Transcript Why Am I Saving? Understanding the Influences of

Presented by Scott H. Payne, PhD, CPA
 Introduction
 Why
Saving Matters
 What About Debt
 Understanding Expenses
 What Else Can I Do?
 Conclusion
 Questions?
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“Successful family finances begin with the
payment of an honest tithe and the giving of a
generous fast offering. The Lord has promised to
open the windows of heaven and pour out great
blessings upon those who pay tithes and
offerings faithfully (see Malachi 3:10)” (“Prepare
Every Needful Thing”, lds.org).
“If you want to change the fruits, you will first
have to change the roots. If you want to change
the visible, you must first change the invisible”
(“Secrets of the Millionaire Mind”, T. Harv Eker).
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Peter Skillman, currently an executive
at Nokia, ran an experiment to see
who could build the tallest tower to
support a marshmallow in 18 minutes
using spaghetti, tape, and a piece of
string.
◦ Most successful – Kindergarteners
◦ Second – Engineers
◦ Least successful – Lawyers and Business Students.
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He later stated, “Multiple iterations almost always
beats single-minded focus around a single idea. If
you have a short amount of time, it’s more important
that you fail. You fail early to succeed soon” (“The Up
Side of Down”, Megan McArdle).
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Delaying the start of your saving
◦ by 5 years requires a 28% increase per year for the
remaining 35 years.
◦ by 10 years requires a 67% increase per year for the
remaining 30 years.
◦ by 15 years requires a 122% increase per year for
the remaining 25 years.
◦ by 20 years requires a 206% increase per year for
the remaining 20 years.
◦ by 25 years requires a 345% increase per year for
the remaining 15 years.
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Starting with 3% at 25 and increasing it by 1%
every two years until you reach 18% at age 55
and then adjust it to 18.65% from age 57
through age 65 will allow you to save the $1
million.
You will have to save about the same amount
as if you began at age 35 ($369,894).
The biggest advantage, however, is that you
are in the habit by age 35 of saving some of
your income over not saving at all.
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These models all assume no company match.
When a company match exists, you will need
to save a much smaller portion of your own
income.
Make sure you understand when the vesting
occurs with a company match.
◦ It could be a gradual vesting. For example, you vest
20% a year beginning in year three. If you worked
the required time but left in year five, you would
receive 60% of the match.
◦ It could be 100% earned in a specific year.
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Consider your career path when making your
determination of whether or not to count the
company match in your calculation.
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“Since the early days of the Church, the Lord's prophets
have repeatedly warned against the bondage of debt. One
of the great dangers of debt is the interest that
accompanies it. When it is necessary to incur debt, such as
a reasonable amount to purchase a modest home or to
complete one's education, the debt should be repaid as
quickly as possible” (Debt, lds.org).
“Some forms of credit, such as credit cards, have
particularly high interest rates. Once you are in debt, you
find that interest has no mercy. It continues to accumulate,
regardless of your situation…Discipline yourself in your
purchases, avoiding debt to the extent you can. In most
cases, you can avoid debt by managing your resources
wisely…When you have paid your debts and accumulated
some savings, you will be prepared for financial storms
that may come your way. You will have shelter for your
family and peace in your heart“ (“True to the Faith”, pg.
48-49).

U.S. household consumer debt profile as of
January 2014:
◦ Average credit card debt for indebted
households: $15,270
◦ Average credit card debt for all
households: $7,123
◦ Average mortgage debt: $149,925
◦ Average student loan debt: $32,258
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As of 12/30/2012 46.7% of households
carried a credit card balance.
Total US student loan debt grew at 11% from
2012 to 2013.
Information taken from http://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/
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If you use a credit card, get in
the habit of paying it off
monthly.
Only use debt when there are
financial benefits associated
with it (i.e. 10% discount, 1% 3% rebate, no interest for 6
months).
ALWAYS make debt payments
on time.
Accelerate debt repayment
when possible.
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If you have savings pay off
your high-rate debt.
Transfer debt from highinterest-rate loans to lowerrate loans.
The amount of debt you
have compared to your
income shouldn’t exceed
35% to 45% of your income.
Information taken from “Get a Financial Life” by Beth Kobliner
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If you carry a balance on a
credit card then consider the
following:
◦ Pay your bill the day you get it.
◦ Never miss a payment, even
when there are special offers to
miss payments for holidays.
◦ Make sure you understand how
the interest is calculated.
Information taken from “Get a Financial Life” by Beth Kobliner
“A need is something required for
survival. It provides a means to go on
living, accomplishing, or contributing.
A want, on the other hand, is
something that provides greater
convenience, enrichment, or pleasure”
(“Love & Money”, Benard Poduska).
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Needs are things we generally can not survive
without having, such as:
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Nutritious food
A place to live
Appropriate clothing
Transportation
Wants are things we'd like to have, but will be
able to survive without. Examples include:
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Designer clothing
Entertainment (i.e. Movies, video games)
Technology (i.e. An iPad, cell phone, computer)
Recreational equipment (i.e. A snowboard, boat)
Information taken from http://pbskids.org/itsmylife/money/managing/article2.html
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Mandatory Expenses
◦ Spending typically required to sustain life.
◦ Examples include rent or mortgage payments, monthly
utilities, tax payments, and debt payments.
◦ Not easy to cut out of the budget as not paying them may
have severe long-term legal consequences.
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Discretionary Expenses
◦ These items are usually related more to personal wants
than actual needs.
◦ They are typically variable in nature.
◦ Examples include going out for dinner, entertainment, and
vacations.
Information taken from http://www.ehow.com/info_8487558_differences-discretionary-vs-mandatory-expenses.html
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Always pay your tithing first before any other
bill.
Never miss a mortgage, debt, utility, or any
other payment that you have a commitment
to pay.
Always pay your bills on time.
Use credit cards wisely and manage wisely.
Look for opportunities to reduce costs
through their use, but never carry a balance.
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Buy a car that is cheaper and maybe more
economical, but as reliable to reduce your
monthly car payment.
Refinance a mortgage with a lower interest
rate. You could also take some cash out to
pay off higher debt which would provide a tax
advantage.
Evaluate some items that you are required to
pay monthly to determine if they are really
necessary.
Marital Quality & Family
Materialism
Education
Versus
Financial Prudence
Marital Quality
.21***
Materialism
-.22***
R2=.21
R2=.45
Age
.12**
Financial
.38***
Prudence
.53***
.18***
Retirement Savings
Rate
Household Income
.09*
Education
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Note: * p ≤ .05, ** p ≤ .01, *** p ≤ .001; Standardized regression coefficients are reported in the figure. R2=
amount of variance accounted for in endogenous variables. Model fit for this model was: Chi-square = 437.01,
df = 234, p ≤ .001; CFI = .998; RMSEA = .039.
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Do I work to find a happy medium on issues
where there is disagreement?
Do I try to make my spouse happy?
Do I try to strengthen my relationship with
my spouse and family?
Do I teach gospel centered values in the
home?
Do I take time to listen and improve
relationships in the home?
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Do I demonstrate the value of education by
identifying lifelong learning goals?
Do I place the highest value on getting and
having things in my life?
Do I make it a priority to minimize my debt
and to pay my bills on time?
Am I more concerned with having things and
less concerned with making sure I have the
money to pay for those things?
1.
2.
3.
4.
5.
6.
Center your life around being charitable.
Save early and save often.
Make interest work for you instead of
having to work for it.
Express gratitude daily for what you do
have, and then manage your resources
wisely to get some of the things you want.
Your relationship with your spouse and
children is the most important key to your
success.
Remember that Becoming is a long-term
proposition. Keep learning.

The following sources from flickr.com were
used: inspiyr, StockMonkeys.com, Mindful
One, kenteegardin, eric731, 401(K) 2013, Tax
Credits, Josh Kenzer, kenteegardin, One Way
Stock, jiazi, Håkan Dahlström, Voxphoto, JD
Hancock, Vít Hassan, Thrift Store Addict,
jDevaun, Maia C, lumaxart, Stuck in Customs,
Alex E. Proimos, Glyn Lowe Photoworks, 2
Million Views, Thanks, joiseyshowaa, Stewf,
Winning Automotive Photography, unicefiran,
crdotx, marfis75