1 Personal Finance: A Gospel Perspective Budgeting and Debt Reduction

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Personal Finance:A Gospel Perspective

Budgeting and Debt Reduction

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Objectives

A. Understand why and how we budget

B. Understand debt and debt reduction

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Housekeeping Items

Opt Out for Credit Card Applications• There is a national credit opt-out number to take

you off the mailing lists of all four major credit reporting agencies:

• It is easy and painless. Call 1-888-567-8688 or 1-888-5 OPT OUT or www.optoutprescreen.com

• Answer the questions on the phone. It only asks your home phone number, your name, and your social security number. Then they send a form to fill out and mail in. The website is even easier. You can do it while I am talking from your laptop.

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Housekeeping Items (continued)

Opt Out for Telemarketers • How do you get the phone marketers from

calling?• You can access the Do Not Call registry

by signing on to:• Donotcall.gov

• From here, you will put in up to 3 phone number(s) and your email address.

• You will then receive confirming emails. When you receive them, click on the hyperlink to confirm them, and you are all set up for 5 years.

https://www.donotcall.gov/Register/Reg.aspx

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Housekeeping Items (continued)

Personal Finance Website• We have put together a website of personal finance

topics from a gospel perspective.

• It is good reference material

• There is a correct perspective, and

• Everything can be freely copied and shared

• We would like your help

• If you would like to review the material and help us make the website better by giving comments, go to http://pf.byu.edu

• If you would just like to review the material, go to http://personalfinance.byu.edu

http://pf.byu.edu/

http://personalfinance.byu.edu/

http://personalfinance.byu.edu/

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Introduction

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Login Screen

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View Course

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Readings

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Teaching Tools

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Why all the Quotes from the scriptures and our leaders?

Boyd K. Packer stated:Doctrine can change behavior

quicker than talking about behavior will. (Boyd K. Packer, “Washed Clean,” Ensign, May 1997, 9.)

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• The spiritual foundation is the principles that hold everything else up. The Spiritual Foundation is based on four key pillars that underlie personal finance:

• Ownership

• Stewardship

• Agency

• Choice and Accountability These pillars form the foundation, that if understood,

will help us keep our priorities in order and to use our wealth as Jesus Christ would have us use it.

The Spiritual Foundation for Using Wealth Wisely

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Pillar 1: Ownership

1. Everything we have is the Lord’s• The Lord is the creator of the earth (Mosiah 2:21),

the supplier of our breath (2 Nephi 9:26), the giver of our knowledge (Moses 7:32) and our abilities (Mosiah 2:21).

• Nothing we have is our own—its all God’s

• In D&C 104:14-15 it states:

• I, the Lord, stretched out the heavens, and built the earth, my very handiwork; and all things therein are mine. And it is my purpose to provide for my saints, for all things are mine. (italics added)

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Pillar 2: Stewardship

2. We are stewards over all that the Lord has or will share with us• The Lord through the Prophet Joseph Smith stated:

• “It is expedient that I, the Lord, should make every man accountable, as a steward over earthly blessings, which I have made and prepared for my creatures.” (D&C 104:13)

• For it is required of the Lord, at the hand of every steward, to render an account of his stewardship, both in time and in eternity. (D&C 72:3)

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Pillar 3: Agency

3. We were given our agency by a loving Father in Heaven• The prophet Lehi, in speaking to his son Jacob

explained:• For it must needs be, that there is an opposition

in all things. If not so. . ., righteousness could not be brought to pass, neither wickedness, neither holiness nor misery, neither good nor bad. (2 Nephi 2:11)

• President Marion G. Romney said: • “Agency means the freedom and power to

choose and act. Next to life itself, it is man’s most precious inheritance.” (Ensign, May 1976, p. 120.)

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Pillar 4: Choice and Accountability

4. We have been blessed with the gift of “choice,” but we will be held accountable for its use• We have been counseled by the Lord:

• Verily I say, men should be anxiously engaged in a good cause, and do many things of their own free will, and bring to pass much righteousness. For the power is in them, wherein they are agents unto themselves. And inasmuch as men do good they shall in nowise lose their reward. (D&C 58: 27-28)

• We have been given the choice, but it is up to us to choose wisely to “bring to pass much righteousness.”

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On the subject of what’s really ours, Elder Neal A. Maxwell stated:• The submission of one’s will is really the only

uniquely personal thing we have to place on God’s altar. The many other things we “give,” brothers and sisters, are actually the things He has already given or loaned to us. However, when you and I finally submit ourselves, by letting our individual wills be swallowed up in God’s will, then we are really giving something to Him! It is the only possession which is truly ours to give! (italics added, “Swallowed Up in the Will of the Father,” Ensign, Nov. 1995, 22.)

What is really ours?

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Four Goals for my Students

1. Know what you want out of life. Write it down.

2. Develop and live on a budget. Live on less than you earn.

3. Pay the Lord first and yourself second. Then invest your money wisely.

4. Learn to give. We make a living by what we get. We make a life by what we give

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A. Understand Why and How to Budget

Applications #1: Your Bishop just came to you and your spouse and asked you to help a young couple that is struggling financially in your ward. This couple is in dire straits. They need to borrow $600 to make the total minimum payments this month on their six credit cards, which they used to finance his schooling (and a few other minor things, such as a new wakeboard and rims for his car he got after graduation). They owe $9,800 on their credit cards and are paying 23.99% interest (APR) on the unpaid balance. The Bishop has given you the specific goal to get them out of their current mess and to teach them to be financially self-reliant. What advice would you give?

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Budgeting (continued)

President Spencer W. Kimball said:• “Every family should have a budget. Why, we would not

think of going one day without a budget in this Church or our businesses. We have to know approximately what we may receive, and we certainly must know what we are going to spend. And one of the successes of the Church would have to be that the Brethren watch these things very carefully, and we do not spend that which we do not have. (April 1975 General Conference)

• If the brethren watch these things very carefully in the church, shouldn’t we in our homes?

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What is a Budget?• It’s the process of making sure your resources are used for

the things that matter most—your personal goals

• A budget is a star to set your sights by, not a stick to beat yourself with.

• It’s only a tool, but an important one!

• While a budget is easy to understand, it takes discipline to follow.

• It is probably the most important single factor in helping you to attain your personal goals.

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• The Budgeting Process• 1. Track your expenses• 2. Develop your cash budget• 3. Implement your budget• 4. Compare it to actual expenses, then make

changes where necessary to achieve your goals

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1. Track Expenditures

There are different methods to track spending:• Checks and credit cards

• These expenditures leave a paper trail

• Cash

• Record expenditures in a notebook

• Computer programs, i.e., Quicken, Money

• These are very useful, especially if tied to bank and credit card companies

• They are a great investment which can save much time if done well and set up properly

• Generate a monthly income/expense statement

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2. Develop and Implement A Cash Budget the Right Way

What is a Cash Budget?• A plan for controlling cash inflows and outflows

• Its purpose--To balance income with expenditures AND savings

Income:

• Examine last year’s after-tax total income and make adjustments for the current year.

Expenses:

• Identify all fixed (non-discretionary) and variable (discretionary) expenditures

• Look for ways to reduce your variable expenses.

• Reduce interest payments—pay off debt

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Budgeting: The Old Way

Available for Savings

Personal Goals

Income ExpensesTithing

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Budgeting: The Better Way

Income Expenses

Personal Goals

OtherSavings

Pay the

LordPay

Yourself

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The Better Line of Thought

Before, you paid the Lord first, lived on the rest, and whatever was left at the end of every month went into savings.• Your priorities were wrong

Now, pay the Lord first, yourself second, and then live on the rest.• Your priorities are now in order• And now you have twice the chance of

achieving your personal goals

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The Better Way (continued)

President Gordon B. Hinckley stated:• In managing the affairs of the Church, we have tried to

set an example. We have, as a matter of policy, stringently followed the practice of setting aside each year a percentage of the income of the Church against a possible day of need. I am grateful to be able to say that the Church . . . is able to function without borrowed money. If we cannot get along, we will curtail our programs. We will shrink expenditures to fit the income. We will not borrow. (Gordon B. Hinckley, “To the Boys and to the Men,” Ensign, Nov. 1998, 51.)

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The Better Way (continued)

Elder L. Tom Perry affirmed this when he said:• After paying your tithing of 10 percent to the Lord,

you pay yourself a predetermined amount directly into savings. That leaves you a balance of your income to budget for taxes, food, clothing, shelter, transportation, etc. It is amazing to me that so many people work all of their lives for the grocer, the landlord, the power company, the automobile salesman, and the bank, and yet think so little of their own efforts that they pay themselves nothing. (L. Tom Perry, “Becoming Self-Reliant,” Ensign, Nov. 1991, 64.)

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3. Implement your Cash Budget

Try the budget for a month• Record all income and expenses in the

proper category by date• Sum all days or columns• Note how much you have available in each

category at the end of each week• Adjust the plan or expenses as necessary to

maintain the plan• Try to be as financially prudent as possible

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4. Compare budget to actual expenses and make changes where necessary

Compare your budget to actual• Adjust the plan or your expenses as necessary to

maintain the plan

• Don’t reduce payments to the Lord or yourself If all else fails, this system will work!

• The Envelope System:

• Put money for each expense in an envelope

• When the money is gone, its gone

• It forces you to make it work (no cheating)

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Final Remarks on Budgeting

Elder Marvin J. Ashton stated:• Some claim living within a budget takes the

fun out of life and is too restrictive. But those who avoid the inconvenience of a budget must suffer the pains of living outside of it. The Church operates within a budget. Successful business functions within a budget. Families free of crushing debt have a budget. Budget guidelines encourage better performance and management. (italics added, Marvin J. Ashton, “It’s No Fun Being Poor,” Ensign, Sept. 1982, 72.)

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Case Study #1

Ideas for the case study• 1. Get them out of the current mess

• Find one off ways of reducing debt• Sell assets, or borrow from parents• Refinance to a lower card if able

• 2. Teach them to be self-reliant• Help them set their goals• Get them committed to and living on a

budget

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Questions

Any questions on budgeting?

See TT04 Budget, Balance Sheet and Ratios Example

Use Quicken as an example of Money Management Software

http://marriottschool.byu.edu/teacher/BM418/Sudweeks/Teaching%20Tools/TT04%20-%20Budget%20Balance%20Sheet%20and%20Income%20Statements%20%2016Jun04.xls

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B. Understand Debt and Debt Reduction

Case Study #2. A family friend has asked you to help one of their children who is having some financial problems. The son came over and this is what you found out. They have four children, ages 18 to 3 months, and have the following bills: Mortgage $150,000 at 6%, 2nd mortgage $20,000 at 7.5% (because they were too far in credit card debt), various financial institutions $10,000 at between 12% an 28% (because she lost her due to the pregnancy), lease on a new truck $18,000, car loan on her car $5,000, miscellaneous Christmas bills $3,000. Debt payments represent 83% of their take-home pay. What suggestions do you have to help them get out of debt.

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Cartoon

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Debt and Debt Reduction (continued)

“It is a rule of our financial and economic life in all the world that interest is to be paid on borrowed money. May I say something about interest? Interest never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it is never laid off work; it never works on reduced hours; it never pays taxes; . . . Once in debt, interest is your constant companion every minute of the day and night; 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. So much for the interest we pay. Whoever borrows should understand what interest is, it is with them every minute of the day and night.” (J. Reuben Clark, conference address, April 6, 1938.)

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President Hinckley commented: “The time has come to get our houses in order. So many of our people are living on the very edge of their income. In fact, some are living on borrowings. The economy is a fragile thing… There is a portent of stormy weather ahead to which we had better give heed. . . I am troubled by the huge consumer installment debt which hangs over the people of the nation, including our own people. I recognize that it may be necessary to borrow a home, of course. But let us buy a home that we can afford. . . We are carrying a message of self-reliance throughout the Church. Self-reliance cannot be obtained when there is serious debt hanging over a household. One has neither independence nor freedom from bondage when he is obligated to others. . . I urge you to look to the condition of your finances. 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, and free yourselves from bondage. This is a part of the temporal gospel in which we believe. That’s all I have to say about it, but I wish to say it with all the emphasis of which I am capable.” (October 1998 General Conference)

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Some might say that their financial position has nothing to do with their spirituality. 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. Marion G. Romney, “The Celestial Nature of Self-Reliance,” Ensign, June 1984, 3.

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Why do we accumulate debt?• Ignorance

• We don’t understand interest and its costs. • Carelessness

• We understand its costs, but we become lazy.• Compulsiveness

• We lack the self-control to discipline our purchases. • Pride

• How we look to others is more important than how we look to God.

• Necessity• We truly cannot feed our families.

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• The Debt Cycle• We start by going into a little debt

• We do it through ignorance, carelessness, compulsiveness, or even pride

• We take on more debt to keep up our lifestyle• Interest costs keep growing, so we must take on

more credit cards and more debt to keep up• This continues until our balances are so high we

cannot get any additional credit• But by now the debt is so large, that we may

never be able to pay it off. • We have lost our freedom, our self-respect,

and perhaps our homes as well

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Stopping the Debt Cycle

Ignorance gives way to wisdom• We begin to understand interest and its costs.

• We realize that we will have to change our habits.

• As we learn about the dangers of debt and the goals foregone through improper use of debt, we gain this knowledge.

• The Lord through the prophet Brigham Young in D&C 136:32 said:

• Let him that is ignorant learn wisdom by humbling himself and calling upon the Lord his God, that his eyes may be opened that he may see. . (D&C 136:32)

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Alma explained true wisdom when he said:

• “O, remember, my son, and learn wisdom in thy youth; yea, learn in thy youth to keep the commandments of God.” (Alma 37:35)

The first step in debt reduction is learning wisdom by humbling yourself, calling upon God, and striving to more fully keep His commandments.

• Although we bring the problems on ourselves, we are not required to work through them alone.

• If we obey the commandments as best we can, we can have the Lord’s help to get us out of our problem, mainly debt.

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Carelessness gives way to exactness

• As we understand the dangers of the debt cycle

• We realize the danger we put ourselves in

• We resolve never to begin the process.

• We become like the armies of Helaman:

• Yea, and they did obey and observe to perform every word of command with exactness, yea, and even according to their faith it was done unto them, and they did remember the words which they said unto me that their mothers had taught them. (Alma 57:21)

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After seeking the Lord’s help, gaining wisdom, and striving to more fully obey God’s commandments, we next need to put our trust in God. We must become like the armies of Helaman who believed:

• Yea, they had been taught by their mothers, that if they did not doubt, God would deliver them. (Alma 56:47)

With His help, we exercise exactness in doing all those things that we have learned we need to do (i.e., developing financial statements, budgeting, and making plans to learn how to live within our means).

• Then we do all in our power to get out of debt, i.e. set up a debt-reduction program or plan

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Compulsiveness gives way to diligence• We develop the self-control to be diligent in our

financial matters• We get on a budget and spend only on our goals

• We realize the spiritual importance of living within our means

• We remember what the Lord said to the prophet Joseph Smith when He said:

• And inasmuch as you are diligent and humble, and exercise the prayer of faith, behold, I will soften the hearts of those to whom you are in debt, until I shall send means unto you for your deliverance. (D&C 104: 80)

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After gaining wisdom and learning to act with exactness, the Lord wants us to be diligent.

• We need to understand what our goals are, to work toward them, and to be diligent in all our financial and other dealings.

We establish goals to be diligent (i.e., pay our tithes and offerings, live within our means, save and invest wisely, etc.)

• Then the Lord will soften the hearts of those to whom we are in debt (D&C 104:80), and will help us find the means to get out of debt.

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Pride gives way to humility• We remember that how we look to God is more

important than how we look to others. • We put Heavenly Father first in our lives and

realize everything is His

• We remember the loving counsel to the prophet where he states:

• And again, verily I say unto you, concerning your debts—behold, it is my will that you shall pay all your debts. And it is my will that you shall humble yourselves before me, and obtain this blessing by your diligence and humility and the prayer of faith. (D&C 104: 78-79)

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After we strive to learn wisdom and more fully obey the commandments, have faith that God can help us, and are diligent in all our financial dealings, we humbly do all that is necessary to get out of debt• The promised blessing that follows our efforts to

humble ourselves is the ability to get out and stay out of debt.

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Necessity gives way to self-reliance• We gain the skills to become self-reliant, and then

we use those skills to help others

• We humbly receive help from others

• Then the Lord is able to turn our weaknesses to strengths. He promised:

• “And if men come unto me I will show unto them their weakness. I give unto men weakness that they may be humble; and my grace is sufficient for all men that humble themselves before me; for if they humble themselves before me, and have faith in me, then will I make weak things become strong unto them.” (Ether 12:27)

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The Lord will take us in our need and will help us understand what we should do

• He will show us what changes we need to make, and will give us the knowledge we need to make the changes.

• He will then bless us with the strength to make the changes. We are changed from the inside out, and in the process, we gain self-reliance.

• And once we become self-reliant, we show our gratitude to the Lord for His help by helping others become self-reliant as well.

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President Gordon B. Hinckley• Reasonable debt for the purchase of an affordable

home and perhaps for a few other necessary things is acceptable. But from where I sit, I see in a very vivid way the terrible tragedies of many who have unwisely borrowed for things they really do not need. Gordon B. Hinckley, “I Believe,” Ensign, Aug. 1992, 2.

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.

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President Ezra Taft Benson said:• “The Lord desires his Saints to be free and

independent in the critical days ahead. But no man is truly free who is in financial bondage” (“Prepare Ye,” Ensign, Jan. 1974, p. 69).

President Heber J. Grant said:• “If there is any one thing that will bring

peace and contentment into the human heart, and into the family, it is to live within our means.” (Gospel Standards, comp. G. Homer Durham (1941), 111.)

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And from a friend who finally got out of debt after 15 years said:• “I can’t express the feeling of freedom I felt

when I paid off my last debt. You cannot be free when you are in debt.”

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How do you develop and use Debt Reduction Strategies?

• What happens if you (or a friend) are already in debt? What should you do?

• 1. Accept that you have a debt problem

• 2. Stop incurring debt?

• 3. Make a list of all your bills

• 4. Look for one-shot ways of reducing debt

• 5. Organize a debt repayment or elimination plan and follow it

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Debt Reduction Strategies (continued)

What are Debt Reduction (or debt elimination) Strategies?

Methods of reducing or paying off debtWhy should you understand these strategies even if

you do not have any debt?You will be working with others who do

• Are their different types of strategies?Personal strategies you can use yourselfStrategies that require outside help

(consolidation and negotiation)Strategies that require legal help (bankruptcy)

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Personal Strategies 1: Elder Ashton’s Debt Elimination Calendar

Elder Ashton’s logic: Pay off your most expensive debts first (From One for the Money pamphlet)

Setup a spreadsheet with rows = months and columns = creditors

Start with debt with highest interest rateThis way you are paying off the most expensive

debt first (and you will be saving the most money)

Once the most expensive debt is paid off, keep paying the same amount until all debts are paid off

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Elder Marvin J. Ashton

Debt-Elimination Calendar

Credit Dept. Dentist Piano AutoCard Store Loan Loan

March 110 70 50 75 235April 110 70 50 75 235May 110 70 50 75 235June 110 70 50 75 235July 180 50 75 235August 180 50 75 235Sept. 180 50 75 235Oct. 230 75 235Nov. 230 75 235Dec. 305 235Jan. 305 235Feb. 540March

19% 13% 9% 7% 6.5%

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Personal Strategies 2: Using the Equity in your Home?

You will hear on the radio and TV adds that you can consolidate your debts with a simple home equity loan which will reduce your monthly payments and the interest is tax deductible. What do you think?

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Personal Strategies:Home Equity Loans (continued)

What is a home equity loan? It is a loan against the equity in your home (the

difference between what the home is worth and how much you owe on it)

Should you take out a home equity loan to consolidate and pay off your debts?That depends:

Have you addressed the original problem which got you into debt in the first place?

Is your job and the economy stable, and you are comfortable with your current situation?

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Personal Strategies: Home Equity Loans (continued)

BenefitsReduce your monthly payment on debt, as interest

rates on secured debt (I.e., homes) is much less than interest rates on unsecured debt (I.e. credit cards)

Interest may be tax deductible Concerns

You have not addressed the real problem!Experience has shown that 80% of those that take

out a home equity loan are back to where they were in debt within three years. The habit hasn’t changed, the spending will continue again, and now they lose both their credit rating and their house.

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Outside Help Strategies 1:Non- and for-profit Counseling Agencies

What are non-profit credit counseling agencies?

Agencies set up specifically to help people reduce the credit-card debt load in their lives.

What do they cost?

Generally, it is about $15-20 for the setup and $12 per month after that

How do they work?

The non-profit companies have arrangements with many of the credit companies. Working with them, they can reduce or even eliminate your interest payments with specific creditors.

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Non-profit CCAs (continued)

Where can I find them?Call the National Foundation for Credit

Counseling (800-388-2227) How do they make money?

• They are reimbursed 10% of the money you pay to the credit card companies

Will this impact my credit report?

• Yes, it is noted on your credit reports. With the successful completion of the Utah program, this is noted on the credit report. Generally companies would rather have some of their money back than nothing at all

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Non-profit CCAs (continued)

Questions to ask non-profit agencies?• What is your tax ID? Are you licensed?• Are they members of the National Foundation of

Consumer Credit (NFCC)?• Are they accredited through the Council on

Accreditation?• Are their counselors certified by the NFCC?• What is the monthly management fee? Is it tax

deductible?• How long will I be in your program? (it should

never be longer than 5 years)• How much will I be paying each month? (generally,

it is taken from a checking or savings account)

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For-profit CCA’s

What are for-credit counseling companies?• Companies whose goal is to make money

through helping people get out of debt• How do they work?

• Consolidate debt into a single loan with a lower rate. Get homeowners into a interest-only home loan and use the excess cash to pay down debt.

• Work with creditors to reduce the interest rate of certain types of loans, especially credit cards. They may get rebates, make money on loan origination and fees, or charge retainer upfront

• Caution: make sure you understand how they make their money.

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For-profit CCAs (continued)

Questions to ask:• What type of loans will they help you work with?• How much will it cost me?• How do they make their money?• When do they get paid?• What is the monthly management fee? Is it tax deductible?• How long will I be in your program? (it should never be

longer than 5 years)• How much will I be paying each month? (generally, it is

taken from a checking or savings account)• Will I talk only with one person or many people?

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Warning Signs

Watch for these warning signs and hang up if you sense these:• High up-front fees

• Promises things they cannot deliver (i.e., we promise creditors will cut the principle owed by 50%)

• Pressure you to sign up for debt-repayment services the moment you call

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Legal Strategies: Bankruptcy

Major types of bankruptcy• Chapter 7:

• Liquidates assets and uses them to pay creditors according to precedence in the Bankruptcy Code.

• It is the quickest, simplest and the most frequently selected (75%) kind of bankruptcy filing. Certain debts cannot be waived by Chapter 7 bankruptcy such as child support, student loans, drunk driving fines, etc.

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Bankruptcy (continued)

Chapter 13:• A repayment plan in which the court binds both

the debtor and the creditors to terms of repayment.

• The debtor retains property and makes regular payments to a trustee out of future income to pay creditors over the life of the bankruptcy plan.

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Interesting facts on bankruptcy• 87% of all bankruptcies are due to 3 events:

• Divorce, death, or separation

• Unpaid medical expenses

• Loss of primary source of employment

• Eliminate the likelihood of these events and you reduce substantially your chance of filing bankruptcy

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Questions when thinking about bankruptcy• Is it honest?

• Is it just a way to get out of debt legally?

• Things that are legal may not be honest.

• Remember your integrity is worth more than money

• Is it really necessary?

• It will remain on your credit report for up to 10 years after you make your last payment

• It will hurt your chances to get the credit necessary for the purchase of a home or business

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Elder L. Aldin Porter on the subject of bankruptcy stated:Utah is the number-two state in the nation "for per-capita bankruptcy filings," according to this editorial ("Broken Promises," Salt Lake Tribune, 15 January 2001, A8). What an indictment of those of us who live in Utah! . . . Our bankruptcy law is on the books for the rare occasion when true disaster strikes a family, and none of us would take away that protection. But I'll also tell you it cannot function as it ought in a society with overextended and, frankly, somewhat dishonest people. The editorial goes on to suggest that the majority [in Utah] are not using chapter 13, [which] permits the applicant to repay his debts over a longer period of time. . . Instead, [60%] applied for chapter 7, which permits one to break his promises . . . and walk away from his debts, leaving his obligations forever unpaid. . . There is a question asked of those who seek a temple recommend that deals with honesty. I sincerely hope that those who have taken unfair advantage of this just and proper law don't carry a temple recommend and feel that they're absolved from responsibilities. (Devotional address given February 4, 2001 at BYU)

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Answers to Case Study #2

Ideas for the case study• Get them out of the current mess

• Find one off ways of reducing debt• Borrowed against life insurance• Sent in Income tax (overpayment)

• Sell assets, or borrow from parents• Sold truck, car, and motorcycle

• Refinance to a lower card if able• Tried to refinance house a second time

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Questions

Do you understand debt and debt reduction strategies?

See: Teaching Tool 18: Credit Card Repayment SpreadsheetTeaching Tool 20B: Debt Elimination Spreadsheet with Accelerator

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Review of Objectives

A. Understand why and how we budget

B. Understand debt and debt reduction

Documents

1 Personal Finance: A Gospel Perspective Budgeting and Debt Reduction