"Where's All Our Money Going?"

Financial Management

One of mortal life’s major challenges is our management of physical resources—preserving and multiplying them to good purposes.

Setting Financial Goals

Personal financial management begins with goal-setting. As individuals and as families, we should determine our goals jointly. Then we should plan together according to our interests and capabilities. Following are the steps for making such a plan:

1. Make a list of basic needs and fixed expenses, such as tithing, offerings, food, shelter, and clothing.
2. Make a list of wants, such as home furnishings, recreation, toys, books, and musical instruments.
   
3. Make a list of wants requiring major financial outlays, such as a new home.
   
4. Set priorities for the items on each list, and establish both short-term and long-range goals to achieve the most important priorities.
   
5. Evaluate and revise your goals regularly so that they will accurately reflect your family’s needs and wants.

Budgeting

President N. Eldon Tanner once said: “It has been my observation in interviewing people through the years that far too many people do not have a workable budget and have not disciplined themselves to abide by its provisions. Many people think a budget robs them of their freedom. On the contrary, successful people have learned that a budget makes real economic freedom possible.” (Ensign, Nov. 1979, p. 82.)

There are as many ways to set up a budget as there are people who make them, but the following steps outline a standard method.

1. For a one-year period, estimate your monthly income from all sources.
2. Estimate your monthly expenses by amount and percent.
   
3. Then see how your current income distribution compares with your family’s financial goals. Do changes need to be made? Ask a few basic questions: Do we need to increase our income? Do we need to reduce expenses?
   
4. Try keeping exact records of real expenses and income for a month. At the end of the month, evaluate your budget and progress toward meeting family financial goals by totaling expenses and comparing them with the original plan. Adjust and adapt as often as necessary.
   

Controlling Debt

Elder J. Richard Clarke adds: “Debt is always a burden, but some debt is necessary. Sound business debt, home mortgages, and other forms of ’secured’ debt are unavoidable for most of us. However, extravagant use of credit, which comes from yielding to our emotions rather than reason, creates burden.

“For most of us, consumer debt is dangerous and difficult to contain because it is so readily available.” (Ensign, Nov. 1980, p. 83.)

Consider these suggestions on the use of credit:

1. Plan the use of credit as part of total money management. Know precisely how much can be borrowed and how it will be paid back..
   
2. Use credit only for necessities, not luxuries.
   
3. Do not use credit for things that will be gone before the debt is paid.
   
4. Avoid overextended credit. Pay off current bills before buying more on credit.
   
5. Compare interest rates from various credit sources.
   
6. Establish a good credit rating in order to qualify to borrow money when needed.
   

Approach buying on credit with wisdom and care. President J. Reuben Clark, Jr., said, “Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you.” (Improvement Era, June 1938, p. 328.)

Saving

A good savings program is essential to financial security. One of the simplest methods of saving is through regular deposits of money in a bank, credit union, or other savings institution. Money in savings gives us three choices of how to use it:

1. Operational—When we spend money from our savings, it should be for planned, short-term purchases, such as for maternity expenses, appliances, and furniture. Savings for these purchases help us avoid interest by paying cash and also lets us wait for the lowest price.
   
2. Emergency—These funds should be between one and three times our monthly income. It provides for such unexpected expenses as illness, car repairs, and temporary unemployment.
   
3. Long-Range—These funds are for future contingencies, such as the purchase of a house, retirement, a mission, weddings, or education.
   

Summary

“The foundation and perspective then are these,” said President N. Eldon Tanner. “We must first seek the kingdom, work and plan and spend wisely, plan for the future, and use what wealth we are blessed with to help build up that kingdom. When guided by this eternal perspective and by building on this firm foundation, we can pursue with confidence our daily tasks and our life’s work, which must be carefully planned and diligently pursued.” (Ensign, Nov. 1979, p. 81.)

Teach your family to live by these basic financial principles, and the blessings that will accrue to both you and them will be immeasurable.

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"Where's All Our Money Going?"