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.