An Orderly Financial An Orderly Financial HouseHouse

Brian BoyerBrian BoyerAdapted from Slides Created byAdapted from Slides Created by

Grant McQueenGrant McQueen

President Gordon B. HinckleyPresident Gordon B. Hinckley

……I am suggesting that I am suggesting that the the time has come to get our time has come to get our houses in order.houses in order. There is There is a portent of a portent of stormy stormy weather aheadweather ahead to which to which we had better give heed…we had better give heed…..

““To the Boys and to the Men,” Conference, Oct. To the Boys and to the Men,” Conference, Oct. 19981998

ThenGDP

DOW

Inflation

Deficit

Story Weather Has Hit

4.2%Growth in 1998

1.1%Growth in 2008

+43%Oct/1997-Oct/1998

-40%Oct/2007-May/2009

Now

1.6%1998

0.1%2008

$69.3BSurplus

$438BDeficit

Great Depression

-30%Contraction: 1929-1933

-71%Sep/1929-Dec/1933

-24%1929-1933

President Thomas S. MonsonPresident Thomas S. Monson

““Many more people could Many more people could ride out the storm-tossed ride out the storm-tossed waves in their economic waves in their economic lives if they had their lives if they had their year’s supply of food … year’s supply of food … and were debt-free. and were debt-free. Today we find that many Today we find that many have followed this have followed this counsel in reverse: they counsel in reverse: they have at least a year’s have at least a year’s supply of debt and are supply of debt and are food-free.”food-free.”

““That Noble Gift—Love at Home,” Church News, May 12, 2001, 7.That Noble Gift—Love at Home,” Church News, May 12, 2001, 7.

Health

Insu

rance

Health

Insu

rance Life InsuranceLife Insurance

Wills

Wills and

and Trusts

TrustsOther InsuranceOther Insurance

Rainy Day FundRainy Day Fund(Safe, liquid)(Safe, liquid)

Tax-advantaged Tax-advantaged Retirement FundRetirement Fund

Food StorageFood Storage Other InvestmentsOther Investments( Index Funds)( Index Funds)

TithingTithing OfferingsOfferings SelfSelf--

SufficiencySufficiencyAttitudeAttitude

GarbageGarbage::Consumer DebtConsumer Debt

GamblingGambling

DerivativesDerivatives

Identity TheftIdentity Theft

Budget/PlanBudget/Plan

TaxesTaxes

Home BuyingHome Buying

President Gordon B. Hinckley’sPresident Gordon B. Hinckley’s Counsel On Debt Counsel On Debt

“I urge you as I urge you as members of this members of this Church to get Church to get free of debt free of debt where possible where possible and to have a and to have a little laid aside little laid aside against a rainy against a rainy day.” day.”

““The Times in Which We Live,” The Times in Which We Live,” Ensign,Ensign, Nov. Nov. 20012001

Appropriate vs. Inappropriate DebtAppropriate vs. Inappropriate Debt

Some debt—such as for a modest home, Some debt—such as for a modest home, expenses for education, perhaps for a expenses for education, perhaps for a needed first car—may be necessary. But needed first car—may be necessary. But never should we enter into financial never should we enter into financial bondage through consumer debt...bondage through consumer debt...

Elder Joseph B. Wirthlin. General Conference, April 2004Elder Joseph B. Wirthlin. General Conference, April 2004

The Debt TrapThe Debt Trap

The Debt TrapThe Debt Trap

A: With 21% APR, 103.2 payments or A: With 21% APR, 103.2 payments or 8.6 years8.6 years

StereoStereo $999.74$999.74

InterestInterest$1,167.56$1,167.56

TotalTotal$2,167.30$2,167.30

May 18 2009summary of research by Geoffrey Millerevolutionary psychologist at University of New Mexico

“ . . . much of the pleasure we derive from products stems from the unconscious instinct that they will either enhance or signal our fitness by demonstrating intelligence or some of the Big Five personality traits: openness, conscientiousness, agreeableness, stability and extraversion. . . . But once you’ve spent the money, once you’ve got the personality-appropriate appliance or watch or handbag, how much good are these signals actually doing you? Not much . . . The fundamental consumerist delusion . . . is that purchases affect the way we’re treated.”

Self-Test:Self-Test:Do I have too Much Debt?Do I have too Much Debt?

• Can I pay off my credit card balance Can I pay off my credit card balance completely each month?completely each month?

• Do I skip some bills to pay others?Do I skip some bills to pay others?• If I lost my job today, do I have enough in If I lost my job today, do I have enough in

liquid assets to pay living expenses for at liquid assets to pay living expenses for at least three months?least three months?

• Do my spouse and I often argue about Do my spouse and I often argue about money?money?

• Do I receive calls from creditors about Do I receive calls from creditors about overdue bills?overdue bills?

• Have I postponed medical or dental Have I postponed medical or dental appointments because I can’t afford them appointments because I can’t afford them right now?right now?

• Am I using an increasing percentage of my Am I using an increasing percentage of my monthly income to pay off debts?monthly income to pay off debts?

Elder Ashton’s Elder Ashton’s Debt Elimination CalendarDebt Elimination Calendar

May start with May start with debt with highest debt with highest interest rate or interest rate or earliest payoffearliest payoff

Currently owe Currently owe minimums of minimums of $60, $70, $50, $60, $70, $50, $75, and $235$75, and $235

Save and pay an Save and pay an extra $50 per extra $50 per monthmonth

Debt-Elimination Calendar

Credit Dept. Dentist Piano AutoCard Store Loan Loan

March 110 70 50 75 235April 110 70 50 75 235May 110 70 50 75 235June 110 70 50 75 235July 180 50 75 235August 180 50 75 235Sept. 180 50 75 235Oct. 230 75 235Nov. 230 75 235Dec. 305 235Jan. 305 235Feb. 540March

Lord’s Council on Getting out of Lord’s Council on Getting out of DebtDebt

And inasmuch as you are And inasmuch as you are diligent and humble, and diligent and humble, and exercise the prayer of faith, exercise the prayer of faith, behold, I will soften the behold, I will soften the hearts of those to who you hearts of those to who you are in debt, until I shall send are in debt, until I shall send means unto you for your means unto you for your deliverance.deliverance.

Doctrine and Covenants 104:80Doctrine and Covenants 104:80

Malachi 3

10: Bring ye all the tithes into the storehouse, that there may be meat in mine house, and prove me now herewith, saith the LORD of hosts, if I will not open you the windows of heaven, and pour you out a blessing, that there shall not be room enough to receive it.

11: And I will rebuke the devourer for your sakes, and he shall not destroy the fruits of your ground;

Credit Counseling ServicesCredit Counseling Services

• National Foundation for Consumer National Foundation for Consumer CreditCredit

• American Consumer Credit American Consumer Credit CounselingCounseling

• American Debt Management American Debt Management ServicesServices

• Debt Counselors of AmericaDebt Counselors of America

BudgetingBudgeting

- The root cause of most family - The root cause of most family financial problems is bad behavior, financial problems is bad behavior, not bad mathnot bad math

- Good governance, communication, - Good governance, communication, and controls are essentialand controls are essential

- Budgeting is about values - Budgeting is about values (priorities), not money(priorities), not money

Available Available for for

SavingsSavings

Personal Personal GoalsGoals

IncomIncomee

ExpensExpenseses

TithinTithingg

The Budgeting ProcessThe Budgeting ProcessThe Traditional ApproachThe Traditional Approach

The Budgeting ProcessThe Budgeting Process

““After paying your tithing of 10 percent to After paying your tithing of 10 percent to the Lord, you pay yourself a the Lord, you pay yourself a predetermined amount directly into predetermined amount directly into savings. That leaves you a balance of your savings. That leaves you a balance of your income to budget for taxes, food, clothing, income to budget for taxes, food, clothing, shelter, transportation, etc. It is amazing shelter, transportation, etc. It is amazing to me that so many people work all of to me that so many people work all of their lives for the grocer, the landlord, the their lives for the grocer, the landlord, the power company, the automobile power company, the automobile salesman, and the bank, and yet think so salesman, and the bank, and yet think so little of their own efforts that they pay little of their own efforts that they pay themselves nothing.” themselves nothing.”

L. Tom Perry, “Becoming Self-Reliant,” L. Tom Perry, “Becoming Self-Reliant,” Ensign, Ensign, Nov. Nov. 19911991

The Budgeting ProcessThe Budgeting ProcessA Better ApproachA Better Approach

IncomIncomee

ExpensExpenseses

Personal Personal GoalsGoals

OtherOtherSavinSavin

gsgs

Pay Pay the the LordLord

PayPayYoursYours

elfelf

Health

Insu

rance

Health

Insu

rance Life InsuranceLife Insurance

Wills

Wills and

and Trusts

TrustsOther InsuranceOther Insurance

Rainy Day FundRainy Day Fund(Safe, liquid)(Safe, liquid)

Tax-advantaged Tax-advantaged Retirement FundRetirement Fund

Food StorageFood Storage Other InvestmentsOther Investments( Index Funds)( Index Funds)

TithingTithing OfferingsOfferings SelfSelf--

SufficiencySufficiencyAttitudeAttitude

GarbageGarbage::Consumer DebtConsumer Debt

GamblingGambling

DerivativesDerivatives

Identity TheftIdentity Theft

Budget/PlanBudget/Plan

TaxesTaxes

Home BuyingHome Buying

PrioritiesPriorities

While Balancing the BudgetWhile Balancing the Budget (behavior, relationships, (behavior, relationships, values, human capital):values, human capital):

1.1. Settle the SacredSettle the Sacred (tithes and offerings), (tithes and offerings),

2.2. Manage the MisfortuneManage the Misfortune (basic life, health, disability, (basic life, health, disability, auto, and home insurance), auto, and home insurance),

3.3. Discharge the DebtDischarge the Debt (credit cards, bondage, FICO), (credit cards, bondage, FICO),

4.4. Anticipate the AdversityAnticipate the Adversity (rainy-day fund, food storage, (rainy-day fund, food storage, will),will),

5.5. Snatch the MatchSnatch the Match (401k, 403b, 457, SEP, Keogh, SIMPLE), (401k, 403b, 457, SEP, Keogh, SIMPLE),

6.6. Fund the FavoredFund the Favored (IRA, Roth IRA, 529, Annuities), (IRA, Roth IRA, 529, Annuities),

7.7. Stuff the SavingsStuff the Savings (diversify across assets and time), (diversify across assets and time),

But Possess a Purpose and Preserve a But Possess a Purpose and Preserve a PerspectivePerspective