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Jan 2009 Issue
[photopress:101Pitfalls_0109.jpg,thumb,pp_style] LDS Church members should actually be less inclined to financial pitfalls than their non-member neighbors because, in addition to generally known financial principals, they have the benefit of generations of prophetic counsel on such matters. Prophets have identified several ways that LDS families can protect themselves and become better insulated from financial crises. Some of these are:
1
Maintain and rotate regularly a family food storage
program that can help provide for emergency needs.
2
Live on less than you earn. This means spending less
than you make and providing for regular savings.
3
Avoid personal debt whenever possible. Debt should
be used only for purchase of a home, large items such as a car, or for gaining an education.
4
Always pay your tithes and offerings. One of the sur-
est ways to provide financial security is to always pay the Lord first.
5
Work with a regular family budget to help keep track
of income and expenses. It is difficult to know your family’s financial health if you don’t know how you are spending your income. Are you spending on the most important things first and separating family “needs” from individual “wants”?
6
There is no evidence that the Lord favors the invest-
ment plans of Church leaders or members who are active and pay a full tithing. Financial success results from personal preparation and following financial principals, not Church activity.
In addition to specific prophetic counsel about finances, Church members have been counseled to follow generally accepted financial principals that lead to financial security. Some of these are:
7
Invest only in things that you understand, and only
with funds that you can afford to place at risk. Putting your home or retirement funds at risk in an investment that promises unrealistic returns is inappropriate and even foolish.
8
Understand the risk and reward relationship. The
higher the promised or expected return the greater is the exposure to potential loss. There are no high return, low- risk investments, but there are lots of low (or even negative) return, high-risk investments.
9
Understand the basic economic laws of supply, de-
mand, and comparative advantage. People want to buy more at low prices than at high prices, while sellers want to sell more at high prices than at low prices. Both buyers and sellers benefit through voluntary exchange, and when people produce goods and services according to what they do most efficiently, markets produce the greatest possible output at the least possible cost.
10
Understand the concepts of compound interest and the time value of money. A dollar today is worth more than a dollar expected in the future, while money invested over time will earn interest on both the amounts invested and on the prior interest earned. The amount invested, the interest rate, and the time periods involved will all increase the ultimate value earned.
Members who heed the counsel of prophets and understand and follow sound money management concepts will be prepared for and prosper during any economic period. Those who ignore such counsel and principles will join their nonmember neighbors in suffering the financial consequences.
These possible consequences, and the many pitfalls that lead to them are the subjects of a new book on money management published by Millennial Press titled Mormons and Money: Avoiding 101 Common Money Pitfalls. Author Bruce W. Kimzey, is a retired BYU-Hawaii economics professor and financial planner. This timely and illuminating new book is available now in LDS bookstores everywhere and can be ordered at www.byubookstore.com.
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