Establish 'pyramid of investing'

Mismanaged credit common woe

Establishing a lifelong habit of savings and wise spending is fundamental to temporal and spiritual self-reliance, according to an LDS Business College professor.

Larry Richards has spent almost three decades in the banking industry while simultaneously serving in the Church. He's learned that adherence to basic money principles can serve Church members well — regardless of their professional backgrounds or respective tax brackets. Conversely, perpetual money woes can weaken the spirit of even the most devout men and women.

"It's hard to be spiritually in tune when you're financially unstable," said Brother Richards, a former president of four different banks.

To remain financially and spiritually solvent, Brother Richards offers some basic counsel.

First establish a "pyramid of investing" anchored to a foundation of savings. Building a viable savings or rainy day fund demands discipline. It likely means foregoing some current expenditures to provide for the future.

But such a savings plan can "help us meet Church standards of being temporally and spiritually self-reliant," Brother Richards said. Develop a regimented habit of savings. Brother Richards recommends that families set aside one month of take-home pay for every $10,000 earned.

Paying tithing first has become a habit for many faithful members — something done without thought or debate. Develop a similar savings habit, counsels Brother Richards. Pay the Lord first — then pay yourself in the form of savings.

"Find out if your employer will automatically deduct your [savings] amount from your paycheck and place it in a separate account," Brother Richards said. "If the money is not in your hands you won't think about [spending] it."

Besides savings, Brother Richards says families need a proper level of insurance to protect them in case of misfortune.

Remember the direction of President Gordon B. Hinckley to make education a lifelong endeavor, Brother Richards adds. Many are underemployed and cannot meet their families' needs because they lack updated, in-demand skills. Taking out a student loan, if needed, to acquire such skills can be a worthy decision.

"The best investment you'll ever make is investing in yourself," said Brother Richards, who serves as second counselor in the Salt Lake University 6th Stake presidency.

Once families have a stable foundation of savings and insurance in place they can begin examining more speculative investing such as the stock market. Professionally managed mutual funds diversify risk and often fit well into conservative investment strategies, Brother Richards said. Remember, the potential for high-yield reward in any stock is typically proportionate to its risk.

Mismanaged credit is the most common cause of personal money woes. Brother Richards champions a simple credit card rule: If you can't pay off the card's balance at the end of each month, cut it up.

"If you consistently carry a credit card balance you're on the road to financial trouble," he said.

Some folks are "overhoused," struggling to make payments on a home they truthfully can't afford. A bank may be willing to loan the money to cover a large mortgage, but the cost may be too great, Brother Richards said. He recommends staying away from any home that demands more than 25 to 28 percent of a family's stable monthly income.

For those in deep financial trouble, Brother Richards recommends sitting down with creditors, discussing the problem and searching for solutions to satisfying the debt.

Beware living paycheck to paycheck, he warns.

"It's a cycle that has to stop."

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