Trevin Waite

Final Assignment Part A

Financial Advice for the Hopefuls

Financial peace is something that is taught a sought for constantly. It is almost depressing
hearing about people getting out of financial bondage at times for a lot of Americans is viewed as
impossible. President Ezra Taft Benson said the following: For over forty years, in a spirit of
love, members of the Church have been counseled to be thrifty and self-reliant; to avoid debt;
pay tithes and a generous fast offering; be industrious; and have sufficient food, clothing, and
fuel on hand to last at least one year This advice is so key to freeing ourselves from this
bondage that we often find ourselves in. The main points here are avoid debt, pay tithing and a
generous fast offering, and to have food storage.
While finding financial independence is one of the most important things we can do in
life with our money this is not where we wish to stop. If we become satisfied with having little or
no debt we will soon find ourselves in more debt than we were ever in after retirement. It is
essential that become independently wealthy. This means that we have acquired enough financial
resources to retire and never work another day. This is done by making certain key investments
that will enable to do this.
Last but certainly not the least is actually making a financial plan. This can sound
intimidating especially after learning what the first step is. The absolute first step is creating a
budget. This a lot of the time scares people away yet it is easier now to do so than ever before.
There are ample amounts of resources and even apps that help us create budgets and even follow
them. After this we must make an actual plan declaring how fast and in what ways we will pay
off our debt and save for retirement.

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Final Assignment Part A

The very first math problem that is going to come into play is luckily a very easy one. We
are going to determine yours and your wifes net worth. This is simply done by adding up all of
your assets first. This consists of liquid assets (cash, money in a checking or savings account, or
even whole life insurance policies), investments (money that has been invested in retirement
accounts, stocks, bonds, mutual funds, and other assets that appreciate over time), personal
property (these are items of value such as furniture, appliances, clothing, automobiles, jewelry,
ect.) and real estate (home, vacation property, and other land.) After this has been calculated we
must find out what your liabilities are. Luckily this has all been included in the document that
has been submitted to your bishop. Liabilities include current and long-term liabilities such as
credit cards, pay day loans, car loans, and mortgages. We then take the total sum of your assets
and subtract out your liabilities. If we are in the positive then we know we are okay. If we are in
the negative we may need to consider selling items or possibly bankruptcy if unable to afford
current expenses.
Next, it is important that we make a cash flow statement. In a lot of ways our bank does
this for us as long as we are using our debit cards. We have already recorded your income and so
the next step is to record what expenses are fixed and what expenses are variable. After this we
add this to our budget and then review weekly and monthly. This can be done more often if
necessary.
After all of this is done we must review our budget to make sure it best suits your needs.
There are three basic steps that we must follow:
1) Spend less than you earn
2) Spend for needs NOT wants
3) Save for emergencies, major expenditures, and investments.

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Final Assignment Part A

This is how we get a sneak peek into the future. We can actually almost predict the future just by
writing out what we will be spending/saving in the next week/month/year. There are different
budgeting methods out there. I prefer a combination of two of them. The first is written. A budget
is a goal and must be written down and put somewhere we will be reminded of regularly. Also,
mentally budgeting is essential to success. When I say this I do not mean that it will be only in
your mind but that it will be there also. We need to be mentally strong in order to win and that is
where the mental part of it comes in.
After becoming financially stable we must put our money to work. This is done in several
different ways. Stocks are a great way to get a good return on our money. It is important that
when investing in stocks we are patient and in it for the long term. This will grant us with the
most success. Stocks can be torturous if being watched daily. Often we recommend that you
invest in it and then forget about it for a little while. Keep adding money in the stock market
when you can afford it and trust that you made a good decision after being prayerful and seeking
advice from some of the professionals.
One tip given by the professionals is to invest regularly at one set price. This is called
dollar cost averaging and generally gives the investor a low average cost even though you
investing high at times and low at others. The IDEAL investor follows this acronym:
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

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Final Assignment Part A

Looks at investing with a long-term perspective

If this is followed then it is almost impossible to not find success in the stock market
It is essential that when investing in the stock market that the stocks are diversified. It is
important not to only have one stock or several stocks in the same type of business. We
recommend investing in some type of insurance, technology, and maybe even a start-up
company. It is important to not only spread out your investments but also to have low and high
risk investments depending on the level of risk you are comfortable with. Diversity is key in
success with the stock market.
One of my favorite scriptures in D&C is so true it just cant be left out. Pay the debt
thou hast contracted Release thyself from bondage D&C 19:35. The absolute best financial
strategy is to pay cash for everything. You have cut up your credit cards and have now written
out a budget. It is important that you dont give into consumer credit because this will work
against your goals of releasing [yourself] form bondage.
Too often we wonder how much credit we can afford to get. The best way to gauge this is
zero except for appreciating assets. It is a hard decision to make but eventually it becomes a
game like how much can I save this pay period, ect. It is said that we cannot afford more than 15
to 20 percent of our net monthly income going to credit payments. It is important we calculate
our debt to equity ratio. This is your total debt divided by your total net worth. If this number is
more than 20% then you are at high risk of bankruptcy.
One thing that motivates me to save versus borrowing is how much quicker the money
can be saved than paying off the debt needed to purchase the item. Not only is it faster but it is
also cheaper. For example, if you wanted to buy a $21,000 car at 5% interest for 48 months you

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Final Assignment Part A

would end up paying close to $23,000 dollars with a $1000 dollar down payment. However, if
you saved the amount you would be paying in paying you could have the money needed in 40
months and only pay the $21,000.
The Book of Mormon was truly made for our time and one way to show that is a verse
found in 2 Nephi 9:51. It reads, Do not spend money for that which is of no worth nor your
labor for that which cannot satisfy. We must harken unto these words and be extremely careful
not to spend extra money on items that are expensive and depreciate over time. The item that
generally is related to this is buying a car. I am a huge fan of having a nice truck or car but it is
essential to make sure that the payments do not pull you over the 15% to 20% threshold. One
huge reason most people are influenced to spend more money on a car is because they are
worried about their self-image. It is important that we do not place too high of a value on
looking good. This is a thought of the world and not a thought of God when placed in this
context.
There are several possible solution to saving money on car payments, insurance, and gas.
This can be accomplished by selling one of the cars and buying a less expensive car, buying a
motorcycle/scooter, taking public transportation, riding a bike, or even walking when possible.
At times it is deemed impossible to sell one of the cars but if possible it would be very intelligent
to get rid of one of the cars for a period of time until it is easier to afford another vehicle.
One last option for a short term would be to lease a car for a period time. The leaser
can save money but it important to calculate the hidden costs into it before
making a final decision. The hidden cost in leasing is if you, the leaser, tends
to drive a lot of miles. When you lease a car there is a mile limit and if you go
over the mileage limit you get charged per mile used. If in the end this

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Final Assignment Part A

decided to be the preferred choice my last piece of advice when buying or

leasing a car is to never take the first offer. The seller plans on negotiating so
you must be ready barter. Always talk the seller down and do your
homework before ever going and looking at vehicles.
So at this point we have now covered the different types of debt and
the best way to make sure that you are not in risk of bankruptcy. The last
payments that we need to calculate into our budget is the mortgage. There
are two simple calculations that we must know in order to know if you are in
a safe zone. This is not a one or the other type calculation it needs to meet
both needs. Your total mortgage (this is the total sum if more than one)
should not be more than 30 percent of your total take home pay, and the
cost of the house shouldnt be more than two and a half years worth of your
gross salary.
It is important to stay up-to-date on current mortgage APRs. If the
APR ever drops significantly lower than your current rate at that given time it
could be smart to refinance. It is important know the different types of
mortgages. There is a conventional which is just like any other loan. It is a
fixed payment for a certain amount of years. Next would be whats called an
ARM or Adjustable-Rate Mortgage. This has a lower initial rate but can be
increased or decreased depending on the general interest rate. Last is called
a Balloon Mortgage. This allows you to have a lower interest rate and finance
for 15-30 years. The catch is you agree to pay it off at 5-10 years. If unable
to pay you can refinance at that given time.

Trevin Waite

Final Assignment Part A

Another great option is to sell and rent until a better and more feasible
time comes when you can afford to buy a house. Home ownership can be a
very large responsibility and if you are in a current situation where your
finances are fairly delicate it may be smart to rent and not take on the
potential liabilities that comes with owning a home. Owning a home is a
privilege not a requirement.
Insurance is often overlooked and sometimes deemed unnecessary. It
is one of those payments that is so easily hated because it seems like you
pay and pay and never get a return. One way we can reduce risk of use of
insurance and essentially lower the cost of having it is by taking simple
precautions. One way we can do this is by being safe. We can wear a
seatbelt or a helmet or install deadbolts in our houses. Also, one way we can
reduce risk of flooding in our home is by replacing our water heater every
eight to ten years. Shut-off valves to our sink, toilettes, and washer machines
should be turned on and off quarterly to reduce risk of rusting and there for
health & dental/life insurance it is important that we eat healthy and go to
our regular doctor/dentist appointments. This can all help keep us healthy or
in a better use of words we can lower the risk of having to use our insurance.
It is important that we understand what it included in our insurance. If
in your car insurance it says 100/300/50 we need to know what each number
means. Also, do we have full coverage on a car that should only have liability
or potentially the other way around? Growing up in Arizona it was very
common for us to crack windshields so we made sure we had a no deductible

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Final Assignment Part A

glass insurance policy. We need to go through our policies regularly and

adding/removing whatever seems necessary.
Life insurance is something looked over too often. There are several
types of life insurance. Term life insurance is where one only has coverage
until the policy is over. This is less expensive as whole life insurance but the
only coverage you have with term life insurance is the risk of death. Whole
life insurance has an increases in equity and can be added to your own net
worth. This also covers the risk of you dying early or late. This takes the
worry out of not having enough money for retirement. There is also a few
other types of life insurance. It is important you know the different types and
that you shop around before getting a policy so that you know that you are
getting the most for your money.
President N. Eldon Tanner stated for those who have prepared, the
declining years of their lives can be the most enjoyable. I done correctly
then upon retiring you will be able to comfortably know that you have
enough assets to never work another day and be completely financially
independent. When saving for retirement it is important that we calculate
how much you want to live on comparatively to now. Experts claim that upon
retiring you live on an average of 75% of your income before retirement plus
inflation. Inflation is 3-5% and must be taken into consideration.
After determining how much you will need for retirement it is important
that we determine which methods of personal retirement plans would be

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Final Assignment Part A

best for you. Some of the best retirement plans are 401K plans and IRAs.
IRAs are very similar to 401K plans but your employee does not contribute.
In an IRA you can contribute up to $5000 a year for yourself and $5000 for
yourself. For example, if you contribute $200 a month for 30 years into an
IRA at 10% you would $452,000 and you would have only contributed
$72,000. Depending on the IRA you get a tax deduction but you do not get it
back until you write it off in your taxes. In a Roth IRA you cannot write the
amount off but it grows totally tax free.
The biggest secret to saving for retirement is starting NOW! The earlier
you start the better off you may be upon retirement. Just to run a couple of
numbers if you invested $2000 a year at 10% for 10 years when you are 25
when you are 70 you will have $895,761. If you invest the same when you
are 35 years old for 35 years you will have $542,049. In the first problem you
only invested $20,000 and the second you invested $70,000 but since you
started 10 years earlier it had a substantial amount of growth. Once out of
debt it is essential that you dont stop and relax then. You must pull every
penny you have laying around and start investing immediately to give
yourself the most amount of time as possible.