Real Life--Living It

Because we can learn so much from each other, Monday's posts will be "Real Life -- Living It" featuring a guest post.

This week's guest post is by Sara from The Pantry Panel. Sara posted a talk she gave in her LDS ward on June 14, 2009 entitled "A Provident Living Talk". I love how she shares personal experiences and the blessings she's received from following inspired counsel. (Thanks for your permission to share this post Sara! You are INSPIRING!)

A provident living talk

Given by me in my LDS ward today.

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"At long last, frugality is becoming cool! According to last week’s Washington Post, people are no longer trying to keep up with the Joneses. “Instead of feeling conscious about spending less, people are flaunting their frugality.” Of course, in the church, provident living is not some new trend.

What is provident living? Provident means carefully preparing for the future. Elder Robert D. Hales said in last conference, “To provide providently, we must practice the principles of provident living: joyfully living within our means, being content with what we have, avoiding excessive debt, and diligently saving and preparing for rainy-day emergencies. When we live providently, we can provide for ourselves and our families and also follow the Savior’s example to serve and bless others.”

The church puts out “Family Finances” pamphlet that summarizes advice about Provident Living: (1) Pay tithes and offerings, (2) Avoid debt, (3) Use a budget, (4) Gradually build a reserve, and (5) Teach your children.

Pay tithes and offerings. President Hinckley called tithing “the Lord’s law of finance.” When we put the Lord first financially by paying tithing, God is able to keep his promises, and open the windows of heaven to bless us. I know that God blesses us when we keep his commandments, especially when it is difficult.

Avoid debt. Our society has had to relearn this lesson recently, haven’t we? Our country’s recent financial problems have mostly been caused by excessive debt. Every generation or so we forget, and we have to learn this all over again.

Even young children can understand why debt is harmful. Sometimes my kids see the pay-day loan stores, with names like “The Cash Store.” They ask me, “Mom, can you buy cash at the store?” I say, “Yes! They say, ‘We’ll give you $10 today, but you have to pay us $20 next week.’” The kids laughed and laughed, and asked, “Why would anyone ever do that?” I did exaggerate the amount of interest slightly to teach the principle, but this is the truth about debt and interest. You always have to repay more than you borrow, and you can never be sure that you will have the money to repay in the future.

Some in recent years have tried to make debt look sophisticated. But no amount of sophistication can deny those simple truths about debt and interest. Speculative thinking is nothing new. In 1986, Elder James E. Faust said, “There are some investment counselors who urge speculative credit practices described as ‘leverage,’ ‘credit wealth,’ and ‘borrow yourself rich.’ Such practices may work successfully for some, but at best they succeed only for a time. An economic reversal always seems to come, and many who have followed such practices find themselves in financial ruin and their lives in shambles.” History repeated itself yet again.

It’s especially important to avoid consumer debt. Credit cards can be handy. But if you can’t pay off the balance every month, get rid of them. Elder Joseph B. Wirthlin counseled in April 2004, “Those who use credit cards to overspend unwisely should consider eliminating them. It is much better that a plastic credit card should perish than a family dwindle and perish in debt.”

Elder Hales said, “Of course some debt incurred for education, a modest home, or a basic automobile may be necessary to provide for a family.” However, even in these cases, debt should only be incurred carefully and prayerfully, and minimally.

Education: Student loans are often thought of as “good debt.” Interest rates have been low in recent years, and education usually leads to increased income that can be used to pay off the loan. But I know of many people whose student loans have caused them a lot of trouble. The loans have to be repaid even if the degree is not finished, or if job opportunities are not what you thought they would be, or if the degree is in a low-paying field, or if the student wants to become a stay-at-home mom. Student loans are not bankruptable, so even in a worst case scenario those debts are with you forever until they are repaid. So make these decisions prayerfully, and get your education without debt if possible.

Car: a “basic automobile” is not a new one. New cars are much more expensive than used cars. New car loans are often structured so that you owe more on the car than it is worth, making the car impossible to sell without spending thousands of dollars. Reliable used cars can be found with careful research and shopping. Teenagers can save up for old cars and pay for them with cash, which is what my husband and his brother did when they were teenagers. That car was often broken, but they were motivated to keep the car running, and they learned how to repair and maintain a car. These skills have blessed our family and saved our family a lot of money.

House: Debt is usually necessary to buy a home now, but in recent years excessive debt has been promoted. It used to be that banks required a 20% down payment on a house, and monthly payments had to be no more than 28% of your income. Buy a “modest home,” as President Hinckley counseled. If you follow these rules, you will have some measure of safety even in a declining real estate market. Avoid home equity loans, and seek to pay off your mortgage as quickly as you can. President Hinckley told the story of President Faust paying off his 4% mortgage, even though people thought it was foolish to pay off a loan with such a low interest rate. But he understood that being debt free brings freedom.

Use a budget. A budget is a great place to start to get control of your finances. When you write down where your money goes and make a plan, it’s easier to see the waste that you can cut out to reach your goals. The mystery of where the money goes is solved, and you are empowered to improve.

Elder Hales counseled us to “joyfully live within your means.” How can we do this? Often we think of budgeting or cutting back expenses as a matter of deprivation. But it helps for us to have the right attitude. Don’t compare your financial situation to affluent lifestyles portrayed in the media. My husband and I once attended a Parade of Homes home show. We enjoyed looking at the many lovely features in the fancy homes, but when we came home, we found ourselves less satisfied with our own simple home.

Instead, compare yourselves to your grandparents when they were your age. We have a great deal to be grateful for. Of course our grandparents didn't have cell phones or cable TV. But they also did without things that we see as necessities, such as air conditioning and dryers. Families had one car each. My grandparents raised 8 children in a 1200 square foot home. That isn't done anymore, but back in the 1960s it was relatively common.

Getting by on a very small budget can become a game. My grandmother was a divorced mother of 3 young children in the 1960s. Money was extremely tight, and often my grandmother went hungry because there was not enough food for everyone. Yet my mother thought of it as a fun challenge to show how clever they were. Their natural gas was turned off the summer after their dad left, and their stove was gas, leaving them without a way to cook. Granny figured out how to cook meals in the electric coffee pot (they were not Mormon at the time), and the children thought their Mom was so clever to figure that out. In our families, we can seek to have the same attitude, even in desperate circumstances.

Sometimes we think of frugal ways of life as “poor,” and extravagance as “rich.” But wealth is accumulating money. If you spend your money on disposable purchases, you don’t have the money anymore. Many rich people are frugal; that’s how they got the money. My husband’s grandparents are enjoying a comfortable retirement after a lifetime of frugality. Even though they don't have to be frugal anymore, they still only eat oatmeal, cracked wheat, or cornmeal mush for breakfast. All of the money they saved on simple breakfasts and in other countless ways over the years added up. Let your children know that those who spend more money than you are not necessarily richer. Without talking about any specific family’s finances, let them know that debt sometimes makes it appear that others are more prosperous than they really are.

It helps to think about what deprivation means to you. Is it deprivation to eat simple foods, wear yard sale clothes, or drive an old car? Or is it deprivation to not be able to afford to have another child, or have mother in the home, or to be unable to sleep well because of excessive debt?

Gradually build a reserve. Save money for a rainy day. 10% is a good figure to shoot for, and increase that if circumstances allow. The money can be automatically withdrawn from your accounts so it can be done without thinking about it.

Also, remember a reserve is more than just money in the bank. Food storage is part of a “reserve” as well.

Plan for the future, and have goals. Often young couples get used to spending two incomes, not planning what they will do when children come. When we were a young married couple, it was our goal for me to stay at home with the children when they came along. We made our decisions on that basis. It was fun to see how little we could live on! We avoided debt, lived in cheap apartments, and avoided turning on the air conditioning and heat. I worked, and during my time off I learned frugal skills such as bread baking and cooking from scratch. We shopped carefully, stocking up on food when it was on sale, eventually building up a good supply of food storage. We drove a junker car. My husband fixed anything that broke. Because of our choices, we were able to reach our goal.

Teach your children. So many young adults are unprepared for adulthood. We may have provident living skills, but the next generation needs to learn them or else those skills will be lost. How can we teach them to live providently?

Don’t do too much for them. I recently watched a news segment called “Unspoil your kids.” Even if you have means, make them work for what they want. Have them provide for their own car, buy their own clothes, save for their own missions or education. This can start at a young age. When our kids whined in the store for candy, we asked them, “Where is your money?” They didn’t have any, and a fight was avoided. We wanted them to never get the idea that it’s the parent’s job to provide for more than the basics. Children are naturally much more frugal with their own money than with your money.

Teach them how the household budget works. When I was a kid, I saw my dad’s paycheck. I selfishly imagined all the things I could do with that money, because I didn’t understand what family obligations that money paid for. We taught our children how the budget works in a family night, using an idea from this book. We represented our household income with Monopoly money, and asked our children what they wanted to do with it. Then we showed them where the money has to go, and how little discretionary money we actually had. After we did this, our children have desired to do what they can to help us save money.

Do self-reliant things as a family. Teach your children to cook. Even young children can learn to make sandwiches, or prepare oatmeal. My mom taught me, “If you can read, you can cook.” We have created a family cookbook so my children can have the confidence to make our family’s favorite recipes. Do family work projects together. Last month, our family worked together to insulate the attic. We all did our part, and the work got done. More importantly, our children can look back on experiences like that when they are adults and gain the confidence to do needed repairs themselves instead of hiring others. Grow a garden and preserve the surplus together as a family. Include your children when making repairs.

Provide the child with opportunities to work for money. Sometimes families give allowances to help children learn to manage money, but in my opinion, the most important lesson to learn about money is that you exchange work for money. Work together as a family. My husband’s parents ran a newspaper distribution office when he was growing up, and as a family they would assemble the newspapers before they were delivered. Because of experiences like this, my husband and his siblings all grew up to be hard workers.

Talk to your children about money. Help them to understand how interest works, and why debt is bondage. Often people are quiet about their financial problems, so children grow up only seeing the fun side of overspending, and never see the full consequences. My kids sometimes overhear the Dave Ramsey show, a national radio show that helps people get out of debt. The show has given my children a good education about why debt should be avoided, by hearing the consequences of others who have gotten into debt. Explain to your children, in a way that they can understand, why it is smart to be frugal.

I testify that Heavenly Father has blessed us greatly, and he wants us to use our earthly resources to provide for our families, plan for the future, and bless others. I know that when we make wise choices with our money, we are blessed with peace."

(Source: Sara, The Pantry Panel blog, June 14, 2009 post)