BYU Graduate Student Society

1. BYU Graduate Student Society Ten Myths of Personal Finance and What Wise Stewards Know March 20, 2014 Bryan Sudweeks, Ph.D., CFA From the BYU Marriott School of Management website on Personal Finance at http://personalfinance.byu.net

2. AbstractTen Myths of Family FinanceAnd What Wise Stewards Know • Some have felt personal finance was just about them, about money, a temporal matter, not required for spiritual growth, and separate from the gospel of Jesus Christ. These and other myths abound that are not only wrong, but detrimental to your financial and spiritual health. The reality is that personal finance is simply part of the gospel of Jesus Christ and is an important part of this life experience here on earth. Individuals who have not fallen for these myths have learned important habits that have helped them become wiser financial stewards and better prepared for the inevitable challenges and storms of life ahead. They have learned what “wise stewards know.”

7. Ten Myths of Personal Finance • Myth 1: Life Revolves Around Me • Myth 2: It’s All Mine • Myth 3: It’s About Money • Myth 4: Finances are a Temporal Matter • Myth 5: Finance is a Man’s Responsibility • Myth 6: Consumer and Credit Card Debt is OK • Myth 7: Budgets are for College Students • Myth 8: Parents are Responsible for Adult Children’s Finances • Myth 9: I can start getting out of debt and saving later • Myth 10: I Pay Tithing, I Have Nothing to Worry About

8. Myth 1. Life Revolves Around Me • Some believe the statement “it’s all about me” • They think life is: • Only about them • What they want is right, regardless • They decide what they should do • They can do whatever they want, because they don’t have to account to anyone • The reality is different

9. Thoughtful consideration causes us to think: Who created us? Who loves us the most? What is our purpose here on earth? Where do we find the most joy? And when we think longer-term Who forgives our sins? Who allows us to live eternally with our families? Who will judge us at the last day? Reality 1. Life is About Others

10. The more we think, the more we realized that this life is not about us, its about what we do with our life Life is a test, training, or probationary time to show where our heart and our will really are (Alma 42:4) Life is About Others (continued) 10

11. Myth 2: It’s All Mine • Some believe the oft-quoted statement “it’s all mine” • They think they own: • Their belongings • Their education they gained • Their money, savings and investments • They earned these things through their hard work, intellect, effort, sweat, tears, luck and the time they spent • The reality is different 11

12. Reality 2. I Am a Steward 1. Ownership: Everything we have is the Lord’s • The Psalmist wrote: • The earth is the Lord’s, and the fullness thereof; the world, and they that dwell therein (Psalms 24:1). • The Lord is the creator of the earth (Mosiah 2:21), the creator of men and all things (D&C 93:10), the supplier of our breath (2 Nephi 9:26), the giver of our knowledge (Moses 7:32), the provider of our life (Mosiah 2:22), and the giver all we have and are (Mosiah 2:21). 12

13. I Am a Steward (continued) 2. Stewardship: We are stewards over all that the Lord has, is, or will share with us • The Lord 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 (D&C 136:27). 13

14. I Am a Steward (continued) 3. Agency: The gift of “choice” is man’s most precious inheritance • President David O. McKay wrote: • Next to the bestowal of life itself, the right to direct that life is God’s greatest gift to man.… Freedom of choice is more to be treasured than any possession earth can give (Conference Report, Apr. 1950, p. 32; italics added). 14

15. I Am a Steward (continued) 4. Accountability: We are accountable for every choice we make • The Lord 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 (D&C 72:3). 15

16. I Am a Steward (continued) • On the questions of what is really ours, Elder Neal A. Maxwell stated: • The submission of one’s will is really the only uniquely personal thing we have to place on God’s 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 God’s 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). 16

17. Myth 3. It’s About Money Some feel personal finance is all about money Money is the answer to all our problems We just don’t have enough of it Someone commented: If you can solve it with money, it is not a problem The Reality is different 17

18. 1. It’s about faith Personal finance is not about money Its about what the Lord trying to teach us about life and ourselves through personal finance What lessons can the Lord teach us from personal finance? Reality 3. It's About Faith 18

19. In most cases, financial problems are behavioral problems, not money problems We all know what we should do: live on a budget, spend less than we earn, not go into debt, build a reserve, etc. But other things (ignorance, carelessness, compulsiveness, pride, and necessity) get in the way For most, it is not a question of knowledge, but of motivation It's About Faith (continued) 19

20. It's About Faith (continued) How do we motivate ourselves and others? Elder Boyd K. Packer answered this when he said: True doctrine, understood, changes attitudes and behavior. The study of the doctrines of the gospel will improve behavior quicker than a study of behavior will improve behavior (Boyd K. Packer, “Little Children,” Ensign, Nov. 1986, 16). 20

21. It's About Faith (continued) The lesson for us then is to understand doctrine The “doctrine” is we have been commanded in the scriptures and by living prophets to: Live within our means Get out of debt Build a reserve Save for long-term goals Teach our children From this perspective, we see that financial problems are not necessarily problems of money, but problems of faith 21

22. It's About Freedom 2. It’s about freedom 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 (“Prepare Ye,” Ensign, Jan. 1974, p. 69). Obedience to the commandments (which includes the commandment to get and stay out of debt) are critical parts to this freedom promised And ye shall know the truth, and the truth shall make you free (John 8:32). 22

23. 3. It’s about happiness Happiness is not dependent on the amount of money we earn Rather, it comes from doing the things that we know are right. The prophet Alma wrote: Behold, I say unto you, wickedness never was happiness (Alma 41:10). It's About Happiness 23

24. Myth 4. Finances are a Temporal Matter • Many think money matters are only temporal matters • They feel that how we manage their money has nothing to do with their spirituality. • They feel that scriptures talk only of spiritual things and not temporal issues such as financial matters. • Those are left up to them • The reality is different! 24

25. Reality 4. Finances are a Spiritual Matter Money matters are spiritual matters because: • 1. All things are spiritual • The Lord said, “All things unto me are spiritual, and not at any time have I given unto you a law which was temporal” (D&C 29:34) • The Apostle Paul taught that the love of money is evil, not money itself (1 Timothy 6:10). 25

26. Finances are a Spiritual Matter (continued) • 2. Money is a medium of exchange • Elder Sterling W. Sill said: • We can build temples with money, we can send out missionaries with money, we can erect educational institutions, operate hospitals, and pay our tithing with money. … In many ways we can build up the kingdom of God with money (Sterling W. Sill, “A Fortune to Share,” Ensign, Jan. 1974, 60). 26

27. Finances are a Spiritual Matter (continued) • 3. There is no true freedom without financial freedom • 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 (“Prepare Ye,” Ensign, Jan. 1974, p. 69). 27

28. Finances are a Spiritual Matter (continued) • 4. Money is a tool to teach gospel principles • Money is a tool to teach us many things, including the gospel principles of sacrifice, discipline, law of the harvest, and work • Money teaches and reinforces both the spiritual and physical creation, as we develop goals and budgets and work toward them • Money teaches the Law of the Harvest, as we invest for retirement and other goals 28

29. Myth 5. Finance is a Man’s Responsibility • Some think money matters are a priesthood responsibility for married couples • They think if wives become knowledgeable about financial matters, their husbands will be upset • They reason that since the husband makes the money, husbands get to decide where it goes (This is known as unrighteous dominion) • The reality is different! 29

30. Reality 5. Finances are a Shared Responsibility • The Proclamation on the Family states: • By divine design, fathers are to preside over their families in love and righteousness and are responsible to provide the necessities of life and protection for their families. Mothers are primarily responsible for the nurture of their children. In these sacred responsibilities, fathers and mothers are obligated to help one another as equal partners (Proclamation on the Family, 1995). 30

31. A Shared Responsibility (continued) • Marvin J. Ashton counseled: • Management of family finances should be mutual between husband and wife in an attitude of openness and trust. Control of the money by one spouse as a source of power and authority causes inequality in the marriage and is inappropriate. Conversely, if a marriage partner voluntarily removes himself or herself entirely from family financial management, that is an abdication of necessary responsibility (italics added, Marvin J. Ashton, “Guide to Family Finance,” Liahona, Apr. 2000, 42). 31

32. Myth 6. Credit Card, Auto and Consumer Debt is OK • Some consider it is OK for us to go into debt for things, especially things they really want • We can’t have a car without a car payment, can we? • It helps build our credit score—doesn’t it? • The reality is different! 32

33. Reality 6. Debt is Dumb and Slows Growth • Consumer debt slows growth, savings, and is expensive, both economically and spiritually • 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, Aug. 1984, 41). • Sadly, consumer, auto, and credit card debt not paid off monthly are not included in that short list of acceptable debt 33

34. Debt is Dumb (continued) • President Ezra Taft Benson said: • Pride is a sin that can readily be seen in others but is rarely admitted in ourselves. . . It is manifest in so many ways, such as . . . living beyond our means (italics added, Ezra Taft Benson, “The Faces of Pride,” New Era, Oct. 2003, p. 40). • Perhaps the debt problem is more a problem of pride than it is of money? 34

35. Myth 7: Budgets are for College Students • Some feel that living on budgets is only for college students • Those more careful with their money, “mature” people like ourselves, don’t need to have a budget • They know where their money goes (it goes to pay their bills) • The reality is different! 35

36. Reality 7. Every Family Should have a Budget • President Spencer W. Kimball counseled: • 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). 36

37. Every Family Should Have a Budget (continued) • What is a Budget? • It is the single most important tool in helping us attain our personal goals. It is a tool—just like a hammer or a nail • It is the process of planning our spending • It’s making sure our resources are used for the things that matter most—our personal goals 37

38. Budgeting: The Old Way Income Available for Savings Tithing Expenses Personal Goals 38

39. Budgeting: The Better Way Pay Yourself Income Pay the Lord Expenses Other Savings Personal Goals 39

40. Every Family Should Have a Budget (continued) Elder L. Tom Perry taught this when he 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). 40

41. Every Family Should Have a Budget (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, “It’s No Fun Being Poor,” Ensign, Sept. 1982, 72). 41

42. Myth 8. Parents are Responsible to Support their Adult Children Financially • Some consider that parents must support their adult children financially (regardless of the age of their adult children) • They must continue giving food, clothing, cars, insurance, etc. regardless of their children’s age, actions, and unwillingness to learn or take financial responsibility • The reality is different! 42

43. Reality 8. Adult Children are Responsible For Their Own Finances • After children become adults, they are responsible for their own financial well-being • Parents are not responsible for our adult children’s finances—our adult children are. • Likewise children are not responsible for their parent’s finances • Parents who continually support their children financially, will find their children will always need support 43

44. Myth 9. I can start getting out of debt and start saving later • Some think they do not need to get their finances in order now because they can always start getting our of debt and saving later • It is easy to get out of debt so why worry now, or • They will start saving when they get the “big bucks” later on, or • There is no possible way that they can begin saving now, so why even try • The reality is different 44

45. Reality 9. We must start saving now • If you want to get out of debt, have an adequate retirement, and save for education and missions for yourself and children, you must start now! • You must think long-term now (D&C 43:34) • You cannot put it off saving • Time value of money takes just that--time • The Law of the Harvest is still in effect

46. Myth 10. I Pay my Tithing, I Have Nothing to Worry About Financially • The prophet Malachi said: • Bring ye all the tithes into the storehouse, . . . and prove me now herewith, saith the Lord of hosts, if I will not open you the windows of heaven(Malachi 3:10, 3 Nephi 24:10). • Doesn’t it say that if they pay their tithing, the windows of heaven will open and they will get all the financial blessings they need, regardless of any learning, thought, application, hard work or effort on their part? • The reality is different! 46

47. Reality 10. We Must Learn To Be Wise (Financially) • The prophet Malachi promised that God will open the windows of heaven • However, there is no promise that the windows of heaven will be financial blessings or that paying tithing will eliminate all our financial problems • We still are stewards over what we have and are, and must learn to live in this increasingly challenging financial world • We have been commanded to be wise (“Oh be wise, what can I say more”) 47

48. We Must Learn to Be Wise (continued) Interesting statistics: • Average per household debt in the U.S. is $14,500 excluding mortgage debt in 2007 • Credit card users pay 12-20% more than cash users • 40% of American families spend more than they earn • The typical family pays $1,200 per year in interest • About 60% of all active credit card accounts are not paid off monthly • Most couples indicate that finances are a major stress on their marriages Source: available upon request 48

49. We Must Learn to Be Wise (continued) • How do to you learn to be wise financially? • There are many sources of good information • It just takes time to sort them out • Let me add two other sources to your list: • 1. The LDS Provident Living Website • www.providentliving.org, then Family Finances • 2. The BYU Marriott School of Management’s Personal Finance website • http://personalfinance.byu.net 49

50. LDS Provident Living Website