FINANCE 101

Assignment #7 Final Part A (Writing)

James Rudd, Kara Beckstead, David Contra-Dancing (Richards), Kaci Roll
Chapters 1 & 2 (James Rudd)

FINANCIAL PRINCIPLE #1 - CHAPTER 1

Dear Bishop,
After reviewing the Hopefuls information I have determined that the following
24 financial principles with be of the most help in their rise above debt, as well as
planning for a stable future.
We begin by explaining the concepts of Financial Independence and Independent
Wealth. Being financially independent means that you have sufficient income for your
needs, with little or no debt, and do not depend on anyone else for your support, i.e.
Church welfare, family, or government aid. However, it is possible to be financially
independent and still find yourself in debt and unable to achieve the quality of life you
would like, which leads us to the principle of Independent Wealth. Being independently
wealthy means that you have enough money in the bank or other investments that you
can live comfortable and do not need to work. It then becomes your choice whether or
not to work, but you no longer have financial worries. Understanding these fundamental
principles will allow Brother and Sister Hopeful to set meaningful goals and have the
motivation necessary to discipline their financial lives.

FINANCIAL PRINCIPLE #2 - CHAPTER 1

Personal Financial Planning is the natural step that follows an understanding of

correct financial principles. Joseph Smith responded when asked how he led the saints so
uniformly with, I teach correct principles and they govern themselves. I also believe
that the only real way to help anyone is to teach them in a way that enables them to
benefit from your teachings continuously. Due to poor planning (or perhaps the lack of
planning altogether) the Hopefuls are burdened by debt, scrambling to make payments,
and living in a generally stressful environment. The way out is planning, there is power in
planning. We must help them consider the six Ps of planning: Proper Prior Planning
Prevents Poor Performance. Helping the Hopefuls understand the value of planning
their finances as well as delaying personal gratification a.k.a. sacrifice they will be able to
rid themselves of the bondage of debt and successfully allocate their funds in the future.

FINANCIAL PRINCIPLE #3 - CHAPTER 1

The financial keys to success will round out the basic principle structure that we

are starting them on. By understanding these first principles they will be prepared to use
the rest of the principles we teach them. First and foremost - Pay the Lord, then pay
yourself. I hope they are paying their tithing, no other principle will help them be
financially stable more than this. Immediately after tithing is paid it is imperative to put
money into savings or investments, somewhere they will not be tempted to spend it. This
will help them live on the money they have instead of spending their savings and greatly
reduce the likelihood of going all in during a future emergency. Next is Collect Interest
which piggybacks on the last one. Simply saving. I assume they are not regularly and

consistently saving, this will do so much for their future. Third Key is Putting Your
Money to Work - When you put your money to work earning interest, dividends, and
appreciation you are not dependent solely on the income you earn through your
employment. Planning for retirement is a critical part of our solution here and this is the
key. Fourth Key is Do Not Pay Interest. By having two mortgages, four credit cards, and
multiple other loans and bills with interest the Hopefuls are currently paying a great deal
more than they need to. By making minimum payments (or sometimes no payments at
all!) they are almost literally throwing money away. Far more than half the payments they
are making are going toward interest and not even denting the principal amount, or what
they actually owe. This is a habit that must be nipped as soon as possible if financial
security is to be achieved. Finally, the Fifth Key is to Prepare Financial Goals and Make
Wise Financial Decisions. I believe that the Hopefuls do desire to use this key, but they
have been sorely uneducated and undisciplined in their financial lives up until this point.

FINANCIAL PRINCIPLE #1 CHAPTER 2

In any sport worth playing, it is important to know the score if you are to

determine a winner. Considering the fact that the Apostle Paul refers to life as a race in
his first epistle to the saints in Corinth, we would not be far amiss to term life a game,
either. There are scores being kept on both sides of the veil on how we do in this life.
Now, reckless spending and undisciplined financials do not necessarily mean damnation,
but Id certainly like to err on the other side of the line and go frugally overboard. You are
a starting player, the main scorekeeper, and you are in the whole game. Some other
players would be debtors, and people who owe you money. They will surely be keeping

score of their involvement in your finances, and they will periodically send you
statements or bills. Keeping these items will increase your overall financial score and
help you to score higher in the future.

FINANCIAL PRINCIPLE #2 CHAPTER 2

Understanding personal financial statements will enable Brother and Sister

Hopeful to have a clear picture of where they stand and enable them to make informed
financial decisions. Keep your financial score by preparing two personal financial
statements: (1) a balance sheet, and (2) a cash flow statement. The balance sheet is a
record of everything you own (called assets) and debts you owe (called liabilities). Your
assets minus (-) your liabilities equal your wealth, which is your net worth.
Understanding these basic financial statements will help the Hopefuls build a strong
financial position.

FINANCIAL PRINCIPLE #3 CHAPTER 2

Preparing a Budget is like an actor memorizing his lines. You cant improve on

anything if you dont have a baseline to move from! This comes first. Preparing a
monthly budget will help them to see where they are at their current position as well as
easily see their yearly progress. Using Excel or another electronic spreadsheet is a
lifesaver, especially if math does not come easily to them! They will have two columns
for each entry: budgeted, and actual income & expenses. When it comes to the physical
application of the budget they will create there are some options: I personally choose to
mentally budget by checking my online budget and financial statements multiple times a

week, usually daily and checking my obedience. Other people enjoy the envelope
method where they keep their money in individually labeled envelopes, i.e. mortgage,
gas, kids, etc. A third, but not final, method suggestion would be the written budget.
Some benefits of this method are the accessibility and accountability associated with it, as
well as the adjustment options that are available. This is the show me the money
approach to budgeting.
Chapters 3/9 & 5 (David Richards)

FINANCIAL PRINCIPLE #1 CHAPTER 3/9

The principle of investing to that seems the most important is having goals. It provides a
vision and a basis for making decisions on issues or opportunities that may arise. Because
there are so many options making decisions can be little confusing.

FINANCIAL PRINCIPLE #2 CHAPTER 3/9

The other principle that is essential is having limits. Giving oneself boundaries provides a
platform from which to grow. It is like drawing out the floor plan for a house. If there are
no lines and limits nothing can get built. There has to be order in all things to have
success. As the couple sets their limits and pace themselves in their investments, their
personal wealth will grow and they will be able to get out of debt. As part of pacing and
limiting in investments, it is best to buy a little stock regularly over time, and hold them.
Generally this has a great yield with less risk, and it is healthier for the mind and spirit
than trying to play the buy low, sell high game.

FINANCIAL PRINCIPLE #3 CHAPTER 3/9

A wise principle is to diversify your investment. That way not all ones stocks are
affected by specific business related bad news or crashes. A great way to do this, if one is
like me with little concept or interest in managing personal investments, is to invest
through a mutual fund. Even though there is a fee attached, which is called a load and one
will do well to pay it at the point of investing and that called front load, it free you up
from worrying about the market too much. Also, it allows one the benefit of professional
investing, and it is generally diversified.

FINANCIAL PRINCIPLE #1 CHAPTER 5

When it comes to credit and debt, the best advice is to avoid it like as much as possible.
That advice comes from the prophets. Get out of all unnecessary debt. This is one reason
the U.S. has all the problems it has, because of consumer, business, and government debt.
The next best thing, if one is going to have debt is to understand how it works. That way
one will see through all the lies and deceit credit loan establishment give us. Through
understanding it one can even make it work for their own advantage

FINANCIAL PRINCIPLE #2 CHAPTER 5

Like in investing, it is important to understand limits in credit. It is wise to never

accumulate more debt than 20% of ones take home pay. Always staying below that limit
helps to ensure one always has enough to pay the debt. Now, take home pay is the money
one brings home after the taxes, 401K, and other unalterable drains on ones income. A

personal recommendation, not spoken in the book is to subtract tithing from the income
as well when determining take-home pay. This will show God that you do not view His
money as your own and you would never draw debt based on a figure with tithing in it.
Tithing is even less ones own than the taxes they pay.

FINANCIAL PRINCIPLE #3 CHAPTER 5

Finally, saving is so much better than borrowing. It requires more discipline, which builds
character. Having a little saved up on hand will buffer against unforeseen accidents and
emergencies. A lot saved up in investments could be invaluable for bigger accidents or
things not covered by insurance. For example, my cousins husband has to have surgery
that will not be covered by insurance, but thankfully they have been very good at putting
away cash and can pay the expense out of their pockets. Saving for things makes one
appreciate them even more when they finally acquire it.
Chapters 6 & 7 (Kaci Roll)

FINANCIAL PRINCIPLE #1 CHAPTER 6

Transportation is necessary, but there are many options to choose from. You do

not have to buy an expensive car to get around. You can ride the bus, walk, ride a bike, or
buy a low cost car. Buying a car that costs less money and is reliable will save you more
money than buying an expensive car for self-image. It is not all about how the car looks,
but rather how reliable the car is compared to the cost. Is it better for you to buy a car or
just use public transportation or walk or ride a bicycle? Answer this question before you
decide to buy a car.

FINANCIAL PRINCIPLE #2 CHAPTER 6

What can you afford? is the first thing you should ask yourself. You need to buy

a car that you can afford otherwise you wind up in a lot of debt that you cannot pay.
When you are deciding what car to buy you need to know how much you can spend on a
car and what other expenses that go along with the car can you afford. Can you afford the
gas and maintenance that will need to be done to this car? Is this car going to cost me
more than I can afford? These questions need to be asked before you can make a decision
on what car to buy.

FINANCIAL PRINCIPLE #3 CHAPTER 6

Should you lease a car or buy a car? for some people leasing a car will be better

for their situation than buying one. Does your job require you to have a new car each year
or are you a person that wants or needs to drive the new cars all the time, if so it would
make sense to lease a car. If you do not have to do those things though it usually makes
more sense to buy a car that you can afford.

FINANCIAL PRINCIPLE #1 CHAPTER 7

Do you have to buy the house or are there better options? Would renting or living

at home be better? We have to weigh our options and decide which one is best for our
situation. For some people living at home with their parents is the best way to go, but for
others that is not an option. For others renting until they have the money to buy a house is
best and others it is better to just buy a house and pay off the loan.

FINANCIAL PRINCIPLE #2 CHAPTER 7

What can you afford? If you can only afford a certain house you do not want to

buy something that costs more because you will not be able to pay back the money. You
want to know what you can afford so that you know what houses you can look at and
what you want to do. Knowing what you can afford could also affect where you decide to
buy a house.

FINANCIAL PRINCIPLE #3 CHAPTER 7

What is your amortization schedule? If you know your amortization schedule you

can compare it to other options to see if that is the best option. You can know how much
you will actually be paying for your house and if that is the right decision compared to
your alternatives. The amortization schedule will help you be better informed on the
financial decision you are making.
Chapters 8 & 10 (Kara Beckstead)

FINANCIAL PRINCIPLE #1 CHAPTER 8

Risk is something we all have to consider in our lives some people imagine things

that could happen to them while others list out and create probability sheets full of
numbers. In whatever way you choose we all naturally weigh risk. Preparing for the
inevitable or what we think to be inevitable can be tricky but through the use of insurance
we can be prepared for whatever comes our way.

FINANCIAL PRINCIPLE #2 CHAPTER 8

Insurance comes in all shapes and sizes. You do not every kind of insurance in

order to be prepared carefully consider where you are in your life and what risks you can
handle and what risks you can not. Insurance gives you the protection you need when life
takes an unexpected turn. You do have to pay into insurance regularly (usually monthly)
and you may not need the insurance at all. Some insurance is required such as health
insurance and car insurance if you have a car.

FINANCIAL PRINCIPLE #3 CHAPTER 8

We all have only one guarantee in this life and that is death, it is all we are entided

to and all we should expect heres where Life Insurance comes into play. Because death is
the only guarantee we have it is the only insurance that has a guaranty of use. It does
change as you get older because you may or may not have dependents so will not receive
as much if you die at 80 versus is you die at 30 with two children.

FINANCIAL PRINCIPLE #1 CHAPTER 10

President N. Eldon Tanner stated for those who have prepared, the declining

years of their lives can be the most enjoyable. Make a goal to be financially independent
in your later years.. This will drive you to have a great retirement portfolio there are
many options for retirement and they all involve preparing now. Preparing now can be as
simple as putting a $100 away per month. We would encourage you to start saving for
your retirement even if it is just a small amount every month.

FINANCIAL PRINCIPLE #2 - CHAPTER 10

There are lots of ways to retire many employers offer retirement plans that help to

increase your savings buy matching the amount you put in. Some offer pensions, 401ks
or IRAs find out which one is going to work best for you.(probably the 401K) Using the
services offered at your work will help you to have a great retirement. As you are
planning your retirement it is best to calculate what kind of lifestyle you want to live and
how much you will need to pay each month into one of your company's retirement plans.

FINANCIAL PRINCIPLE #3 - CHAPTER 10

It is best not to rely on the government's social security to take care our your

retirement. Planning to not use Social Security will get you ahead in retirement if you do
have the opportunity to receive some. Social Security is calculated by several different
factors and in order to calculate it you must go to their website. It also changes every year
based on inflation and can not be used until you are 65-67.