Money Management

After teaching my GD class last week, I looked ahead in the lesson manual, and was dismayed that the next two lessons are grounded in genealogy stuff.  I figure I can do one lesson on that, but two in successive weeks is a little much for me.  Now that the Church has been planted in Utah territory and we’re not really doing straight history any more but more topical things, the lessons seem to be getting very repetitive (such as lots of missionary work and prophets/continuing revelation).   Last week, in the lesson on preparation and self reliance, we talked about food storage and 72-hour kits.  We had a great discussion humming when we ran out of time, so I made an executive decision to continue with the next topic I had in mind for last week’s lesson, which was personal finance and dealing with money.  So this post outlines some of the things I expect we’ll talk about in tomorrow’s class.

In our internal welfare system, representatives of the bishop (RS Presidents, high priests and such) often have to counsel with families with respect to their personal finances.  I’ve never been in that position, but the purpose of the lesson is for us as a group to articulate some of the things one might need to know in order to do such counseling effectively.

I thought an interesting entree to the material would be to start with some highlights from a fascinating article from Sports Illustrated in 2009, “How (and Why) Athletes Go Broke.”  The piece starts with the Notre Dame product football player Rocket Ismail, who at the end of his rookie year realized he had somehow blown through his entire rookie salary of $4 million, and was totally tapped out.  Bankruptcy and other financial distress is extremely common for former athletes, afflicting for instance 78% of former football players within two years after retirement.

Some of the factors they talk about include: 1. The Lure of the Tangible.  Athletes tend not to understand normal investing, and look for tangible places they can put their money, like restaurants and record labels.  Putting all of your money in speculative equity investments is a terrible idea.  2. Misplaced Trust.  The analog for athletes is not a white collar executive, but rather a lottery winner.  A huge financial metamorphosis over night.  Instead of relying on professionals they tend to rely on friends without any expertise.  3.  Family matters.  Divorce and child support are among the most common causes of financial problems among athletes.  4.  Not Being Able to Say No.  There is an expectation that they throw their money around, give it to people from home or hire them, conspicuous consumption to show they’ve made it.

OK, we’re not athletes, but let’s talk about how to better deal with our money in our own families.  Here’s an exercise to help you understand what your values are concerning money: Suppose you won $10,000 in a lottery.  [That's a good amount to use, because while it represents some serious coin it's not enough for anyone to quit a job.]  What do you do with it?  Are you and your spouse on the same page?  There isn’t necessarily a right or a wrong answer, but if one spouse says “Yay! I’m going shopping!” and the other says “Yay! I’m paying down our credit cards!” there is a potential for tension in that relationship over money matters.

You need to think about what you want your financial goals to be.  Ideally they should be specific, measurable, attainable, realistic, and time bound.  You need to think about trade-offs; what are you willing to give up to achieve your goals?  (Example: say you want to establish an Emergency Fund.  How are you going to do it?)

You need to understand where your money goes.  A good idea is to carry a small notebook and record all your spending over a period of time, even small things.  What do you owe?  (Need to understand debt.)  A good idea is to create a financial calendar so you don’t pay your bills late.  You need to understand your cash flow, which is the interplay of your income and expenses over time.  To balance, you can either increase your income, or decrease your expenses, or some of both.  (Increasing income may involve getting a new or second job, or getting education to improve your employment options.  Decreasing expenses is usually a quicker and easier option to improve your bottom line.)

If you want to make progress, need to stop spending leaks.  (I’m going to use the example of buying a Starbucks every day; do you have any idea how much that is over the course of a year!)  Problems are impatience to obtain something, impulse buying, using too much credit, lack of self discipline.  Using a shopping list is a good example of a tool to help avoid this problem.

I imagine we’ll talk a bit about the pros and cons of using credit.

Then we’ll come to developing your budget, which entails knowing your monthly income, your monthly fixed expenses, your monthly flexible expenses, your occasional expenses, and then comparing the income and spending and adjusting to bring them into balance.  Ideally, regular savings should be part of the budget.

We may also talk about calculating your net worth (which is your financial position at a point in time, like a corporate balance sheet) by listing assets less liabilities, and perhaps we’ll talk a bit about different financial records.

So, have any of you been in the position of needing to counsel members of your ward family (or others) on basic money management issues?  If so, how did you do it, what did you focus on?  What ideas can you add to the OP for effectively communicating these kinds of concepts?

Comments

  1. Your post is also helpful for those of us who teach the youth Sunday School. One of the lessons this month is “How I can I prepare to be financially self-reliant?” I think my sports fan YW and YM could really appreciate that SI article.

    I think in GD, you could also bring up teaching youth about finances, and how it’s important as parents and mentors to start teaching them when they are young.

    When I was RS pres, it was often an uphill battle to help some families budget. It was particularly difficult for one of my counselors to fill food orders for some families, because she lives on very little, but is very good at managing her money (and hence is very independent/self-reliant). So when she went into homes where individuals had more money than she but were asking for food orders, it was hard to swallow. She taught me that there is a time and place to be pretty frank with some people and ask hard questions and help them think about their finances (such as, “Wow, $200 is a lot to pay for a cell phone plan. How can you reconsider your expenses so that you can redirect some of that money towards food or other essentials?”).

    I don’t have much advice other than making sure to create strong, genuine relationships with our ward brothers and sisters so that it’s easier to have these financial teaching moments. There’s nothing more awkward than having to talk about finances with someone you hardly know. So VT and HTeachers need to genuinely build relationships with their families, so they can help, if needed, in money management.

  2. Kevin Barney says:

    Thanks, Corrina. The SI article is online and can be found with a google search. And I agree that framing this in terms of teaching our children is a great way to do it. I have a story about trying to teach my daughter to budget that I was going to share. (When she got her first real job and was living in Chicago she would get a check and think “Ooh, I’ve got $700 in the bank!” and spend it. But she didn’t think ahead; her next check would barely cover her rent, and then she’d have no money at all for two weeks. So I helped her set up “accounts” so that she would set aside half of her fixed expense each check, and that solved the problem.)

  3. If you talk about how to teach children, make sure you actually have parents in the class. I always found it awkward when teachers talk about how we should raise our kids and I look around and I wonder if the teacher notices that many in the class have already raised their kids or don’t have kids.

  4. Interesting advice. As I began reading the OP I was thinking that 2 yrs ago my wife and I had 10K at our disposal in the form of our son’s mission money. It was a goal of his to pay for his own mission and he saved up the 10K. We can easily afford to pay for his mission so we thought we would surprise him at he end of his mission with his 10K. That left us with his 10K sitting in a very low interest checking account. We are investing novices to say the least and I asked around to some of my Mormon aquaintances and was given wacky advice (silver, which would have been a big loser over the last 24-months, and other fringy kind of money tips.). We ultimately just left it sitting in a checking account for the 2 yrs and he is now using it to finance his college years-mostly his active social life. In essence, we just “buried” the 10K in the ground-to use the parable of the talents. Our decision was a combination of being risk averse with someone else’s money, ignorance about our options and laziness to really look into the options. At least we ended up with the 10K, plus very little interest.

    I sometimes wonder why we spend so much energy on money management at Church. It really isn’t necessary to be a good money manager to be a good Mormon, except in the cultural sense. Sure, we don’t want a bunch of free loaders mooching off the Church’s resources or, worse, married Mormon grad students with kids sponging off the state welfare system and Church welfare, but why does being good with money play such a prominent feature in our “ministry?”

    There is good practical advice of the kind in the OP, but I don’t see any of it necessary to being a follower of Christ. One can be as profligate as the “Rocket” Ismail and be spiritually healthy. so long as one pays an honest tithe, why does it matter so much on a spritual level how someone spends the rest of his or her money? Can’t a poor person teetering on the edge of penury or bankruptcy repent just as well as the middle class person who is materially comfortable?

    I recall, but can’t verify at the moment, that Spencer W. Kimball was a lousy businessman and ran his business into the ground to the point of declaring bankruptcy. If that’s true, his poor money management skills didn’t stop him from being a spiritual giant. Apart from, I suppose, trying to protect the Church’s assets from being abused, why do we spend so much Church time on a secular function like money management?

  5. Not that it should consume much of the discussion, but since it is church focused, the role of tithing would be an appropriate note to bring up. And as it is towards the end of the year and tithing settlement is nearby, I’m sure the Ward Bishop would appreciate the “plug” also. There is a brother in our ward who shared the thought “I know a lot of people who cannot live on 100% of their income (increase), but I know a lot more people who can live well on 90%”. Enjoy the class!

  6. While I agree that there can sometimes be an over-emphasis on money or material matters in church discourse and culture (shades of the “prosperity gospel” in some forms of evangelical Christianity), I view that as quite distinct from teaching principles of self-reliance. Good money management implicates important spiritual themes, such as humility and avoiding covetouness. Further, there are big practical benefits from sound fiscal habits, the biggest of which I would say is avoiding disharmony in the home. It has become a cliche but it is still true that money troubles are the biggest cause of divorce.

    So, is sound money management necessary to be a Christian and a member of the church in good standing? No. Is the lack of money management skills likely to make it harder to be a Christian and a member of the church in good standing? I think there is ample evidence that this is the case. It’s important not to conflate “lack of money management skills” with actual income or social class. Just because someone is poor or teetering on the edge of bankruptcy doesn’t necessarily mean they lack money management skills. Similarly, simply because someone is rich and has lots of toys doesn’t mean that they have those same skills. In my experience, a lot of toys sometimes is an indicator of lack of the same.

    And just to correct the record, Spencer W. Kimball was a good businessman who lead his company through the Great Depression and was known for his frugality. He was deeply effected by the bankruptcy of an early employer, losing a lot of his savings. He later preached in General Conference about the evil of declaring improper bankruptcies just to avoid repaying loans. I think his life experience greatly influenced the self-reliance message that became engrained in church culture during his tenure, think gardens and one year supplies.

  7. proud former welfare sponging young family man says:

    rb,

    I found your comment, “Sure, we don’t want a bunch of free loaders mooching off the Church’s resources or, worse, married Mormon grad students with kids sponging off the state welfare system and Church welfare” worth discussing. I have spent a good part of my life in wards full of your “worse’ case, young mormon families with (usually) the man in a top academic program (phd or law school) with a wife and multiple young kids. In full disclosure I have been that family, in my business PhD program with 4 kids, a wife who primarily stayed at home, receiving state subsidized health care and when our children were young WIC. I had many of these families as my neighbors. And yes at times the ward would step in and help a family out. It is unclear to me this is an evil of any sort that we ought to be trying to dissuade “good” members from pursuing. Many of these families were among the most resourceful and self-reliant I have seen. Yet without assistance from governmental programs and sometimes our community they simply couldn’t have entered or finished these programs. In my experience, by and large these families graduate to very self-sustaining jobs (to put it mildly) and go on to become social and financial pillars in wards around the world. I think the government is paid back handsomely for their investment as well.

    I am a big believer is self-reliance but there are really good reasons why programs such as WIC and (in our case) Massachusetts state insurance program for low income individuals (thanks Mitt!) should be encouraged and their usage encouraged, even among latter-day saint families. Investing in human capital has real returns to families and communities. While I think it is important to think very seriously about what is “good” and “bad” educational debt and our responsibilities as citizens in utilizing governmental programs I think a widespread cultural prohibition to following this route is ultimately counterproductive and a bridge too far. Please be careful before advising young families to forgo good educational opportunities or to eschew the usage of government programs when they are in need to help them cope with the realities of these early years.

  8. Kevin Barney says:

    Good idea, Lee, I’ll throw a tithing plug in there.

  9. Jack Hughes says:

    “…married Mormon grad students with kids sponging off the state welfare system and Church welfare”
    My college ward was packed with such people (mostly dental students). The scenario that infuriates me, though, are the graduate student families that come from wealthy backgrounds and live very comfortable lifestyles while in school (luxury high-rise apartment/condo, fancy cars, etc) but are claiming to be poor and living on welfare programs. Then when they graduate and start making money, they become politically ultra-conservative and vote away welfare programs for the people that really need it.

    I don’t have a problem with grad students on welfare, as long as they are truly living within their means, and not trying to support an unrealistic lifestyle. And I think the Church has too many dentists. Most dental students I knew weren’t really passionate about the science of dentistry; their aspirations were clearly punctuated with dollar signs. But that’s a topic for another thread…

  10. rb,

    I think that you’ll find that spiritual health and where we spend our money are far more related than you think, the scriptures are filled with warnings about money and it’s use, and it goes far beyond tithing.

  11. What? None of this is in the manual. I object in the strongest terms.

  12. I knew a young man who truly was passionate about dentistry but as is sometimes the case his strength eventually became his downfall. His fixation on dentistry became all-consuming, he came to focus on it to the exclusion of everything else around him. It was as though he had an entire keyboard at his disposal but he chose to focus on one key, tapping it over and over again until his was deaf to the possibility of anything else. Unfortunately this led him to neglect filling out government forms verifying income and the young man’s family never got on WIC though they would have likely qualified. His wife eventually left him, he became inactive and he now spends most of his time rehearsing the details of his divorce to patients unable to respond as he drills holes in their teeth.

  13. What’s with the hating on dentists?

  14. I am sure that the conversation will likely include the fact that sometimes there are circumstances beyond our control that make money management difficult. The most common of these is medical expenses. Before my wife died, every month we got deeper into the red because of her medical expenses. It took more than a year after she died to pay all of them off, and the only reason I could was that there were no new medical bills. It feels strange to me now that once the mortgage, insurance, and utilities are paid, my bill paying is over. Tithing is simple now, when it once was a challenge. I am no longer living paycheck to paycheck. The only thing that really changed in my finances was the lack of medical bills.

  15. My son is a spender and is one who has champagne tastes and a beer income. His son is much wiser and gave my son a Dave Ramsey course for Christmas last year. The difference in their lives as a result of the course is amazingly good

  16. Meldrum the Less says:

    i was in a half military half native ward in the South in the 1980’s and had the opportunity to counsel and help many people with financial problems. I don’t know anything about your ward. I was surprised at the things people didn’t know, things that I assumed everyone knew. Some of the people with the biggest financial challenges are the least equipped knowledge-wise to meet them. I would consider starting out very basic.

    Take budgets for example. Many people think this is some old-fashion punishment to keep your grandmother happy. It takes a leap for some to realize that your budget is about you insuring that you spend your money where you choose and not where others cajole you into spending on things you don’t want. Budget- the door to real freedom.

    Many people are in near impossible conditions with inadequate education, obligations too great to meet, past poor work performance and emotional baggage that will haunt their best efforts. One of the real lessons is the importance of preparation while young and avoiding problems that cripple you in the game of life; drug addictions, criminal records, too many kids under the custody of a crazy ex-spouse, “zipper problems” in general, etc.

  17. rb – I’d say that good money management has a lot to do with our ability to serve. If a family can live on 1 income rather than 2, then the stay-at-home spouse is much more available with their time to give service (especially when the kids are a little older). If you’re not living paycheck to paycheck, you can give money to those in need or make meals for others, etc. It’s so much easier to reach out to others and be generous when you don’t have to reserve all your resources for yourself or your family.

  18. Actually, when I was in the LDS Store (aka church distribution) this morning, I noticed that the church has an entire series called The Family Finance Workshop. There is a facilitator’s manual, student manual, and various worksheets.

  19. I read a comment a month so ago where some one, reflecting on how she had raised her children, wished she had focused on teaching budgeting over merely living frugally. If you budget you will hopefully be able to take part in experiences as a young adult, like travel, that you may not have the opportunity to for many years once you have a family. If you just focus on frugality, it becomes just deprivation.

  20. Kevin, I hope the lesson went well.

    I think a key challenge that many encounter when it comes to budgeting is what they classify as unforeseen expenditures. But if you’re really budgeting properly there should be few unforeseen costs. The battery of the car dying, an unexpected illness, even loss of a job should leave a family completely stranded if they are carefully considering what their needs will be beyond next week, next month, and even next year.

    If possible, once the immediate needs of food, shelter, clothing, transportation are covered it’s important to consider the development of an emergency fund (cash) to cover what often qualifies as unanticipated expenditures. It’s important to recognize that cars don’t last forever, appliances need to be maintained, and one should budget savings to cover the day the fridge dies for the last time. Cashflow management also allows for stocking up on staples when sales happen so you’re spending less per item than you would if you bought them on a weekly basis. Also, actively developing a plan for short term and long term disability (because it could happen to you tomorrow), life insurance, and other risk mitigation in life ensures that the unthinkable is potentially covered if that day arrives.

    As far as self reliance with employment, this speaks to maintaining skills and keeping up with the direction of your profession. Building a network today in helping others grow their careers and find employment becomes a storehouse for the future in the event you find yourself in need of help later on.

    Lastly, I think the greatest skill I gained as a child was an understanding that if you learn a few things about appliance repair, plumbing, electrical work, carpentry, auto maintenance, small engine repair, you can dramatically decrease your costs by being either a DIY type or at least an educated consumer.

  21. Sorry, that SHOULD say, “The battery of the car dying, an unexpected illness, even the loss of a job should NOT leave a family completely stranded…”

  22. Alf O'Mega says:

    If you want a succinct gospel hook to anchor the topic to, I’d suggest stewardship. Obviously, that can degenerate into a self-congratulatory, prosperity gospel discussion, but what gospel principle can’t?

    I don’t have much experience counseling others regarding their finances, but my own finances have become easier to manage since I decided to keep a comprehensive spreadsheet of all our accounts and balances. I created a tab for each account (checking, savings, credit, loan, HSA, 401k, etc.). At the front is a summary tab with hyperlinks to each account tab, followed by current and projected balances, and payment and due date, if applicable. The only thing I don’t track is cash, which is a fairly small part of our financial picture. Others might need to include it, of course.

    To keep up with this, I have a routine where every day I visit each account online and reconcile it against the spreadsheet. Doing it daily keeps the task manageable, and if there’s ever anything fraudulent going on, I’ll be aware of it pretty quickly. Also, by keeping an eye on my retirement balances, I am more frequently reminded that I need to find ways to contribute more. And I will, as soon as I pay off some short-term debt that we incurred during a recent family crisis. Fortunately, this kind of discipline has left us with a pretty clean credit history, so we have been able to use no-interest credit card offers to carry the debt until we can pay it all off. (Perhaps I shouldn’t even mention such playing with fire in the context of giving advice, but the necessary discipline is the same, whether you’re paying interest or not.)

  23. sidebottom says:

    @former sponger – I’d be cautious about encouraging students or “student families” to use government assistance, in that the system is not designed to accommodate them and often does them a disservice. Medicaid or subsidized health insurance carry income restrictions that create a bizarre incentive to ‘stay poor’, which can get in the way of paid opportunities for career growth. My family’s grad school experience was funded in large part by lucrative internships with my future (and current) employer. Although we qualified for Medicaid, we purchased group health insurance through the university and paid COBRA rates during my internships. Had we been enrolled on Medicaid, the pay increase would have immediately disqualified us, which would have left us footing the bill for (among other expenses) the birth of our second and third children, and possibly talked us out of taking the position altogether. Instead, we maintained continuous health insurance for four and a half years, finished graduate school without accumulating additional debt and managed to avoid government assistance altogether (except for the NSF fellowship that paid my meager stipend).

    Put simply, most government assistance comes with ‘strings attached’ and students (or anyone) choosing to accept it needs to understand how it might restrict their choices down the road.

  24. @sidebottom, excellent comment but the source of the problem is more fundamental. How can a married couple, or unmarried couple for that matter, explain or justify having a child they cannot provide for? Regardless of grad school, undergrad, no college-whatever-how can someone in good conscience have a child when he or she cannot afford to feed and clothe the child? Unless there are medical problems, chdren aren’t wildly expensive-though worth every penny of whatever they cost to raise. If a couple cannot provide the basics, why in the world would they have a child or children?!?!? Talk about people who need to learn some money management.

  25. Self-reliance is a cultural concept that has crept into American Mormonism, but is actually quite counter to the gospel. Look up “rely” in the topical guide of the standard works and tell me how often you see admonitions to rely on ourselves. We are told time and again to rely on no one besides the Lord, “wholly” (2 Nephi 31:19) and “alone” (Moroni 6:4) upon Him in fact.

    The modern Church’s teachings on financial responsibility may include good temporal advice, but it’s all a sad ersatz of the Law of Consecration, the cornerstone of a Zion community. Ever since the Saints chose mammon over God, we’ve condemned ourselves to serving the serpent.

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