Financial Preparedness

Recently the First Presidency distributed a letter to be read in sacrament meetings. In the letter, the First Presidency states that “reports of fraud schemes and unwise investments prompt us to again counsel members with respect to prudence in managing one’s financial affairs.” They also wrote that they are “concerned that there are those who use relationships of trust to promote risky or even fraudulent investment and business schemes.”

“We are concerned that some church members ignore the oft-repeated direction to prepare and live within a budget, avoid consumer debt, and to save against a time of need.”

“Consideration should also be given to investing wisely with responsible and established financial institutions. We are also concerned that there are those who use relationships of trust to promote risky or even fraudulent investment and business schemes.”

“While all investments carry an element of risk, that risk can be managed by following sound and proven financial principles: first, avoid unnecessary debt, especially consumer debt; second, before investing, seek advice from a qualified and licensed financial advisor; and third, be wise.”

We have heard this counsel from the brethren over and over again. Now is the time to listen and heed the words of our prophet and his counselors.

Financial Preparedness: Avoiding Fraudulent and Risky Schemes

In February 2008, the First Presidency issued a letter to general and local leaders in the United States and Canada with a message to be prudent in managing financial affairs. They offered concern about individuals who may use relationships of trust to promote risky schemes and shared sound financial principles to manage risk: “First, avoid unnecessary debt, especially consumer debt; second, before investing, seek advice from a qualified and licensed financial advisor; and third, be wise.” Here are some of the common warning signs of fraud.

Sense of Urgency
An opportunity that requires an immediate response is typically a clear sign of fraud. Someone trying to sell an opportunity may try to persuade by saying it’s the chance of a lifetime or only a certain number can participate, but the need for a quick decision means there is little or no time to think about the commitment or to check the background of the investment. Fraudsters will try to create a sense of urgency to encourage investors to jump in before various concerns or anxieties can settle. It is important to take the time to carefully consider each aspect of the decision. A quality investment opportunity will be around long enough to allow the time needed to fully contemplate the options.

Guaranteed Profit, Little Risk
Who could turn down an investment opportunity with virtually no risk and guaranteed profit? It almost seems too good to be true, and according to Brian Sudweeks, an associate professor of finance at Brigham Young University, it probably is. “No one can promise a consistently high specific rate of return, and there are no ‘get rich quick’ schemes that work on a consistent basis,” Brother Sudweeks said. “Guaranteed high returns are never guaranteed or high.” But promoters will often propose such ideas, appealing to the desire to see a fast return and immediate profit. Brother Sudweeks encourages potential investors to apply two important principles to any investment decision. “First, know what you invest in and whom you invest with,” he said. “Second, invest only with high-quality individuals and institutions.” Often a scheme continues to operate simply because investors don’t know what they are investing in, only that they see a return. As new investors contribute money, those funds go to pay previous investors, creating a never-ending shuffling of money that eventually collapses.

Well-Known Referrals
Most individuals are more likely to participate in an investment opportunity if they know their sister, home teacher, neighbor, or co-worker is also participating. Promoters will often use these examples to appeal to and build some level of trust. While it may or may not be true that these friends and acquaintances are involved, investors cannot responsibly respond to this elevated form of peer pressure. “A lot of people don’t understand the proper principles of investments and don’t want to take the time to research and investigate something,” Brother Romney said. “Instead they rely on the fact that someone else has investigated it. When they hear the names of people they know, they automatically assume the research has been done.”
With a countless number of fraud schemes come just as many types of fraudsters. While terms such as swindler or scammer may bring a stereotypical image to mind, there are no set characteristics of someone promoting fraudulent investments. In fact, they may be typical acquaintances from work or church, family members, or close friends, and they may not even know the depth of what they are involved in. “Ask yourself if you are interested solely because you know someone else involved,” Brother Romney said. “If this is the case, perhaps take a step back and really look into the background of the investment. No matter how trustworthy the source seems, potential investors should never make a decision based solely on the advice of others.”

Avoiding Fraud
As investment fraud becomes increasingly common, Church leaders have offered counsel to avoid unwise investments and stay out of debt.
“We again urge our people to avoid unnecessary debt, to be modest in the financial obligations which they undertake, to set aside some cash against an emergency,” said President Gordon B. Hinckley (1910–2008) in a general conference address in 2003. “We warn our people against ‘get rich’ schemes and other entanglements which are nearly always designed to trap the gullible” (“The Condition of the Church,” Liahona, May 2003, 4).

Resources exploring the basics of family finances are available on the Church’s Web site, ProvidentLiving.org. The site features an online financial course, references to talks from Church leaders, lesson materials, and access to additional resource material.

Source: Adapted from an article posted on LDS.org http://www.lds.org/ldsorg/v/index.jsp?vgnextoid=7cecc8fe9c88d010VgnVCM1000004d82620aRCRD&locale=0&sourceId=64332ac9a0a5a110VgnVCM100000176f620a____

Food Storage

The church has recently published a pamphlet entitled "All Is Safely Gathered In: Home Storage" http://providentliving.org/fhs/pdf/WE_FamilyResourcesGuide_International_04008_000.pdf

It states:

MESSAGE FROM THE FIRST PRESIDENCY

Dear Brothers and Sisters:

Our Heavenly Father created this beautiful earth with all its abundance, for our benefit and use. His purpose is to provide for our needs as we walk in faith and obedience. He has lovingly commanded us to "prepare every needful thing" (see D&C 109:8) so that, should adversity come, we may care for ourselves and our neighbors and support bishops as they care for others.

We encourage Church members worldwide to prepare for adversity in life by having a basic supply of food and water and some money in savings.

We ask that you be wise as you store food and water and build your savings. Do not go to extremes; it is not prudent, for example, to go into debt to establish your food storage all at once. With careful planning, you can, over time, establish a home storage supply and a financial reserve.

We realize that some of you may not have financial resources or space for such storage. Some of you may be prohibited by law from storing large amounts of food. We encourage you to store as much as circumstances allow.

May the Lord bless you in your home storage efforts.

The First Presidency

THE BASICS OF FAMILY HOME STORAGE

Three Month Supply

Build a small supply of food that is part of your normal, daily diet. One way to do this is to purchase a few extra items each week to build a one-week supply of food. Then you can gradually increase your supply until it is sufficient for three months. These items should be rotated regularly to avoid spoilage.

Drinking Water

Store drinking water for circumstances in which the water supply may be polluted or disrupted.

If water comes directly from a good, pretreated source then no additional purification is needed; otherwise, pretreat water before use. Store water in sturdy, leak-proof, breakage-resistant containers. Consider using plastic bottles commonly used for juices and soda.

Keep water containers away from heat sources and direct sunlight.

Financial Reserve

Establish a financial reserve by saving a little money each week and gradually increasing it to a reasonable amount (See All is Safely Gathered In: Family Finances guide).

Longer-Term Supply

For longer term needs, and where permitted, gradually build a supply of food that will last a long time and that you can use to stay live, such as wheat, white rice, and beans.

These items can last 30 years or more when properly packaged and stored in a cool, dry place. A portion of these items may be rotated in your three-month supply.

Financial Preparedness

The church has recently distributed a pamphlet to the worldwide church entitled "All is Safely Gathered In: Family Finances."

http://providentliving.org/ff/pdf/WE_FamilyFinancesGuide_International_04007_000.pdf

It states:

MESSAGE FROM THE FIRST PRESIDENCY

Dear Brothers and Sisters:

Latter-day Saints have been counseled for many years to prepare for adversity by having a little money set aside. Doing so adds immeasurably to security and well-being. Every family has a responsibility to provide for its own needs to the extent possible.

We encourage you wherever you may live in the world to prepare for adversity by looking to the condition of your finances. We urge you to be modest in your expenditures; discipline yourselves in your purchases to avoid debt. Pay off debt as quickly as you can, and free yourselves from this bondage. Save a little money regularly to gradually build a financial reserve.

If you have paid your debts and have a financial reserve, even though it be small, you and your family will feel more secure and enjoy greater peace in your hearts.

May the Lord bless you in your family financial efforts.

The First Presidency

THE BASICS OF FAMILY FINANCE

Pay Tithes and Offerings

Successful family finances begin with the payment of an honest tithe and the giving of a generous fast offering. The Lord has promised to open the windows of heaven and pour out great blessings upon those who pay tithes and offerings faithfully (see Malachi 3:10).

Avoid Debt

Spending less money than you make is essential to your financial security. Avoid debt, with the exception of buying a modest home or paying for education or other vital needs. Save money to purchase what you need. If you are in debt, pay it off as quickly as possible.

Keep a Budget

Keep a record of your expenditures. Record and review monthly income and expenses. Determine how to reduce what you spend for non essentials.

Use this information to establish a family budget. Plan what you will give as Church donations, what you will save, and what you will spend for food, housing, utilities, transportation, clothing, insurance, and so on. Discipline yourself to live within your budget plan.

Build a Reserve

Gradually build a financial reserve, and use for emergencies only. If you save a little money regularly, you will be surprised how much accumulates over time.

Teach Family Members

Teach family members the principles of financial management. Involve them in creating a budget and setting financial goals. Teach the principles of hard work, frugality, and saving. Stress the importance of obtaining as much education as possible.

Note: See PDF (link above) file for budgeting worksheet included in pamphlet

First Presidency Letter, January 20, 2002

Letter's text below:

January 20, 2002

To: General Authorities; Area Authority Seventies; Stake, Mission and District Presidents; Bishops and Branch Presidents

Dear Brethren:

Home Storage and Financial Reserves

Priesthood and Relief Society leaders should teach the importance of home storage and securing a financial reserve. These principles may be taught in ward councils or on a fifth Sunday in priesthood and Relief Society meetings.

Church members can begin their home storage by storing the basic foods that would be required to keep them alive if they did not have anything else to eat. Depending on where members live, those basics might include water, wheat or other grains, legumes, salt, honey or sugar, powdered milk, and cooking oil. (See suggested amounts.) When members have stored enough of these essentials to meet the needs of their family for one year, they may decide to add other items that they are accustomed to using day to day.

Some members do not have the money or space for such storage, and some are prohibited by law from storing a year's supply of food. These members should store as much as their circumstances allow. Families who do not have the resources to acquire a year's supply can begin their storage by obtaining supplies to last for a few months. Members should be prudent and not panic or go to extremes in this effort. Through careful planning, most Church members can, over time, establish both a financial reserve and a year's supply of essentials.

Sincerely Yours,
Gordon B. Hinckley
Thomas S. Monson
James E. Faust
The First Presidency


Suggested amounts of Basic Foods for Home Storage*:

Per adult for one year
This may vary according to location.

Grains: 400 lbs.
Legumes**: 60 lbs.
Powdered Milk: 16 lbs.
Cooking oil: 10 qts.
Sugar or honey: 60 lbs.
Salt: 8 lbs.
Water (2 wks) 14 gal.

* See also Essentials of Home Production and Storage, 1978
**Legumes include dry beans, split peas, lentils, etc.