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Assignment Chapter 1


									                          Personal Financial Plan Assignments

                       Personal Finance: A Gospel Perspective
                  Assignments, Readings, and Teaching Tools
                       For your Personal Financial Plan
                                     February 23, 2005

The purpose of these assignments is to help you put together your own personal or
family financial plan. This personal or family financial plan is a careful evaluation of
each of the major areas of personal finance to help you as you improve your financial
situation. While none of us are perfect (nor hopelessly lost) in what we do, we can all
improve. We believe that the information in this website is very important to the
improvement process. However, after you read each section, it will mean more if you
will do the assignment, read the recommended readings, and use the teaching tools as
you put together your financial plan. If you are married, we strongly recommend you
discuss the information with your spouse. We welcome you on your quest for
increased financial self-reliance from a gospel perspective.

                1. Personal Finance Introduction and Basics

1. Introduction: A Gospel Perspective on Wealth

You assignment is to think about the things we have discussed regarding the purpose of
wealth in our lives. The world has a different perspective on wealth—an incorrect
perspective. To become truly wealthy, we must first have a correct perspective and our
priorities in order. ―Behold, he that hath eternal is rich.‖ (D&C 6:7). This is the true kind
of wealth. Think through the things necessary to have this correct perspective on wealth.

For your assignment, please read and discuss the following three important chapters
which help us with our correct perspective on wealth. Read 1Timothy 6, Jacob 2, and
D&C 6. If you go to or you can read these chapters

Reading Assignments
      1. N. Eldon Tanner, ―Constancy amid Change,‖ Ensign, Nov. 1979, 80.
      15. Dallin H. Oaks, ―Timing,‖ Ensign, Oct. 2003, 10.
      44. William R. Bradford, ―Words of Jesus: Riches,‖ Ensign, Feb. 2003, 52.

Teaching Tools
      1. Personal Financial Plan Table of Contents
             This is a recommended Table of Contents for your personal financial plan.

2. Setting Personal Goals in Life

                                         - Page 1 -
                          Personal Financial Plan Assignments

Your assignment is to think through the things you want to accomplish in life. This is not
a short term assignment, and is likely the most important part of this entire financial plan.
The purpose of this assignment is to have you write down your goals for your future,
which will help determine where you want to be. President Thomas S. Monson stated:
―When we deal in generalities, we rarely have success; but when we deal in specifics, we
rarely have a failure. (Thomas S. Monson, ―Seven Steps to Success With Aaronic
Priesthood Youth,‖ Ensign, Feb. 1985, 22). While we know that some goals will change
over time, many of our goals which define our actions need be made only once. Our
prophet has declared: ―Decide to decide.‖ (Spencer W. Kimball, ―Boys Need Heroes
Close By,‖ Ensign, May 1976, 45.) What are those things we should decide about?

First, think about what Heavenly Father wants you to become. If we truly believe that He
knows what is best for us, then we can become nothing better than what He wants for us.
The challenge then, is to come to understand His will for us, and try to become that.
While it takes a lifetime to truly understand what He wants for us, we can know, through
prayer and hard work, some direction in our lives. What do you think Heavenly Father
wants you to do or become? As you answer this question, think through the scriptures,
the purpose of your life here on earth. Think through times when you felt closest to the
Spirit. What was the direction you felt inclined to go? Think through Patriarchal,
Father’s, and other Priesthood blessings. What direction and guidance were you given?
Try to answer this question with as much honesty and detail as you can. While it is a
very difficult question, it is an important question to answer.

Based on your understanding of what Heavenly Father wants you to become, begin
organizing your personal goals. As you think through your goals, there are many
different ways to organize them. You can organize them by time frame: short-term, less
than one year; medium term, more than one year and less than 10 years; and long-term,
greater than 10 years. You can organize them by responsibility: family, work, education,
church, etc. And you can organize them by priorities, with your highest priority goals
first. Regardless of your choice of organization, we encourage you to think about what
you want to accomplish, and to take your top three goals and write about them in detail.

Finally, write your epitaph, or simply describe how you want to be remembered by
family and friends. Sometimes, if we think about how we want to be remembered, we
can lead our lives in that direction. For examples of goals, see TT02 Examples of Goals.

      45. Spencer W. Kimball, ―Set Some Personal Goals,‖ Ensign, May 1985, 46.
      20. Dean L. Larsen, ―Some Thoughts on Goal-Setting,‖ Ensign, Feb. 1981, 62
      33. Spencer W. Kimball, ―Boys Need Heroes Close By,‖ Ensign, May 1976, 45.
      19. Joseph B. Wirthlin, ―Earthly Debts, Heavenly Debts,‖ Ensign, May 2004, 40.
      18. Boyd K. Packer, ―The Choice,‖ Ensign, Nov. 1980, 20.

Teaching Tools:
      2. Examples of Goals

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                         Personal Financial Plan Assignments

               These are examples of goals from students who have taken this course

3. Budgeting and Measuring your Financial Health (2/23/05)

While the previous chapter helped you determine where you wanted to be, this chapter
helped you to see where you are right now financially. Financial statements help you
understand your current financial position.

An important financial statement is your budget. Since every family should have a
budget, as President Kimball stated in the April 1975 conference, we all need to put one
together. Long-term discipline on maintaining a budget is based on anchoring the budget
to your personal and family goals.

Whether your budget is handwritten in a notebook, input into a spreadsheet program, or
part of a commercially available money management program, the important thing is that
we know where our money is coming from, where it is going, and most importantly, if
we are living within our means and moving toward our goals. A good rule of thumb
regarding spending is, if it is not moving you closer to your goals, it is not a good idea.

If you are not already living on a budget, your assignment is to begin today. Begin
keeping a record of all your expenses, using the recording method of your choice. Your
budget is probably the single most important tool to help you attain your goals. Use it
wisely and refer to it often. In addition, recording expenses is not budgeting. Recording
expenses is just record-keeping. You need to plan where your money is to go, and then
see that you follow your plan. Don’t stop budgeting just because it pinches your
spending. That shows your budget is working. If it is not keeping you from spending on
things not consistent with your goals, it is not working. TT04 Budget, Balance Sheet
and Financial Statements Worksheet is a good spreadsheet that can be used as a starting
point for your budget, balance sheet, and income statements.

In addition, put together your own personal or family balance sheet. Be conservative in
your valuation of your assets and exact in the valuation of your liabilities. Follow the
methods discussed in this chapter and see where you are financially.

Finally, calculate your financial ratios regarding savings, liquidity, and debt. Are you
saving as much as you should? Are you as liquid as you should? Are you reducing debt
as you should?

Financial statements, if used properly, can help us understand where we are financially,
see what we have done in the past, and make plans to help us achieve our goals in the


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                         Personal Financial Plan Assignments

       27. James E. Faust, ―Doing the Best Things in the Worst Times,‖ Ensign, Aug.
           1984, 41.
       7. Carolyn C. Williams, ―Beginning Budgeting,‖ Ensign, Apr. 1997, 71.
       11. Rulon T. Burton, ―Know Where Your Money Goes,‖ Ensign, June 1973, 45.
       29. ―Questions about Coping Financially: Welfare Services Suggests Some
           Answers,‖ Ensign, June 1980, 12.
       5. Robert D. Hales, ―Tithing, A Test of Faith with Eternal Blessings,‖ October
           General Conference, October 2002.

Teaching Tools
      4. Budget, Balance Sheet and Financial Statements Worksheet
            This is an excel worksheet which includes a one-year budget and two-
            period balance sheet, income statement, and financial ratios for
            determining where you are financially.

                 2. Tax Planning and Cash Management
4. Tax Planning and Strategy

Your assignment is to get a copy of last year’s income tax. What form did you use, i.e.,
1040A, 1040EZ, etc.? Why did you use that form? What form are you going to use this
year? What can you do to reduce your taxes now and in the future?


Teaching Tools
      8. Tithing Share Transfer Example
              This document is an example of a form you can use to pay your tithes and
              other offerings with appreciated stock or mutual funds.

5. Cash Management

Your assignment is to review your current cash management framework. What interest
rate are you earning on your savings account(s)? What are you paying in other fees and
expenses for this savings account? What interest rate are you earning on your checking
account(s)? What are you paying in other fees and expenses for this checking account?
What cash management vehicles should you be using which can help you get higher rates
of interest on savings or checking, and still give you adequate liquidity to meet your
needs for cash?


Teaching Tools

                                       - Page 4 -
                         Personal Financial Plan Assignments

                 3. Credit Cards, Debt and Debt Reduction

6. Credit Cards and Credit Scoring (2/23/05)

Your assignment is to see how you are doing financially. Since credit evaluation and
credit scoring are important tools in the acquisition of a home and other items, it is
important that you understand where you stand as far as the financial system is

Your first assignment is to get your credit report. If you are from the western United
States and some other select states, you can, by law, obtain one free copy of your credit
report each year from each of the three major credit report suppliers: Experian,
TransUnion, or Equifax. Go to and put in your necessary
information. You will select one of the major credit providers, input the necessary
identification information, and the credit reporting agency will provide you a copy on-
line. Save the formatted copy to your hard drive, as you will have to put a copy in your
financial plan. You will also have the option to purchase a credit score for $5.00 from
Experian (the cheapest). Please purchase a copy if you have not done so in the last 6-12

If you are not from one of the ―free‖ states which give free credit reports each year, you
can go to and for $14.95 get both a copy of your credit report from
your choice of supplier and a FICO credit score.

Once you have your credit report, read it very thoroughly and ensure that it is accurate. If
there are problems, follow the process discussed to improve your score and to get
inaccuracies removed from your credit reports.

Next, review your credit score. Read through the credit score report in detail. Write
down the things that you could do to improve your credit score and work on those items.

Finally, if you have credit card debt, use TT18 Credit Card Repayment Spreadsheet to
see how quickly you can pay off that debt using specific assumptions as to amounts paid
off each month.

      9. ―Teaching Teens about Credit,‖ Ensign, Dec. 1998, 61.
      30. Mark E. Petersen, ―Blessings in Self-Reliance,‖ Ensign, May 1981, 61.
      31. L. Tom Perry, ―Becoming Self-Reliant,‖ Ensign, Nov. 1991, 64.
      32. Boyd K. Packer, ―Self-Reliance,‖ Ensign, Aug. 1975, 85.

Teaching Tools:

                                         - Page 5 -
                         Personal Financial Plan Assignments

       18. Credit Card Repayment Spreadsheet
              This excel worksheet helps you determine how long it will take to pay off
              a specific credit card or loan based on the balance owed, annual
              percentage rate, compounding periods, and payments per month.

7. Consumer Loans

Think through the purpose of any consumer loans that you have. Were they necessary?
Could you have gotten by without them? It is better to save for consumer related items
than to borrow for them. If you have consumer loans outstanding, write down the costs
of these loans in terms of interest rates, fees, grace period, balance calculation method,
and any other fees or expenses? What can you do to pay these off quickly and get back
on the path to eliminate debt?

Resolve now to follow the counsel of our leaders. President James E. Faust stated: Over
the years the wise counsel of our leaders has been to avoid debt except for the purchase
of a home or to pay for an education. I have not heard any of the prophets change this
counsel.‖ (―Doing the Best Things in the Worst Times,‖ Ensign, Aug. 1984, 41.) Resolve
now to not get into debt except for a home or education.

      6. James E. Faust, ―What's in It for Me?‖ General Conference address, October
      17. L. Tom Perry, ―Becoming Self-Reliant,‖ Ensign, Nov. 1991, 64.
      34. Rulon T. Burton, ―The Dangers of Debt in Marriage,‖ Ensign, Sept. 1984, 49
          – consumer loans
      3. Bryan Sudweeks, ―Financial Self-reliance,‖ unpublished manuscript, January

8. Debt and Debt Reduction Strategies (added 2/14/05)

The Lord’s counsel through his prophets has always been to get and stay out of debt.
Being in debt not only has temporal effects, but spiritual effects as well. President
Marion G. Romney stated:

       ―Doctrine and Covenants 29:34-35 tells us there is no such thing as a
       temporal commandment, that all commandments are spiritual. It also tells
       us that man is to be ―an agent unto himself.‖ Man cannot be an agent unto
       himself if he is not self-reliant. Herein we see that independence and self-
       reliance are critical keys to our spiritual growth. Whenever we get into a
       situation which threatens our self-reliance, we will find our freedom
       threatened as well. If we increase our dependence, we will find an
       immediate decrease in our freedom to act.‖ (―The Celestial Nature of Self-
       Reliance,‖ Ensign, June 1984, 3.)

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                         Personal Financial Plan Assignments

Debt impacts our ability to grow spiritually. If you are in debt, or know others in debt,
think through the reasons for that debt. Are there things that you might have done or
done without that would have reduced that need for debt?

You were given your agency by a loving Father in Heaven in the Garden of Eden. But
while you have your agency, you cannot determine the consequences of that agency.
Consumer debt is not only a bad choice financially, but it is long-lasting and both
spiritually and emotionally draining. Your choices must coincide with your goals
discussed earlier.

Review any debt that you may have, including consumer debt, mortgage debt, or student
loans for education. What interest rates are you paying? What are the additional costs
for the loan? Are there any other fees? Write out your debt situation for each debt
including: creditor, phone number, reason for the loan, principle owed, interest rate,
minimum payment, and when you expect to have the loan paid off. Once you have
written down all your debts, determine a debt reduction strategy to reduce your debt. In
the reading, ―One for the Money,‖ Elder Ashton offers a good method.

Finally, write down your views on future debt. What are your thoughts and reasons you
feel as you do toward debt?

If you have debt, two tools that may be useful are the TT20 Debt Elimination Worksheet
which helps determine which debt to pay off first, that TT9 Debt Amortization and
Prepayment Spreadsheet which gives a debt amortization schedule as you repay debt.

      2. Marvin J. Ashton, ―One for the Money: Guide to Family Finance,‖ adapted
          from the April 1975 Welfare Conference Address.
      13. Ezra Taft Benson, ―Pay Thy Debt, and Live,‖ Ensign, June 1987, 3.
      8. Janene Wolsey Baadsgaard, ―Escaping the Debt Trap,‖ Ensign, Aug. 1996, 17-

Teaching Tools
      20. Debt Elimination Worksheet
             This excel document gives a framework for paying off debt that
             encourages you to pay off your most expensive debt first, and then your
             next most expensive, etc., until you have paid off all your debts.
      9. Debt Amortization and Prepayment Spreadsheet
             This excel document gives a debt amortization and prepayment schedule
             to help as you reduce and eliminate your debt.

                            4. Time Value of Money

9. The Time Value of Money (1)

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                          Personal Financial Plan Assignments


There is a language to Finance that is different from most other languages. As you
continue to operate in this increasingly complex world, it is important to understand that
language of finance. As you read through the chapter, think through the purpose of each
of the different lines of financial thought: Present Value and Future Value. Using either
a calculator or the TT12 Excel Financial Calculator from the teaching tools, make sure
you understand how to solve problems of Present Value and Future Value. Mathematical
formulas and instructions on using different financial calculators can be found in TT3
Financial Calculator Tutorial and Key Time Value of Money Formulas.

      35. Scott Nash, ―Understanding Interest on Debt,‖ Ensign, Sept. 1997, 64

Teaching Tools
      3. Financial Calculator Tutorial and Key Time Value of Money Formulas
             This document is a financial calculator tutorial for most of the major
             financial calculators. It also includes the financial formulas for those who
             would prefer to program their own calculators.
      12. Excel Financial Calculator
             This excel worksheet is a simple financial calculator for those who prefer
             to use spreadsheets rather than financial calculators. It can perform most
             the functions of a financial calculator, including present value, future
             value, payments, interest rates, and the number of periods.

10. The Time Value of Money (2) and Inflation

As you read through the chapter, think through the purpose of each of the new lines of
financial thought: Annuities, Present Value of an Annuity, and Future Value of an
Annuity. Review also the use and calculations of amortized loans. Using either a
calculator or the excel financial calculator from the teaching tools, make sure you
understand how to solve problems of annuities, including present value of an annuity,
future value of an annuity, and amortized loans. In addition, it is critical to understand
the impact of inflation on returns. Make sure you understand the correct method of
calculating real returns, which is the return after the impact of inflation.

Teaching Tools

                                   5. Insurance

11. Insurance 1: Basics

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                         Personal Financial Plan Assignments

As you read through the chapter, think through the different ways you manage risk and
the key principles of insurance planning. These principles are important, as they provide
the structure to help you evaluate the different types and uses of insurance products.
Think through these principles as you read through the succeeding chapters on health,
life, auto, property and liability insurance.


12. Insurance 2: Health Insurance

Health insurance is an important part of every family’s financial plan. While it is not
necessary (nor perhaps cost-effective) to have every type of health insurance, it is
important to have basic and catastrophic coverage should accident or illness strike.

Your assignment is to get a copy of your health insurance plan if you have one. Who is
the provider? What type of coverage is it? Which of the major types of health insurance
coverage do you have?

Get a copy of your insurance manual. Go through the manual, and review the different
types of coverage you have, the co-payments, where you need to go for service, available
doctors and clinics, etc. Plan now, that in case of accident or illness, you know where
you can go to get coverage for the problem.

In addition, I recommend you keep a copy of the summary pages for your insurance
company in your financial plan, so that in case of accident or illness, you can go to that
summary page, find all the necessary phone numbers and addresses, and hence minimize
the problems that might occur from not understanding your available benefits.


13. Insurance 3: Life Insurance

Your assignment is four-fold. First, determine if you need life insurance. As discussed
earlier, not everyone needs it. If you have no dependents and are in good health with no
family history of disease which would keep you from getting coverage, you may not need
life insurance. However, if you are married or have dependents who would suffer
financially if you were not around, it is a critical idea and something that should be in
place before you move on to personal investing or retirement and estate planning.

Second, determine your goal for your insurance, If your goal is income replacement, the
least costly and preferable type for most individuals is term insurance. If your goal is
estate planning, cash value products should be evaluated. If your concern is making sure
you have insurance should a unforeseen medical event happen which would preclude
coverage, either a convertible term policy or a cash value product should be evaluated.

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                          Personal Financial Plan Assignments

Your goal for insurance is a critical part of the direction you should go in evaluating the
different types of life insurance products.

Third, determine how much insurance you need. Based on the framework in the chapter,
estimate how much you will likely need. Remember, as interest rates decline,

Finally, determine how much you can afford based on your budget. This is a critical step.
Moreover, take into account the potential for job-loss or changes in lifestyle due to
children, teenagers, etc. when considering your budget. A significant amount of money
is lost each year as insurance consumers purchase largely cash-value products which have
very high up-front costs and then cancel them later on due to a lack of funding or a
change in plans.

Finally, evaluate the different insurance companies and their products. Using the criteria
discussed, evaluate the different insurance companies for stability and the likelihood that
they will be around when benefits need to be paid. Determine the type of product that
you should have, and evaluate the different alternatives.


14. Insurance 4: Auto, Property and Liability Insurance

There are a number of different assignments for this section. Regarding auto insurance, if
you have a car, it is illegal to drive without insurance. Insurance is a critical part of
owning and driving an automobile. Your assignment is to get a copy of your auto
insurance and include it in your financial plan.

First, look at your credit score, if it is reported on your policy. It should be consistent
with your credit score noted earlier. Improving your credit score can result in a decrease
in your auto insurance costs.

Second, look to your discounts on your policy, such as good student, good driver,
multiple car, etc. Call your insurance provider and see if there are any other discounts
you qualify for. Discounts can reduce the cost of your insurance policy.

Third, review each of your four basic parts of your insurance: Liability, Medical
coverage, uninsured/underinsured coverage, and comprehensive physical damage
coverage. What are your liability limits? If you have split coverage, what is that
coverage? Remember that most state requirements for liability insurance were set more
than 30 years ago and are generally insufficient given the rising medical and automobile
repair costs. If you must reduce your insurance costs, increase your deductible rather
than reducing your liability limits.

Finally, go to Once a year you can get a free copy of your auto
CLUE (comprehensive liability underwriting exchange) report. Check it to ensure it is

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                         Personal Financial Plan Assignments

correct. If there are mistakes, follow the process on the website to change the incorrect

Regarding home insurance, if you own a home or a condo, get a copy of your
homeowner’s policy and review it carefully. Which type of homeowners insurance do
you have? Is it sufficient for your needs? Does it cover the current value of your home?
What could you do to improve your coverage?

Regarding disability insurance, do you need it? Is it something that you need to be
worried about at this point in your life? Should you look into it later?

Finally, go to Once a year you can get a free copy of your
personal property CLUE (comprehensive liability underwriting exchange) report. Check
it to ensure it is correct. If there are mistakes, follow the process on the website to
change the incorrect information.

Regarding liability insurance, do you have a need for an umbrella coverage? As the size
of your assets increases, this may be something to look into.


                         6. Home, Auto and Education

15. Buying a Home

This is an optional section for those interested in the process of buying a home or
refinancing a home. If you are thinking about buying a home, what is your credit score
(from the section previously)? Credit scores are important tools in borrowing for a
mortgage. Next, use TT11 Maximum monthly payment calculator for LDS Home
Buyers. How much of a mortgage could you qualify for using ―front end‖ and ―back
end‖ ratios? Because we pay the Lord tithing and save a minimum of 10% of all we earn,
our houses should be between 10-20% less than other non-LDS homebuyers.

If you already have a home and a mortgage, what are the costs of your current loan in
terms of mortgage payment, private mortgage insurance (if applicable), and any other
costs or fees. If interest rates have declined, would it be a good time to think about
refinancing, or moving from a variable rate to a fixed rate loan, or perhaps even reducing
the maturity of your mortgage? Remember the word of President Hinckley when he said:
―I recognize that it may be necessary to borrow to get a home, of course. But let us buy a
home that we can afford and thus ease the payments which will constantly hang over our
heads . . . for as long as 30 years . . . I urge you to be modest in your expenditures;
discipline yourselves in your purchases to avoid debt to the extent possible. Pay off debt
as quickly as you can.‖ (Gordon B. Hinckley, ―To the Boys and to the Men,‖ Ensign,
Nov. 1998, 51).

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                         Personal Financial Plan Assignments

Finally, if you are looking for a new loan or thinking about refinancing, it is important to
be able to determine the effective interest rate of different fixed maturity loans. The
effective interest rate takes into account all the fees and expenses of buying a home.
TT19 Home Loan comparison allows you to evaluate different loans with different fees
and points. In addition, it also allows you to evaluate how many months of payments you
would save by making additional pre-payments of principle each month.

      36. William E. Berrett, ―I Have a Question,‖ Ensign, Oct. 1979, 29.
      37. Preparing for Emergencies,‖ Ensign, Dec. 1990, 59.
      39. James E. Faust, ―Responsibility for Welfare Rests with Me and My Family,‖
      Ensign, May 1986, 20.

Teaching Tools:
      11. Maximum Monthly Payment Calculator for LDS Home Buyers
            This excel worksheet is to help you as you determine the maximum
            amounts financial institutions will generally lend using traditional front-
            end and back-end ratios. However, traditional banking ratios do not take
            into account the fact that we pay tithes and other offerings, and also that
            we save a certain percentage of our earnings. This spreadsheet allows us
            to take these other factors into account, and shows how we should be
            borrowing less than those who do not pay tithes and offerings for our
      19. Home Loan Comparison
            This excel spreadsheet helps you determine the Effective Interest Rate for
            multiple home loans, taking into account the loan amount, interest rate,
            compounding periods, points, and other fees. In addition, it also calculates
            the rate assuming prepayment after a certain number of years. In addition,
            it also helps determine how much time and money will be saved if you
            prepay a specific amount of principle each period.

16. The Auto Decision

This is an optional assignment for those with interest in the automobile decision. If you
are interested in buying a new vehicle, fulfill the following assignments. First, review
your budget and determine how much you can save each month. Review your bank
accounts to determine how much you have saved already? It is generally better to pay
cash for a vehicle than making payments. Use wisdom in your purchases.

Next, identify the types of vehicle that you are interested in? What are the key items that
are important to you? What do the different auto reviewers think of this vehicle? How
safe is the vehicle? Next, pick your vehicle and the options you want. Go to the major
automobile websites, i.e.,, etc., and price the vehicle
with your desired options. In addition, determine the dealer holdback for your vehicle.

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                          Personal Financial Plan Assignments

Once you have the invoice price and holdback, use that as your beginning bargaining
point. Work with different dealerships to get the best price for your vehicle.

If you are interested in buying a used vehicle, the assignment is different. Again, review
your budget and determine how much you can save each month for this vehicle.
Determine how much you have saved so far, and try not to go into debt for a vehicle.

Next, identify the types of vehicle that you are interested in? What are the key items that
are important to you? What do the different auto reviewers think of these vehicles? How
safe are the vehicles? Next, pick your vehicle.

Next, go to the major automobile websites, i.e.,, etc., and
price the vehicle with the year you are looking at, your desired options, and the quality of
the vehicle. Find the range of prices for the vehicle. Once you have the recommended
price, use that as your starting point. Now go and look for potential vehicles. Look
through the newspaper, the internet, with local dealerships, and with friends and

Once you have found the vehicle, follow the steps discussed in this section. I strongly
encourage you to use programs such as to verify the vehicle history.
Most used car dealerships will have this information freely available. In addition, it is
also wise to have the vehicle checked out by a reputable mechanic. This investment in
time and money could help you find a better and better-maintained vehicle.

Once you have determined potential vehicles to purchase, negotiate the price within the
research done earlier. Again, I strongly recommend you save for the vehicle, but if you
must finance the vehicle, finance it at the lowest interest rate possible.

While saving for a vehicle is generally the best option, if you are considering leasing a
vehicle, use TT20 Lease Versus Buy Spreadsheet as a means of comparing the cost of
leasing versus buying a vehicle.


Teaching Tools
      22. Lease versus Buy Analysis
             This spreadsheet gives a (very close) approximation of the costs of buying
             a vehicle versus leasing a vehicle.

17. Financing Education

Financing education is an important part of helping your children prepare for life.
Whether you can help out a lot, or just a little, every little bit helps. The key is to do it
wisely within the structure of currently available investment vehicles to save the most as
you can in the most tax-efficient manner.

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                         Personal Financial Plan Assignments

Your assignment is to review the available investment vehicles that you can use to pay
for your children’s education. What is the priority of money for education? Which
vehicles should you use first, and why? We will in the next section begin discussing
investments, so for now review the investment vehicles which will help you most to save
for your children’s education.

      47. Henry B. Eyring, ―Education for Real Life,‖ Ensign, Oct. 2002, 14.
      41. Russell M. Nelson, ―Where Is Wisdom?‖ Ensign, Nov. 1992, 6.
      42. Ardeth G. Kapp, ―The Treasure You Will Take with You,‖ New Era, Jan.–
      Feb. 1985, 9.
      43 Janet Thomas, ―Giving It a College Try,‖ New Era, Oct. 1991, 44.

                                  7. Investments:

18. Investments 1: Before you Invest

Understanding yourself is a critical part of investing. As such, it is important that you
understand not only your personal view on investing, but also your family view as well.
Start by taking the simple TT16 Risk Tolerance Test from the website. The results of the
test give simple recommendations of possible asset allocation targets for later on in the
discussion. How much risk are you willing to take?

Second, review the TT21 Key Questions on Money in the Family. What have been the
major experiences that have influenced your views on money and investing? What were
you taught growing up about money and investing? What would your parents say are the
things that they would do differently? How are you going to teach you children about
these topics?

Third, review the investment hourglass. Where are you on the top of the hourglass? Are
your priorities in order? Do you have ―adequate‖ health and life insurance? Are you out
of consumer and credit-card debt? Do you know your goals, your budget, and are you
ready to begin writing your Investment Plan? Determine where you are and what you
need to do to begin to get ready to begin investing.

      22. Charles E. Davis, ―A Banker’s Dozen: Guidelines for Wise Investing‖
          Ensign, Sept. 1991, 64.
      25. Joe J. Christensen, ―Greed, Selfishness, and Overindulgence,‖ Ensign, May
          1999, 9.

Teaching Tools

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                         Personal Financial Plan Assignments

       16. A Risk Tolerance Test
              This document is a simple risk tolerance test to help you determine a
              suitable risk level for your investments. It gives eight questions, and then
              explains how each question can help you understand your tolerance for
              risk. It also gives a few recommended asset allocation targets based on
              your answers to the eight questions.
       21. Key questions on Money in the Family
              This document asks simple questions regarding how your view of money
              was developed. It asks 9 questions relating to money which gives
              important insight as to the events that shaped your view on money.

19. Investments 2: Your Investment Plan

Copy TT05 Investment Plan Example from the website. Read through it from beginning
to end. Make sure you understand the terminology of the Plan. We will discuss much of
the Plan over the next few sections.

You will not have just one portfolio, but many portfolios, all which are part of your
Investment Plan. Go back and review your personal goals. While it is not necessary to
detail every single goal, determine your three most important financial goals, or those
goals which have a financial cost attached. Put a date by each of them, and determine a
risk level you are comfortable with, and then determine how much you must save each
month for each goal.

      16. John W. Hardy, ―Recognizing—and Avoiding—Bad Investments,‖ Ensign,
          Sept. 1983, 55.

Teaching Tools
      5. Investment Plan Example
             This document is a recommended example of an Investment Plan. Users
             are encouraged to understand the investing section, copy this investment
             plan, and change the investment goals, objectives, allocations, etc. to be
             consistent with your personal goals, objectives, return and risk
             requirements, asset allocation targets, and other investing parameters.

20. Investments 3: Securities Market Basics

It is important that you understand the environment in which you invest. As such,
understanding the players is critical. First, you need to decide whether you can invest on
your own or whether you will need help. Often, when assets are small, you can make the
important decisions on your own. As you asset size increases, it may be helpful to get
help in your investment decisions.

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                         Personal Financial Plan Assignments

Understand the major players in the investment area. How are they compensated? What
are their major areas of expertise? What is the difference between an independent broker
and a captive broker? What are their strengths and weaknesses? What about financial
planners? Come to understand the strengths and weaknesses of each of the different
types of providers of financial advice.


21. Investments 4: Stock Basics

Your assignment is to review the past 5, 10, 25, 50, and 75 year history of stocks. How
have they performed? What do stocks add to a portfolio? What disadvantages do they
have? How can you minimize the disadvantages of stocks, while at the same time
enjoying their benefits?

What are the major benchmarks or indexes that follow this asset class (see TT15 Possible
Benchmarks for your Investment Plan)? You will likely include stocks in your
diversified portfolio, so select the major benchmarks you will follow to help you
understand how this asset class performs. To help understand the volatility of various
asset classes, use TT23 Return Simulation Worksheet to see the impact of volatility over


Teaching Tools
      15. Possible Benchmarks for Investment Plans
             This document suggests possible benchmarks for most of the major asset
      23. Return Simulation Worksheet
             This worksheet helps you see the impact of various investment strategies
             and volatility for different types of asset classes.

22. Investments 5: Bond Basics

Your assignment is to review the past 5, 10, 25, 50, and 75 year history of both short-
term and long-term bonds. How have they performed? What do bonds add to a
portfolio? What disadvantages do they have? How can you minimize the disadvantages
of bonds, while at the same time enjoying their benefits?

What are the major benchmarks or indexes that follow this asset class (see TT15 Possible
Benchmarks for your Investment Plan)? ? You will likely include bonds in your

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                          Personal Financial Plan Assignments

diversified portfolio, so select the major benchmarks you will follow to help you
understand how this asset class performs.


23. Investments 6: Mutual Fund Basics

Your assignment is to understand how mutual funds can give you exposure to the major
asset classes discussed and others as well. How have mutual funds performed versus
their underlying securities? What do mutual funds add to a portfolio? What
disadvantages do they have? How can you minimize the disadvantages of mutual fund,
while at the same time enjoying their benefits?

Mutual funds have their own separate benchmarks as well, which are noted in the Wall
Street Journal each week and month. So in addition to the major asset class benchmarks,
there are mutual fund benchmarks as well.


24. Investments 7: Building Your Portfolio

Now that you understand stocks, bonds, and mutual funds, it is important that you
understand the process of building your portfolio. What is the process of building on the
portfolio? Why is it critical to take an approach that looks at risk? Why is an emergency
fund and food storage so important?

Based on your work previously, you will need to determine your targets for your major
asset classes, or asset allocation targets. This will change as your situation in life
changes. Determine your three major phases in life, and put an asset allocation target
with each phase.

Finally, determine a beginning portfolio size and with your asset allocation targets,
calculate the amount of money to invest in each asset class to give you exposure to the
various markets. A good tool to help you is TT13 Investment Process Worksheet. For
now, use this tool to determine your total allocation to each of the different asset classes.
In the next chapter, you will pick the financial assets to invest in for each asset class.


Teaching Tools
      13. Investment Process worksheet

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                          Personal Financial Plan Assignments

               This excel worksheet helps you determine how much you should invest in
               your chosen funds based on your individual asset allocation targets from
               your investment plan. It also can help you as you work toward your
               investment targets by showing your target amount, how much you have
               invested thus far, and your remaining amount to reach your target.

25. Investments 8: Picking Financial Assets

Your challenge is to begin building your portfolio. As you begin, you will have only a
few assets, but at the same time you need to apply the 10 principles of building a
successful portfolio. How do you do that?

Critical in this process is diversification. Single assets are not diversified. But most
mutual funds hold multiple assets and may be very diversified. Look into mutual funds
as your first financial assets. What factors make a good mutual fund? We discussed
items such as low cost, tax efficient, low cash drag, no manager style drift, etc.? Are
there other areas that are important to you? What about index funds and exchange traded
funds? What kinds of tools are available to help you choose potential candidates for your

Utilizing the asset allocation targets, and the beginning size of your portfolio discussed
earlier, determine which assets you should purchase to offer exposure to your desired
asset classes. What are their minimum purchase amounts, management fees, 12b-1 fees
(if any), loads (these are not recommended), and other critical areas. Select 4 initial
assets for your portfolio.

First, select an Emergency Fund. Find a liquid fund with low minimums and which still
gives positive returns.

Second, select a Core mutual fund. Select a fund that is inexpensive, low cost, tax
efficient, and offers exposure to your main equity market.

Third and fourth, select two funds which broaden and deepen your asset classes. To
broaden your asset classes is to increase your asset classes to include other ones, such as
international stocks or bonds, emerging market stocks or bonds, real estate (through real
estate investment trusts), etc.

To deepen your asset classes is to take your main asset class, which generally in the U.S.
would be large capitalization companies which are represented by the Standard and
Poor’s 500 Index (S&P 500 Index), and to include more companies. You might include a
small capitalization fund, or a mid-capitalization fund. You might also include a fund
that offers exposure to all the stocks in the U.S. market, by offering exposure to the
Russell 5000 Index, and index that includes all the stocks in the U.S.

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                          Personal Financial Plan Assignments

Once you have determined your assets, print off the main page with the information on
pricing, size, fees, total return, and return versus benchmarks. These will be included in
your financial plan.

In addition, fill out TT13 Investment Process Worksheet with each of your chosen
financial assets. Put in the name of the funds, the asset allocation target, and it should
give the preliminary targets for your portfolio.


Teaching Tools
      7. Using to select mutual funds
             This document helps you use the website to pick
             financial assets, mainly mutual funds, for your investment plan. It helps
             you use both the internet and the library edition of Morningstar.
      10. Key Sources of Financial Information
             This document gives suggestions on where to find quality sources of
             financial information.

26. Investments 9: Performance Reporting and Rebalancing

Portfolio rebalancing is an important part of managing your investment portfolio. You
need to decide how often you will rebalance your portfolio. Generally, rebalancing too
often results in excessive transactions costs and often taxes, and rebalancing not often
enough results in portfolio’s which violate the principle of diversification and managing
risk. Determine how often you will rebalance your portfolio and make that your plan by
including it in your Investment Plan.

Portfolio attribution is a tool to help understand how your portfolio is performing versus
your benchmarks, and can help you determine areas of improvement. While not a
requirement, if you are interested, use TT17 Portfolio Attribution Spreadsheet.
Determine how each of your assets has performed over a specific period, either monthly,
quarterly, or annually. Calculate the return of each of your major benchmarks over that
same period. Finally, calculate the weight of each of the assets in your portfolio, and
your asset allocation targets. By putting this information into the spreadsheet, you can
determine where you are adding or subtracting value from the performance of your


Teaching Tools
      17. Portfolio Attribution Spreadsheet Example

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                          Personal Financial Plan Assignments

               This excel spreadsheet helps you, based on your asset allocation targets
               and benchmarks, perform a simple performance attribution analysis to
               help you understand your sources of portfolio return to your portfolio.

                       8. Retirement and Estate Planning

27. Retirement Planning 1: Basics

Think through what kind of retirement you would like. How much money will you need
each year to maintain your specific lifestyle? Using TT6 Retirement Planning Needs
Worksheet, determine how much you must save each month to achieve your specific
lifestyle at retirement based on your estimates of your years until retirement, expected
return, inflation, and tax rates.


Teaching Tools
      6. Retirement Planning Needs Worksheet
              This excel worksheet helps you determine how much you must save each
              month to achieve a specific lifestyle at retirement based on certain
              estimates of years until retirement, expected return, inflation, and tax rates.

28. Retirement Planning 2: Understanding Social Security

Your assignment is to learn what your benefits will be from Social Security. Get a copy
of your Social Security Statement benefits by going to on the
internet. Click on ―Your Benefits‖ near the top, and then click on ―Request a Social
Security Statement‖ at the bottom of the page. Fill out your name, middle initial, last
name, social security number, birthday, and other information that is requested. Click on
―continue‖ to submit a request for your Statement. You will receive your Statement in 3-
4 weeks.

As a preliminary estimate of benefits before receiving your Statement, go to on the internet. Click on ―Need to Request a Social Security
Statement‖ in the top, and then click on ―How can I calculate my own benefit estimates‖
in the middle of the page. Then click on ―Benefits Planner‖ and ―calculate your
retirement benefits based on different retirement scenarios.‖ You can either fill out the
quick calculator ―Quick Calculator‖ or the more detailed ―Online Calculator.‖ Click on
the calculator desired, and then fill in the information. How much will you likely receive
when you retire from Social Security?


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                          Personal Financial Plan Assignments

29. Retirement Planning 3: Employer Qualified Plans

If you have an Employer Qualified Plan, go to your employer. Find out as much
information as you can regarding your plan. What type of plan is it?

Is it a Defined Benefit Plan or a Defined Contribution Plan or both? If it is a Defined
Benefit Plan, what are the requirements for the plan? What is the payout formula:
number of years working, average salary, percentage, etc.? How long must you be with
the company to receive benefits? At what age can you begin receiving benefits? Based
on today’s earnings, how much will you receive each month after retirement?

If it is a Defined Contribution Plan, what type of plan is it? Does it have a company
match (or ―free money‖)? Are you getting your full company match each year? How
much do you currently have in the plan? Where is that money allocated? Is it allocated
consistent with your risk level discussed earlier and the fact that these are long-term
funds? Have you followed the principles of successful investing, regarding
diversification, low costs, risk, and other key factors? Are you rebalancing back to your
target allocation in a timely manner? Find out this information, as it is all important to
your retirement planning.


30. Retirement Planning 4: Small Business and Individual Retirement Accounts

Do you have a small business or individual retirement account? If you do, who is it with?
What are your annual fees for the account? Is there a way to minimize those fees?

Where are your assets invested? Are they invested consistent with your asset allocation
targets detailed in your financial plan, and consistent with the fact that these are longer-
term assets?


31. Estate Planning 1: Basics

First, review your goals from chapter 2. Do you have specific goals that go beyond your
lifetime and would require a trust? If so, what would you like to do? Is it feasible given
your current financial condition? Review your net worth from chapter 3. Does your
current exceed the estate tax threshold established by the IRS? How close are you to the
threshold? If you are close, you are encouraged to get qualified help.

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                          Personal Financial Plan Assignments

Second, do you have a will? If you have children, a will is critical as it states your wishes
regarding who should take care of your children should you pass away. Your choice is
either to write your will, or let the government determine what you would have wanted.
If you have few assets but have children and reside in a state that allows holographic
wills, write one immediately. At least your wishes will be known regarding who is to
take care of your children. If you are beginning to acquire assets, it is recommended that
you visit a legal attorney who can for a fee help you write up a will valid for your state.
Wills should be reviewed every 3-5 years or more often if your situation has changed.

Finally, are you concerned that your wishes regarding health care might not be able to be
made known to medical personnel should something happen to you and you are unable to
communicate your wishes. By filling out TT14 Sample Advance Directives to
Physicians, this document helps you state your intentions for medical care in event of an
emergency where you are unable to make your wishes known.

      38. Steven J. Dixon, ―Planning Ahead: The Importance of Wills and Trusts,‖
      Ensign, June 1983, 28.

Teaching Tools

       14. Sample Advance Directives to Physicians
              This document is a sample advance directives to physicians to help you
              state your intentions for medical care in event of an emergency where you
              are unable to make your wishes known.

                      9. Learning to Give and Conclusions

32. Conclusions 1: Learning to Give

Your financial plan is not competed until you determined how you are going to share
with others. President Spencer W. Kimball said:

       Many people spend most of their time working in the service of a self-
       image that includes sufficient money, stocks, bonds, investment portfolios,
       property, credit cards, furnishings, automobiles, and the like to guarantee
       carnal security throughout, it is hoped, a long and happy life. Forgotten is
       the fact that our assignment is to use these many resources in our families
       and quorums to build up the kingdom of God.‖ (Ensign, June 1976, p. 4.)

How are you going to help build the kingdom? What goals will you set as to what
you will do to bless the lives of those around you? Think through the goals you

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wrote down earlier, particularly ―What does Heavenly Father want you to do or
be?‖ What can you do to bring that goal to reality?

      4. Marion G. Romney, ―Caring for the Poor—A Covenantal Obligation,‖ Ensign,
          Nov. 1978, 87.
      48. F. Burton Howard, ―On Giving and Getting,‖ New Era, Oct. 1985, 44.
      46. Carol B. Thomas, ―Sacrifice: An Eternal Investment,‖ Ensign, May 2001, 63.

33. Conclusions 2: Decide to Decide

You have come to the end of this series. We have discussed many important things
regarding putting your financial house in order. What are the important things you
should take away from this series of discussions? What are the things you have been
impressed with regarding personal finance? What are the things you should decide to

      James E. Faust, ―Responsibility for Welfare Rests with Me and My Family,‖
      Ensign, May 1986, 20
      26. L. Tom Perry, ―If Ye Are Prepared Ye Shall Not Fear,‖ Ensign, Nov. 1995,


Money and Marriage

Readings not yet included:

       12. W. Steve Albrecht, ―Making Money Your Ally,‖ Ensign, Dec. 1988, 49.
       14. Marion G. Romney, ―Principles of Temporal Salvation,‖ Ensign, Apr. 1981,
       21. Lynn G. Robbins, ―The Cost of Riches,‖ Ensign, June 2003, 24
       23. M. Russell Ballard, ―Do Things That Make a Difference,‖ Ensign, June 1983,
       24. M. Russell Ballard, Spiritual and Economic Self-Reliance, Opening Remarks
       at the BYU Center for Economic and Self Reliance (CESR), March 2004.
       28. Marvin J. Ashton, ―This Is No Harm,‖ Ensign, May 1982, 9.

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