Mauricio Caballero

Finance 101
Final Part A

Final Part A: Writing Assignment

Chapter 1
Three principles that stood out from chapter one that can be helpful to this family were financial
independence, personal financial planning, and the five keys to personal financial success. It was pointed
out that when you are financially independent you dont depend on anyone else for financial support. This
appeals to me because this is a personal goal of mine. With personal financial planning they gave us six
Ps of planning. They are proper prior planning prevents poor performance. I like this statement because it
teaches us that with the right skills and planning you can prevent financial mistakes in your future. The five
keys to personal success are the following; Pay the lord first, and then yourself, collect interest, you cannot
retire until your money goes to work, do not pay interest, and last make financial goals and making wise
financial decisions. In these steps a few things that I learned was we should pay ourselves and save that
money. I never knew that we were also supposed to save ten percent. Another great thing that I learned
was to make attainable goals that are short term, long term, and annual.
Chapter 2
That every man [and woman] may give an account unto me of the stewardship which is appointed
unto [him or her]. D&C 102:12
I think one of the first things we need to do is to recognize our financial situation. In order to do that
we have to have two financial statements, which are a balance sheet and a cash flow statement. A balance
sheet show your wealth (net worth) by the difference between everything you own (assets) and everything
you owe (liabilities). So, we see to increase your net worth you need to increase your assets or decrease
your liabilities. There are several ways to reach it: saving money, buying appreciate assets (investments,
and etc.), paying off present debts, avoiding additional debts.

Mauricio Caballero
Finance 101
Final Part A
In order to build a strong financial position we also need to have budget. Budget is a plan of how
are you going to manage your money. You need to know how much you have, what is your income, how
much youre going to spend. Budgeting will help to spend less than you earn, spend for need rather than for
wants, save for emergencies, major expenditures, and investments.
The earlier we learn how to manage your finances, the earlier we start to increase our net worth.
We learn how to avoid some expenses, how to save, what to purchase first, what to purchase second.
Being young man or woman, we want to try as much as we can so it is the best time to learn.
The third principle I learned for this chapter was the ways of keeping written records of expenditures. They
are notebook, checkbook, and computer. For me, the last one is more convenient and powerful because it
involves calculation. There are many programs which can help you in this area so you could chose the
most suitable one for you.
Chapters 3/9
After they analyze their debts and figure out how to pay some of those debts, if they have an extra
money in de end of payments this family can invest some money in order to put money to work. First they
need to know what kind investor their con be through the concept IDEAL investor does the following:

Invests consistently and does not attempt to time the market

Diversifies and ignores confusing world events

Expects the market to go up and down

Always selects investments that outpace inflation

Looks at investing with a long term perspective

Mauricio Caballero
Finance 101
Final Part A
Lets assume that the family after all processes of pay the debts they have $5000 dollar to invest
and Stokes. Also lets make an assumption that they will buy 52 Apple stokes. Based the last 8 weeks of
shares investment, le calculate how much this family could make in a short period of time.
Stock Portfolio Assignment
Stocks

Symbol
AAPL

Apple INC

Shares
52

Total

Week 1
$96.10
$4,997.20

% Inc
Starting / Ending Fund Totals

Stock Prices
Week 3
$100.62

Week 2
$100.75

Week 4
$105.97

Week 5
$106.13

Week 6
$109.56

Week 7
$110.96

Week 8
$109.88

$5,239.00

$5,232.24

$5,510.44

$5,518.76

$5,697.12

$5,769.92

4.8%

-0.1%

5.3%

0.2%

3.2%

1.3%

$4,997.20

$5,713.76
-1.0%

$5,713.76

Total Fund Growth

14.3%

$120.00

$100.00

$80.00
Apple INC
#REF!

$60.00

#REF!
#REF!
#REF!

$40.00

$20.00

$0.00
1

Total
$6,000.00
$5,800.00
$5,600.00
$5,400.00
$5,200.00

Total

$5,000.00
$4,800.00
$4,600.00
1

Even if some lost in the last week if the family invest $5.000 in AAPL stokes in 8 weeks (based in
the last period) they can make the following calculation:

Investment

Total end of period

Amount

Mauricio Caballero
Finance 101
Final Part A
$4997.20

$5713.76

$716.56

In 8 week putting the money to work, this family cam make extra $716.56. That will represent a
good part of the pay debts.

Another Alternative is Bonds or Debt Investments when they buy bonds, they will loan their
money to the company selling the bonds. A bond is a promise by the issuer to repay the face value at
maturity, plus the stated interest rate, until the bond is repaid.
Type
Premium
Yield % =

Market Value
$5000
$500
= 9.1%

St. Interest rate

10%

Annual Interest
%500

Yield
9.1%

$5500
This type of investment will yield this family make 9.1% over the money invested and that will
represent extra money that will help they pay the debts and restart their health financial life.
Chapter 4
I recommend, due to the situation, the family start immediately to learn how to run the numbers.
Once they start getting rid of those unnecessary expenses like magazine subscriptions, newspapers,
manicures, pedicures etc. Anything that could be considered a want instead of a need should go until
you are out of debt or greatly decrease your debt, they can star to calculate the necessary payments
required to pay their full debt as well as the time to pay it.

I also suggest that they start immediately to learn how to determine the future value of an initial
long term investment. It's true that theyll need to do something to save a few dollars today. But, it's certain
that the future reward will be greater than the sacrifice. Often the difference between financial comfort and

Mauricio Caballero
Finance 101
Final Part A
poverty isn't great. Saving a few dollars a week might not seem like much, but if done consistently it could
make a big difference in their financial future. They have to begin to earn interest on the interest they have
already earned. Applying the principles of compound interest in the life of this family will increase
enormously the chances to grow savings in a long term for other future investments, such as school or
housing, retirement or any emergency.

An additional advice to low the pressure of the debt, they can stop spending money and those
things that are not important, and then they can calculate in how many ways they can pay off their debt,
rate of time and interest. One of the biggest down falls that they have is the reliance on credit cards. Unlike
spending real cash, when you charge it to a card you dont feel the burn. So if you cannot control how much
they spend on their card, then cut up your cards, leave them locked up at home, freeze them or bury them
until you are out of debt. The more the money they make, the more they will have left over to throw at their
debt. So they also have to look for opportunities for picking up tasks with higher commission, or overtime
pay or something that will result in a bonus. Take their job seriously and work hard every day, at some point
it will pay off.
Chapter 5
One of the first principles we need to consider concerning credit is the advantages and
disadvantages. Everyone and their families spend money differently, however, everyone needs to keep
their credit in mind. There are advantages to credit when your spending habits are good. If you build up
good credit you can get better loans from banks on cars, houses, or other large expenses. However in
situations like yours, with many debts, credit can be low and you will have problems when trying to borrow
or loan money. This may also cause your loans to have higher interest.

Mauricio Caballero
Finance 101
Final Part A
Another principle to keep in mind on credit is calculating your credit capacity. This will help you
spend and borrow money more wisely. By knowing how much you earn and spend in a month you can
calculate acceptable loans and loan rates. This is very important for you to know so that you dont bite off
more than what you can chew when you are buying and using your credit cards.
One other principle is realizing the consequence of minimum payment plans. When you got to buy
a car, the salesman may give you an offer of paying a low monthly fee for a very nice expensive car. This
may seem like a deal and it may be very tempting. There is a big problem with that. Interest will build up on
your payments and lower monthly payments mean you pay for a lot more months. In the end the interest
you pay might even double or triple the original cost of the car. The sooner you pay of loans and credit the
better. This may mean higher monthly payments, but it will save you so much more money in the long run.
Chapter 6
What can you afford? It is not rare to fantasize about your dream car. When purchasing a new
vehicle, our fantasies and wishes can often cloud our judgment and we end up at the mercy of the car
salesman and spending more than we can afford. Researching and knowing what you can afford are key
principles and can save you financially. Certain things to consider before purchasing a new car are vehicle
expenses, what type of vehicle will fit your needs, insurance, taxes, your affordable debt and credit score. If
you do your research and walk into the dealership with your mind set on what you can afford, you will end
up walking out the dealership financially successful.
New or used? There can be pros and cons to both. Knowing your finances and budget can help
you in the long run. The general fact that most new vehicles depreciate by as much as 50 percent the first
two years of ownership could be a deciding factor. A car even depreciates the second it gets driven off the
lot. However, purchasing a new vehicle can have its perks. The trade-off is that with a new vehicle, you get

Mauricio Caballero
Finance 101
Final Part A
a full warranty, service contracts and more whereas with a used vehicle, yes you pay less, but there are
often no chances of getting a warranty. However, purchasing a used vehicle could hurt your wallet a lot less
and minimizes the loss in value caused by depreciation. You will usually be better off financially to buy a
slightly used vehicle than to buy a new one.
Should you buy or should you lease? Certain people have certain needs. Knowing when you
should buy a car or when you should lease a car can help keep your wallet full. But who doesnt want their
own car? In certain situations, leasing a car would actually be more logical. Such situations could include
living in a certain location for a small amount of time. Leasing a car in this situation could be more cost
effective because of maintenance and costs. However buying a car can be more logical if you plan on
staying within a certain area and plan to keep the car for longer than a few years. Knowing your situation
can have a lasting impact on your long term personal wealth and net worth.
Chapter 7
House payments often consume an especially large portion of a familys income. So naturally when
it comes to looking for ways to cut down on bills, one of the first places to look should be house payments.
Essentially, the question they must ask themselves is: can I afford the home I am currently living in? We
as a people need to learn to live within our means, so there needs to be a level of acceptance to whether or
not our current living conditions fall within the means that we are able to afford. The family discussed is no
exception to this. The question then becomes how do they do this (live within their means)?
The first principle that needs to be taken into consideration, when it comes to determining whether
or not they can afford their home, are these two of the bullets as discussed in chapter 7. First, one "should
not spend more than 20 to 30 percent of (their) take-home pay on housing. Secondly, one "can afford a
home valued at 2 times (their) annual income." These two principles are of course general guidelines
and are not rules that must be followed to the T. Depending on how they budget their money will

Mauricio Caballero
Finance 101
Final Part A
determine how strictly they should follow these guidelines. I would suggest that if a majority of their money
is going to their mortgage, some changes need to be made to bring the numbers closer to the suggestions
they book gives. We need to learn to live within our means and not think we can constantly spend more
than we can afford without repercussions down the line. Obviously we want to avoid debt but if it cannot be
avoided, paying for what we owe is a huge aspect of keeping ourselves out of debt.
This leads into my next piece of advice for the family. When looking at their mortgage they need to
consider the obvious fact that they are literally buying their home. It is important to consider that the sooner
they pay off the house the sooner the time will come when they no longer have to make house payments.
As we take out a mortgage we are given a set amount we have to pay monthly. However, there are many
benefits to paying off little extra each month. Not only will they pay off their house faster but this extra
amount goes directly to reduce the principal and significantly decrease the cost of credit. Overall, by
paying off a little extra each month, they can save themselves money in the long run.
Finally, the last consideration in regards to their mortgage I would make directly depends on how
long they have been making payments on their home. It is general understood that roughly the first 5-10
years of payments on a home arent necessarily made to the price of the home, but to the interest tacked
on when looking at the overall cost of the home + interest when payments are completed. It is horrendous
how much we actually pay in interest when everything is said and done. With this, the principle of
refinancing can be a helpful tool. Looking for opportunities to lower their interest rate, thus lowering the
payments, can be a huge help in saving the family money. Learning how to properly run the numbers can
help them see if refinancing their home would be a benefit. It is a general rule that you only refinance in the
first few years of your loan and if the interest rate drops by 1% or more.
Chapter 8

Mauricio Caballero
Finance 101
Final Part A
Life is full of risks. I would advise the family to think about how they handle risk in their lives. Do
they avoid it completely, do they reduce the risk, or do they assume or transfer risk. Knowing how to handle
your risk in the most beneficial way will help the family stay out of tight spots they could end up in. They can
be able to keep themselves out of great debt as well.
I would advise the family to get life insurance. By having life insurance, it will help them avoid to
major risks. Those risks are living to too long or dying too soon. Life insurance will help them provide for
retirement if they live too long. If they die too soon then their children or spouse wont end up being in a
financial struggle. They will be able to pay off their debts and stay financially strong.
Health insurance is not mandatory but it is essential. By having health insurance the family may
be able to avoid catastrophic debts in medical bills. You never know when something will happen that will
cause a trip to the hospital. Only having to worry about paying your health insurance plan will be a huge
relief compared to having to pay for thousands of dollars for a visit to the doctor.
Chapter 10
One of the three things that I liked about this chapter is under a brief sub-title called, How much do
you need? Along with the sub-title we read the following questions, you must ask yourself, How do I want
to live when I retire? For some people, expenses will go down and you will be able to live on less. As I read
this part of the chapter under this sub-category I began to ponder these questions and so far as looking for
an answer, I re-read the question in itself over again and the meaning of the questions defined what I was
looking for. It is true, that wherever you may live throughout live demographically, Mortgage, transportation,
food, employment, taxes, medical expenses, leisure activities, gifts and inflation will vary depending on
where you choose to live less in life or more with its surroundings.
Employer plans was another big thing about this chapter that made me look and put into more of a
depth perspective of how or what we should do with a plan that will help us to grow and succeed. Within the

Mauricio Caballero
Finance 101
Final Part A
paragraph of studying it states a defined benefit plan and a defined-contribution plan. Within these two
plans it mentions the importance of Social security and also 401k within the future to help benefit your
needs and lifestyle as approaching retirement, and or collecting from the IRS certain amount of income that
can help you satisfy your needs as you get older in age.
Last but not least, this heading really helped me and likened unto me a deeper and broader
connection of knowing what we should do as we prepare for life in living within our means and in and of
itself. The importance of starting early in life was something I learned that can really help and benefit my
needs as I maneuver my way through life. It states and gives an example of what or how we can be
successful continuously if we are saving our money in the ways we should be. Being smart financially I feel
is all a part of the way we should discipline ourselves in our lives. What we can afford and cant is based
solemnly on Independent wealth and as we see the many changes in our lives with a wife and or not, we
will see how important this chapter and this principle will play knowing what the Savior wants for us and our
potential.