Title: Foundations of Leadership Conference
1Foundations of Leadership Conference
- Lead Out in
- Personal Finance
- Bryan L. Sudweeks, Ph.D., CFA
- August 25, 2009
2Abstract
- You are a leader, and others look up to you in
all you do and say. Whether you like it or not,
you have an influence on what others may do and
become. Make leading out in personal finance
another one of the important areas in which you
lead, by internalizing the principles of
finance, living on a budget, understanding and
using credit wisely, minimizing debt, and
learning to give.
3Leadership
- A leader is one who knows the way,
- goes the way, and shows the way.
- Poster in my daughters 7th grade classroom
4Objectives
- Remember the Principles
- Embrace the B Word
- Tame the C Monster
- Use wisely the D Word
- Learn to Give
5A. Remember the Principles
- Elder Richard G. Scott commented
- Joseph Smiths inspired statement, I teach them
correct principles, and they govern themselves,
still applies. The Lord uses that pattern with
us. . . Your consistent adherence to principle
overcomes the alluring yet false life-styles that
surround you. Your faithful compliance to correct
principles will generate criticism and ridicule
from others, yet the results are so eternally
worthwhile that they warrant your every sacrifice
(Richard G. Scott, The Power of Correct
Principles, Ensign, May 1993, 32). - What are those correct principles that are so
eternally worthwhile?
6Principle 1 Ownership
- 1. Ownership Everything we have is the Lords
- The Psalmist wrote
- The earth is the Lords, and the fullness
thereof the world, and they that dwell therein.
(Psalms 241) - The Lord is the creator of the earth (Mosiah
221), the supplier of our breath (2 Nephi 926),
the giver of our knowledge (Moses 732), the
provider of our life (Mosiah 222), and the giver
all we have and are (Mosiah 221). - Nothing we have is our ownits all Gods
- .
7Principle 2 Stewardship
- 2. We are stewards over all that the Lord has, is
giving, or will share with us - The Lord through the Prophet Joseph Smith stated
- It is expedient that I, the Lord, should make
every man accountable, as a steward over earthly
blessings, which I have made and prepared for my
creatures. (DC 10413) - The Lord through the prophet Brigham Young said
- Thou shalt be diligent in preserving what thou
hast, that thou mayest be a wise steward for it
is the free gift of the Lord thy God, and thou
art his steward. (DC 13627)
8Principle 3 Agency
- 3. We were given agency by a loving Father
- President Marion G. Romney commented
- Agency means the freedom and power to choose and
act. Next to life itself, it is mans most
precious inheritance. (Ensign, May 1976, p. 120.)
- President David O. McKay
- Next to the bestowal of life itself, the right
to direct that life is Gods greatest gift to
man. Freedom of choice is more to be treasured
than any possession earth can give (italics
added, in Conference Report, Apr. 1950, p. 32
italics added).
9Principle 4 Accountability
- 4. Accountability We are accountable for every
choice we make - The Lord through the prophet Joseph stated
- For it is required of the Lord, at the hand of
every steward, to render an account of his
stewardship, both in time and in eternity. (DC
723) - Elder Todd Christofferson recently stated
- We control the disposition of our means and
resources, but we account to God for this
stewardship over earthly things. (D. Todd
Christofferson, Come to Zion, Ensign, November
2008. )
10What is Really Ours?
- Elder Neal A. Maxwell stated
- The submission of ones will is really the only
uniquely personal thing we have to place on Gods
altar. The many other things we give, brothers
and sisters, are actually the things He has
already given or loaned to us. However, when you
and I finally submit ourselves, by letting our
individual wills be swallowed up in Gods will,
then we are really giving something to Him! It is
the only possession which is truly ours to give!
(italics added, Swallowed Up in the Will of the
Father, Ensign, Nov. 1995, 22.)
11B. Embrace the B Word - Budget
- President Spencer W. Kimball said
- Every family should have a budget. Why, we would
not think of going one day without a budget in
this Church or our businesses. We have to know
approximately what we may receive, and we
certainly must know what we are going to spend.
And one of the successes of the Church would have
to be that the Brethren watch these things very
carefully, and we do not spend that which we do
not have. (Conference Report, April 1975, pp.
166-167) - And if the Brethren watch these things very
carefully, shouldnt we?
12Budgeting (continued)
- What is a Budget?
- Its the single most critical tool in helping you
achieve your personal and financial goals - Its the process of making sure your resources
are used for the things that matter mostyour
personal goals - Budgeting is a star (or tool) to set your sights
by, not a stick to beat yourself with.
13Budgeting (continued)
- What is the Budgeting Process?
- 1. Know what you want to accomplish
- 2. Track your spending
- 3. Develop your budget
- 4. Implement your budget
- 5. Compare it to actual spending, then make
changes where necessary to achieve your goals
14Budgeting (continued)
- 1. Know what you wantwrite it down
- What do you want to accomplish?
- Do you want to
- Prepare for a mission?
- Prepare to be a worthy husband or wife?
- Graduate?
- Get a great job?
- Return to your Heavenly Father?
- Determine what you want to do, then write it
down. A goal not written is only a wish
15Budgeting (continued)
- 2. Track your Spending
- There are different methods to track spending
- Checks and credit cards
- These leave a paper trail
- Cash
- Record spending in a notebook
- Computer programs, i.e., Quicken, Money
- These are useful, especially if tied to bank and
credit card companies - The goal is to generate a record of everything
you earn and spend
16Budgeting (continued)
- 3. Develop a Budget--the better way
- What is a Budget?
- Its a plan for controlling earning and spending
- Its purpose -- To help you spend your money of
what is really important to you - Earnings/scholarships/gifts/grants
- Determine what you earned last year, and make
adjustments for the current year - Expenses/school costs
- Identify all fixed (must have) and variable
(would be nice to have) spending - Look for ways to reduce your variable spending
17Budgeting The Old Way
Available for Savings
Income
Expenses
Tithing
Personal Goals
18Budgeting The Better Way
Other Savings
Income
Expenses
Pay the Lord
Pay Yourself
Personal Goals
19Budgeting The Better Way (continued)
- Before
- You paid the Lord first, lived on the rest, and
whatever money was left at the end of the month
went into savings--your priorities were wrong - Now
- Pay the Lord first, yourself second, and then
live on the rest--your priorities are now in
order - Now you have twice the chance of achieving your
personal goals
20The Better Way (continued)
- Elder L. Tom Perry said
- After paying your tithing of 10 percent to the
Lord, you pay yourself a predetermined amount
directly into savings. That leaves you a balance
of your income to budget for taxes, food,
clothing, shelter, transportation, etc. It is
amazing to me that so many people work all of
their lives for the grocer, the landlord, the
power company, the automobile salesman, and the
bank, and yet think so little of their own
efforts that they pay themselves nothing. (L. Tom
Perry, Becoming Self-Reliant, Ensign, Nov.
1991, 64.)
21Budgeting (continued)
- 4. Implement your budget
- Try the budget for a month
- Record all earning and spending in a spreadsheet
- Sum all days or columns by category
- Note how much you have available in each category
at the end of each week - Adjust the plan as necessary to maintain the plan
22Budgeting (continued)
- 5. Compare budget to spending
- Compare your budget to actual spending
- Adjust the plan or your expenses as necessary to
maintain the plan - Dont reduce payments to the Lord or yourself
- If all else fails, this system will work!
- The Envelope System
- Put money for each expense in an envelope
- When the money is gone, its gone
- It forces you to make it work
23Budgeting (continued)
- Elder Marvin J. Ashton stated
- Some claim living within a budget takes the fun
out of life and is too restrictive. But those who
avoid the inconvenience of a budget must suffer
the pains of living outside of it. The Church
operates within a budget. Successful business
functions within a budget. Families free of
crushing debt have a budget. Budget guidelines
encourage better performance and management.
(italics added, Marvin J. Ashton, Its No Fun
Being Poor, Ensign, Sept. 1982, 72.)
24Want help with Budgeting?
- You can download a copy of a budgeting
spreadsheet in the better way format from the
Personal Finance website at - http//personalfinance.byu.edu.
- Click on Teaching Tools and Teaching Tool 31
Budget spreadsheet (which includes tools to help
prepare your Budget and also get out of debt)
25C. Tame the C Monster - Credit
- Know about Credit Reports, Credit Scoring, and
Credit Cards - 1. Credit reports
- Information collected by credit bureaus from
private and public records - 2. Credit scoring
- A numerical evaluation of your credit based on
specific criteria (similar to a grade in a class) - 3. Credit cards
- Either the single most destructive financial
instrument in the history of mankind or a
financial tool to help you attain your goals
261. Credit Reports
- What are credit reports?
- Credit reports are privately collected
information on all your existing and available
credit - It includes all your borrowing history, credit
card balances and payment history, mortgages,
phone payment records and the like - Like it or not, it is a record of how well you
handle credit
272. Credit Scoring
- What is credit scoring?
- Its a way of grading your ability to pay back
loans - 75 of all mortgage (home loan) applications are
sorted on credit scores - It may help you get the lowest interest rate on
many types of consumer loans - Home, car, and consumer
- It also may reduce the cost of your insurance
products - These are based on your credit score
- Know your credit score!!!!!!!!
28Credit Scoring
- How does credit scoring work?
- Lenders base your interest rate on your score
- The higher the score, the lower the rate
- Research by Fico showed (Fico uses a 0-850
range) - 300,000 30-year fixed rate mortgage
- Scores 760 paid 4.873 Scores 700 paid 5.095
- Scores 680 paid 5.272 Scores 660 paid 5.486
- Scores 640 paid 5.916 Scores 620 paid 6.462
- Source http//www.myfico.com/ 26Jan09
- The above mortgage at the bottom versus the top
rate paid 108,523 more in interest over the life
of the loan
293. Credit Cards
- Credit cards
- Either the most destructive financial instrument
in the history of mankind or a tool to help you
achieve your goals. It depends on you! - What are the correct uses of credit cards?
- Guarantee / Emergency Use
- Convenience, float, or timing
- Free services
- What are the problems with credit cards?
- It is too easy to spend money
- Its easy to lose track of what you spend
- Interest costs on credit cards are very high
(12-28)
30Credit Cards (continued)
- Keys to effective credit card use
- Know your goals
- Spend only on things planned in your budget
- Dont go into debt
- Use wisdom in your expenditures
- Dont use credit cards to finance school
expenses!!!!
31Too Much Credit (Applications)?
- Getting too much junk mail (i.e., credit card
applications)? - Get rid of it! It also reduces the opportunity
for identity theft. - Take your name off the mailing lists of the major
credit reporting agencies - Call 1-888-567-8688 or 1-888-5 OPT OUT or go to
www.optoutprescreen.com - Answer the questions on the phone or online. It
only asks your name, phone number, and social
security number.
32D. Use Wisely the D Word - Debt
- Level of Education Annual Earnings
Lifetime Earnings - Not a HS graduate 21,314
852,577 - High school graduate 30,560
1,222,396 - Two-year vocational 36,833
1,473,335 - Associate 38,118 1,524,703
- Bachelors 49,334 1,973,760
- Masters 57,676 2,307,025
- Doctorate/Professional 71,573
2,862,914 - Source Give Yourself the Gift of a Degree
Vocational Education Worth Almost 1.5 Million
Over Working Lifetime," an EPF News Release from
the Employment Policy Foundation. December 19,
2001, Washington, D.C.. -
33Does Education Pay?
- President Gordon B. Hinckley counseled
- You young people, the little decisions that you
make can so affect your lives. Shall I go to
school or not? Shall I continue on with my
education? That is a big decision for some of
you. Our doctrine suggests, although there may be
some circumstances that would affect that
decision, that the more education you receive the
greater will be your opportunity to serve. That
is why this Church encourages its young people to
get the schooling that will qualify them to take
their places in the society in which they will
become a part. Make the right decisions. Take a
long look. (italics added, Pocatello, Idaho,
regional conference, Idaho State University, 4
June 1995).
34Use Debt Wisely
- What has been the prophets counsel on debt?
- President James E. Faust stated
- Over the years the wise counsel of our leaders
has been to avoid debt except for the purchase of
a home or to pay for an education. I have not
heard any of the prophets change this counsel.
(Doing the Best Things in the Worst Times,
Ensign, August 1984, 41) - How do we minimize debt while at the same time
getting an education? - By using debt wisely and sparinglyusing the
Priority of Money for Education
35The Priority of Money for Education
- Is there a priority of money for financing
school? - Priority of Money for School
- 1. Free Money
- 2. Family Money
- 3. Employment
- 4. Loans
- 5. Credit Cards
- Remember credit cards are last on the list!
361. Free Money
- Get free money first--scholarships and grants
- This is free money which is not paid back
- If you pay to get a scholarship its a scam!
- Grants are need-based--complete the FAFSA
- Pell Grant approximately 976-5,350/year
- ACG Grant approximately 750-1,300/year
- SMART Grant approximately 4,000/year
- SEOG Grants not available at BYU
- Scholarships from schools and private sources
- You may need a supplemental application
- Find out which ones you are eligible for on a
scholarship search engine and apply for each - Armed Forces Scholarships See recruiting offices
372. Personal and Family Money
- Use personal savings and help from parents next
- If children pay for their education and missions,
they will likely use their resources more wisely,
as its their money they are spending. - Start the process of financial self-reliance as
soon as you can. - Do as much as you can to help your children, but
dont do it all - If parents and grandparents can help, that is
wonderful. - Express appreciation to anyone who helps!
383. Employment
- Work when possible to offset education expenses
- Most colleges offer federal College Work Study.
Some universities, including BYU, provide
thousands of student employment opportunities
from their own funds. - Undergraduate students enrolled in 12 semester
hours should work no more than 20 work hours per
week. This may cover rent and food expenses. - Working summers to save for mission and college
is also very desirable.
394. Loans
- Use (all) loans wiselythey are debt
- There are five main items to be aware of with
loans - a. Who pays the interest during school?
- The borrower or the government?
- b. When must you start paying back the loan?
- Immediately or after graduation?
- c. Who takes out the loan?
- You or your parents?
- d. What is the interest rate cap?
- What is the highest rate you may pay?
- e. What are the costs?
40Loans (continued)
- A. Subsidized loans
- 1. Subsidized Federal Loans
- Subsidized Stafford Loans Student loan where
the government pays interest while the student is
in school and repayment begins after graduation - 2. Subsidized Private Loans
- Student loan from private institutions, such as
the Woolley Law Loan or the Marriott School of
Management Loan where the institution pays
interest while the student is in school and
repayment begins after graduation
41Loans (continued)
- B. Unsubsidized loans
- 1. Unsubsidized Federal Loans
- Unsubsidized Stafford Loans Student loan where
interest accrues immediately and repayment begins
after graduation - 2. PLUS Loans Parent Loans for Undergraduate
Students - Parent loan where repayment begins 60 days after
the loan is given and parent pays interest
42Loans (continued)
- C. Private Loans (also called Alternative Loans )
- Student loan where repayment begins immediately
and interest rates are MUCH higher - Caution -- these unsubsidized loans are much more
expensive than federal unsubsidized loans - These loans also may have higher up-front fees
and may require a cosigner. Read the fine print
VERY CAREFULLY BEFORE TAKING OUT THESE LOANS
435. Credit Cards
- These are the most expensive way to borrow
- They require you to pay it back immediately
- There is no help in the payment of interest
- The interest rates are extremely high and you are
in school - This is the least advisable way to finance
schooling and is usually the result of poor
planning!
44E. Learn to Give
- Someone wrote
- We make a living by what we earn, but we make a
life by what we give. - If you cant learn to give when you are poor, you
will never learn to give when you are rich. - Now is the time to continue your life-long habit
of giving - Learn to give of what you haveyour time,
talents, and resources. - Make giving a part of each and every day
- Realize it is not what we have, but what we give,
that makes us rich, with the riches of eternity
45Summary
- A. Remember the Principles of Finance
- Ownership None of this is ours
- Stewardship We are stewards over all we have
been, are, or will be blessed with - Agency The privilege to choose is a God-given
gift - Accountability We will be held accountable for
all our choices in life (including our financial
choices)
46Summary (continued)
- B. Embrace the B Word Budget
- 1. Know what you want to accomplish
- 2. Track your spending
- 3. Develop your budget
- 4. Implement your budget
- 5. Compare it to actual spending, then make
changes where necessary to achieve your goals - And budget the better way
47Summary (continued)
- C. Tame the C Monster - Credit
- Understand
- 1. Credit reports
- 2. Credit scoring
- 3. Credit cards
48Summary (continued)
- D. Avoid or use wisely the D Word - Education
Debt - 1. Free Money
- 2. Family Money
- 3. Employment
- 4. Loans
- 5. Credit Cards
49Summary (continued)
- E. Learn to Give
- Make giving a part of your everyday goals
- Learn to give
- Of your time
- Of your talents
- Yes, and even of your meager resources
50Leadership
- A Leader is one who knows the way,
- goes the way, and shows the way.
- Poster in my daughters 7th grade classroom
51Tools to Teach Personal Finance
- The BYU Marriott School Personal Finance Website
is a great and free resource - We have prepared a website of Personal finance
information from a gospel perspective to help you
to know, go, and show the way. It is at - http//personalfinance.byu.edu
- It contains a number of beginning, intermediate,
and advanced courses, with its purpose is to help
students and non-students get their financial
houses in order. All information from the
website is freely shareable with others without
cost.
52BYU Website
53Assignment
- Want something to do before school starts? Go
to http//personalfinance.byu.edu, go to - Courses of Study
- Beginning Courses, and
- Beginning Course for College Students.
- Complete that course. You will be very well
prepared financially for the monetary challenges
in College ahead. Then, later on, go and do the
Advance College Course to really prepare yourself
for life.
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56Thank You
- I leave you with my excitement, my testimony of
the gospel, and one of my favorite scriptures,
DC 4562 - For verily I say unto you,
- that great things await you.
- For they truly do
- As you lead out in Personal Finance