Financial Peace University Week 5 Review
(This post is part of my Finance Peace University Review series from 2019, and updated in 2020 with additional content!)
This review covers the 5th lesson in Dave Ramsey’s Financial Peace University Flex online course.
The previous lessons are covered in these posts:
- Week 1: Starting an Emergency Fund & Budgeting (Baby Step 1)
- Week 2: How to pay off debt using the Debt Snowball method (Baby Step 2)
- Week 3: How to build up a fully-funded 3 to 6-month emergency fund (Baby Step 3)
- Week 4: Retirement, homeownership, college, and building wealth (Baby Steps 4-7)
This comprehensive personal finance online course was created by Dave Ramsey to help people who struggle with money management. The self-paced curriculum covers a wide variety of topics, from budgeting to retirement planning to insurance.
All content is web-based, with videos and downloadable worksheets to help you follow along and take notes. Each session has a checklist so you can stay on track with the program.
Week 5 of the Financial Peace University course is all about learning how to spend wisely.
This is very important, because once you’ve completed all of the previous steps, you’ll be sitting pretty with a whole lotta cash in the bank. It will be easy to say yes! to every shiny new object that passes by.
But beware – because your financial situation sets you up as a prime target for hungry salespeople.
You need to learn the difference between a want and a need, and also how to stand your ground to get the best deal.
Protect the Plan
At this point, you’ve completed baby steps 1 through 7. It was a long road, but you did it!
You got out of debt, you’ve got a comfortable cushion in the bank, and you’ve made a solid plan for your future.
What more could you ask for?
Well, I’ll tell ya: protection.
Lessons 5 through 9 in the course are all about how to build a good offense and defense. Dave teaches how to protect your wealth and also how to keep it growing into your golden years.
In the week 5 video, Dave takes a deep dive into the psychology behind marketing. Sounds a little out of place in a personal finance course, but it’s actually very relevant.
Everywhere you look, someone is trying to sell you something. You can’t escape it – it’s on your TV, it’s on your phone, it’s in the magazines you browse through, it’s on the side of the road while you’re driving. It’s all around you!
And marketers are pros at tuning in to the one thing that can drive a sale every time – emotions.
When you’re completely out of debt, and your bank account has never been healthier, it can be too easy to start letting your emotions drive the ship.
You might even start confusing a want for a need. You may convince yourself that a new 86″ 4K flat screen TV needs to become a part of your plan.
This is why it’s important that you have a plan to protect your plan.
But first, it’s helpful to know what you’re up against.
You’re being watched – closely
Marketing is an art, but it’s also a science. The people behind the ads you see and hear – on TV, on the radio, on the internet – are not just trying to be creative or clever or funny.
They want your money.
And they know how to get it because they’ve been watching you for a long time. Creepy, I know.
Marketers determine their strategies based on your buying habits, your internet searches, your age, your marital status, where you live, and even what level of education you have.
But, when you’re aware of their strategies, you’re better prepared to respond with a trick or two up your own sleeve.
Dave says there are four major ways we’re marketed to:
MARKETING METHOD #1: Personal Selling
The first is personal selling, and a typical example would be experienced on a car lot.
Tactics such as always answering a question with a question will draw you into the buying experience and allow the salesman to find out more about what you want. Once your desires are known, it’s easy to be persuaded that the product’s benefits are worth the cost.
Have a plan before you get approached, and do some “emotion” checks through the decision process. If you know exactly what you’re looking for and a maximum amount you’re willing to pay, then you won’t be swayed by clever communication tactics.
MARKETING METHOD #2: Creative financing
Another marketing tool is financing and creative payment methods. This technique works so well because the “weight” of the decision is lifted. If you’re not paying cash, you’re not feeling the consequences – and marketers know this.
Go to the bank the day before you go shopping and get out the amount of cash you want to spend.
Take it home, count it, feel it, lay it all out in its bare glory before you. Get a good deep feel for how much is about to disappear forever. Then decide if you want to go through with the purchase or not.
MARKETING METHOD #3: Repeated advertising
A third type of marketing is done through TV, radio, magazines, internet and other media.
There is typically nothing tangible to touch or smell or taste, so this heavily relies on what you see and what you hear. So when logos and jingles are repeatedly being consumed by your eyes and ears, only your memory is needed to prompt you to buy.
This is why it’s so important to have a plan – because even your own subconscious will trick you into buying! Stick to the list and you won’t be drawn in to impulse buys.
MARKETING METHOD #1: Product positioning
The last marketing tool is called product positioning, and this can mean a physical position in the store, or a mental position in our minds.
A good example is Apple, which has positioned itself as the “cool” brand. People will pay two or three times as much for a product if it has an Apple logo on it.
These are all ways that marketers influence you to buy their products. You may think your decision to buy started in your own mind, but the fact is that good marketing will put that thought there first – and then persuade you to purchase.
Use your head, not your heart
You have to be intentional about not letting marketers lure you in and get you emotionally involved.
Dave gives some good suggestions about planning around a significant purchase, which he defines as anything over $300.
- Put some space between you and the item. Go home, sleep on it, and see how you feel the next day.
- Figure out what your buying motives are. Is it a want or a need? (*Hint*: it’s a want!)
- Don’t buy it if you don’t fully understand it (that means read the fine print and be committed to learning all about the product).
- Be aware of what you’ll be missing out on if you go through with the purchase (this is called the opportunity cost).
- Always talk it over with your significant other first – and make sure you agree on the decision.
When you have a plan – steps that you’ll follow before giving your cash away – you’ll more likely make the decision based on your principles and not on your emotions.
Learn the skill of negotiation
I hate negotiating, so I make my husband do it. But, it really is a helpful skill to have in those times when you’re on your own.
As the buyer, you’re the one in charge of initiating a better deal for yourself. The worst thing that could happen is that the seller turns down your offer, so the least you could do is try. Even if you only save a few bucks, that’s better than full price!
Rachel Cruze (Dave’s daughter) tells us her 7 tips to negotiate successfully:
- Always act with full integrity and be completely honest.
- Use cash when you can. Remember, when you can see it and feel it there is an emotional reaction – and this goes for both sides of the transaction.
- Be willing to walk away. Care less about buying than the seller cares about selling, and leave it on the table if you don’t get the deal you want.
- Use the silent treatment. Let the seller do most of the talking and don’t be afraid to create long, awkward pauses. The more he talks, the more likely he’ll lower the price.
- Get comfortable with saying (nicely) “that’s not good enough“ – then wait in silence for the response.
- Recognize when you’re being drawn in to a commitment with a really good deal, only to have the salesman later blame their manager for not approving it. If he can’t follow through on the original quote, it was never a deal in the first place.
- Offer a commitment to buy if an extra incentive that you identify is also included. If they can’t do that, then insist the price needs to be lowered. This makes it seem like the incentive was always a part of the price, so if you can’t have it then it’s only fair to have the price lowered. This one is a little Jedi mind trickery. Typically this applies to very large purchases, such as when you buy a home or a vehicle.
Use these tips to stretch your dollars as far as they’ll reach.
Remember – your goal is to protect your money so you’ll have more to keep growing.
Video: 5 Things You NEED To Negotiate
There’s a lot to know about building a good offense and defense for your wealth.
It’s not enough to just get out of debt and have some extra in the bank.
You must be intentional and strategic so your money doesn’t slip through the cracks. The more you have, the more you’ll have to grow.
In the next session, Dave will talk about the different forms of insurance that will help us achieve our goals.
I know, this might sound like a big yawn. But, it’s super important in order to guard all that you’ve worked so hard for.
So come back next week, when I’ll share what Dave teaches us about insurance.