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Today’s Discussion:

4 Save and Invest for the Future

Financial Stewardship Success Map

Read:When people hear the term investing, they may think of a loud and chaotic trading floor with people selling stocks and bonds. While that may be part of investing, investing is also the act of putting time, effort, or money into something and expecting some type of a return. In this sense, investing is an element of self-reliance.

In this chapter, you will explore three ways to invest:

1. Save money

2. Consider home ownership

3. Seek education

1. Save Money

Ponder:Take two minutes to think about the following question and write down your thoughts: What would I most like to save up for?

Read:One of the easiest ways to invest is to save money. You have been working to build an emergency fund, starting with one month’s worth of expenses and then building up to having three to six months’ worth of expenses. Imagine the possibilities if you continue to save even after establishing a strong emergency fund.

Elder L. Tom Perry taught, “Pay yourself a predetermined amount directly into savings. … 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” (“Becoming Self-Reliant,” Ensign, Nov. 1991, 66).

As illustrated earlier with the jar example, it is critical to “pay yourself” first by putting money into savings. This will help you build financial security.

Discuss:Take a minute to review the jar example again. What is most meaningful to you about this example? How are you demonstrating faith by taking the self-reliant approach?

2. Consider Home Ownership

Read:Buying a home could be another way to invest. Home ownership is not for everyone, however, and often renting may be a better option.

Activity (10 minutes)

Step 1: Divide into groups of two to three people and spend a few minutes reviewing the positives and negatives listed below of owning versus renting an apartment or home. Also add some of your own ideas to the lists below.

Step 2: Then come back together and discuss the following questions: What did you learn? What additional positives and negatives did you write down?

Read:For those considering home ownership, remember these two principles:

• Buy a home only when and where it makes sense for you.

• Buy only what you can comfortably afford.

Now let’s discuss some factors that can influence these principles.

Activity (5 minutes)

Individually answer the questions below. If you cannot answer yes to these questions, renting in your current situation may be a better option than buying.

Discuss:Why are these questions important to ask yourself before purchasing a home?

Read:Most people buy a home using a loan called a mortgage. This mortgage is debt, and it will cost you interest. You are expected to make the monthly payments and pay back the loan.

For long-term financial stability, your monthly mortgage payment should not exceed 25 percent of your monthly income. Use this as a guide for what you can afford to pay, rather than what a lender is willing to let you borrow.

Calculator Activity

In the United States, the median household income in 2013 was around $52,000. What is the most money a family making $52,000 a year should spend each month on their mortgage payment?

As a group, enter the following information into your calculators. Stop after each step to be sure everyone receives the same answer before moving on to the next step.

Steps	Calculations
25% of 52,000 = annual mortgage expense	.25 x 52,000 = 13,000
13,000 divided by 12 months = monthly mortgage expense	13,000 ÷ 12 = 1,083

A family with this income would be wise to ensure that their monthly house payment not exceed $1,100.

Now, individually or with your spouse (if possible), calculate 25 percent of your monthly income following the steps above. You do not need to share this number with anyone else in the group if you prefer not to. Write your answer here .

Discuss:What does it mean to you to purchase a home that you can comfortably afford?

Read:Keep in mind that there are other expenses of home ownership beyond the mortgage. When you own a home, you are responsible for the maintenance. Things break, wear out, and sometimes need updating. Financial advisors generally recommend saving at least 1 percent of the value of your home each year for maintenance.

Bonus Checks

Right when we first started learning about financial stewardship, I got a new job that paid quarterly bonuses. With that extra money, we decided to use some of it for savings and the rest for an extra mortgage payment. We did the math, and this extra payment each quarter will save us thousands of dollars in interest!

Get out of Mortgage Debt

Read:As explained previously, a mortgage is a loan—it is debt—and it costs you interest. Reiterating President J. Reuben Clark’s teachings, President Ezra Taft Benson said, “Let every head of household aim to own his [or her] home, free from mortgage” (“Prepare for the Days of Tribulation,” Ensign, Nov. 1980, 33). Paying off a mortgage earlier might require some sacrifice, but the faster you pay it off, the more money paid out in interest you save. There are two ways to pay down your mortgage:

• Pay extra

• Structure a shorter-term loan with a lower interest rate

Paying extra toward the principal can save you many years of payments and tens of thousands in interest. For example, if you had a 150,000, 30-year mortgage with a 4.5 percent interest rate, you would pay 123,610 in interest over the life of the loan. Look at the chart below to see how much time and money you can save by paying 100 or 200 extra per month.

	100 extra per month	200 extra per month
Time saved	Almost 7 years	Almost 11 years
Money saved	29,715	47,462

Another option to pay off a mortgage more quickly is to get a mortgage with a shorter term. Shorter-term mortgages typically come with lower interest rates. Your monthly payment is higher, but you will save years of payments and thousands in interest.

Let’s compare the same mortgage as before, but this time with a 15-year loan. The original example was a 150,000, 30-year mortgage with a 4.5 percent interest rate. Let’s compare that with a 15-year mortgage with a 3.5 percent rate.

	30-Year Mortgage	15-Year Mortgage
Interest rate	4.5%	3.5%
Monthly payment	760	1,072
Total interest paid	123,610	43,018
Time to pay off	30 years	15 years

In this case, a 15-year mortgage means a monthly payment of about 312 more, but it would save you:

• 15 years of mortgage payments.

• Over 80,000 in interest.

Discuss:What would you be willing to give up in order to pay extra on your mortgage or get a shorter-term mortgage to be free from debt sooner?

3. Seek Education

Read:Education is another form of investing. Typically, additional training or education will have a cost. If you are going to invest in education, ensure that it will lead to better work so there is a good return on your investment. President Gordon B. Hinckley counseled that the “world will in large measure pay you what it thinks you are worth, and your worth will increase as you gain education and proficiency in your chosen field” (“A Prophet’s Counsel and Prayer for Youth,” Ensign, Jan. 2001, 4).

Sometimes it may be appropriate to incur debt to gain education, but there are also many other ways to pay for school. Explore all other options before turning to debt. If you do go into debt for education, strive to pay it off as quickly as possible.

The Education for Better Work self-reliance group may be a great option for you when considering investing in education.

Discuss:How is education an investment in yourself?

Discuss Saving Money, Pursuing Home Ownership, and Investing in Yourself through Education in Your Family Council

Read:One of your commitments this week will be to discuss saving, home ownership, and investing in your education during family council. Discuss things you would like to save up for, whether you should rent or buy a home (or how you can begin paying down your mortgage), and what educational goals, if any, you should work toward. You may want to use the “Sample Family Council Discussion” outline below.

Sample Family Council Discussion

Be sure to begin and end with a prayer to invite the Spirit.

Part 1: Review

• What would you like to save up for someday? Review your answer to the ponder question on page 167.

• What are some of the positives and negatives of owning a home versus renting? Review the activity on page 169.

Part 2: Plan

• How can you save for your future wants?

• If you don’t currently own a home, should you consider buying a home? Or should you continue renting for the time being?

• If you currently own a home, how can you work to pay down your mortgage faster? Would selling your home and renting for a time be a better fit for your current situation?

• What type of education or additional education, if any, should you invest in for better work?