Young Women Finance Class
Lesson 3: Be Mindful of Money
The Big Picture
We need to understand the importance of the rainy day fund, how to make wise purchases using cash, and the advantages of saving at an early age.
Application:
Mastering money takes work and patience. It will take time, but the payout is huge!
What it Boils Down To:
We should strive to be obedient with prayerful planning. It is often through the planning and preparation that Heavenly Father pours out His richest blessings.
Scripture Thoughts:
Genesis 41: What can we learn about Joseph of Egypt? Be prepared and ye shall not fear!
5 Handy Questions to Ask When Making Big Purchases
1. Would you buy this product tomorrow if you were to wait overnight and had time to think about it?
2. Is this item a need or a want? Basic needs are food, clothing, transportation, and shelter. Everything else is a want.
3. Do you understand the item? If you buy something just to own it, without really knowing how to use and enjoy it, is this a really good purchase?
4. Is there a better use for the money? Consider the opportunity cost. Once you buy an item, you can’t do anything else with that money. In the long run, would it be better to save this amount for the future?
5. Have you asked anybody their opinion? Seek wise counsel.
Saving:
It’s recommended that you save at least 10% of your income.
Examples of time and interest being on your side:
Put in $50 a month for 24 months at 5% will turn into $1260, but you only put in $1200
If you do this ($50/month at 5%) for 60 months, it will turn into $3400 but you only put in $3000!
Now for some bigger numbers to show the power of interest:
If you start at age 25 and put in $20/month for 10 years at 5%, you will only have put in $20,000. But if you then, at age 35 stop investing and just let the money sit, when you are 70 it will have turned into $895,765!!!
Now suppose we wait ten years to being investing our $20/month. Starting at age 35 putting in $20/month for the next 35 years at age 70 we will only have $542,049. So even though we put in $70,000 as our investment, the interest never lets us catch up!
*** It is not necessarily how much you have that counts…it is what you do with what you have that really matters!
*Dave Ramsey has some great tips on his website: www.daveramsey.com
Dave Ramsey’s Baby Steps
Baby Step 1
$1,000 to start an Emergency Fund
An emergency fund is for those unexpected events in life that you can’t plan for: the loss of a job, an unexpected pregnancy, a faulty car transmission, and the list goes on and on. It’s not a matter of if these events will happen; it’s simply a matter of when they will happen.
Baby Step 2
Pay off all debt using the Debt Snowball
List your debts, excluding the house, in order. The smallest balance should be your number one priority. Don’t worry about interest rates unless two debts have similar payoffs. If that’s the case, then list the higher interest rate debt first.
Baby Step 3
3 to 6 months of expenses in savings
Once you complete the first two baby steps, you will have built serious momentum. But don’t start throwing all your “extra” money into investments quite yet. It’s time to build your full emergency fund.
Baby Step 4
Invest 15% of household income into Roth IRAs and pre-tax retirement
When you reach this step, you’ll have no payments—except the house—and a fully funded emergency fund. Now it’s time to get serious about building wealth.
Baby Step 5
College funding for children
By this point, you should have already started Baby Step 4—investing 15% of your income—before saving for college. Whether you are saving for you or your child to go to college, you need to start now.
Baby Step 6
Pay off home early
Now it’s time to begin chunking all of your extra money toward the mortgage. You are getting closer to realizing the dream of a life with no house payments.
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The Young Women in Our Ward are Focusing on Becoming Self-Reliant!
"What skills do we need to help us become self-reliant? . . . In the early days of the Church, Brigham Young pled with the sisters to learn to prevent illness in families, establish home industries, and learn accounting and bookkeeping and other practical skills. Those principles still apply today. Education continues to be vitally important. . . . "I asked several bishops what self-reliance skills the sisters in their wards needed most, and they said budgeting. Women need to understand the implications of buying on credit and not living within a budget. The second skill bishops listed was cooking. Meals prepared and eaten at home generally cost less, are healthier, and contribute to stronger family relationships." Julie B. Beck, Relief Society general president.
