Fernanda Resendiz

April 13, 2016

Final Written Section
Bro. Pendleton

PRINCIPLES TO FOLLOW FOR FINANCIAL INDEPENDENCE

The first principle to follow for financial independence is to realize that we are
dependent. Pay the Lord first, and then yourself. As members of the Church we are taught that
the One who has given everything to us has set as a commandment that we give 10% of our
income to His Church to help the needy and help with the expansion of His kingdom. Being
embarked in such a great work has its perks. Its not a matter of money, its a matter of faith. As
we prove to God that we are willing to give up our selfish desires to contribute in His kingdom,
we will be blesses and we have been promised that He will cause blessings to come in such a
way that there will not be enough room for us to hold it in (Malachi 3:10). I have been able to
experience in my own life how the Lord truly blesses our efforts to contribute and help the lessfortunate. In the case of the family that we are helping, this principle is key. If they want to
prosper, they must understand that tithing is a basic concept to start talking about finances.

Now that we have understood the concept of giving to God what is his there is also this
concept of financial bondage that we need to be aware of. Even though this family has been

trying to keep priorities straight, it obvious that there has been some mismanagement. We must
first recognize that the amount of debt is extensive and it will take some time before they are free
from those obligations to pay creditors. The plan we propose includes an organized budget to
prevent them from falling into bigger debt and helping them get out of financial bondage as
soon as we can.

We must prepare financial goals and make wise financial decisions. I see that this family
has tithing at the top of their list, but I also see things that they certainly can live without and
would enable them to become debt-free faster. By looking at their financial situation, the goal we
propose for this family is to be completely out of debt in 38 months. Now, this does not mean
that they will completely have to abandon some things that in my perspective are not essential,
but certainly cutting down on the budget for that activity would be helpful. Every financial
decision made in wisdom will help this family get closer and closer to financial independence.

What we want to accomplish by the end of this financial management project is to

increase this familys worth. I am not talking about the worth they may have in Gods eyes, but
in how the world measures their worth, and this type is certainly important to our Heavenly
Father so we can be at peace in our lives. Our worth is equal to our assets (things of value and/or
increase in value) minus our liabilities (things that cost us or cause us to lose capital). We get rid
of the liabilities and slowly but surely increase our net worth as we get rid of debt, pay off
accounts, invest in assets that will appreciate and as we said before, continue making wise
financial decisions to not trip with the same rock.

We start this project by laying out specifically how this family is spending their money.
Now, bishop, this does not only apply to this family but any family that is going through the
process of wanting to become financially independent. We are constantly earning and spending
money, but do we keep track as we should? If we dont control it, it will control us. It is
important that we know where our money is going to be sure that is going to the priorities,
essentials and all needs are being met. This process is called budgeting. We organize how our
income will be distributed among the various accounts and bills to pay to stay organized and
focused on our financial goals.

Each little principle that we live helps us build strong financial position. This can be
accomplished by saving money, buying appreciating assets, pay off present debts and avoid debt
in the future. The more we build upon these principles, the more we are in control. A strong
financial position does not necessarily mean that we are rich by any means, but it means that we
are living within our means. Being in a strong financial position means being disciplines,
independent and helpful to others that are still in the process. There are multiple ways in which
we can strengthen our financial position. We can have control over our budget, set priorities and
even invest!

Investments are instances in which you spend on an asset and this assets value grows
over time and gives you back appreciation, so you end up with more money than the money you
put in. Now, this family especially should be careful on their investments at this point.

Investment money should be money that you are not planning on using for the next 10 years at
the very least. One of the few things that I can think of getting in debt for because of investing
would be education or a house and maybe a car as this family is contemplating. Investments go
from real state, to stocks, etc. If anyone is interested in investing, they should get educated first
to learn that appreciation doesnt always happen as quickly.

In the world of investing there are stocks. Stocks are a fraction of the worth of a company
that you buy, which makes you a part owner of the company if you would. Stocks prices are
always changing, so something that you bought for a really cheap price might be very expensive
the next day and you would have made money. The same can also happen the other way around,
you could buy expensive stocks one day and the next you will have lost thousands of dollars in
stock but it doesnt really work that way. You should buy and hold stocks for a long time. The
scriptures say that all things spiritual to God and I enliken this to that concept too. For example,
God stays even when its hard. He keeps us even when we are damaged or having done
otherwise wrong. There is a saying that says that things get worse before they get better. The
economy is not very predictable, but the general principle for succeeding at investing in stocks is
buy and hold. .

IDEAL investor: invest consistently (not timing the market), diversifies and ignores
confusing world events, expects the market to go up and down, looks at investing with long term
perspective. BE NOT DECEIVED. There are a few secrets for the ideal investor. As we were
talking about in the previous chapter we need to be consistent in our investing. One cannot try to

time the market to make sure you buy stocks when cheap and sell them when they are expensive.
Also, we need to diversify our types of investing. Dont just limit yourself to one kind of
company investment. Remember that the market is a big place, and when someone in one place
is down, usually another place somewhere is up. Also, do not have high expectations. Dont
misunderstand, ideal investors have hope but not false ideas that the market will go up the day
after we buy our first stock. Do not be deceived by what other people say. The facts are that the
market is unpredictable and nothing in the near future can change that.

The concept of investing is a good idea for many, but if you are trying to get out of debt,
it is probably best to do that first, so lets go back to the family in ward. It seems like this family
has leaned a little too much on credit and now is paying a lot of interest too. Credit can be good
for many things. Buying a house for example is something worth to get into debt for, but even
better if you can get out of it as soon as possible.

Once weve seen one side of the coin, lets look at the other one. There are disadvantages
to credit that accompany the purchases you make with it. First, there is interest. Interest is an
additional amount you have to pay corresponding to the money you spent. We should now spend
what we dont have, I understand there are emergencies, but as often as our conditions permit we
should try to live within our means and avoid interest. In the end, you pay more than what you
actually spent because the bank that let you use their money wants to get something out of it.
Interest is really easy to become a slave to.

As we consider our options to cover our needs without the need of getting into debt and
avoiding interest there is the good old solution of savings. Savings work in your favor if you
have self-control and know how to save. You can even put your money into a savings account
and if you dont touch the money in a certain amount of time you could get interest that works
for you. Instead of you paying for using money, the bank rewards you with a percentage of what
is in your account and little by little your money starts growing. There is also the option of
borrowing. Be it from a friend or a loan center, you are always subject to a certain degree of
liability and you come to terms as to when to pay the amount you borrowed off. My
recommendation however, is savings as long as you are able.

At the beginning of this analysis we talked about making wise financial decisions and
how those affect our net worth because we have more assets than or liabilities can take over.
There is also the concept of making Critical financial decisions which are those decisions that
will decrease our worth. Some of those decisions include spending money on things that rather
decrease in value such as automobiles. Transportation is something we all have to do. We need to
be able to move around in order to go to school, work, social activities, etc. Even though we have
options between public transportation, rides with friends, our having our own car, most people
would agree that is comfortable to have your own car and manage your own time. However, we
need to be wise when making the decision of buying a car as well as the process of financing the
same.

We are our own agents and are free to choose. When it comes to knowing if we want to
buy a new or used car, most people would go for the new or fancy because cars are nicer to have,
but we need to remember that the car we drive does not define who we are. We need to be careful
and not let this definition deceive us. If a person has come to this far to have the money to buy a
car, we might as well be careful with how we manage where the money goes.

Another part of financing is to know how to negotiate the deal. We need to know what we
are able and willing to pay. This applies for any type of purchases, be it a house, a car, furniture
or any needs. Also, it is important to do enough comparative shopping to know where we can
find the best deal. If you feel like the deal you are being offered is not fair or there is a better one
out there, be willing to walk out if the negotiation is not acceptable or reasonable. In the end, you
have the last word and will make the decision as to whether the purchase is worth the spending
or not. Never buy something because you feel responsibility to the person offering you the deal.
Also, making a big purchase because the person you talked to was nice even though you were
not convinced with the product, this is the opposite of making wise financial decisions.

As we come to making a decision on housing, for example, it is also important to know

when its appropriate to rent or buy. Even though most people would prefer to own a house than
to rent there are several circumstances to consider. Young married couples, for example, prefer to
rent until they reach a more stable status. Also, income plays a big role because you want to be
able to buy a house you can afford. This is something where both spouses should be involved
together and make a decision.

Selecting a home that is appropriate for your needs is as important as the price itself. One
makes of his or her home a sanctuary. The selection of the home should also be something in
which both spouses are involved and constantly re-assessing. The condition of the home is
obviously important and the deal that you reach with the real estate agent is a huge part of
closing the sale.

Once you have selected a house you can look at your payments plan, this is called
Amortization. This helps you see how much of the house you are paying off and how much
interest you are getting rid of. You will notice in Excel spreadsheet showing the payments for the
house, that interest is taken care of first, so for at least the first 10 years you are just getting rid of
interest and then you start putting the money into the house itself. The amortization will give you
a clear sense of direction of where your money is being put into. Also, having a home is an
appreciating asset that your family can enjoy even after you are gone.

While we are on the subject of being prepared for the future, it is important to remember
that we have very few certainties in life, including how much time we will live or what can
happen tomorrow so we can be prepared. The concept of risk addresses the issue that accidents
or unexpected expenses can happen such as car accidents, death, sickness, etc. Insurance is the
part of the economy that makes sure we are ready in case any of those situations come up. We
have been taught to avoid risk by being careful, reduce it by taking the necessary precaution and

assume them when they happen. There a lot of insurance plans, and according to the needs of the
individual or family you can choose the one that suits the best.

I currently work at an Auto Insurance agency and I am constantly reminded of the

importance of having the right coverage. I met this family once that only the parents were in the
policy because their children were 16 and 17 and it would be too expensive to put them in the
policy. One of the teenager had a car accident and the insurance would not cover because the
driver was not insured in the policy. The family ended up hiring a lawyer but lost the case
because they were at fault. They lost tens of thousands of dollars. Fortunately no one was
seriously injured but coverage should not be avoided because of price because you might end up
saving a lot more if there is an incident.

Life and Health Insurance are also crucial to have because they tend to be the most
unexpected incidents. There is not a reasonable process to follow to know when you will get sick
or die, but you want to make sure that your family is taken care if in case that happens.
Depending on the familys needs (either if its just an individual, a couple, a family with one
child or more) you can find the perfect plan by doing enough research. If a family member has a
special medical condition its important that the insurance knows so they can offer additional
coverage. For example, people in my family are more likely to get cancer because of our family
antecedents so we are currently paying for coverage that will pay if I get cancer.

Ultimate financial independence is our goal. As we get rid of our liabilities and work hard
to increase our assets we become more likely to enjoy financial freedom and be better tools in
the hands of God to help other people achieve the same goal. The family that we are doing this
project for has the potential to financially independent if they carefully follow the plan with
which we have presented them.

As they get close to accomplish the goal of being financially free it is also important to
think of their retirement assets. These are assets that will appreciate in value and is basically
money that will be sent to work for you. These assets come in the form of investments, property
or businesses.

Nephi taught men are that they might have joy (2 Nephi 2:25). Even though it is part of
this mortal time to pass through sorrows and trials, there are some that we can avoid if we follow
the counsel of the living prophets and prepare for the future. This advice is not only helpful, it is
essential. As we come to learn how to work with the tools God has given us we will be better
able to look at things on the spiritual side because the temporal issued will no longer be such big
problems for us.