I do hope that you do not come away from this feeling like some of the disciples of Christ saying that, "This is an hard saying." (John 3:60-61). I have spent much of my life studying personal finance and coaching people on a regular basis on improving their finances. However, I have spent several weeks pouring over Ensign and Liahona articles, General Conference Talks, and the Self Reliance Course on Personal Finance to make sure that what I present here does not come from me or my learning, but comes from prophets of God. ("I Have a Work For Thee" An Eternal Perspective on Personal and Family Finance Guide to Family Finance Protecting Family Finances by Avoiding Fraud Personal Finances for Self Reliance)
In the October 2017 talk "I Have a Work For Thee," Elder John C. Pingree Jr. quoted Spencer W. Kimball as saying, "Before we came [to earth, we] were given certain assignments. … While we do not now remember the particulars, this does not alter the glorious reality of what we once agreed to."
President Russell M Nelson expanded on this idea when he said, "The Lord has more in mind for you than you have in mind for yourself! You have been reserved and preserved for this time and place. … The Lord needs you to change the world. As you accept and follow His will for you, you will find yourself accomplishing the impossible!" And David O. MacKay said, "Find a purpose in life so big it will challenge every capacity to be at your best."
We have a specific purpose, a mission, that is unique to each of us. During this life, if we are faithful, this mission will be revealed to us, a little at a time. I believe it is this calling or mission referred to in Doctrine and Covenants section 88 when the Lord tells us to learn things both of doctrine and of history, nature, and the dealings of men, so we may better fulfill our mission (D&C 88:77-80)
Unfortunately, "many are called but few are chosen. And why are they not chosen, because they [are distracted]" (D&C 121:34-35) There are too many appealing things of the world that draw their attention away from seeking to learn their calling in life. So how do we learn to focus on discovering our mission and avoiding the distractions of the world? One way is to find people who have the results you seek, and spend time with them. Most people chose people to spend time with based on convenience or enjoyment. I would recommend seeking people who have the fruit you seek (wherefore by their fruits, ye shall know them. Matthew 7:20). Strive to spend time with them.
When were young, our parents cautioned us not to spend time with certain people, the trouble makers. They knew that if we spent enough time with them, we would become like them. As adults, the same applies to us. Actively seek out people that have the results you want, not just in finances, but in health, spirituality, and all areas of life, and intentionally spend more time with them.
So if we are to fulfill a great purpose in our lives, this will require resources. This is often referred to as a stewardship. We have been blessed with skills, talents, and opportunities that will be needed to fulfill our life mission. Our stewardship is to care for and nurture these until we discover our purpose so we can fulfill our mission.
I propose that our financial foundation is made of seven layers. Each layer is less important than the preceding layers. While you do not need to exclusively focus on the more important layers to the exclusion of the others, I believe the more important layers should receive your main focus until they are mastered.
Layer 1 Tithes and Offerings
All that we have, even our very lives, are not ours. They are gifts from Father. He has given us every gift for a purpose. He asks us to show faith in him, and return a tenth of our increase. We can do more with 90% of our stewardship that is blessed by living the law of tithing than we every could with 100%.We should also give generously to other offerings. Offerings are those donations beyond tithing. Each has a specific purpose. For instance, fast offerings is the most efficient and effective assistance for those in need. Not only does 100% of the money go to the needs, those needs are carefully and prayerfully evaluated and discerned by those who have been given special gifts. I challenge anyone to find a more effective or efficient program to help the needy.
Layer 2 Focused Expenses on Your Purpose
As everything you have is a stewardship meant to assist you in fulfilling your life's mission, nothing could be more disappointing than to come to fully recognize your mission and realize you have frittered away the resources you were blessed with to fulfill this great purpose.
Many people think they are frugal by seeking to get the most stuff for the least money. If you are focused on your purpose and stewardship, then this is completely backwards. Every purchase carries the question, "Does this help me fulfill my purpose." It doesn't matter how great a deal it is, if it is a waste of money, serving no purpose in your life and ends up in a land fill.
Layer 3 No New Debt, Pay Down Debt as Fast as Possible
The prophets, from ancient to modern, have been clear about debt, get rid of it.
President Gordon B. Hinckley declared: “Many of our people are living on the very edge of their incomes. In fact, some are living on borrowings. … I urge you to be modest in your expenditures; discipline yourselves in your purchases to avoid debt to the extent possible. Pay off debt as quickly as you can, and free yourselves from bondage.”
President Ezra Taft Benson said, "The Lord desires his Saints to be free and independent in the critical days ahead. But no man is truly free who is in financial bondage."
And Solomon said, "The rich ruleth over the poor, and the borrower is servant to the lender." (Proverbs 22:7)
The words of the prophets are clear, we need to eliminate and avoid debt. While there have been times in which prophets have given some exceptions in which getting into debt may be "acceptable," such as buying a house or education, I fear this is too often left as an open door to acquiring as much debt as the world will let us. However, the prophets words are clear. Avoid debt as much as possible. And when you do have debt, pay it off as fast as possible.
Many people think that paying off all their debt, including their mortgage, quickly is an impossible task. Yes, it is. Just like it is impossible to walk on water. At least that is what Peter thought until he saw his Lord walking on the sea. When he saw Christ walking on the water, he stepped out of the boat and took a few steps on the water. And then he started to fail. And as he sunk, Jesus reached out and pulled him back up. (Matthew 14:25-31)
Find people who have gotten to be debt free and spend time with them. Even ask them to coach or mentor you into becoming debt free. In our congregation we have a handful of people who are completely debt free, including their homes. They do not owe anybody. And we have a few more that I know of that will be reaching that lofty goal in the next three years. Seek these members out. Spend time with them. Learn from them. And when you start to sink, they can reach out their hand and pull you up. You can do the impossible.
I named this layer No New Debt and Pay Down Debt as Fast as Possible because that is how it progressed for me. To borrow a phrase from the Prodigal Son, when I came to myself, I realized I had strayed from what I was taught in my youth to avoid debt. It started small, and I found myself in more debt that I ever thought I would be in. The first step I took was to commit to no new debt.
And like any commitment, Father tested my resolve. Right after I made that commitment, our air conditioner went out, and it would cost $8,000 that we did not have to fix it. But I had made a commitment to not increase my debt. We went through three Texas summers, with only window A/C units in selected rooms in our home.
Never shy away from sacrifice. Sacrifice is nothing other than the production of sacred things. My children will remember the commitment that we had to not increase our debt. Those summers burned (almost literally) memories into their young minds that do not go away easily. We went through discomfort, and it was ok.
So we invested three years into proving our commitment to not increase our debt, but we did not commit to paying off debt as fast as possible. That was the following three years. Our peak debt, including our house, was over $200,000. Again, it was by any measure impossible for me to pay off this amount any faster than 10 years, but 10 years is better than nothing. So we set our resolve on the next commitment. I guess I felt like the boy who only had five loaves and two small fishes, but gave it to Jesus and he multiplied it to feed five thousand (John 6:9-13). I feel because I was true and faithful to my commitment to no new debt and our new commitment and action towards that commitment to eliminate debt as fast as possible, our efforts were multiplied beyond what seemed possible. We had paid off all our debt in three years.
Layer 4 Invest in Your Ability to Provide
When I was in school, I was counting the years until my schooling would be complete. No more reading. No more learning. At that point I would just be making money for the rest of my life. This was very poor thinking.
Education has an expiration. We should be continually learning, growing and becoming better. Education may include formal education, but is in no way limited to it.
Money is a receipt for the value you add to society. I had a sister in the ward ask me about stay at home mothers. They add a huge value to society, but do not receive these "receipts." You may not collect money when you add value to society, especially when it is in line with your life's mission. When it comes to your career or profession, the more value you add, in general, the more compensation you will receive. This compensation often will not come immediately after you add value, but it will come.
This is one place where I will give my personal recommendation which I did not find a specific prophetic counsel that directly aligned with. I recommend that in addition to 10% tithes, you should automatically pay 10% of all income into a bank account which has the sole purpose of investing in your ability to continuously provide. The only time you spend money from this account is when you can show that the expense will have a financial return in your life. This would cover books, audios, trainings, certifications, classes, courses, mentoring, etc. Anything that would increase your value to society.
Outside of 10% tithes and 10% investing in you, the rest of your income would cover expenses that should be trimmed down to be just enough to fulfill your stewardship, and every other dollar would be focused on paying down debt. The every other dollar especially includes "extra" money, like income tax refunds, bonuses, raises (except for taxes, 10% tithing and 10% investing in you), etc.
Layer 5 Prepare for Emergencies (Emergency Fund, 72 hour kits, food storage, insurance)
Once you've properly funded your education account, the 10% can then be focused on preparing for emergencies. The first focus would be an emergency fund. This would be a separate account that contains 3 to 6 months of expenses. To determine how much 3 to 6 month of expenses are, look at how much money you would need in the bank to maintain your current lifestyle with no income coming in.
72 hour kits, or bug out bags, are another essential part of preparation, especially here in central Texas where large storms have shown their ability to disrupt lives. You should refresh the contents of your 72 hour kit every 6 months to a year.
The importance of the prophet's counsel to have food storage is also evident here in central Texas. We get a dusting of snow and the store shelves are empty for days as Texans prepare for the snow-apocalypse. Imagine if we had a disaster that disrupted the trucking lines and prevented the stores from restocking. Or for a less dramatic scenario, how many times have we heard of families who survived periods of unemployment due to having food stored. Start with enough food to last you 3 to 6 months with a plan to build that up to a year's supply.
Insurance is a critical part of preparing for emergencies. Insurance prevents massive losses. You should make sure you have enough insurance to prevent catastrophic loss. However, you should also not be overinsured. Another benefit of your emergency fund is that you can now have higher deductibles, which can often lower your payments.
Layer 6 Plan for Upcoming Expenses
There are expenses that you know will be coming. For instance, I pay my car insurance every six months (which saves money over paying monthly). I know the expense is coming up in August, so I set aside enough each month so I can pay it in full when it is due.
I also know that my water heater will probably die in five to seven years. So I set aside enough money each month so I can buy one when the time comes. But because I am planning ahead of time, I can be looking for discounts on water heaters and buy one before it becomes an emergency and save money at the same time.
I've gotten a bit crazy with this, to the point where I even have small items like printer ink on my planned expenses.
Layer 7 Traditional Investments
So once you have focused on the six preceding layers, and mastered them, you can turn your focus to what most people consider investments. However, remember that the biggest return you will ever get is your investing in yourself. The increase in income from your improvements will compound and give you far more than any other investment.
While I have several opinions on traditional investments, I will set those aside and strictly rely on what the First Presidency has said.
Elder M Rusell Ballard said "There are no shortcuts to financial security. Do not trust your money to others without a thorough evaluation of any proposed investment. Our people have lost far too much money by trusting their assets to others. In my judgment, we will never have balance in our lives unless our finances are securely under control.
A letter from the First Presidency dated March 7, 2013 stated, “We are concerned that some Church members ignore the oft-repeated direction to prepare and live within a budget, avoid consumer debt, and to save against a time of need. Consideration should also be given to investing wisely with responsible and established financial institutions. We are also concerned that there are those who use relationships of trust to promote risky or even fraudulent investment and business schemes.
“While all investments carry an element of risk, that risk can be managed by following sound and proven financial principles: first, avoid unnecessary debt, especially consumer debt; second, before investing, seek advice from a qualified and licensed financial advisor; and third, be wise.”
In a flyer entitled "Being Wise in Managing Our Finances" attached to a letter from the First Presidency on February 14, 2019, the following principles were recommended for discussion:
- While we generally trust others, we use wisdom when investing.
- As all investments carry risk, verify the legitimacy of the investment and the company and representatives providing the services.
- Be cautious when high-pressure or fear tactics are used.
- Be wary of persuasion by power or position rather than the strength of the opportunity.
- Protect personal and financial information to minimize the risk of exploitation.
- Approach risky situations cautiously and wisely to avoid the negative consequences of poor decisions.
- Avoid investments that are “too good to be true.”
- Do not invest if you cannot afford to lose your investment.
- Avoid the temptation of “get rich quick” investments.
- Note that poor investment decisions often lead to other unwise or even illegal decisions.
- Be aware of fraudulent activity used to take advantage without providing value.
So build a solid financial foundation. As you seek to learn what the Lord would have you do, make sure you have a solid foundation to fulfill the calling you are called to.
