Financial Security vs Financial Freedom

[nprice]

I had this I idea I thought I'd throw out there to the LDS community.

Just as LDS church members help and guide others in gaining financial security through the church welfare system and through teaching provident living, why not have LDS church members who have gained financial freedom mentor other members in their pursuit to gain financial freedom? I know there are members who have gained reached financial freedom. There are many books written on the subject but it would nice to have someone who has a LDS perspective to act as a mentor.

What is the difference you say???

When I say FINANCIAL SECURITY, I mean having enough money coming in monthly from a job to provide for my basic needs (i.e. food, shelter, health care, transportation, etc.). The problem is what if I get sick, laid off, disabled, etc?I lose financial security and need to turn to family and the welfare system for help again.

By FINANCIAL FREEDOM I mean having enough money come in monthly from passive income that exceed my monthly expenses. Passive income would be money that comes in whether I work or not such as money from rental properties, stocks, business investments, etc. Then, if I get sick, laid off, or disabled, I wouldn't have to worry about losing financial security because my passive income would be sufficient to cover all my expenses.

I started a blog on the subjects at LDS Helping LDS Gain Financial Freedom. My next post on the blog will be about why I think financial freedom will help us as LDS members to be better equipped and able to serve in God's kingdom.

[pam]

As long as this doesn't promote or solicit any particular kind of business or financial planning system.

[nprice]

I'm not selling anything. Just wanted to start a discussion. I was worried about others trying to sell something through the thread though.

[pam]

I think it's an important topic. As long as the rules are followed I don't have a problem. We, as moderators, will make sure that no one else tries to turn it into a solicitation as well.

[skippy740]

I had this I idea I thought I'd throw out there to the LDS community.

Just as LDS church members help and guide others in gaining financial security through the church welfare system and through teaching provident living, why not have LDS church members who have gained financial freedom mentor other members in their pursuit to gain financial freedom? I know there are members who have gained reached financial freedom. There are many books written on the subject but it would nice to have someone who has a LDS perspective to act as a mentor.

Wrong definition of financial security in relation to the church welfare system & provident living.

The Church Welfare system is designed in such a way to help people work for the assistance that is extended to them. It is meant to be short-term, but not relied upon. To state that you can attain financial security through the church is wrong. Please do not substitute the Church for your Banker.

It IS meant to help people short term until they are able to be self-sustaining on their own.

However, I am curious as to how you think you can help someone who is barely able to make ends meet and help them build a passive income???

I'm sorry, but I'm sensing a "Robert Kiyosaki" or MLM pitch coming on. These are BUSINESSES and INVESTMENTS and are NOT appropriate at a time when people are just gaining their own financial footing. They need to SAVE money in short-term liquid savings accounts for when their tires blow out, doctors appointments and the myriad of things that come up and were neglected when income was extremely low. Savings should continue until there is about 3 months worth of expenses saved up.

This does NOT provide "passive income". This provides SECURITY and a sense of accomplishment! It's also a way to put money aside in such a way that it CANNOT be taken from you by outside forces, such as stock market, real estate market, rising interest rate loans, etc.

Something else, is that you are assuming that these people will be earning incomes SUFFICIENT for their needs. Many people who are on church assistance will require new job training skills to build up a new career. They will be earning MUCH less than they were before, with new student loan debt and won't be able to act on such an opportunity.

A person should invest in themselves FIRST, unless they feel that they are a poor investment. :)

Saving & personal self-investments are the BEST ways to help people who are trying to move out from dependency to independency.

[prisonchaplain]

I'm not selling anything. Just wanted to start a discussion. I was worried about others trying to sell something through the thread though.

Arrgh, just when I was going to post encouraging site members to gain spiritual prosperity through donations to the Chaplain's Entertainment Fund!

[skippy740]

Now, onto the subject of Financial Freedom:

One must have a "board of advisors" who can help direct your financial affairs.

You should have:

- an Estate Planning Attorney (in regards to your estate, your stuff and the custody of your minor children in the event of your passing)

- A CPA/Accountant (to help you maximize tax savings EACH year, but to balance it with other lifetime tax-savings strategies)

- A financial advisor (one to help you design strategies for lifetime income from the assets you acquire)

- A P&C insurance agent (to protect your stuff in the event of an accident that you CAUSE)

- A life insurance agent (to protect your economic value to your family in the event of your death & to protect your income in the event of disability)

- A mutual fund advisor/stockbroker (to help you grow your money while you are satisfying your protection needs)

- A banker (to help you leverage other people's money while you harvest rental property equity)

- A real estate agent (to help you find appropriate rental properties & personal residences towards your financial aspirations)

Some of these people can be the same person. A financial advisor can be your insurance agent and mutual fund/stockbroker & P&C agent.

The fact is, is that you will need to become more knowledgable about the protections you have in place and where there may be holes in the protection of your economic castle. It does you no good to build a castle that can be taken by a court because you didn't carry enough liability insurance.

But you've also got to balance the costs of that protection while growing your financial castle.

You've got to be able to find, select and hire the appropriate advisors to help you design appropriate strategies.

Please note that each state has different rules, laws and guidelines that must be followed to have a successful plan. Sharing ideas online MAY or MAY NOT be advisable. ALWAYS check with appropriate professionals before engaging in ANY financial strategy. The cost of avoidance may be better than a costly error in judgment.

Don't get me wrong. I'm all for these kinds of discussions. However, one should be sure that it's not just people forming an "investment club" and sharing stock tips. Get professionals in on the plot so you can have some real guidance in these matters.

Edited December 27, 2009 by skippy740

[Guest mormonmusic]

Financial Security vs Financial Freedom

I think financial security refers to having enough savings that if one of life's vicissitudes hit you (death of a spouse, health problems etcetera) you have enough of a reserve to help you get through those tough times. This will involve someone in the household having to work eventually. It means you can keep your home and sustain your most important needs like food, utilities, shelter, etcetera when temporary setbacks hit, with someone working through it all in your household..

Financial freedom refers to the fact that you don't have to work ever again to keep your home and pay all your bills. You don't need a job to sustain you.

LDS Mentoring LDS

Regarding LDS people mentoring LDS people in regard to financial security. I think we do that already. Our Bishop would send myself or a capable hometeacher to families in need to coach them in how to budget, how to save, follow-up to their career planning efforts at LDS Employment services to help them succeed, as well as ways to alter their life so they can generate a surplus each month and ave for retirement (emphasis on generating surplus, not on investment advice -- we stood clear of the latter).

However, these relationships tend to be short-term -- until the family gets on their feet and self-sufficient again. I'm not sure how well these skills actually stick.

Regarding financial freedom, an LDS person would want money to coach someone over the long-term how to do this, in which case it becomes a business.

Financial Freedom and Luck

Also, I think there's a certain amount of luck in having financial freedom. I've done a lot of the right things over the years in terms of investing, saving, generating sources of passive income, and then I lost a huge whack of it in real estate when the bust came. Even Warren Buffett has made billion dollar mistakes due to the unforseen.

Financial Freedom Courses Not Always Worth It, or Consistent with Wealth Creation Principles

Lots of people will take your money to teach you how to be wealthy. Funny, they teach principles like cash flow is king, figure out what's going to happen before you invest (like having a tenants list in your pocket before you even buy an investment/rental property), that you don't need any money to make money in real estate, but they want you to fork over $5000-$6000 in tuition fees to learn their principles. Put you in a negative position up front just to learn the principles.

For one course, the salesperson, after convincing me you can make money in real estate without any up front investment, then told me I needed to pay the thousands upon thousands in tuition for his wealth-creation course because "it takes money to make money".

I'm cynical about these wealth creation seminars now. Particularly the way they make it sound so easy, and then, when you go to sign, you get the "results may vary" disclaimer.

[Moksha]

I have been upset before when I have heard about all those scams that various people have fallen for - all with the same motivation - of getting rich quick. There is usually a common thread to them: Finding a mark, setting the mark up and then fleecing the mark. This seems especially annoying when the confidence of the mark was gained through mutual church membership. If only these scams could be confined to tin pan alleys and yacht clubs, it would be easier on the rest of us.

[nprice]

Now, onto the subject of Financial Freedom:

One must have a "board of advisors" who can help direct your financial affairs.

You should have:

- an Estate Planning Attorney (in regards to your estate, your stuff and the custody of your minor children in the event of your passing)

- A CPA/Accountant (to help you maximize tax savings EACH year, but to balance it with other lifetime tax-savings strategies)

- A financial advisor (one to help you design strategies for lifetime income from the assets you acquire)

- A P&C insurance agent (to protect your stuff in the event of an accident that you CAUSE)

- A life insurance agent (to protect your economic value to your family in the event of your death & to protect your income in the event of disability)

- A mutual fund advisor/stockbroker (to help you grow your money while you are satisfying your protection needs)

- A banker (to help you leverage other people's money while you harvest rental property equity)

- A real estate agent (to help you find appropriate rental properties & personal residences towards your financial aspirations)

Thanks Skippy740 and mormonmusic. My wife and I read through your posts and had a good discussion about what you suggested. I'd like more people to post their ideas about achieving financial freedom so that I can learn from them.

[Guest mormonmusic]

Alright -- I have a friend who has financial freedom (and when I say a friend, I mean a friend, not ME disguised). This is how he did it. He bought a house that he could rent out part of -- it was a legal duplex. For 20 years people paid his mortgage and property taxes, and all he paid was his insurance and utilities. He paid off the house very quickly.

He and his wife never had a car. They lived in a metro city so transit was good. They took trips that made use of bus and planes and taxi. He's travelled all over the carribean and Mexico and the US and Canada.

He invested the money in mutual funds and sometimes stocks. That part frustrated him because he could never predict what they were going to do, and sometimes he lost, and lost big time. But overall, his family has had only average household income (they both worked, and he brough up a relative from another part of the world to look after the kids for free rent, and also took jobs where he and his wife had staggered hours -- he was home during the day, she was home at night, so the relative only did an hour or two here and there).

Also, he kept a budget every month. A simple, paper-baed budget where he had 13 categories, had a total budget figure for each all in pencil, and when he spent money, he rounded it up to the nearest dollar, and then rubbed out the old total, and added the new round number to the old total, arriving at a new total which he recorded. No Quicken, No Microsoft Money, just paper-based budgeting.

He also lives by the mantra 'keep it simple'. He would never get involved in complicated business transactions that carry much risk. He built his wealth by creating "sure things" (except for the mutual funds and stocks) through lifestyle changes. He would never risk an international move like I did because it carries too much uncertainty and relies too much on expensive accountants and lawyers.

Some will say "I can't live like that", but that's how he did it.

I budget and we have only one car. It causes mountains of hassles, but we work with it. I also rented out part of my house for years upon years and its great to have that extra cashflow hit the bottom line. We actually lived in the basement (it was a walk-out) and rented out the top. If you can handle having people living in your house (they had their own entrance and were totally separate) it's a great way to generate cashflow without investing or taking much risk.

Those decisions helped us weather this last recession and the housing bust.

Edited December 28, 2009 by mormonmusic

[MorningStar]

I've come to hate the term "financial freedom". It just sounds like the desire to make lots of money and never have to work again. This guy in our ward got involved in a real estate investment scam and was trying to get other people to join him. All you have to do is pay $20,000 for their "university" and these wonderful, wealthy mentors want to help you become wealthy out of the kindness of their hearts. If you do the legwork in finding properties, they give you a huge chunk of the profits. Makes total sense. Why make 100% of the profit you invested in when some inexperienced person can choose properties for you? If you don't have the money for the "university", no problem. What you do is apply for financial aid at a real college and use that money for the "university". You'll be investing in properties in no time, but until then, get other people to sign up for the courses and you'll make a percentage off of that.

He's a nice guy, but I can't believe he was taken by this obvious scam. Here he was with no house, living in a two bedroom rental with almost three kids, and trying to get people to believe he was on the road to financial freedom. I don't know if he has figured out yet that it's a scam, but I noticed him recently asking for sales job leads. He sold a business he put a lot of money into to pursue this "opportunity". Ugh. It's really not a convincing sales pitch when he doesn't even own his own home or any investment properties yet. It would be like me promoting a miracle weight loss pill.

[Hemidakota]

I have to agree when I hear this from the info-[commercials]scammers, who I never heard before come on during the hours of non-watching entertainment viewing time, giving claims of Financial Freedom. I believe a popular one that reigns on different scams would even sell his mother if he knew how.

[Guest]

Here's advise for you for financial freedom...

My dad is a walking billboard for financial freedom. His motto: "It matters more how much money you spend than how much money you make" and "It is not how much you have but how happy you are."

It is a habit you can learn even as early as when you are born. There is a completely different attitude from people with the "habit" going to the mall and people who do not have the "habit" going to the mall. My dad can walk the mall and enjoy looking at the stuff without having the desire to want anything for himself.

We had this light-blue station wagon he bought in 1975. He didn't buy a new car until 1991. All his friends teased him for having that "old hearse". It doesn't bother him. He sold the station wagon to my aunt. It broke down not even a few years later. I can guarantee you, that if it had stayed with my dad, it would have lasted longer. My cousin lived with us when I was growing up - it was his job to check the car every Saturday - that's all the fluids, the tires, the brakes, the lights, etc.

My dad is like that - he buys quality stuff and takes very good care of it so it lasts practically forever.

It is a standing joke in our family when we go visit my dad's house, the first thing we check is if the electric fan is still sitting on its "specially built" stand. He bought that electric fan before I was born - a quality desk fan, although not an expensive one, and had a carpenter build a stand for it - the standing fan was too much money and the stand part is not good quality. It was my job when I was a kid to clean that fan every Saturday - that includes taking the fan blades off and wiping it thoroughly.

My dad paid for all our college - including my older brother who is now a neurologist. He believes that education is the key to financial freedom. He can't let his kids go out into the world without these skills.

My dad believed that if you can't afford your own house, then you stay with your parents until you've saved up enough to put the downpayment on one - in the Philippines, you cannot buy a house for more than 50% bank loan. My brothers and sister had kids before they moved out of my dad's house. My neurologist brother has been a doctor for 4 years, have 3 kids, and is still living at my dad's house. He finally poured the foundation for his new house last month.

We all got a weekly allowance. We don't get new toys unless it is birthday or Christmas. We didn't get new clothes unless it is birthday, Christmas, or first day of school. If we want new toys or new clothes other than these times - we gotta take it out of our allowance. Yeah, we get to learn the habit very early in life too - it was quite tough trying to decide whether to blow our allowance on new converse shoes that everybody else is wearing - or wait until christmas.

My dad retired when he was 49 years old - all the kids except my doctor brother are out of college by that time. He put his savings into businesses - this habit that he has is perfect for running a business. He didn't start his business until we were all out of college because he did not want the risk of losing in business. He wanted the security of a steady paycheck. Now, he has too many business for us to keep track of. An idea would pop in his head and wham - it's a business.

Okay, here's his first business: He used to work for a beer company. The beer company throws away the grain byproduct - actually pays somebody money to haul it out of there. After my dad retired he asked the director in-charge of the grain byproduct that he will haul the grain for free. Of course, the director said yes! My dad bought a dump truck to take out the grain - then he packed them into sacks and sold them to the pig farmers for half the price of regular pig feed. He also started his own pig farm just to use as trade for our family consumption (barter pig meat for beef, etc.). Then he expanded it to more dump trucks.

Well, by this time, he decided, if he has a gasoline business, he can save more money on his trucking operation. So, he opened up a gas station. Well, since he has his own station, he decided he can buy a car, use the gas from his station, and start a chauferring business.

Now he has 3 small business, all making okay money - not enough to make him rich by any means - but because of his spending habits - it is enough to give him financial freedom.

Now, since he has some trucks, the trucks come back from the farms empty - waste of trip - so he decided to start another business collecting empty beer bottles. He knows that the beer company has their own bottling operation (makes their own bottles). He talked to the director of the bottling division and told him that he can give them clean bottles (free of cracks, cigarette butts, spit, trash etc. ) so he can save on recycling efforts. Of course, the company says YES!

So, now he hired several people wearing rubber gloves up to their armpits, and all they have to do is inspect the bottles that the truck hauls in, and spray it spotlessly clean using jet-setting of garden hoses. The truck delivers it to the bottling division, on the way to pick up the next grain for the pig farmers.

So, I ask my dad - why don't you invest in a conveyor belt system to pressure wash those bottles so you don't have to hire all these people? My dad's answer - and then what, deprive all these people with a way to attain financial freedom?

And that, my friends, is the secret. Lots of people think oh, financial freedom is living like Paris Hilton or Donald Trump. I say to you - my dad feels richer than Donald Trump. If greed is what is ruling your life, you'll never attain financial freedom.