Finance 101

ASSIGNMENT #7 FINAL PART A (WRITING)

[EVAN TRAASDAHL]

Financial Principles
1 FINANCIAL PRINCIPLE #1 CHAPTER 1 TITHING
The first and most important thing that the Hopeful family will need to do is before anything
else, pay their tithing. It is outlined in chapter one of the finance text book, that if we pay the
Lord first, then ourselves, we will be in the right mindset to properly manage our money. It states
Personal financial management is about more than just money. It starts with the mind and the
heart of an individual or couple. By paying your tithes and offerings first, you allow the Lord to
bless you and you prepare your heart and mind for the understanding and skills necessary to
properly manage the rest of your financial affairs. The Lord knows that we need money for a lot
of things in this life, and He is more than willing to help us manage our financial affairs, if we
are willing to put Him first and receive His help.

2 FINANCIAL PRINCIPLE #2 CHAPTER 1 MAKE A

PLAN AND SET GOALS
Being aware of their money and financial situation is a very important part of being able to
get back on their feet. When we know what we have to work with, set plans and make goals as to
how we want to spend and use our resources, we will be able to keep track of what we have and
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be able to regulate the usage of it. First, they should set weekly goals and make a plan, it could
also be called a budget, as to how they want to spend their money. Make an allotment for
groceries, gas and all of the necessary bills that they have to pay. Then they should use any
money that they can to begin paying off their debt. By prioritizing their money and setting goals
as to how much theyd like to spend, or how much theyd like to have at the end of each
week/month/year, they will be able to organize their spending and be able to realize the things
that they really need and the things that they will be able to cut out of their budget.

3 FINANCIAL PRINCIPLE #3- CHAPTER 1 COLLECT

INTEREST
As the Hopefuls better manage their money, set goals and make plans, they will be able to
start putting money into savings. Putting money into savings or investments is a very important
part in ensuring financial security. When we put our money into savings or invest it we can
collect interest. Putting their money to work will be one of the smartest things that they can do.
The book says, When you put your money to work earning interest, dividends and appreciation,
you are not dependent solely on the income you earn through your employment. You can enjoy
financial security now and eventually retire to enjoy and utilize your independent wealth as you
choose. Having another form of income that isnt just a weekly paycheck is a very smart move
to make if you have the opportunity to do so. For the Hopefuls to experience financial freedom,
they will have to work on putting a certain amount of money into either savings or investments
each month, or whichever period of time they decide.
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4 FINANCIAL PRINCIPLE #4- CHAPTER 2 FINANCIAL

RECORDS
Organizing financial records is another fantastic way of keeping all of their expenses,
liabilities and assets in check. Without the use of proper paperwork and without keeping track of
all that they spend, have spent and will spend, they have a high chance of getting very lost with
all of their finances. Keeping a cash flow statement will help them keep track of all of their
incoming and outgoing cash, allowing them to follow their goals and plans that they set. This
will also help them to keep track of their assets and liabilities. A very important thing they need
to do as well is make sure that their assets outweigh their liabilities, this can be easily done if
they keep track of their financial records.

5 FINANCIAL PRINCIPLE #5- CHAPTER 2 BUDGETING

As before mentioned, making plans and setting goals as to how they want to and should be
spending their money, they will have a better idea as to where they will be in the future and also
be able to judge how much money they will have for different expenditures. It takes a lot of selfdiscipline to be able to successfully budget your money. There are three key points to making a
successful budget that they should focus on
Spend less than you earn.
Spend for needs rather than wants.
Save for emergencies, major expenditures, and investments.
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We should always be spending based on how much we earn. Using that as a guideline as opposed
to just buying whatever we want will help us stay within our budget. The second point is the one
that takes the most self-discipline. If they are able to hold back on buying things that they want,
and cutting back in certain areas so that they cover their basic needs. Having a good backup fund
in savings is a swell idea as well because you never know what could happen, it is always smart
to be prepared for emergencies.

6 FINANCIAL PRINCIPLE #6- CHAPTER 3/9 INVESTING

One asset that they can invest in would be the stock market. If they Watch the market and
invest some extra money each month in a reliable companies stock, they can put their money
to work and have an appreciating asset. Through investing in the stock market they have the
chance to receive dividends if the company is doing well. It is a large risk, investing in the
stock market, but as they budget and save money, they will be able to invest even just a little
bit of money each month, increasing the value of their investment, which in turn could
increase their return.

7 FINANCIAL PRINCIPLE #7- CHAPTER 3/9 MINIMIZE

RISK
Investing in the stock market is a risky business. There are many steps that the Hopeful
family can take to minimize the risks of investing in the stock market. First off, they need to
realize that through major world events, the stock market will fluctuate. It would not be smart of
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them to get worried and pull out their investments if the market goes down for whatever reason.
That is a normal part of investing. It takes a lot of patience to have an investment because the
stocks could go way down, but then rebound back up and they could make money instead of lose
it as it initially seemed. Regardless of the circumstances of the world or the market, sticking with
their investments, and choosing wisely the investments that they make so that they will want to
stick with them will help them to maximize profit from the stock market and minimize risk.

8 FINANCIAL PRINCIPLE #8- CHAPTER 3/9 DIVERSIFY

To have a successful stock investment portfolio, The Hopefuls will need to study the market
and invest in several different stocks that have the potential to grow. It is important to invest in
several different things to have a better opportunity of their assets increasing. As they invest in
different stocks, they will experience more of the market and help the market to grow. It is
important that they put their money into many different stocks so that if one stock goes down by
many points, they arent entirely out of luck.

9 FINANCIAL PRINCIPLE #9- CHAPTER 3/9 MUTUAL

FUNDS
A great way to diversify their investments in the stock market is by looking into mutual
funds. Investing in mutual funds is very smart when investing because professionals basically
create a diverse stock portfolio for you and invest your money. This is another great way to

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minimize risks. Mutual funds are a good starting point for small investors and would be a great
option for the Hopeful family.

10 FINANCIAL PRINCIPLE #10- CHAPTER 4 RUN THE

NUMBERS
Running the numbers is another fantastic way for them to organize their numbers, and have
a good idea of what numbers will be worth at what point. This will help them to keep track of
their interest on investments and other assets, helping them to take full advantage of all of the
resources that they have. This will also help them decide on what to invest. As they run the
numbers on things before spending money, they will understand how to best spend their money
and get the most out of each purchase. Running the numbers will help put them in a position to
be financially independent through finding out how things may play out before they invest in
them.

11 FINANCIAL PRINCIPLE #11- CHAPTER 4

COMPOUND INTEREST
One of the key ways that they can take advantage of saving money and getting interest is
being able to collect compound interest. As they collect interest on the interest that they are
receiving, they will make much more money as their interest rate goes up. Saving and investing
will be much more effective if they are able to collect compound interest. If they reinvest the

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dividends they receive from previous stock investments, and put their money into savings with a
good bank, they will be able to collect a good amount of compound interest.

12 FINANCIAL PRINCIPLE #12- CHAPTER 4

MICROSOFT EXCEL
Making use of the program, Microsoft Excel, will help the Hopefuls to run numbers, get all
of their things in order and understand how their money is working for them. With Excel, they
can calculate how much interest they can get, how much they should be paying, how much they
should invest and basically work everything out in advance to know how things can turn out in
different circumstances. Using Excel, they can do the necessary things today to make the most
money possible in the future. As has been previously stated, managing money now and making
plans is the best way to ensure future financial security.

13 FINANCIAL PRINCIPLE #13- CHAPTER 5

MANAGING CREDIT
In order to make sure that they have enough money when they really need it, the Hopefuls
could look into making good use of credit. Credit is a good way to take care of their present
financial situation until they can put themselves into a better one to be able to afford all of the
things that they need. They must be very cautious however because it is very easy to get into a
lot of trouble with credit and just end up making their situation worse. If they wisely manage
their credit, they will be able to stabilize themselves at the present time, and not end up having to
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pay ridiculous amounts for the credit it the future. Credit is a good strategy for them if they are
able to use it wisely.

14 FINANCIAL PRINCIPLE #14- CHAPTER 5 PAYING

CASH
An alternative to using credit would be to save instead of borrow. Paying cash for things is
ideal. It doesnt involve debt or anything of the sort, its the safest, cleanest way to buy things.
My father used to work for McCarran Airport in Las Vegas and his main advice for them was to
have a stockpile of cash as a backup. After a while of keeping back a chunk of the money they
made each month, they were out of debt and have remained so for a good number of years. They
should be putting away each month so that they are able to make a lot of their purchases in cash
or with liquid assets.

15 FINANCIAL PRINCIPLE #15- CHAPTER 5 OPEN

ENDED CREDIT
To best fit their financial situation, the Hopefuls should look into open-ended credit. With
this type of credit, they will be able to pay what they can in varying amounts, if they needed they
could just focus on making the minimum payments each month. It would be a very easy option
for them to keep up with and not get too swamped with more big payments each month. It would
even help them to make more of their other payments and take care of all of their necessities. If
they look into credit, this is the kind they should definitely get.
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16 FINANCIAL PRINCIPLE #16- CHAPTER 6 NEW AND

USED CARS
With their situation, I would advise that they sell their new car and buy a used car that they
would not have to make payments on. In this circumstance, they do not need to have a new car,
and they can find a reasonably priced used car that will meet their needs just as well as a new car.
In the interest of saving money, selling their new car and buying a used car will help them
tremendously. It would greatly reduce their monthly payments so that they could focus on other
things as well as not really changing a lot of their lifestyle as is. They will still have two cars,
they just wont have to be making payments on one of them any longer. This will give them extra
money each month to either save, invest or spend on their other monthly expenditures.

17 FINANCIAL PRINCIPLE #17- CHAPTER 6

NEGOTIATING THE DEAL
To save a lot of money buying a used car (if they so choose) is to negotiate with the
dealership or with the person that they are buying it from. If buying from a dealership, the
dealership will always sell a vehicle for less than the advertised price if they just do a little bit of
talking and negotiating. In the past, my dad has really enjoyed doing this while buying cars, he
has even talked down dealerships several thousand dollars and down several percent on interest
when buying new and used cars. If the Hopefuls take the time necessary to negotiate with the
dealership while purchasing a used car, they will be able to save a lot of money.
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18 FINANCIAL PRINCIPLE #18- CHAPTER 6 YOU ARE

NOT YOUR CAR
A lot of people get the idea that if they dont have a cool or fast car that people will look
down on them or that they might be shamed by others but that is not the case. It is far more
important to be safe and to have a cost effective mode of transportation. For the Hopefuls this is
especially the case. They can save a lot of money if they focus on buying a cost effective used
car in the place of their new one. One thing that has helped me and that will help them a lot as
well is the use of public transportation. As I have used the bus and train to get between locations
as opposed to just driving everywhere, it has saved me a lot of money. If they do that as well,
when possible, they will be able to spend less money each month on gas for their cars.

19 FINANCIAL PRINCIPLE #19- CHAPTER 7

REFINANCING
To help the Hopefuls with their home payment, they can look into refinancing their loan. By
doing so they can possibly lower their interest rate on their loan. Refinancing is a great way to in
the end, pay less money for their home overall. Refinancing lowers the interest rate on the house
and that means they will be paying less on payments. Refinancing could help them tremendously
on their mortgage loan. At this point in their mortgage, if the Hopefuls stay put and dont move
for a while, they will experience a lot of monetary gain from refinancing and save a lot of money
on loan payments and whatnot.
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20 FINANCIAL PRINCIPLE #20- CHAPTER 8 INSURING

RISKS
Though it may seem like insurance is another payment every month to worry about, it could
potentially help them out quite a bit. We can never be quite sure as to what is going to happen to
us in life, and insurance helps us to not take heavy losses when unexpected things do happen. If
they do not have insurance and something happens to them, they will find themselves in an even
bigger pit than the one they are already in. To avoid any risks and to be sure that they have what
they need when they need it if they have any sort of accident, insurance is definitely a necessity.
Insuring risks is very important because they will have the necessary funds when the time comes
that they need them.

21 FINANCIAL PRINCIPLE #21- CHAPTER 8

AUTOMOBILE INSURANCE
Having two cars and needing to drive places for their childrens lessons, work and all of the
other things that they need to do, automobile insurance is a must. If they are one day hit by
another car or if they accidentally hit another car, the automobile insurance will be there to back
them up so that they will not have to pay for all of the damages out of pocket. On top of all that,
if they end up getting injured in the accident, the insurance will help to cover medical expenses
and loss of time at work. The Hopefuls are in no position right now to take leave from work due
to injury, with good insurance, they will not need to.
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22 FINANCIAL PRINCIPLE #22-CHAPTER 8 HOME AND

PROPERTY INSURANCE
Along the lines of never knowing what could possibly happen, having home and property
insurance is also very important for the Hopefuls. Making sure that the assets they have are
insured is important because if they end up getting damaged or what have you, the Hopefuls will
have to pay for it themselves or fix up whatever problem took place with money out of their own
pockets. The wonderful part about insurance is that it is a good fall back for emergency situations
and it is just a good way in general to be prepared for anything. They can also get insurance on
assets that they may possess that are worth a lot of money. They can add a floater to their
insurance to make sure that all of their assets are covered. It is very important to insure assets
just so that you can still get a good amount of money out of them even if something ends up
happening.

23 FINANCIAL PRINCIPLE #23- CHAPTER 8 HEALTH

INSURANCE
Getting health insurance is probably the most important kind of insurance that they could
possibly get. Having good health insurance is an absolute necessity in our day and age with how
the health care system works. The hopefuls can minimize the need to spend a lot on health
insurance by living a healthy lifestyle. Of course it is a very smart move to have health insurance
just in case something happens, but it is best if they dont have to use it. By exercising regularly,
having a healthy diet and not participating in extreme sports or doing anything ridiculously
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crazy, they can minimize the need for health insurance. If something does end up happening to
them however, good health insurance will get them out of a lot of trouble and unnecessary costs
at the doctors office and hospital.

24 FINANCIAL PRINCIPLE #24- CHAPTER 7 BALLOON

MORTGAGE
With all of the other things put into play, the Hopefuls should be able to save a lot of money
each month by wisely investing their money and cutting back on certain expenses. With more
take home pay each month they will be able to make more payments on their mortgage loan each
month. As they do this, they will be able to have what is called a balloon mortgage. They will be
able to get a lower interest rate on the loan as they pay off the loan at a faster rate. This will help
them get all the way back on their feet quicker.

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