Lesson Two -- BYU -- Record Keeping And Budget -- August 7, 2024 -- August 11, 2024; Part 2 -- August 12, 2024 -- August 19, 2024

Homework: record keeping and notional budget. 

Cash management:

• record keeping, notional: link here.
• budget spreadsheet, notional: link here.
  

************************************
Chapter 3: Record Keeping and Budget

Good zoom call on August 11, 2024. Follow-up zoom call on August 22, 2024.

Thanks for a good call today guys.  Looking forward to next week.  Remember, two assignments between now and then.

1)  Do some independent research on personal records keeping and come prepared to talk a bit about what you plan to keep, how you plan to keep it, and why.  What will your system look like?

2)  Do some research and come prepared to discuss what tool you hope to use for budgeting.  Remember the guidelines from the text:

• I will record every dollar that I earn and spend.
• I will minimize fixed expenses, and keep them low.
• I will only spend on things in my budget/plan. 
• I will plan and save for big ticket items
• I will avoid going into unproductive debt.  (sometimes exceptions are student loans, and primary mortgage)
  

And remember, you are just starting out.  Your tools can and likely will evolve and change.  So, find something that works well now.

3)  Finally, if you are interested, here is the article and video I referred to  during our talk.

• Consistency and discipline are what matters in the long-run.  More than your job.  More than income.
• In the National Study of Millionaires (Ramsey Solutions, 2018), over 10,000 millionaires were surveyed.  Can you guess the top three professions of millionaires?  They were:
• accountant,
• engineer, and,
  
• school teacher
• NOT (doctors or lawyers)
• A great article on this concept:  https://www.thescopeofpractice.com/why-are-teachers-more-likely-than-physicians-to-become-millionaires/
• A great book on this concept:  The Millionaire Next Door Summary & Review (Thomas Stanley) - ANIMATED 2021

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Original Post

Zoom call: held, August 11, 2024, very successful.

Time required: see below.

First lesson:

• start date: August 7, 2024
  
• end date: August 11, 2024
• Zoom meeting: August 11, 2024
  

BYU Freshman College Course Manual: link here.

Chapter 3 -- Saving, Income, and Expense Planning: link here.   [63 of 352; page 52]. [60 minutes]

• this begins the "meat of the course"
• video and slides reinforce the manual 
• additional resources: see bottom of this page
  

• objectives:
• record keeping
• budgeting
• net worth
• personal income statement and spending analysis
• Action: set up a record-keeping method 
• Papa uses a virtual, nesting, hierarchical folder system
• nested: by category, year, month
  
• Action: create a rudimentary budget

• Takeaways for me:
• saving records; how to save records
• I have found scanning records and storing them digitally is the ONLY way to go
• with a few exceptions: minimize paper copies

• While still in college, there may not be much to one's budget but this chapter will give you a start.

• Things move quickly between college and early early years of work: you will probably update your budget frequently.

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Assignment

- Read the chapter 3, review the slides, and skim/watch the video:  https://personalfinance.byu.edu/freshmancollegecourse 

• at that link, go to the sidebar and click on "3. Budgeting .... " and that will take you to slides and video.

- Read Clay Christianson's - How will you measure your life:  https://hbr.org/2010/07/how-will-you-measure-your-life

Optional, but highly recommended:  Watch Professor Christian speak first-hand on this topic at a TED talk:  https://www.youtube.com/watch?v=tvos4nORf_Y

Lesson One -- BYU -- Introduction -- August 1, 2024 -- August 6, 2024

Time: see below.

First lesson:

• start date: August 1, 2024
• end date: August 6, 2024
• discussed, Zoom meeting: August 6, 2024
  

BYU Freshman College Course Manual: link here.

The disclaimer, introduction, and table of contents are very, very long. [20 minutes]

• scroll through it to get an overview of the course

Chapter 1-- Building a Strong Foundation: link here.  [12 of 352; page 1]. [20 minutes]

• moral compass: the BYU message
• do not be put off by this chapter
• it sets the moral compass 
• for personal finance planning you may want to quickly move on

Chapter 2 -- Your Personal Finance Plan -- Planning: link here.  [37 of 352; page 26]. [30 - 45 minutes]

• moral compass: the BYU message continues
• again, do not be put off by this chapter
• one of the segments: page 51 of 352 or page 40 of the document which I particularly appreciated
• from the bestseller, Stephen R Covey's The 7 Habits of Highly Effective People:

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Lesson Two
Next week, August 7, 2024 -- August 14, 2024

Link here.

Discount Brokerage Account

 

Checking account within the discount brokerage account. Link here.

Stay fully invested to extent possible.

• to extent possible, keep all cash working for you
• concept of "dry powder"
• I preferred keeping "dry powder" in MMFs, safe, high-yielding equities

Cash:

• park all cash in safe, high-yielding, easily accessible accounts
• money market funds (MMFs)
• broker's ETFs (SCHG, SCHD)
• maybe high-yielding safe blue chips? Utilities?

Difficult to "time the market"

• see "pullback" as opportunities

Pyramid:

• Roth IRA
• mutual shares

Financial Planning Pyramid

Variations of this graph are found in every financial planning course. 

It is worthless. 

Mostly because it's common sense. 

Also, it does not relate well to large groups of investors. For example, parents and grandparents often play (or can play) a huge role in emergency funding, and even such "things" as insurance.

This quickly drawn diagram is much more important: 

Far left and far right columns: items listed in relative importance with regard to financial independence by age 57.

For example, "then" -- your great-grandparents, pensions and social security were most important.

For your parents and you -- the "now" -- pensions and social security are least important.

Good Morning And Good Luck!

This site was created by your grandfather Bruce.

These are the best years of your lives. Spend wisely but don’t go nuts worrying about jobs, income, retirement. 

Explore. Live your passion. Be all that you can be. Foster close and lasting relationships.

Grandparents will have your back financially and for retirement.

Grandparents’ goal:

• fund retirement vehicles for each of the five grandchildren; funding has begun;
• monthly stipends for those in college;
• a million-dollar legacy for each grandchild.

Use the tabs at the top of the web page to go directly to what interests you.

The "home page" -- my summary of this entire project. Embedded in the "home page":

• actionable items
• advice
• lessons learned

Credit Agencies

 

• www.equifax.com. 

• www.experian.com.

• www.transunion.com.

• www.equifax.com/personal/credit--report-services. 

• www.experian.com/freeze/center.html. 

• www.transunion.com/credit-freeze.

BYU Personal Finance Course -- Chapter 8: Time Value of Money 1: Understanding the Language of Finance

BYU Personal Finance Course -- Chapter 8 -- Time Value of Money 1: Understanding the Language of Finance

Papa's takeaways:

• one of the most important chapters
  

Link here.

Begins on page 173 / 164 of 352. 

Objectives:

• understand the term investment.
  
• understand the importance of compound interest and time.
• understand basic financial terminology (the language of finance).
• solve problems related to present value (PV) and future value (FV)
  

BYU Personal Finance Course -- Chapter 9: Time Value of Money 2: Understanding Inflation, Annuities, and Amortized Loans

BYU Personal Finance Course -- Chapter 9 -- Time Value of Money 2: Understanding Inflation, Annuities, and Amortized Loans

Papa's takeaways:

• another important chapter
  

Link here.

Begins on page 183 / 194 of 352. 

Objectives:

• explain how inflation impacts your investments (spoiler alert: it's not all bad)
  
• understand how to calculate real returns (returns after inflation)
• solve problems related to annuities
• solve problems related to amortized loans
  

BYU Personal Finance Course -- Chapter 7 -- Debt: Avoiding Debt Like The Plague

BYU Personal Finance Course -- Chapter 7 -- Debt: Avoiding Debt Like The Plague

Papa's takeaways:

Link here.

Begins on page 155 / 166 of 352. 

Objectives:

• understand our leader's counsel on debt
• understand principles of using debt wisely
• understand how to develop and use debt-reduction strategies
• understand plans and strategies for debt reduction
  

BYU Personal Finance Course -- Chapter 6 -- Loans: Avoiding Consumer and Minimizing Student / Mortgage Loans

BYU Personal Finance Course -- Chapter 6 -- Loans: Avoiding Consumer and Minimizing Student / Mortgage Loans

Papa's takeaways:

• 
  

Link here.

Begins on page 127 / 137 of 352. 

Objectives:

• understand consumer loans, principles, characteristics and costs
• understand mortgage loan types, characteristics, and costs.
• understand the key relationships for borrowing.
• understand and create your Consumer Loans and Debt Plan

 

understand consumer loans, principles, characteristics and costs

understand mortgage loan types, characteristics, and costs.

understand the key relationships for borrowing.

understand and create your Consumer Loans and Debt Plan (starts on page 143 / 154 of 352)
very lengthy list with lots to consider

BYU Personal Finance Course -- Chapter 5 -- Credit: Understanding And Using It Wisely

BYU Personal Finance Course -- Chapter 5 -- Credit: Understanding And Using It Wisely 

Papa's takeaways:

• Papa needs to provide contact information for three credit agencies (telephone numbers, e-mail addresses, and mailing addresses)
• never carry credit on credit cards
• if one uses debit cards, have two bank accounts with debit card linked to only one bank account
• keep bank account linked to debit card very, very low
• "park" money in high-earning cash accounts; possibly high-earning equity / bond accounts
  

Link here.

Begins on page 108 / 119 of 352. 

Objectives:

• understand credit bureaus, credit reports, credit scoring
• understand the principles of using credit wisely
• understand the correct uses of credit cards
• learn how credit cards work and how to manage credit
• understand and create your credit plan

Understand credit bureaus, credit reports, credit scoring

Understand the principles of using credit wisely

 

Understand the correct uses of credit cards

 

 

Learn how credit cards work and how to manage credit

understand and create your credit plan

BYU Personal Finance Course -- Chapter 1 -- Building A Strong Foundation: Another Perspective On Wealth

Chapter 1 -- Building A Strong Foundation: Another Perspective On Wealth

Begins on page 1/ 12 of 352.

A very, very long introduction. 

A moral compass.

BYU Personal Finance Course -- Chapter 4 -- Cash Management: Making The Little Things Count

Chapter 4 -- Cash Management: Making The Little Things Count
 

Link here.

Begins on page 85 / 95 of 352.

Papa's takeaway: now, we're starting to get to the "meat" of the course.

• this would be a great time to see if folks are keeping a journal of some sort

Objectives:

• understand the importance and principles of cash management
• know the different types of financial institutions that
• you need to spend time on each week
• you need to effectively manage your finances
• understand the different cash-management alternatives
• know how to compare them
• understand and create your cash management plan

Understand the importance and principles of cash management

 

 

Know the different types of financial institutions

Understand the different cash-management alternatives

 

 

Understand and create your cash management plan

BYU Personal Finance Course -- Chapter 3: Saving, Income and Expense Planning: Giving Every Dollar a Name

Chapter 3: Saving, Income and Expense Planning: Giving Every Dollar a Name

Link here. 

Begins on page 52 / 63 of 352.

Papa's takeaways:

• one should keep an SEI journal, even if it's very rudimentary in the beginning
• grandparents needs to provide information regarding financial support they may be able to provide

Objectives:

• understand family record keeping
• understand the principles, methods and levels of successful saving, income and expense planning (budgeting) and its methods and process
• calculate your net worth using a personal balance sheet
• develop a personal income statement and use ratios to analyze your spending
• understand and create your budget (saving, income, expense -- SEI budgeting)

Then the chapter expands on each one of these. Scan through them quickly so you know what is there and then go back as needed.

There are five main types of SIE budgeting:

• the envelope method
• the 60% rule
• spreadsheets
• budgeting software
• DNAH-ial methods (do nothing and hope)

Definitions of lots of jargon.

This chapter becomes more important once:

• you graduate from college;
• have a job; earn an income;
• require less and less financial support from family;

My hunch:

• both Arianna and Olivia have already learned to budget;
• the question is whether they maintain a journal, or a record-keeping device (handwritten or electronic worksheet)

To make this chapter more interesting and more relevant, Arianna and Olivia need to know the financial contributions their grandparents and parents may provide over time.

BYU Personal Finance Course -- Chapter 2 -- Your Personal Finance Plan: Planning Your Financial Future

 Chapter 2 -- Your Personal Finance Plan: Planning Your Financial Future

Link here. 

Begins on page 26 / 37 of 352.

Papa's takeaways:

• in this chapter, you will begin a rudimentary Plan for Life
• it should be a written plan, even if the first plan is only a few lines
• the plan should be reviewed whenever there is a major "life change" but at least annually
• over the years the plan will become more involved, more comprehensive, more detailed

Four objectives for this chapter:

• understand the importance of planning your financial future and creating your PFP
• understand how to create "your plan for life"
• understand how to catch your vision of what you want to accomplish in life and the different types of goals
• understand and apply the principles of effective goal setting

Six-step process for creating your Personal Finance Plan:

• catch (determine) your vision for your life
• decide how you will evaluate (measure, score, rate) your life (the metrics to rate your life)
• create your plan for life, your personal and family goals
• evaluate your financial health
• develop your plans and strategies, constraints, and accountability in each of the 15 areas (?)
  
• your plan should be
• flexible
• liquid
• protective
• tax efficient
• you will develop 16 separate plans for this course -- p. 30 / 41 of 352
• implement your plan and revise as necessary

Then the chapter is very, very wordy and expands on the six steps. 

Scan this and then go back to it as needed.

The Grandchildrens' "529" Page -- July 16, 2024

 

Personal investment links here:

• personal investing by the grandparents.
• the "529" page.

Philosophy:

• most important, Sophia, right now, because she is already ten years old
• next: Judah and Lev, four years old
• then: Arianna, for post-graduate education
• finally: Olivia, just in case

Note: 

• "529's" are incredibly flexible
• owner and beneficiary can be changed at any time with a simple signature by the owner
• after a "529" has been in existence for 15 years, up to $35,000 can be converted into an Roth IRA but requires active income on the part of the beneficiary, and annual contributions within IRS rules
• if folks understand the concept of the fungibility of cash it's hard to think of a better passive investment for many grandparents wishing to provide support for grandchildren
  

Grandparents' "529" proportion for the grandchildren:

• Sophia: 40%
• Judah: 20%
• Levi: 20%
• Arianna: 20%
• Sophia: 0%

As of July 16, 2024:

• Judah: 
• parents have "529" established for Judah. Grandparents send contributions to the parents for his "529."
• Levi: 
• parents have "529" established for Judah. Grandparents send contributions to the parents for his "529."
• Sophia: 
•  "529" established by grandparents; contributions began in CY2024
• Arianna: 
• no "529" established by grandparents yet. Would like to have that done by end of CY2024.
• Olivia: 
• no "529" established by grandparents yet. Using funds that would go to her "529" for living expenses at Stanford, but would like to start a "529" if for no other reason than the Roth-conversion benefit.
  

Life Insurance

Whole life insurance police on Olivia (similar for all five grandchildren).

 

IRA: Can Tap $1,000 In Emergencies -- July 15, 2024

The bill was passed in 2022.

The bill goes into effect in 2024. It took that long for the IRS to finalize the rules after the law was passed.

One can remove up to $1,000 from an IRA for "an emergency."

Lots of small print.

Link here. 

It's almost ridiculous but it is an interesting wrinkle. 

Only one emergency withdrawal per year; must be paid back within three years without incurring a taxable event.

The withdrawal cannot drop one's IRA below $1,000. Example: if one's IRA is worth $1,500, one can only withdraw $500.

USAF Travel Voucher

 

Link here.

Link here.

Overview -- Posted July 12, 2024

 

 

Investing. Link here.

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Contents

• Pyramid
• Emergency funds
• Insurance, life
• insurability
  
• whole: grows in value but not to be used for investing purposes
• term: only for "x" number of years
  
• annuities
• auto
• deductibles
• Savings / Checking accounts
• Retirement
  
• Investing For Retirement
• Then (your great-grandfather, grandfather) vs Now (your parents, you)
  
• Transition (papa, grammy)
  
• Vehicles for Retirement Savings
• active (work, salary, hourly pay) vs passive income (mailbox money): 
• only active income allowed for retirement accounts
  
• IRA --
• two types
  
• traditional
• Roth -- RECOMMENDED
  
• how managed
• managed by professionals (see below) -- RECOMMENDED
  
• mutual funds (see below)
• load / no-load (see below)
• brokerage firms (see below)
• self-directed (see below)
• 401 (k) -- through your employer
  
• TSP -- secret sauce -- Federal government / military pay
  
• Pension -- more secret sauce -- including military pay
  
• Social security -- how it works
  
• How businesses raise money 
• stocks
• bonds
  
• How to read "the business page."
• the big three exchanges / the three big equity markets / stock markets
  
• Dow
  
• NYSE (New York Stock Exchange)
  
• Dow: 30
  
• (Dow industrial vs Dow transport)
  
• "everyone follows" Dow" (Dow industrial)
• "no one follows Dow transport
  
• S&P 500
• perhaps most important
  
• old days, NYSE:S&P500::10:1
  
• NASDAQ 100
  
• Others:
• Russell 2000
• jargon 
• VIX -- volatility index -- jargon -- important later on
  
• bull market, bear market, recession
  
• ticker: 3-letter vs 4- / 5-letter
• P/E (p/e) -- "sells for"
• dividend -- "pays"
• cash
• stock 
• stock split
  
• how to invest in stock market
• mutual funds
• load
• no-load
  
• stock brokers
• full service -- high commission; lots of help but expensive
  
• discount (no commission but no guidance): Robinhood, Schwab, Fidelity
• hybrid: Edward Jones -- moderate commission, but lots of guidance
  
• taxes 
• progressive: the more you earn, the more you pay
• even if you don't owe any money, you want to file
  
• income
• active income
• passive income (investments)
• dividends
• capital gains
• credits: dollar-for-dollar reduction of taxes owed (really nice)
  
• deductions: reduces taxable income (nice)
• itemizing / not itemizing: big change over the decades
• Business media
• your dad would likely have better suggestions
• WSJ
• Barron's
• CNBC
  
• Spaceholder