Kelly Gil

644 W North Temple

Salt Lake City
(801) 500 6106
Thursday, 14th April, 2016
Randall White
Bishop
Church of Jesus Christ of Latter Days Saints
Dear Bishop White,
As a financial planner in the ward, I have been assigned to help the Hopeful family. I have meet
with them and discuss about their situation. During the last meeting they expressed despair
concerning their situation and a sincere desire to put their financial life in order, no matter what
sacrifices they have to make. I participate in one of their family counsel, there they explained to
their three children that everyone will be involved in learning correct principles for everyone's
long term benefit. After evaluating their situation and doing the calculations for their finances. I
came up with this document so they can learn specific principles about personal finance. This is
going to help them to understand what are we doing, the importance of planning, and it would be
a remainder of their goal and desires to be debt free.
Chapter 1
Principle 1: Personal financial management
Knowing how to manage your personal finances provides the critical thinking and application
skills to achieve personal economic success and promote the financial progress of our society.
How you manage your income will largely determine your happiness and success in life.
Therefore, your financial management ability and discipline will be as important to you as your
capacity to earn an income. You will use the knowledge and skills gained from effective financial

management every day of your life. How you apply this knowledge and skills is as important as
any education you will experience.

Principle 2: Financial Independence

Financial independence means you are self-sufficient and do not depend on anyone for your
financial support. A husband and wife can be financially independent when they provide for their
financial needs, preferably with little or no debt.
However, you can be financially independent and yet find yourself in de
bt and not having enough money to achieve the quality of life you desire. You could achieve the
next level in managing your finances and become independently wealthy.
Independent wealth means you have accumulated enough funds to live comfortably and do not
need to work. You may choose to work or you may be retired, but you have the necessary
financial resources to live comfortably. Your investments will continue to earn the income that
you will need.

Principle 3: A Lifelong Financial Plan

This skills, are really important for the Hopeful family, of saving, budgeting, accounting, using
credit and financial services, making major purchases, managing risks, investing, and retirement
planning will be discussed in the chapters ahead. These skill are needed to prepare a personal
lifelong financial plan on a spreadsheet. You should update this plan throughout your life as
conditions change and as your life unfolds. With this plan that we create, they will have the
power to achieve their goal of financial independence throughout their life and independent
wealth during their retirement.

Chapter 2
Principle 1: Financial Records
Something that they can start doing from now on is to keep legal documents, such as contracts,
titles, deeds, certificates, policies, wills and trusts, in a safe deposit box or fireproof safe to
protect against loss by fire or theft. They could also use a personal computer financial
management system to record, file, and prepare financial transactions. Keep backup data in a
safe place away from the computer

Principle 2: Personal Financial Statements

They will keep their financial score by preparing two personal financial statements:
a balance sheet, and 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.

Principle 3: Budgeting
This is one of the most important principle they are going to apply in their lives. They need to
keep track of their money and spend only the necessary. Since they are in a financial problem,
they are going to now in advance. Viewing a budget as a method to stay out of trouble and to
solve any potential problem in advance should help change the concept of budgeting in their
minds. Budgeting is also a game plan that encourages discipline and direction in managing your
finances. Preparing a budget is the key to achieving your goal of financial independence.
Budgeting will help you to:
Spend less than you earn.
Spend for needs rather than wants.
Save for emergencies, major expenditures,and investments.

A budget is a forecast of your cash flow for a period of time, generally a month. Most income
and expenditures recur on a monthly basis. However, income and expenses may vary over a year.
Bonuses, seasonal employment, tuition, gifts, holiday celebrations,insurance, taxes, doctor bills,
and vacations are examples of periodic cash flows. Therefore, a monthly budget for a full year
would be a sound way to predict your financial score.

Chapter 3/9
Principle 1: Investment Alternatives
After they have a stable financial economy. They can start thinking in investments. They can
either be an owner or a lender or a combination of both. An owner buys assets such as stocks, or
real estate,or other appreciating assets. A lender puts his/her money into savings accounts or
bonds. Owners have equity,while lenders hold debt.

Principle 2: Stocks or Equity Investments

A share of stock represents ownership in a corporation. Stockholders may receive dividends from
the corporation which is a portion of company earnings. Dividends are determined by the board
of directors,and the stockholders elect the board. The company generally retains some or all of
the earnings that a reused for company growth.

Principle 3: Stock Investment Strategies

Stock values go up and they go down. This is measured every business day and reported in the
media. If you own a stock and it goes up, your net worth has increased and you are happy. When
your stock goes down, your net worth decreases and you can become anxious and even

distressed. Therefore, investing is risky. You should consider two important concepts when you
decide to invest:
1.What is your risk tolerance?
2.How can you minimize your risk?

Chapter 4
Principle 1: Value changes over Time
This is something they are going to realize and learn, that money changes over time. We start
with 2 basic principles:
1.Money has a different value depending on the time frame we are discussing. For
example, money has a different value today than it will have in a future time period.
2.We learn from the Law of the Harvest that we must do certain things today IF we
want specific benefits at a later time. For example, we need to plant seeds in the spring IF we
want to harvest in the fall.

Principle 2: Lifelong Financial Planning Skills and Tools

One of the most easiest and effective tool we have to do our calculations is Excel. It is a
spreadsheet software that allows you to perform calculations that help solve math problems in
this course. You supply key figures and Excel automatically makes the calculations for you. This
class assumes a basic working knowledge of Excel. Please discuss any questions you may have
about Excel with your professor.

Principle 3: Excel Financial Formulas

Some of the most basic and useful formulas are:

 FV (Future Value):This formula calculates the future value of an investment or

any number that grows at a certain interest rate for a certain number of periods.
PMT (Payment): This formula calculates the payment for a certain loan or
investment based on a certain interest rate for a certain number of periods.
PV (Present Value):This formula calculates the present value of an investment or
loan based on a future amount of the money received or paid given a certain interest rate
and a certain period of time.
RATE (Interest Rate): This formula calculates the interest rate per period for a
certain loan.
NPER (Number of Periods):This formula calculates the number of periods for a
certain

investment or loan at a certain interest rate.

Chapter 5
Principle 1: Credit Capacity
Some of the many question they asked me was: How much credit can you afford? I replied that
you do not want to afford any except on appreciating assets. Your debt-to-equity ratio is total
debt outstanding divided by your total net worth. The higher the ratio the more risk you have.
This ratio should never exceed 1, which means that your debt and net worth are equal. If you
exceed the maximum guideline of 20% of your take home pay going to consumer debt payments,
you will risk becoming bankrupt. This means you can no longer meet your financial obligations
and you must go to the bankruptcy court to get a new start. As a result, you lose your credit
standing and your ability to borrow at any kind of reasonable interest rate.

Principle 2: Advantages of Credit

Consumer credit allows you to enjoy goods and services now and pay for them in the future. It is
a convenience when shopping and allows you to pay for many purchases with a single payment.

You can make reservations, shop by phone and mail, rent a car, and provide identification. You
get a consolidated statement of your expenses.

Principle 3: Disadvantages of Credit

The major disadvantages of credit cards, charge accounts, and installment contracts are
overspending and the high cost of credit. Spending what you do not have and cannot pay for will
result in loss of goods, income, reputation, peace of mind, and even your health. It can result in
court actions and bankruptcy. Family relations suffer and financial net worth diminishes.

Chapter 6
Principle 1: Transportation Alternatives
Analysing one of the things we can do to reduce expences was trasportation. You can spend a
large amount on transportation or you can minimize these expenses. You can buy an expensive
vehicle costing in excess of $50,000. You could choose to walk, ride a bicycle, use public
transportation, lease a car, or buy a low cost vehicle. There is significant discretionary spending
involved in transportation. The trade-offs are significant as you trade time, image, and
convenience for cost.

Principle 2: Purchasing New Versus Used Vehicles

Assume you choose the more expensive transportation option and buy a vehicle. Should it be
new or used? A very important consideration is depreciation. Depreciation is the amount the
vehicle will decrease in value over time. Most new vehicles depreciate by as much as 50 percent
the first two years of ownership. Buying a new car is expensive because it does not hold its
value. Buying a two-year-old used vehicle minimizes the loss in value caused by depreciation.

The trade-off is that you get a full warranty with a new car and little or no warranty with a used
car. In fact, you may have to pay extra for coverage. However, todays high quality cars have
fewer maintenance problems in the first 50,000 miles. You will usually be better off financially
to buy a slightly (one or two years old) used vehicle than to buy a new one.

Principle 3: Buy vs. Lease a Vehicle

A popular alternative to owning a vehicle is to lease it under a contractual agreement. With a
lease you make monthly payments for a set period of time; generally three to five years. General
advantages of leasing include:
Low initial cash outlay required for a security deposit rather than a down
payment.
Lower monthly payments than with traditional financing.
Driving a newer vehicle, which is returned at the end of the lease term.
However, a lease includes potential penalties for excess mileage, disposition fee, and charges for
excess wear and tear.

Chapter 7
Principle 1: Housing Alternatives
The American dream is to own ones home so living in an apartment is generally viewed as a
temporary step while you save enough money for a down payment on a home and/or become
more established in a specific location. Other alternatives include renting a home or owning a
condominium. While each alternative has advantages and disadvantages depending on your stage
of life, income, and other circumstances, it is generally true that purchasing a home and paying it
off as quickly as possible is one of the best methods for increasing individual wealth.

Principle 2: Renting Versus Home Ownership

Renting provides more flexibility, lower maintenance costs, and less up-front cash (security
deposit versus down payment) than home ownership. Home ownership provides tax benefits and
increasing equity, or net worth, through appreciating in value and decreasing the loan principal.

Principle 3: Selecting a Home

The essential elements in selecting a home include:
Location: Location determines value both when buying and selling. How well the
neighborhood is maintained by residents, traffic, access to work, shopping, and schools
are important factors to consider.
Conditio:The homes condition is a key factor. You should make sure the home is
inspected by a professional and that an appraisal by a certified appraiser is conducted,
which will help establish the homes condition and current market value.
Real estate agent: A reputable real estate agent can assist you in finding a home
you like and can afford.
Chapter 8
Principle 1: Few Certainties in Life
Everything in life is uncertain, which means risk is involved. The way you handle risks in life
can determine your success and feeling of well-being. The risks in life can be handled in these
ways:
Avoid risks: You cannot avoid all risks and have a productive life. You could
avoid the risk of being involved in an automobile accident by not driving, or avoid the
risk of an on-the-job injury by not working. However, avoiding these risks reduce your
ability to provide a living for your family. The rewards of some risks are too great to

avoid the risks altogether. However, other activities carry an above average risk, such as
riding a motorcycle or skydiving. You can certainly decide to avoid these types of risks.
Reduce risks: You can reduce some risks by following established safety
procedures such as:
- Wearing a seatbelt or other protective equipment
- Installing deadbolt locks
- Installing a security system and smoke detectors in your home You can also
reduce the risk of failing an examination by diligently studying, and the risk of sickness
by eating properly and exercising.
Assume or transfer risks: Assuming risks means you take the responsibility for the
consequences or losses. When the risk is small or the cost of insurance is too great, you
may decide to assume the risk yourself.

Principle 2: Insuring Risks

Insurance is based on the law of large numbers, which says you can determine the probability of
loss and share that risk with a large number of people at a low individual cost called a premium.
Pure risks, or risks in which there is only a possibility of loss, such as in a fire or injury, are
insurable. Speculative risks, or those in which there is potential for a loss or gain, such as in
investing or gambling, are not insurable.

Principle 3: Types of Insurance

The insurance required for your home, required for your automobile, your health insurance needs
and options, your disability insurance needs and options, and your life insurance needs and
option.

Chapter 10
Principle 1: Ultimate Financial Independence
You are financially independent when you live on less than you earn from your employment.
However, you are independently wealthy when you have accumulated enough funds to live
comfortably and no longer need to work for the rest of your life. This is ultimate financial
independence.
As a result of our longer and healthier lives, the old adage about how much your spending will
decrease after you retire needs to be reviewed. The main considerations to properly prepare are:
How much total savings do you need to retire comfortably?
How much do you need to save each working year or month between now and
your retirement to accumulate sufficient savings?

Principle 2: Alternative Sources of Retirement Income

We have three types of sources of retirement income.
Social Security. A portion of your retirement needs may be met by social security
benefits.
Employer Plans. There are two basic types of employer retirement plans:
1.Defined benefit plan: Your employer pays a specified monthly benefit for life
after you retire.
2.Defined-contribution plan: Our employer pays into the plan but no specific
benefit is defined.
Personal Retirement Plans. In addition to social security and employer retirement
benefits, you can set up personal retirement plans.

Principle 3: The Importance of Starting Early in Life

If you start early then you are going to have more for your retirement. In the other hand if you
wait for ten years to start saving so that you only have thirty years to accumulate the $986,400 in
retirement savings, you will need to save $436.37 per month. The startling fact that you must
save 2.8 times as much ($436 versus $156) if you delay your savings program by ten years is a
powerful illustration of the need to start saving early so you get the benefits of compounding.

This principles are a great start to understand and learn of Finance. If they follow the plan we
have create for them and apply ths principles in their lives, they are going to be out of debt. In
addition, with time they are going to start building their retirement. The most important if they
rely in the Lord and follow His counsel they are going to live a happier life. As Lane V. Erickson
said: Anyone can achieve financial well-being by relying on the Lord and following prophetic
counsel on monetary matters.

Atte,
Kelly Gil
(This paper has been made by myself, using quotations and definitions.)