The second session in Dave Ramsey’s FPU (Financial Peace University) class takes a step back from the 7 Baby Steps that were outlined in the first class. Although the second step in the Baby Steps is Dave’s famous “Debt Snowball,” he doesn’t dive into it until the 4th class session. It seems that he recognizes there is much more ground to cover before he can help you aggressively go after your debt. Some of that ground is how different people relate differently with money, the topic of the second class and today’s blog post.
Nerds and Free Spirits
As I’ve been exposed to more and more of Ramsey, I’ve learned that his approach is largely one-size-fits-all. There’s not a lot of wiggle room in the overall plan that he has laid out, and it seems he would argue that this is intentional. Every piece of the plan is meant to work together as a unit – to skip Baby Steps or do them out of order would be to negate the benefits of the plan altogether. His Baby Steps are broad, and so they do work for most people, but he makes other broad generalizations in areas that made me a little uncomfortable, such saying that men see money as a scorecard, while money represents security to women.
In Session 2, Ramsey talks about how every relationship has a Nerd and a Free Spirit when it comes to money. The Nerds are the ones that like to work with numbers, enjoy watching the budget, appreciate rules, and like things neat and organized. The Free Spirits are the ones whose eyes glaze over when looking at a spreadsheet, feel restricted by the budget, see rules as general guidelines, and appreciate the flexibility of not always having everything in its place.
While these are general ends of a personality spectrum, I would hesitate to say that every relationship has one of each, and I appreciate that Ramsey is clear that the nerd and free spirit roles don’t correlate with gender. Nevertheless, Ramsey goes on to explain how to structure the creation of a budget when you have a nerd and a free spirit in the house. He gives the primary responsibility of creating the monthly budget to the nerd, as they are more likely to actually do it, enjoy it, and have a better idea of what amounts are realistic. The free spirit then must review it and make some sort of change somewhere, even if only one. Saying, “Whatever you want to do is fine with me” is not allowed. This is a good idea – the premise from which Ramsey is working is that both people in a marriage need to be active participants in the handling of money. By making the free spirit (whether that’s the husband or wife) change something, it makes control and ownership of the budget shared. The overarching principle is that the husband and wife need to be aligned and in communication on their use of their money and the goals to which they are striving. With finances being a major factor in divorce, alignment and communication sound like a great idea!
Kids and Money
During the session, Dave brings out his daughter to talk briefly about how to raise kids in a way that they begin to learn how to handle money responsibly and wisely. His daughter, Rachel Cruze, gives a few principles for handling money with children that she experienced and appreciated when she was growing up.
- Commissions, rather than allowances – If kids are paid, they need to learn that they need to earn their money. Commissions for chores are a lot better for that than a simple weekly allowance for doing nothing.
- Tangible money tracking – use a large clear jar to stockpile kids’ money so they can see it grow, and use envelopes to help kids split their money into different categories, such as one each for giving, saving, and spending. All earned money should be split into these categories, teaching kids that they don’t get use all of their money, that its important to save for longer term goals, and that tithing comes first.
- Upgrade as they age – When they become responsible enough, they can upgrade to checking accounts, credit cards (not Ramsey’s idea), and cell phone apps to help them track their money.
At first, I thought this class may have been a waste of a session, as it has a lot of common sense information, but I realize that it is an important foundational aspect to dealing with money. Before we can dive into the nitty gritty budgeting, debt reduction, and investing, we have to be in communication with spouses and accountability partners, and we have to be aligned on our goals. Without this, the rest of the plan will quickly crash and burn.