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?