For the sake of making it easy to reference my FPU summary posts, I’ve listed the links below. It took me longer than I though to write this series but think they’ll be a good resource for those who’ve attended FPU. I know I’ll be referring to them in the future.

I want to reiterate that these summaries are not meant to be a substitute for attending FPU. Not only are they not comprehensive (I couldn’t cover every little detail), but half of the value of attending FPU is the act of physically going and taking the time out each week for 3 months to think about and work on your finances. In fact, even though my wife and I already know this content, we’ve considered attending again simply for the discipline of reviewing all aspects of our financial life. The classes are also very motivational. The fact is, I’ll probably be conducting a round of FPU at our local church so I’ll get to participate again, this time as a moderator. I’m excited at the prospect of introducing others to Dave Ramsey and helping them reach their financial goals.

So without further ado, here are the links to each FPU summary post.

Financial Peace University Part 1
Financial Peace University Part 2 – Understanding Insurance
Financial Peace University Part 3 – Retirement and College Planning
Financial Peace University Part 4 – How to be a smart consumer
Financial Peace University Part 5 – Tips on buying and selling real estate
Financial Peace University Part 6 – Increasing your income through career development
Financial Peace University Part 7 – Collection practices and the spiritual side of managing finances

In this final installment of the Financial Peace University summary, I’ll cover credit collection practices and will briefly address the spiritual side of managing your finances. This series of summaries about FPU has taken much longer to complete than I originally anticipated. The information was so good I couldn’t pack it into just a couple of posts. I’m glad we’re ending with lucky post #7.

Credit collection practices

In week 12 of Financial Peace Universtiy, Dave Ramsey addresses credit collection practices and how to create a plan to deal with creditors. This is not an area I’m familiar with so I can’t add much of my own opinion. Hopefully those of you dealing with creditors will find this information useful. If you’ve had experience dealing with creditors, please post your experience and any advice in the comments.

It’s better not to go into bankruptcy, but rather to create a plan.

Dave’s first piece of advice is that you’re better off dealing with creditors than going into bankruptcy. If you have a clear plan and communicate that to your creditors, you can make it through the experience.

Collectors are not professionals. Don’t let them manipulate you into thinking they are.

Dave mentions that the average turnover for a collections agent is 90 days. It’s literally a revolving door. This helps you put things in perspective about who you’re talking to. It’s not an intimidating professional in a suit and tie, but more likely some tween in a tee shirt and jeans who won’t even be around next month.

A collector agent’s first rule is to evoke emotion (fear, anger).

Collection agents use scare tactics to manipulate you by evoking anger and fear. If they can get you to react strongly, you’re more likely to take action. Beware – This will lead you to make non-logical decisions that won’t be in your best interest. For example, in the heat of the moment, you may reason “I’ll pay this off to show you and get you off my back.”

Take care of the “four walls” before paying creditors.

Take care of your necessities before paying creditors. Dave defines necessities as the “four walls” – food, shelter, clothing, and transportation. In a previous session Dave tells a story about when he had creditors coming after him. He and his wife ordered their budget according to needs and drew a line on the paper after the “four walls.” When the creditor called, Dave told them “I’m sorry, you’re below the line.” The creditor asked “well how do I get above the line?” Dave replied “You be nice next time you call.”

Creditors have rules dictating how they can act. Don’t let them break those rules.

In 1977 the government passed the Federal Fair Debt Collection Practices Act dictating how collectors can behave.

Here are some things to look for:

• Creditors can only call between 8 AM and 9 PM.
• You can send a certified letter to your creditor with a return receipt stating they are not allowed to call you at work. If they do so, they will then be violating federal law.
• They can’t use gestapo tactics. Dave tells a story about a collection agent who sat in the debtor’s driveway and threatened him when we got home. If the collection agency is using such tactics you can send a cease and desist order. But be warned, doing so could trigger a lawsuit.
• No collector can confescate your bank account without suing you. If they say they can, they are lying. However, they can do this with student loans because there is such a high default rate.

Create a plan for paying your bills.

The main way to deal with collection agencies is to create a plan and communicate it to the agencies.

If you can’t pay all your bills:

1. Take care of your needs first
2. Create a Pro-rata plan in which you pay your creditors as a percentage of how much debt you have with that company. For example, if you owe one creditor 25% of your total debt and another 75% of your total debt and you have $100 a month to pay down debt, you would send the first creditor $25 and the second $75.
3. Send a cover letter with copy of your budget every month along with your payment.

Communication is key in dealing with creditors. If they see you’re making progress and have a clear plan, they’ll be much more confident that they’ll get paid and will be less likely to pester you.

The number one catalyst of filing bankruptcy is pressure from collection agencies. If you communicate excessively they probably won’t sue (although they could). A proactive approach is the best.

Settling debt for less than the full amount.

If you don’t have enough to pay a debt you can ask for “settlement in full.” This means you offer to pay less than the full amount you owe immediately if they will consider the debt paid. If they agree, make sure you have a written agreement. This is a less desirable approach since you should ideally pay whole debt (you do owe it). It also will show as a gray mark on your credit report (which is better than showing as a black mark). Also, if you receive a settlement in full, the amount of the debt you don’t pay off is taxable income.

Managing your credit report.

Here are some useful tidbits to help you manage your credit reports.

• Financial accounts are taken off your credit report every 7 years from last report. Bad debts stay on your credit report because they continue to be reported. The sooner you pay them off the sooner they will be removed.
• Keep track of your credit report. 50% of people have errors on their credit report. 37% have major errors that can make it hard to get a job or loan. Check your credit report once a year. You are entitled by law to one free credit report a year from each of the three major credit reporting companies: Experian, Equifax, and TransUnion. Get your free credit reports at AnnualCreditReport.com.
• The credit bureau is required to remove inaccuracies within 30 days of you reporting it unless they prove the inaccuracy is correct. If they don’t remove the inaccuracy you can have them take off the entire file (Dave wasn’t clear on this point but it sounded like you could actually have the entire financial account removed from the record).
• You can contact the credit bureaus to prevent you from receiving pre-screened marketing offers from financial institutions. You can call each company and follow up with certified mail to each of 3 credit bureaus. If you request a block by phone it lasts for two years. If you request a block in writing, it lasts forever.

The spiritual side of managing your finances.

Dave wraps up Financial Peace University in week 13 by talking about the spiritual aspects of managing money.
I know many people give Dave a lot of flack for talking about spiritual matters, but it’s hard to deny the impact of having a charitable mindset. I personally have had many positive experiences giving funds for charitable causes and have seen miraculous results. If nothing else, the idea of sharing your wealth is healthy from a psychological perspective.

Dave points out that we shouldn’t just try to gain more money for the purpose of holding on to it. Money is just a small piece of life and isn’t the source of happiness. By using money to help others, we can keep money in its proper place and maintain a healthy attitude towards material gain.

Giving money to worthy causes helps our relationships and increases our wealth.

Dave advocates giving a portion of your income to charitable causes. This helps you release your tight hold on money and helps it flow to those who need it most, including to yourself in times of need.

We are happiest and most fulfilled when giving and serving. Giving is:

1. A reminder that the lord owns all. We are just stewards.
2. Praise and worship. We show our attitude towards God when we share our money with others. It’s a form of praise.
3. Spiritual warfare. Giving freely of your wealth can spiritually protects you against both spiritual and temporal harm.

Dave offers the following guidelines for sharing your wealth.

1. Give 10% of your income
2. Give off top. Budget your charitable giving first. Don’t wait until you’ve budgeted all your categories or you won’t have anything left.
3. Give offerings in addition to tithes. When possible give above and beyond the 10% tithing.
4. Never give with the motive of receiving in return. If you give with the wrong motive, you won’t receive the corresponding blessings
5. Financial peace is about understanding. By putting money in the proper place and perspective, you can obtain financial peace. It’s not about how much money you make or how much “stuff” you have.

In week 11 of Financial Peace University, Dave Ramsey talks about the income side of the equation. Up until now, Dave has primarily talked about managing the expense side of the financial equation. What people often don’t really think much about when managing their finances is that an increase in income of $100 is the same as a decrease in expenses of $100. Sometimes the fact is that you just need to make more money to make ends meet. Easier said than done, right? Well, yes and no. Sometimes it’s easier than you think to increase your income. In many cases it may be as simple as walking in to your boss and asking for a raise or a bonus.

Dave provides advice about not only making more money but also about how to get more joy and fulfillment from your career. Here are the highlights from this week’s session. I’ve thrown in my own comments and points for good measure.

• Be prepared to change jobs…and grow your career – 50 years ago people would work for one company their whole life. Now the average career lasts 3.2 years. The downside is you shouldn’t expect to stay in one place for too long. The upside is you shouldn’t expect to stay in place for too long. Changing jobs isn’t the stigma it once was but that’s a good thing – it makes it easier for you to change roles and accelerate your career development. Rather than being stuck in the same job or role forever, you can experiment with different roles and areas of responsibility until you find one that suits you.
• Determine what contribution you want to make in life and seek to make it – Being introspective to determine your life’s goals is a good thing. You shouldn’t choose a job or career solely based on money but rather on making your unique contribution. You will end up much happier and fulfilled.

  Dave tells about an experiment where researchers hired a group of people to dig a hole. At the end of the day, they were instructed to fill the hole back up. The next day they were told they would be paid more money for doing the same job, yet not everyone showed up. After several days of hole digging, the crowd of workers dwindled even though they were paid progressively more. Because they felt like they were doing meaningless work, they were dissatisfied regardless of the income.

• Make sure your job lines up with your values – This is an extension of the previous point. If you do work that violates your values, you will inevitably be miserable. For example, working in a bar is not ideal if drinking is against your values.
• Your job is not your life – While you should seek meaningful employment, it’s also important to realize your job is not your life and doesn’t define you as a person. You have many roles in life as a family member, friend, member of the community, etc. Your job is just one piece of your life.
• Do you have a job, career, or vocation? – I liked the way Dave defined each of these terms. A job “J-O-B” is daily activity that produces income. A career is a line of work, but not necessarily a calling. A Vocation is a calling, purpose, or destiny. Dave says “If your vocation is something you love, you’re on vacation for the rest of your life.
• Your personal style will help you choose your career better than your education – Dave points out that 15% of success in a job comes from skills whereas 85% comes from personality, ambition, enthusiasm, and attitude. You can gain most of the skills you need on the job. In fact, most people don’t even go into a field related to their major in college.
• When finding a job, be yourself – your best self – When sending resumes and interviewing for jobs, don’t try to be something you’re not. People will almost always see through your act. Instead be your best self. Finding a job is essentially a process of marketing yourself – so highlight your best points and accomplishments but be honest.
• Networking is key to finding a job – This is good solid advice. Only 15% of jobs are covered in newspaper classifieds. The best jobs aren’t even posted and must be found through networking. When looking for a job, be sure to tell everyone that you’re looking and what you’re looking for. Be specific. Jobs may come from the most unexpected contacts…even from a friend of a friend.
• 3 steps to landing your dream job – Dave provides some specific action steps to help you land your dream job. Basically you make a list of companies you’re interested in and contact them three times.
  1. Send an introduction letter stating that you’re interested in the job and that you’ll be contacting them and sending them a resume
  2. Send your resume with a cover letter stating why you’re interested in the specific job and why you’re the right person for the job.
  3. Call the company (ideally the person responsible for hiring) a couple days later to follow up and make sure they received everything

  Most people don’t make the consistent effort that these steps require. Even though they’re simple, by doing them you will stand out amongst other candidates as a person ready to take initiative.

• In your resume, don’t just list where you’ve been, but rather what you’ve done and how it applies to the job – A resume is not just a list of places you’ve worked but should rather list what you accomplished at your previous jobs. If you can show anything quantifiable, that’s even better. And if you can show how your accomplishments will help you in the job you’re applying for, you’ve hit a home run.
• If necessary, take a temporary job to clear the log jam – Oftentimes, you’re in a financial bind and just need an extra boost to clear the metaphorical log jam – maybe you just need to pay off that final debt or to finish saving for a vacation. If that’s the case, a temporary job may be just the thing. It’s amazing how quickly you can get a job as a pizza delivery person; and how quickly you can earn a few hundred or thousand extra dollars.

  Taking on a temporary job:

  1. Cleans up little bills
  2. Reduces debt with gazelle intensity
  3. Helps you save for stuff or vacations
  4. Helps you build up some lump sum savings (emergency fund or your children’s college education)

• Start a home based business – The possibilities of starting a home-based (or cottage industry) business are endless. And the good part is, you can do something you love. 45% of homes have a home-based business. Dave tells the story of a lady who placed an ad in the back of a magazine selling her homemade pecan pie recipe. She literally made thousands of dollars selling her recipe.
• Build a home-based business with time, patience and consistency – This is my input on starting a home-based business. I’m convinced that anyone can do it given enough time, patience and consistency. Don’t expect it to be an overnight success. Set aside time every week to work on a business. Just start with your best idea without worrying too much if it’s the right one. If you put in consistent time and effort, over time you can make your business grow.