NEXT PAGE

Investing isn’t one-size-fits-all. Because you never invest in
something you don’t understand, you need to learn what’s
best for you. Read on for a crash course on mutual funds!

Lesson 7 // 109
LESSON 7 //
DEEP DIVE

MUTUAL
FUNDS
If you want to win with money, find someone who’s won with
money and copy them. If you want to build wealth, find someone
who’s wealthy and copy them! The good news is we found 10,000
of them for you.

In our research for Chris Hogan’s book Everyday Millionaires: How

Ordinary People Built Extraordinary Wealth—and How You Can
Too, we surveyed over 10,000 millionaires and asked them how
they built their wealth. The number one answer? By investing early
and consistently in their company 401(k) plans.

That’s why we do Baby Step 4: Invest 15% of your household

income in retirement.

When you’re ready to start investing, you won’t need to camp

out on the trading floor of the New York Stock Exchange. Just
keep it simple and follow the investing advice that’s worked for
over 20 years!

Invest in the right mix of mutual funds with a history of strong

performance and stick with them over time.

110 // Lesson 7
 THE 4 TYPES OF MUTUAL FUNDS

You Should Use!

GROWTH
Growth funds are some of the most common types of mutual funds. Using
mid-cap funds (cap is short for capitalization, or money), they generally
include medium-sized companies that are still growing—and still making
money. Growth funds can provide above-average growth for your money
with above-average risk. Over the long run though, they live up to their
name: growth funds.

GROWTH AND INCOME

Dave calls these “obedient, predictable child” funds. They include large-
cap funds with a lot of big-name companies you probably recognize.
Growth and income funds usually grow steadily with an average risk. So,
you won’t make a fortune overnight, but you won’t lose it all either.

AGGRESSIVE GROWTH
Dave calls these “wild child” funds. They can have an incredible return
one year, then lose money the next. A small-cap fund is one example of
an aggressive growth fund. These funds are generally made up of smaller,
active, emerging companies, such as start-ups and tech companies. They
have the potential for a higher return—but also carry greater risk.

INTERNATIONAL
International funds invest in companies outside the United States. But
they still might be companies you recognize. That’s because so many
products created in the United States are actually owned by international
companies. International funds carry varying degrees of risk, but they’re
great for diversification.

Investing doesn’t have to be intimidating. A

Let us help! SmartVestor Pro can help you invest the right
way. Find these investing professionals in your
area at financialpeace.com.

Lesson 7 // 111
REAL ESTATE
& MORTGAGES
KEY POINTS
A house is the largest financial investment you will
ever make.

Here’s your home-buying plan: a 15-year fixed-rate

mortgage with at least a 10% down payment, and monthly
payments of no more than 25% of your take-home pay.

When you pay off your home, you’re 100% debt-free!

Lesson 8 // 113
LESSON 8 //
REAL ESTATE
& MORTGAGES
RENTING
There is nothing wrong with for a little
while. This demonstrates patience and wisdom.

G UID E WHEN TO BUY

Dave Ramsey
You should be finished with Baby Step 3. That means you are
debt-free and have a full emergency fund in place.

WHY TO BUY
• It’s a savings plan.

• It’s an hedge.

• It grows virtually - .

Notes

ANSWER KEY
Renting
Forced
Inflation
Tax-Free

114 // Lesson 8
LESSON 8 //
REAL ESTATE
& MORTGAGES

Notes

WHAT TO BUY
• Buy in the price range of
the neighborhood, and never overbuild your
neighborhood through home additions
and improvements.

• Homes appreciate in good neighborhoods and

are priced based on three things: location, location,
and location.

• If possible, buy near water or with a .

• Buy bargains by overlooking bad landscaping, ugly

carpet, outdated wallpaper, and the Elvis print in the
master bedroom.

• Always buy a home that is (or can be) attractive from

ANSWER KEY
the street and has a good basic floor plan.
Bottom
View

Lesson 8 // 115
LESSON 8 //
REAL ESTATE
& MORTGAGES
HOW TO BUY
Real estate agents have full access to the
Listing Service (MLS) and can make house hunting easier.

Always get a land survey if you’re buying more than a

G UID E
standard subdivision lot.
Chris Hogan

Have the home inspected mechanically and structurally by

a certified . Get an
appraisal but understand that it’s just an “opinion of value.”

Title insurance insures you against an unclean title, which is

when your property ownership is called into question. It is a
must-buy.

Get a monthly payment of no more than of your take-

home pay on a - fixed-rate loan, with at
least down.

“
AS FOR ME

AND MY HOUSE,
Lord. ”
ANSWER KEY
Multiple
Home Inspector
WE WILL SERVE the
25%
15-year JOSHUA 24:15 (ESV)
10%

116 // Lesson 8
LESSON 8 //
REAL ESTATE
& MORTGAGES

Notes

HORRIBLE MORTGAGE OPTIONS

• or Adjustable-Rate Mortgages

{{ The concept of the ARM is to transfer the risk of

higher interest rates to the borrower. So, in return,
the lender gives a lower rate.

{{ If you have an ARM, refinance immediately!

• Interest-only loans are a bad idea because you’re only

paying the interest.

ANSWER KEY • Mortgages

ARMs
Reverse
• Accelerated or Biweekly Payoff Program

Lesson 8 // 117
LESSON 8 //
REAL ESTATE
& MORTGAGES
BASIC WAYS TO FINANCE A HOME
• loans are usually through
Fannie Mae and are privately insured against default.

• PMI is private mortgage insurance.

G UID E
• (Federal Housing Administration) loans
Dave Ramsey
are insured by HUD—the federal government.

• VA loans are insured by the US Department of

Veterans Affairs.

• Owner financing is when you pay the owner over time,

making him or her the mortgage holder.

“ 100% OF FORECLOSURES
HAPPEN ON HOMES
with a mortgage. ”
– DAV E R A M S E Y

Notes

ANSWER KEY
Conventional
FHA

118 // Lesson 8
LESSON 8 //
REAL ESTATE
& MORTGAGES

Notes

CHALLENGES AND OPPORTUNITIES

If you do what we teach, your credit score will eventually hit
zero, which means you’ll need to find a mortgage lender that
does underwriting.

When you owe more on your house than it is currently worth,

you are upside down on your home.

In a sale, the home is sold for less than

the amount owed, and the lienholder agrees to accept
the proceeds from the home sale as payment in full
without recourse.

Willfully walking away from a mortgage—even though

ANSWER KEY
Manual you have the money to make the payments—is called
Short
strategic default.

Lesson 8 // 119
LESSON 8 //
REAL ESTATE
& MORTGAGES
SELLING A HOME
The most important aspect of preparation is attention
to appeal.

The exposure through the Listing Service

G UID E is worth it.
Dave Ramsey

You should interview at least three real estate agents.

Have your agent do a detailed Comparative Market Analysis

(CMA) to accurately price your home.

ANSWER KEY
Curb
Multiple

120 // Lesson 8
LESSON 8 //
ACTIVITY

BUY A
HOME the Right Way
Drew and Amy and Charles and Misty each put 20% down on a
$200,000 home at a 4% annual interest rate.

$
200,000 HOME DREW & AMY CHARLES & MISTY

MORTGAGE 30-YEAR 15-YEAR
(FIXED)

PAYMENT 764
$
1,184
$

(MONTHLY)

TOTAL $
274,993 $
213,030
AFTER 30 YEARS AFTER 15 YEARS

WHILE DREW & AMY PAY LESS IN THE SHORT TERM,

THEY PAY HOW MUCH MORE OVERALL?

$_________________________
(Hint: $274,993–$213,030)

Respond to the following questions:

1 Based on this example, would you rather be Drew and Amy
or Charles and Misty? Why?

2 What could Charles and Misty do with the difference to

build additional equity in their home? What would you
do with the difference?

Lesson 8 // 121
LESSON 8 //

DISCUSSION
REAL ESTATE
& MORTGAGES

Whether you’re in a class or online, be honest with your answers

and remember to encourage one another!

When you picture your dream home, what do you see?

1 What parts of your home stand out and why are they
important to you?

Based on what you’ve learned from Dave and Chris,

2 how do you know if you have too much house?

Based on your answer to question two, do you need to

3 make any adjustments to your housing situation? If so,
what? Refinance? Sell? Buy? Throw more money at
your mortgage?

If you’re a homeowner, think about life without a

4 mortgage. What could you do with the extra money
that’s currently going toward payments? If you’re
renting, how do you feel about owning a home
someday? How could you save up for one?

KEEP THE
CONVERSATION
GOING!

Answer these questions

online in the Financial Peace
community!
financialpeace.com
LESSON 8 //

ACTION STEPS
REAL ESTATE
& MORTGAGES

It’s time to live out what you just learned! Complete each of the
Action Steps before the next lesson.

☐ ☐ USE THE MORTGAGE CALCULATOR AND CONNECT

WITH A REAL ESTATE ELP
If you’re a homeowner, use the Mortgage Calculator on
financialpeace.com to figure out how much you’re paying in
interest over time—and to see how quickly you could pay off
your home with extra payments. If you’re ready to buy, use
the calculator to see how much house you can afford, then
connect with a real estate Endorsed Local Provider!

☐ ☐ TAKE A LOOK AT YOUR BUDGET

As part of your next budget, put some extra focus on your
housing category. How much are you assigning to housing?
Based on the lesson, do you have too much house?

☐ ☐ INVESTIGATE A REFINANCE
If you’re in a bad mortgage like an adjustable-rate mortgage
(ARM), you don’t have to stay there—and you shouldn’t!
Research how to refinance to a 15-year fixed-rate mortgage.

☐ ☐ COMPLETE YOUR FINANCIAL SNAPSHOT

Now that you’ve completed eight lessons, use the Financial
Snapshot tool at financialpeace.com to list your debt paid off,
amount saved, and credit cards cut up or closed. If you’re in a
class, don’t forget to transfer that information to your second
Financial Snapshot card (page 120) and turn it in to your
coordinator at the start of Lesson 9. Celebrate your progress!

☐ ☐ READ PMI: NECESSARY OR NOT? ON THE NEXT PAGE

During the lesson, Chris described what PMI is all about. This
article shares a little more about why it’s not worth the trouble
and how to knock it out once and for all.

Lesson 8 // 123
LESSON 8 //

PMI:
DEEP DIVE

NECESSARY or Not ?
We’re going to save you $10,000 before this article ends. Ready?

You’ve worked the Baby Steps, done your research, and kept an
eye on the housing market. You’re ready to buy a home. If you can’t
put 100% down, you’ll move through a mortgage approval process
where you may encounter private mortgage insurance (PMI).  

Hold on a second. You might be asking yourself, Was this on the list
of the seven insurances I need to have? We’re glad you asked. The
answer is no. And here’s why.

AT A GLANCE
PMI = PRIVATE MORTGAGE INSURANCE

IF YOU PUT 20% DOWN, YOU AVOID IT

RATES RANGE FROM .5–1.5% OF HOME LOAN AMOUNTS

WHAT IS PMI?
PMI protects the lender. You’re about to borrow a lot of money, and
your lender wants to make sure they get their money back if you
can’t make the payments and end up in foreclosure. Every year,
there are between 500,000–1.5 million home foreclosures, so you
can understand why lenders want insurance. PMI protects their
investment. 

But here’s the catch: You’re the one who will be paying the
insurance premiums—not them.

124 // Lesson 8
HOW MUCH DOES PMI COST? 
PMI rates can range anywhere from .5–1.5% or more of your loan amount. For this
example, let’s use a 1% PMI and a $200,000 home loan amount.

At 1%, that would make your PMI $2,000 per year—an extra $166.67 per month
added to your mortgage payment. After five years, PMI has added $10,000 to the
cost of your home. There’s that $10,000 you can save yourself.

HOME LOAN PMI ADDED

$200,000 X 1% = $10,000
$166/mo. over five years

INSURANCE
POLICY

HOW CAN I AVOID PMI? 

The easiest way to avoid PMI is to put at least 20% down on your home. That
completely eliminates PMI. If you don’t put 20% down, PMI will be added to your
loan automatically! You won’t be able to get rid of it until you’ve paid down your
loan enough to have 20–25% equity in your home. Basically, your loan-to-value
amount has to be less than 80%.

HAVE A PLAN AND USE A PROFESSIONAL 

If you’re going to buy a home and get a mortgage, stick to this plan: Find a real
estate agent you trust and get a 15-year fixed-rate mortgage with at least 10%
down (though 20% is best), and make sure the total payments (including PMI) are
no more than 25% of your take-home pay.

Ready to find a real estate agent you trust?

Let us help! Go to financialpeace.com to find a real estate

Endorsed Local Provider in your area who is ready
to walk you through the home-buying process.
OUTRAGEOUS
GENEROSITY
KEY POINTS
If we all became outrageously generous, we could
completely change the landscape of America.

God is a giver and because we’re made in His image,

we are designed to be generous!

God owns it all. We are just managers of His money.

Lesson 9 // 127
LESSON 9 //
OUTRAGEOUS
GENEROSITY
TRUE FINANCIAL PEACE
The in financial peace comes from
outrageous generosity.

G UID E
Dave Ramsey “You cannot shake hands
”
WITH A CLENCHED FIST.
–INDIRA GANDHI

GIVING CHANGES YOU

We are happiest and most fulfilled when serving
and .

“
A GENEROUS PERSON WILL PROSPER; WHOEVER
REFRESHES OTHERS WILL BE refreshed. ”
PROVERBS 11:25 (NIV)

GENEROSITY COULD CHANGE AMERICA

If “we the people” increased our giving a percentage
points, we could do things like eradicate domestic hunger,
fund adoption from foster care, and build hospitals.
ANSWER KEY
Peace
Giving
Few
WHY GOD TELLS US TO GIVE
Made The more generous you become, the more you’re becoming
who God you to be.
128 // Lesson 9
LESSON 9 //
OUTRAGEOUS
GENEROSITY

Notes

TITHES AND OFFERINGS

The tithe is a of your increase.

The Bible says to give your tithe off the (firstfruits).

The tithe goes to your local .

Offerings are above the tithe and are freely given

from .

“
YOU SHALL TRULY tithe
ANSWER KEY
Tenth
Top
ALL THE INCREASE OF YOUR GRAIN THAT
THE FIELD PRODUCES YEAR BY YEAR.
”
Church
Surplus DEUTERONOMY 14:22 (NKJV)

Lesson 9 // 129
LESSON 9 //
OUTRAGEOUS
GENEROSITY
OWNERS AND MANAGERS
God owns it all. We are just asset for
the Lord.

“THE EARTH IS THE LORD’S, AND

THE FULNESS thereof. ”
PSALM 24:1 (KJV)

Notes

ANSWER KEY
Managers

130 // Lesson 9
LESSON 9 //
OUTRAGEOUS
GENEROSITY
DEBT FREEDOM
The Bible calls sin “debt,” but Jesus already paid that debt.
The only thing you have to do to become debt-free is accept
the gift.

“FOR GOD SO LOVED THE WORLD THAT HE

GAVE HIS ONLY BEGOTTEN SON,
”
THAT WHOEVER BELIEVES IN HIM
SHOULD NOT PERISH BUT HAVE everlasting life.
JOHN 3:16 (NKJV)

Lesson 9 // 131
LESSON 9 //

Give to look more

ACTIVITY

LIKE GOD
Giving changes you. We’re not trying to be mushy or corny—it’s a
fact. You see, God is the ultimate giver. And when we give, we start
to look more like Him.

1 Chronicles 29:14 (NIV) says, “Everything comes from you, and

we have given you only what comes from your hand.”

Everything we have comes from God. He owns it all! When He asks

us to give, it’s not because He needs our money. His goal is not to
reshape economics. His goal is to reshape our hearts.

When you give your money, your time, and your talents to help and
love other people, it doesn’t change them as much as it changes
you! And God’s all about changing you. That’s what this whole
journey toward financial peace is about—changing you.

Remember, the peace in financial peace comes from outrageous

generosity!

YOU SHOULD always BE A GIVER

In Baby Steps 1–3, you might only be

giving a tithe to your local church.

In Baby Steps 4–6, you may have

a little room in your budget to start
giving offerings.

By the time you hit Baby Step 7,

you’re giving from your surplus with
outrageous generosity!

132 // Lesson 9
WAYS YOU CAN START GIVING 
Jot down ideas about how you can start giving your money,
time, and talents today—no matter which Baby Step you’re on!

MONEY
1
Budget a tithe (10% of your income off the top) to your local church.

Give a 100% (or more!) tip at a restaurant.

TIME
2
Volunteer to be a Big Brother/Sister.

Sign up to serve at a local nonprofit or ministry you’re passionate about.

TALENTS
3
Lend your skills and volunteer to help build a home.

Put your mechanical talents to work and help fix your neighbor’s car.

Lesson 9 // 133
LESSON 9 //
OUTRAGEOUS
GENEROSITY
DISCUSSION
Whether you’re in a class or online, be honest with your answers
and remember to encourage one another!

Remember, no matter where you are in the Baby Steps,

1 giving should be the priority in your budget! How has
this lesson helped you better understand the reason
this is so important?

Giving is the most fun you can have with money! How
2 have you had fun with giving in the past? What’s one
way you want to be outrageously generous in the
future?

What keeps you from giving as much as you’d like to

3 give? How does this lesson help you work through that
hang-up?

Whether you have a little or a lot, God owns it all! How

4 does His ownership of everything affect the way you
think about what He’s given you to manage?

KEEP THE
CONVERSATION
GOING!

Answer these questions

online in the Financial Peace
community!
financialpeace.com
LESSON 9 //
OUTRAGEOUS
GENEROSITY
ACTION STEPS
It’s time to live out what you just learned! Complete each of the
Action Steps below.

☐ ☐ GRATITUDE LEADS YOU TO CONTENTMENT

Whether you’re on Baby Step 2 or 7, God has given you
something to manage. Instead of chasing what’s next, stop to
practice contentment and thank God for what He’s given you.
In the space below, write three things you’re thankful for!

1.
2.
3.

☐ ☐ LOOK BACK AND CHARGE AHEAD

No matter where you are in the Baby Steps, your life should
already look different than it did before you started. In the
space below, list the top three things you’ve learned and then
list your why—the reason you refuse to quit. This is why you
won’t give up when things get tough, and why you’ll live like
no one else so later you can live and give like no one else.

1.
2.
3.

I will NOT give up because

☐ ☐ STAY PLUGGED INTO YOUR MEMBERSHIP

Your Financial Peace membership is the best place to go for
motivation and instruction. Log in every week to use tools,
watch videos, update your budget, and more!
Lesson 9 // 135
 Your S tory Began
WITH ONE DECISION...
TO CHANGE.
No matter where you started, you made it to where you are
right now, and you can get to where you want to go next.
And no matter how much longer it takes, you can get to Baby Step 7!

You’ve already taken the most difficult step—the first one.

The journey you’re on didn’t end on lesson nine. We’re here to help you
every step of the way. That’s why your membership is so important!

YOUR MEMBERSHIP PERKS

Stay gazelle intense and work the plan with your Financial Peace
membership. You have access to video lessons and new courses, tools,
EveryDollar Plus, the member community, and financial coaches.

Attacking debt on Baby Step 2? Stay on track with the Debt

Snowball Tool.

Need a refresher on compound interest? Re-watch a lesson

and find a SmartVestor Pro to start investing on Baby Step 4!

Need to talk through an obstacle you’re facing? Connect with

members in the online community or reach out to one of our
financial coaches.

Interested in teaching your kids about money? Check out

Dave and Rachel’s video course, Smart Money Smart Kids.

Whatever you need to work the plan, you’ve got it! Plus, we’re always
adding new features to your membership.

Take advantage of your membership and keep going!

You got t his.

LEARN MORE FROM
Dave, Chris, and Rachel!
We want to walk with you through every step of your financial journey. Stay
connected daily with your Financial Peace membership and with our live
events, books, podcasts, and shows.

Interested in hearing from us live? Reserve your seat for one of our upcoming
live events at daveramsey.com/events. Or pick up one of the best-selling books
from our team at daveramsey.com/store/books. No matter where you are in
your journey, we have content, tools, and resources to help you along the way!

Hear from Dave every weekday

on The Dave Ramsey Show—
listen on the radio or on our app!
(daveramsey.com/show)

Learn more from Chris on

The Chris Hogan Show
podcast. (chrishogan360.com)

Watch Rachel on
The Rachel Cruze Show
or listen on her podcast.
(rachelcruze.com)
CHANGE LIVES AS A
FINANCIAL PEACE UNIVERSITY COORDINATOR
The two biggest reasons people become Financial Peace University coordinators is to
stay motivated on their plan and to help others win with money! When you lead a Financial
Peace University class, you get the opportunity to help others who are exactly where you
started—people who are stressed, overwhelmed, and ready to make a change.

And you don’t need to be out of debt or have any special training to lead a class. If you
want to share Financial Peace University with others, then you’re the perfect person to
become a coordinator!

In fact, we make it easy to lead a class on your schedule.

YOU PICK THE TIME

Classes meet once a week for each lesson—at a time that
works best for you.

YOU PICK THE DATE

Classes meet year-round. We’ll help you set a date that’s
convenient for your schedule.

YOU PICK THE PLACE

Your class can meet at a church, local community center, or
at your home.

Visit fpu.com/coordinator to connect with someone

from our team about starting and leading a class.

Spread hope! Spread hope to people right in your community

and change lives as a Financial Peace University
coordinator.

139
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DIRECTIONS FOR
ALLOCATED SPENDING Planning
If you want to budget based on your pay period rather than the month, this form is for you!
The four columns on this form represent the four weeks in a given month. If you’re married,
combine both of your incomes and then follow the steps below to allocate your spending.

FILL OUT YOUR PAY PERIOD DATES

AND PAY PERIOD INCOME.
Your pay period dates are simply how long you’ll Pay Period Dates 7/1 TO 7/14
go between paychecks. For example, if you get
paid on the 1st and 15th, then your pay period Pay Period Income
$
3,188
for July would be 7/1 to 7/14. Your pay period
income is how much you will be paid in that
pay period. In our example, that will be $3,188.

FILL OUT YOUR PLANNED AND HOUSING

REMAINING COLUMNS. Planned Remaining
For this pay period, write down how much Mortgage/Rent $
945 $
2,243
money you plan to spend in each category in
the Planned column. In the Remaining column,
keep a running total of how much of your
Water $
25 $
2,218
income you have left for that pay period.

PLAN FOR EACH CATEGORY ON THE Planned Remaining

LIST UNTIL YOU HIT ZERO. 90
Saving $
100 $
Plan for each category on the list until the
Remaining column hits zero. When that happens, Giving $
90 $
0
you’re done budgeting for that pay period!

If the remaining column still has money, adjust an area!

IF YOU HAVE MONEY LEFT OVER . . .
If you’ve planned for every category and you Planned Remaining
still have money left over in the Remaining
column, go back and adjust an area, such as
Saving + 50
$ $
100 $
200
savings or giving, so that you spend every
single dollar. Every dollar needs a job to do! Giving +$60 $
90 $
110

142 // Budgeting Forms
ALLOCATED SPENDING FORM
Don’t let this form scare you. Managing your money week to week happens here!

We’ve made an example form throughout the next couple of pages to help! For a blank form,
go to financialpeace.com.

Pay Period Dates 7/1 TO 7/14 7/15 TO 7/29 TO TO

Pay Period Income

$
3,188
$
472

GIVING Income - Church = Remaining to budget this pay period

Planned Remaining Planned Remaining Planned Remaining Planned Remaining

Church $
410 $2,778

Charity
Remaining minus planned, and then go back & forth

SAVINGS
Planned Remaining Planned Remaining Planned Remaining Planned Remaining

Emergency Fund

HOUSING
Planned Remaining Planned Remaining Planned Remaining Planned Remaining

Mortgage/Rent $
945 $1,833

Water $
55 $417

Natural Gas $
75 $342

Electricity $
100 $1,733

Cable/Internet $
40 $1,693

Trash

 Budgeting Forms // 143
 Pay Period Dates 7/1 TO 7/14 7/15 TO 7/29 TO TO

TRANSPORTATION
Planned Remaining Planned Remaining Planned Remaining Planned Remaining

Gas $
200 $ 1,493

Maintenance

FOOD
Planned Remaining Planned Remaining Planned Remaining Planned Remaining

Groceries $
450 $1,043 $
150 $192

Restaurants $
50 $993

PERSONAL
Planned Remaining Planned Remaining Planned Remaining Planned Remaining

Clothing $
150 $ 843

Phone $
124 $68

Fun Money $
30 $813 $
30 38
$

Hair/Cosmetics $
60 $753

Subscriptions

LIFESTYLE
Planned Remaining Planned Remaining Planned Remaining Planned Remaining

Pet Care

Child Care

Entertainment $
50 $703

Miscellaneous

144 // Budgeting Forms
Pay Period Dates 7/1 TO 7/14 7/15 TO 7/29 TO TO

HEALTH
Planned Remaining Planned Remaining Planned Remaining Planned Remaining

Gym

Medicine/Vitamins

Doctor Visits $
50 $653

INSURANCE When Remaining equals zero, you’re done budgeting for this pay period!
Planned Remaining Planned Remaining Planned Remaining Planned Remaining

Health Insurance $
38 $
0

Life Insurance

Auto Insurance $
88 $565

Homeowner/Renter $
12 $553

Identity Theft

DEBT
Planned Remaining Planned Remaining Planned Remaining Planned Remaining

Car Payment $
310 $ 243

Credit Card 1 $
150 $
93

Credit Card 2 $
45 $48

Credit Card 3

Student Loan

Medical Bill $
48 $
0

Personal Loan

 Budgeting Forms // 145
DIRECTIONS FOR

IRREGULAR INCOME Planning

If your income is different every month, use the Irregular Income Form—along with your
EveryDollar budget—to make a plan for your money before the month begins. Follow the steps
below to make a plan for any additional income you earn this month.

FILL OUT YOUR BUDGET.

Fill out your budget based on what you INCOME
reasonably expect to bring home for the month.
If you aren’t sure, use last year’s lowest income Paycheck $3,500
month as your starting point.

ITEMS
FILL OUT THE ITEMS COLUMN.
In the Items column, list out anything that didn’t Main Card - Snowball
make it into your budget. These are items you
couldn’t budget for, but you still need to fund. Hospital Bill - Snowball
Store Card - Snowball

LIST ITEMS IN PRIORITY ORDER. PLANNED

Make sure your Items list is in the right order and $

50
keep a running total. Setting the right priorities
is crucial here. For instance, a beach trip is not $
460
more important than paying off your debt! $
770

FILL IN ADDITIONAL INCOME. ADDITIONAL

When you get paid, write any additional income IRREGULAR $
1,500
in the box. “Additional” means anything above INCOME
and beyond what you planned on your budget.

PLANNED RUNNING TOTAL

SPEND UNTIL IT’S GONE.
Spend your money right down the list until it’s
$
460 + $510
all gone. You most likely won’t make it all the
way down the list. That’s okay! That’s why it’s
$
770 = $1,280
important to prioritize. 500 $220
$ $
1,780 $1,500
X

146 // Budgeting Forms
 IRREGULAR INCOME FORM
This form helps you prioritize and plan for the items that didn’t make it into your monthly budget.
Follow the steps on the previous page to plan for your additional irregular income. We’ve made
an example form below to help! For a blank form, go to financialpeace.com.
Any additional irregular income goes here.

List in priority order anything that didn’t ADDITIONAL IRREGULAR INCOME $

1,500
make it into your monthly budget.
Work back & forth, adding each budgeted item to the running total.
ITEMS PLANNED RUNNING TOTAL

Main Card - Snowball $

50 + $
50
Hospital Bill - Snowball $
460 = $
510
Store Card - Snowball $
770 $
1,280
Car Sinking Fund $
500 $220 $
1,780 $1,500
X

X
Christmas Sinking Fund $
100

 Budgeting Forms // 147
 KEY TERMS
Money shouldn’t be complicated. We make it simple. We cover the
words and phrases used in the last nine lessons in a way that’s easy
to understand.

SAVING & BUDGETING

Baby Steps: Dave Ramsey’s proven seven-step path for winning
with money.

Budget: A monthly plan, either on paper or digital, that puts every dollar
you make into a specific category.

Compound Interest: Interest that gets paid on both the money you put in
(your principal) and on the interest you’ve already earned.

Four Walls: The most basic expenses you need to cover to keep your
family going: your food, your utilities, your shelter, and your transportation.

Interest Rate: An extra percentage you pay to a lender for money

you borrow.

Money Market Mutual Fund: Basically, a savings account you can open
with a mutual fund company instead of a bank; it usually earns a little
more interest than a bank savings account thanks to short-term mutual
fund investments.

Sinking Fund: Setting aside money over time so you can buy something
with cash—for example, saving $400 a month for 10 months to buy a
$4,000 car.

Zero-Based Budget: A monthly budget that puts every dollar you earn
into specific categories—so when your income is subtracted from your
expenses, you come up with zero.

DEBT
Annual Percentage Rate (APR): The amount that borrowed money costs
you each year; the APR includes your interest rate and other related fees
you have to pay on a loan.

148 // Key Terms
Debt Snowball: List of all debts (except your house) from smallest to
largest. Make minimum payments on all of them while you attack the
smallest debt with a vengeance. Once that debt is gone, take that
payment and apply it to the second smallest debt. Keep this going until
you’ve paid off the last, largest debt.

FICO Score: Number used to evaluate your “credit worthiness;” it’s really
an “I love debt” score that’s based on your debt history, how much debt
you currently have, how long you’ve been in debt, new debt, and the
kind of debt you have.

Introductory Rate: A marketing tool that offers a lower-than-normal

interest rate during the early stages of a loan; it’s a rate designed to
attract new customers, and it almost always goes up over time.

Navient: A student loan service that split off from Sallie Mae in 2013.

Sallie Mae: Originally a government program known as the Student Loan

Marketing Association (SLMA), it’s still the largest private student loan
lender in the country.

SPENDING
Brand Recognition: A marketing term that measures just how aware
customers are of particular brands.

Buyer’s Remorse: Feeling of doubt or regret about a purchase soon after

making it.

Caveat Emptor: Latin term that means “let the buyer beware”.

Financing: Using debt to buy something; can also refer to the attractive
terms and conditions companies use to market what they want you to
buy with debt.

Impulse Purchase: Buying something without thinking about the

bigger picture.

INSURANCE
Cash Value Life Insurance: Basically, a permanent life insurance policy
(as opposed to a term policy) that charges high premiums and puts
money in a savings account with low return rates; also referred to as
whole life, universal life, and variable life. Never buy this kind of life
insurance.
 Key Terms // 149
 Claim: The paperwork you send to an insurance company when you
want them to cover a loss.

Coverage: The amount of protection you get from an insurance company

when you suffer a loss.

Deductible: The money you pay out of pocket before insurance benefits
kick in.

Health Savings Account (HSA): A tax-free savings account that sets

aside money for medical expenses.

Liability: The amount of your financial obligation when you’re found at

fault in an accident.

Policy: In insurance, a contract that explains what is covered and what

is not.

Premium: The regular payment you make to an insurance company to

ensure coverage; can be a monthly, quarterly, or annual payment.

Stop Loss: For insurance, the maximum amount of out-of-pocket

expense you pay each year.

Term Life Insurance: Life insurance that remains in force for a certain
period (a term); if someone depends on your income, you need term life
insurance.

INVESTING
401(k): A retirement savings plan through a business where employees
set aside tax-deferred income from each paycheck.

401(k) Match: A company benefit where an employer “matches” a

percentage of what an employee sets aside for retirement.

403(b): A tax-favored retirement plan for public school and nonprofit

employees.

Roth 401(k): An employer-sponsored retirement plan funded with

after-tax money; since taxes have already been paid, the account
grows tax-free.

150 // Key Terms
Roth IRA: A personal retirement account that grows tax-free because it’s
funded with after-tax dollars.

Direct Transfer: Moving the money from one tax-deferred retirement

plan into another approved plan; because none of the money goes to
you, there are no immediate tax liabilities or penalties. Also known as a
“rollover.” Often used when moving from one company to another.

Diversification: Spreading money among different kinds of investments

to minimize risk.

Individual Retirement Arrangement (IRA): A tax-deferred plan where

workers can save some of their income for retirement; as the plan’s value
grows, the money isn’t taxed until it’s taken out.

Liquidity: A measure of how easy it is to get to your money from an

account; the easier the access, the more liquid it is.

Mutual Fund: An investing tool where a group of people combine their

money to create a fund of several different stocks.

Risk: The level of uncertainty about the potential returns on an

investment.

Rollover: See “Direct Transfer”.

Share: How much an individual investor owns in a publicly traded

company.

MORTGAGE
Adjustable-Rate Mortgage (ARM): The mortgage interest rate changes—
usually going up—periodically; allows banks to transfer risk to consumers
through higher interest rates.

Curb Appeal: How nice a house looks to someone passing by.

Comparative Market Analysis (CMA): The estimated value of property

based on what similar properties in the area have sold for.

Equity: How much of property you own compared to how much you
still owe on it; usually seen in terms of how much of a mortgage amount
you’ve actually paid.

 Key Terms // 151
 Fannie Mae (FNMA): The Federal National Mortgage Association, a
privately owned company that deals in mortgages.

Fixed Rate: An interest rate that never changes over time; considered a
much better option than an adjustable rate.

Inflation Hedge: An asset that increases in value over time and counters
a rising inflation rate.

Multiple Listing Service (MLS): A computer program used by real estate

agents to search updated property listings.

Mortgage: A loan arrangement made for buying real estate; the property
serves as collateral for the loan.

Private Mortgage Insurance (PMI): Insurance that protects a lender

from a borrower who defaults on a mortgage; usually required when the
borrower has paid less than 20% of the mortgage value.

Principal: For investments, the original amount of money put in the

investment; for loans, the actual payoff amount of a loan, not including
interest or other fees.

GIVING
Firstfruits: The first produce gathered during a harvest, typically given as
an offering to God in the Bible.

Great Misunderstanding: The mistaken belief that you get more by

holding tightly to what you have instead of keeping an open hand.

Offering: A gift given above and beyond the tithe; freewill gifts given
without a sense of obligation or expectation.

Stewardship: The act of managing the resources God has given each of
us for His glory.

Tithe: A gift of the first 10% of one’s income, given to the local church.

152 // Key Terms
 Member Workbook 06.19

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