Set goals to achieve monetary good health, don't dwell on the past

Question: Everyone wants to be self-reliant in financial matters. How can you accomplish this?

Answer: Begin where you are. Don't procrastinate. Don't fret about past financial mistakes. Too many of us are overwhelmed, so we do nothing.Becoming financially self-reliant takes work and commitment. Rather than chasing more dollars through second jobs and overtime, it involves working smarter with the money you already have as well as the money you will receive in the future.

Question: After you make up your mind to get started, what's the next step?

Answer: Set financial goals. As easy as it sounds, many of us fail to do the obvious. Having a written financial plan reflecting your goals is paramount for your financial peace of mind.

Naturally, the setting of financial goals includes the payment of full and honest tithes and offerings. All of us do better with the Lord's help. The scriptures make great and specific promises for those who choose to keep the law of tithing.

Question: What else is obvious?

Answer: Spend less than you earn. The benefits cannot be overstated. If you can't afford something, even if it is on sale, it isn't a bargain.

People typically fall into one of three categories. People who: Spend more than they earn, Spend about what they earn, and Spend less than they earn. Individuals and families who invariably spend more than they make are headed for grave financial difficulties. People who spend about what they earn are OK as long as nothing goes wrong. However, as soon as the refrigerator needs to be repaired or the car needs replacing they are "suddenly" in financial trouble. People who consistently spend less than they could are in sound financial shape and have peace of mind.

Specifically, people who spend less than they earn have learned to distinguish between genuine individual/family needs and so-called "necessary luxuries" or wants. How well you manage your money has nothing to do with the amount of money you earn. It has everything to do with your personal discipline, priorities, attitudes and attributes. Incidently, it is incumbent upon those who are bringing in the family's income to communicate with and recognize the needs and wants of the entire family.

Question: What about the individual or family who has a great deal of debt?

Answer: Get rid of debt. Surprisingly, 34 percent of all the dollars a typical family spends goes for interest expenses and carrying costs. In a lifetime, each of us will see hundreds of thousands of dollars go through our hands. To conceive of the possibility that one third of that income is being siphoned off or drained out of our control as an interest expense is an incredible waste. Unless you have a plan to get rid of your debt, chances are that you will carry the burden of being in debt throughout your entire life.

Suppose you carry $2,000 on a credit card, for example, and you never quite get around to paying it off at its 20 percent rate. You are paying $400 per year in interest. In this case, by permanently getting rid of short-term debt you will have $400 more to work with - year-in and year-out. Why pay for an item twice over a four-year period? Why charge-to-own when you can save-to-own instead?

Question: What about saving?

Answer: Be an investor, not a saver. Most of us do not see ourselves as investors, but rather as savers. Unfortunately, this is misleading. According to the American Association of Individual Investors, if you can get 3 percent more interest than you are presently making, in 25 years you will have twice as much money as you would have had.*

Question: Any other suggestions?

Answer: Use financial systems to manage all aspects of your financial life. Having financial systems means doing things automatically such as paying tithing first, funding an emergency fund, paying yourself by systematically saving/investing, discussing purchases over a preset limit with your spouse, utilizing company-sponsored pension and/or profit-sharing plans, finding and filing important paper work, rotating your year's food supply, taking care of what you already have, as well as studying to be current in your present career. All of these items and others should help to increase your money management effectiveness.

The principal amount of a certificate of deposit is fixed and FDIC insured. Other investments are not insured and can include risk and fluctuation of principal. Mutual funds and mutual fund performance are not guaranteed. Past performance is not a guarantee of future performance. Please read the prospectus carefully before investing.

Additional Information

Tough `What-if ' questions

What would happen to me and my family if I/we lived a long time?

Would our resources last as long as I/we do?

What would happen to my spouse/family if I died prematurely?

Is there sufficient funding to meet my spouse/family needs over the long term?

Do I/we have the right types of legal documents - wills, trusts, and so forth? Are they current? Does my spouse or other family members know where they are?

What would happen to my spouse/family if I became disabled? (Contrary to popular opinion most disabilities are from illness, not injury.)

Have I prepared my spouse to live alone? (This includes everything from balancing the checkbook to preparing nutritious meals to changing the furnace filter.)

How to avoid common mistakes in managing your fiscal affairs

Procrastination: The road to poverty is paved with good intentions. "Someday, I'll. . . ." Rather, the attitude should be, "Today is the day and now is the time."

No goals or plans: If you don't know where you are going, congratulations, you are already there! Most people plan their vacations better than they plan their financial future.

Failure to fund worthwhile goals: We are all dreamers. Ultimately we have to put our money where our mouths are. In other words, you must start to fund your goals now!

Financial illiteracy: If you think financial planning is expensive, you ought to try ignorance. Ben Franklin said, "An investment in knowledge pays the best interest."

Failure to understand risk: Many of us take too much of the wrong kinds of risk - all the eggs in one basket - and not enough of the rights kinds of risk.

Failure to allow for inflation: Like high blood pressure, inflation is the silent killer of your purchasing power. If you don't believe this, ask people who live on fixed incomes how they have done after retirement.

Failure to allow for taxes: Premature distributions from pension and profit-sharing plans result in hefty penalties. A basic knowledge of taxes and tax consequences is essential.

Underfunding of long-term goals: Many people underfund their retirement. Start funding now; otherwise, when you need it, it won't be there.

Failure to understand the time value of money: When you are young, time is your ally and the most important factor in a portfolio. When you are older, you have a shorter period of time to save.

Failure to seek professional help: Many mistakes can be avoided by asking a professional for advice, even on apparently simple questions, which aren't so simple. Specifically, more mistakes are made in retirement planning than any other area.

Seven steps to becoming financially self-reliant

Begin where you are. "If you believe all these things see that ye do them." (Mosiah 4:10.) "No man, having put his hand to the plough, and looking back, is fit . . . ." (Luke 9:62.)

Set financial goals. "And the Gods saw that. . .their plan was good." (Abraham 4:21.)

Pay tithes and offerings. "Bring ye all the tithes. . . ." (Malachi 3:8-12.)

Spend less than you make. Count the cost before you buy or build. (See Luke 14:28-30.)

Get rid of debt. "Pay the debt thou hast contracted. . .release thyself from bondage." (D&C 19:35.)

Be an investor, not a saver. See parable of the talents. (Matt. 25:14-30.)

Use financial systems. "Organize yourselves; prepare every needful thing." (D&C 88:119.)

When should I seek professional advice?

Use professional help when you don't have the:

Time. Doing things right requires adequate time. Consider using others when you need to do something right, but don't have the time to follow things through to conclusion or closure.

Talent. Ralph Waldo Emerson said, "Every man I meet is in someway my superior." All of us have talents. Why not use the talents of others to bless and benefit your family?

Training. A neurosurgeon doesn't do heart surgery. If you find yourself in a legal or financial matter which is over your head, seek professional help. Don't try to do everything yourself.

Do you know?

Question: People often ask, "What are the differences between gambling and investing in the stock market?"

Answer: The stock market is not like a game of chance. In a game of chance: 1. The amount of money in play remains fixed. 2. There is only one person who stands to "win" (using that term loosely). 3. The odds of winning are not in your favor. 4. The money is considered "immoral money," that is, "something for nothing."

By contrast, stock market investors: 1. Could derive a steady stream of income and capital gains over long periods. 2. May expect to profit when a diversified portfolio of securities is held over the long-haul. 3. Find that the risk/reward ratio of buying and holding long-term is relatively low. 4. Do not have "immoral money." (See parable of the talents, Matt. 25:14-30.)

Question: "Should I invest and open an IRA or should I put my money into food storage?"

Answer: You can't eat an IRA. The prophets are quite clear about the importance of providently acquiring and maintaining a year's supply of food and so forth.

Question: "Why should I save for the future? You can't take it with you. The world might end tomorrow anyway."

Answer: We are not preparing for the end of the world, but rather for the beginning of the millennium. In the meantime, it takes hard-earned dollars to send children on missions and to college, and fund retirement accounts. (See President Ezra Taft Benson's priesthood address, Oct. 3, 1987.)

Financial laws of the harvest

The date you start. Every six years you delay at a 12 percent rate of return means you will have to put in twice as much money six years later. (Twelve percent is the small-capitalization stock average over the past 65 years, according to Ibbotson Associates.)

The rate at which you save. The rate (or amount) at which you save and invest is more important than the return rate. This is especially true in the early years. How many times have you heard the phrase, "Pay yourself first"?

The way in which you allocate. Once you have begun to save/invest, the way in which you allocate and diversify your investments can double and even triple the amount of money you have at retirement. This can be done without necessarily doubling or tripling your risk. In general, people in their 20s, 30s, 40s, and even 50s should be going for growth with most of their dollars in retirement accounts. (See explanation: Be an investor, not a saver.)

The way in which you take withdrawals. At retirement, life expectancy is no longer just five or seven years. At age 701/2 years, a man's life expectancy is over 16 years according to an IRS withdrawal schedule for minimum IRA taxation. A woman's life expectancy is even longer. Prior to retirement, you systematically will have made purchases into your investments over many years. Contrary to popular belief, you will not necessarily take your entire retirement funds out in lump-sum. At retirement you will most likely make systematic withdrawals from your investments.

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