Finance Principles Applied to Life

True principles often find a way of showing up in many facets of life. Here are three basic (and interrelated) principles of finance and economics that I believe can be applied to our personal development.

(1) The principle of compounding interest.

Put simply, the principle of compounding interest is that–all else equal–more frequent compounding periods (i.e., the number of times that interest will be calculated in a given period) equal higher returns. Consider the following example.

A magical genie walks up to you, and offers you a choice. You can either receive a single dollar bill that will earn interest of 1%, compounded each day, for the next five years (“Option A”) or you can choose to receive $1 million right then and there (“Option B”). What do you do? I’m sure, given the leading nature of the example, that you surmised that the “correct” answer (the one that yields a higher total value) is Option A. Consider that:

  • In year 1, Option A amounts to a mere $37.41. Option B, on the other hand, affords you $1 million.
  • In year 2, Option A amounts to the better, but still small, amount of $1,413.
  • However, by year 5, Option A has transformed your $1 into more than $76.2 million.

How is it that a single dollar becomes so valuable? The first day 1% interest is calculated on the $1. That means, on the second day, 1% interest is calculated on $1.01, and so on. The power of compounding is in the exponential growth that occurs from applying the same growth rate to an ever larger balance. And our lives are much the same way.

When I was in third grade, I began participating in our school’s presidential fitness test. Being an athletic young buck, I had scored well on many of the other fitness tests such as the sit-and-reach, pull ups, and shuttle run. The last fitness test was a mile trial. The fateful day arrived to complete this test in our PE class, and our teacher blew the whistle. I took off at a full sprint, and led the pack for about two-thirds of the way through the first lap. Then I hit a wall. I had never run a mile before, and not being prepared for the sort of conditioning required to run a fast mile, I walked/slowly jogged the remainder of the race. I ended up running the mile in 9 minutes and 21 seconds. I vividly remember my time because I am a very competitive person, and at that time it stung that my best friend (an avid runner) had posted a time of 7 minutes and 12 seconds and beaten me by more than two minutes.

Given my competitive nature, I hated getting beat so badly by my friend and other classmates. So every day that summer, I ran a one mile loop from our house to my elementary school and back. Slowly but surely, my times improved, each day building off the slightly increased stamina I had developed from the previous day. That next year, I was one of the fastest in the school (and ran a 6:29 mile). Running that 6:29 mile ultimately led to me being selected for a selective youth cross country team that qualified for the junior olympics in Reno, Nevada. And all because I ran a mile every day that summer.

Henry B. Eyring, a leader in the Church of Jesus Christ of Latter-day Saints, and someone who I respect greatly, has stated, “Time passes at a fixed rate, and we can’t store it. You can just decide what to do with it – or not do with it… Time is the property we inherit from God, along with the power to choose what we will do with it… Your inheritance is time. It is capital far more precious than any lands or houses you will ever get. Spend it foolishly and you will bankrupt yourself and cheapen the inheritance of those who follow you. Invest it wisely, and you will bless generations to come.”

I believe this is true. We can choose to invest our time through consistent, productive habits, or we can choose to spend it on things that bring short-term happiness or pleasure, but do not yield any long-term benefits or growth. Consider the benefits of consistent studying or accumulation of knowledge, regular exercise, practicing daily spiritual habits, and small, but regular, acts of service or kindness for your friends or loved ones.These consistent habits compound over time into massive personal value and growth.

(2) The principle of opportunity cost.

The principle of opportunity cost is that there is a cost of foregone activities. Investopedia states, “Opportunity cost refers to a benefit that a person could have received, but gave up, to take another course of action. Stated differently, an opportunity cost represents an alternative given up when a decision is made…In investing, it is the difference in return between a chosen investment and one that is necessarily passed up.”

Opportunity costs is all about the most basic of economic concepts: trade-offs. When you make a choice, you forgo other options. Some choices may be less permanent and easily reversible (e.g., my decision to go to Chipotle instead of sweetgreen for lunch) and some may be more permanent (e.g., my decision to major in accounting). I’m very grateful for my accounting degree–it has afforded me incredible opportunities. However, the simple fact is that my decision to study accounting did have a cost: choosing to major in accounting was at the cost of getting a degree in computer science, or math, or political science (all degrees I would have also enjoyed immensely). While it is certainly not impossible for me to go back to school, the cost of doing so now is significantly higher than when I was a sophomore in college, when I made that decision. That doesn’t mean my choice was a bad one, but it does highlight that some decisions we make come with an opportunity cost that may be more “sticky” or permanent. I have found that when I consider the costs of my decisions, it often helps ground me in what really matters.

Admittedly, opportunity cost is also often best measured in hindsight, because it is difficult (if not impossible) to measure the exact costs of our decisions. Nonetheless, our consideration of previous decisions and our analysis of the result of those trade-offs, can inform our future decisions. Take a common time-thief: Netflix. I could choose spend my night watching an hour of Netflix (and believe me, I often do) or I could choose to invest my time by reading, sleeping, exercising, meditating, or many other activities. While Netflix and reading are certainly not mutually exclusive activities, time is a scarce resource that cannot be multiplied. As your life starts to get busier, you inevitably have to choose between investing your time in one activity or another. I often find myself working long hours at my current job… thus, when I choose to watch Netflix, I’m not simply losing an hour of my time, I’m losing the opportunity of using that time for any other activities that could have replaced it.

(3) The principle of net present value.

The principle of net present value is that capital is more valuable today than it is in the future. Embedded in this principle are the concepts of compounding interest and opportunity cost, because receiving capital in the future reflects an implicit opportunity cost of not being able to productively use that capital now. For example, if you offered me $100 today (and I knew that I could invest that $100 at a 5% rate of return), for you to make me an offer to pay me in a year that I would consider equivalent to your original offer of $100 today, you would have to offer me $105 to compensate me for that “time value of money.” This is why, when valuation experts or investment bankers value a company, they “discount” future cash flows at the compounded cost of capital or required rate of return (the time value of that money).

In the context of my life, I refer to this principle as the “decide/act now” principle. Neil A. Maxwell stated, “Act now, so that a thousand years from now, when you look back at this moment, you can say this was a moment that mattered—this was a day of determination.” He also noted that, “The truth is that ‘not yet’ usually means never.” I can think of many decisions that I put off–justifying that I would “do it tomorrow,” but then tomorrow never comes, or comes much later.

For example, last August, I went through some personal experiences that had left me feeling alone and frustrated. I was pretty down, and my mom had suggested that I see a therapist. I was resistant at first, and kept telling myself that next week I would put a plan in motion to sit down with a therapist and chat about my situation. This occurred for a good three months, until the middle of November. One day, during work I finally acquiesced and scheduled an appointment. And sure enough, my visits with the therapist did help me to get some stuff off my chest and move past that difficult experience. After realizing this, and seeing that I was able to off-load a lot of the emotional baggage I had been carrying, I was frustrated that I hadn’t acted on the advice months earlier, and lightened my load sooner. 

In sum, these three basic finance principles of compounding interest, opportunity cost, and present value can inform our decisions, and influence our actions. I hope to apply these principles more fully in my life and would encourage you to do the same.


Acting “As for Years”

Millennials can be nomads. Since I graduated high school, I have bounced around from activity to activity and location to location in increments ranging from six weeks to one year. Since 2014, I have worked in every time zone in the contiguous United States, and have had four different jobs. I’ve also changed wards, callings, and had many of my friends get married. In the midst of so many life changes, it can feel like uncertainty becomes the status quo. And when so much uncertainty is the status quo, it can be tempting to bide my time and wait until the next life change occurs to “really” start living my life.

For example, my third transfer of my mission was especially difficult for me. I was a relatively new missionary and was gung-ho about the work (admittedly, probably obnoxiously so). My companion and I had very different personalities, and prior to being paired with me he had been dealt a string of rough companions who hadn’t been particularly interested in missionary work. In addition, he had been struggling with some back problems that made tracting and other missionary activities more difficult.

At the time, I was frustrated with the situation, and with how much time I had spent not doing missionary work the way I thought it should be done. (I cataloged our whole area book by geographic area during one week). After about two weeks, I started to have thoughts creep in: “just hold out for another four weeks… you have been moved every transfer so far, and you’ll probably get transferred again.” After a couple days of this really negative thinking, I started to wonder, “what if I am stuck in this area for a long time? Maybe I’ll be with this companion for six months… or longer!” As I began to have all of these feelings, I came across a scripture that really struck me. It describes God’s counsel to early Mormons who had been driven from city to city, and across states. I’m sure many of them thought, “why should I build a house or till the field?…I’m probably going to be driven out soon anyway.” The scripture states,  

16 And I consecrate unto them this land for a little season, until I, the Lord, shall provide for them otherwise, and command them to go hence;

17 And the hour and the day is not given unto them, wherefore let them act upon this land as for years, and this shall turn unto them for their good. (D&C 51:16-17)

After reading that scripture, I realized that my attitude needed to change. I decided to treat the area and my companion as if I would be there for a long time. As I did that, my heart softened, and I was more compassionate and understanding of the challenges my companion was going through. As I saw my companion, and the area, through new eyes, I began to be a better friend to him, and I also tried to think of different ways my companion and I could improve the long-term trajectory of the work in that area. Consequently, the work in that area began to pick up, and we started teaching more people, and even had a miracle baptism right before I got transferred (which happened to be at the end of the transfer).

Similar thoughts can plague all aspects of our lives, whether it be jobs, classes, relationships, wards, spirituality, etc. It can be easy to ignore the many opportunities our circumstances in life can afford us if we are too busy assuming that we will not be “there” long enough to make a difference. I have wondered how my actions and perspective would have changed in some circumstances if I had more fully acted upon my endeavor “as for years.” Dennis Gaunt wrote, “When we ‘act upon this land as for years,’ we begin to recognize opportunities we may not have seen before. We may also see that some of these opportunities may never come our way again. Then we think, ‘As long as I’m here, I’m going to get involved, do the best I can, and choose to be happy. I’ll continue to hope for the future, but in the meantime, let me do some good here.’ It’s the difference between treading water and actually swimming.”

Dennis points out that “acting upon the land as for years” does not mean we cannot hope for a brighter future, and it doesn’t mean we do not work to improve our station in life. We can take a long-term view while still deciding to end a relationship, or to get a new job, or to move to a new city. Nonetheless, while we are in that relationship, job, city, etc. we should do everything we can to cultivate actions that would produce sustainable contentment, and to leave the situation better than we found it.

I conclude by sharing this analogy from Whitney L. Clayton:

A few years ago I saw an example of this principle in nature. We have a large pot filled with flowers on the walkway leading to our front door. The pot sits under a scrub oak tree. One fall a few acorns fell from the scrub oak tree into the pot. The next year the oak sprouts became visible by early summer, when I started to pull them out so the flowers in the pot could look their best. Just a leaf or two of each acorn’s new tiny scrub oak seedling had become visible. As I pulled the little seedlings from the pot, the roots kept coming and coming. The seedlings had long, skinny roots that were thrusting themselves ever deeper into the soil. The roots in the soil were much longer than the seedlings above the soil.

Likewise, we would be wise to sink our roots into the pot in which we are planted and not wait for a later time or a different place or a new pot. No matter how “little [our] season,” we should act upon this, our land, “as for years.” We sink our roots by getting involved, making friends, seeking opportunities for service, accepting and then magnifying callings, attending the temple, and joining in community efforts. Sending our roots deep will enrich our experience and bless others as well. We may be plucked up and moved to some new place when our friendships or jobs are just tiny seedlings, still with barely a leaf to be seen, but sinking our roots gives us experience and will “turn unto [us] for [our] good.” This is particularly applicable to those who are single, in graduate school, or know they will soon move and who may be tempted to hold back and let others do the heavy lifting of earnest Church work. It’s a mistake to put our baptismal covenants on hold that way. You may not think you will be in this particular pot for very long, and you probably won’t be, but your life will be richer and your opportunities enhanced if you treat this time and this place and this situation as your promised land.

Why not me?

In 1 Nephi 3:31, Laman and Lemuel ask Nephi, “How is it possible that the Lord will deliver Laban into our hands? Behold he is a mighty man, and he can command fifty, yea, even slay fifty; then why not us.” This inquiry is juxtaposed so aptly with the very next verse in 1 Nephi 4:1, in which Nephi tells his less-faithful brothers, “Let us go up again unto Jerusalem, and let us be faithful in keeping the commandments of the Lord; for behold he is mightier than all the earth, then why not mightier than Laban and his fifty, yea, or even than his tens of thousands?” The exact same phrase then why not is used in both circumstances, but associated perspective and follow-on consequences of that attitude could not be more diametrically opposed.

Nephi has a clear opt-in strategy that is demonstrated throughout the rest of the first book of Nephi; whereas his brothers Laman and Lemuel demonstrate a clear opt-out strategy. In essence, when a challenge arises, Nephi’s older brothers immediately ask the question, “who are we to overcome this seemingly insurmountable challenge against all odds”; meanwhile, Nephi asks, “who am I not to?” with a confidence borne from trust that is well-founded on the rock of the integrity of gospel living. He then follows that positive introspection with decisive action that expands his skill set and makes him more capable to solve problems in the future. To summarize a few of these examples and juxtapositions found throughout the rest of the first book of Nephi:

    • Lehi, Nephi’s father, sees an incredible vision of the Savior and the future destruction of Jerusalem (in which its inhabitants are carried away captive into Babylon). Laman and Lemuel proceed to think about all the things that they are missing out on (1 Ne 2:11) and choose to dwell in ignorance (1 Ne 2:12). Meanwhile, Nephi decides to act instead of being acted upon, and he prays and the Lord visits him and softens his heart (1 Ne 2:16). This same pattern occurs again when Lehi has the vision of the tree of life in 1 Nephi 8, with Nephi seeing an even more detailed version of the dream in 1 Nephi 11-13. While Laman and Lemuel miss out on spiritual experiences and truths that would have been bestowed upon them with their desire and asking, they choose to take the easier route and live in ignorance.
    • Nephi breaks his bow (1 Ne 16:18). The first response of Nephi’s brothers is to murmur (1 Nephi 16:20). While Nephi’s brothers are complaining and thinking of their terrible state, Nephi moves to action, and builds a bow out of wood (1 Ne 16:23), and then later goes up into the mountain and finds food for his family.
    • The Lord tells Nephi to build a ship (1 Ne 17:8). Again, Nephi’s can-do attitude causes him to problem solve, and instead of asking the Lord to give him a ship, he thinks backward and recognizes the essential elements he would need to build a ship. Nephi is not troubled that he has no previous boat-building experience, but he trusts that God will provide a way for him to follow the direction he has been given (1 Ne 17:50). We see Nephi, yet again, say, “if the Lord has such great power, and has wrought so many miracles among the children of men, how is it that he cannot instruct me, that I should build a ship?” Once again, Nephi is confronted with a problem he has never before faced, and his response is to think “who am I not to rise to this challenge?” His response in this experience is contrasted with the response of Nephi’s brothers, who don’t even try to think big enough to suppose that their talents are greater than their current state and, thus, they don’t even want to try (1 Ne 17:17-18).

In sum, how am I going to use the phrase “why not me?” in response to my circumstances? Will it drive me to accomplish things I have never before done, or will it drive me into a state of mediocrity–paralyzed by a fear of failure? The pattern that Nephi demonstrates in the first book of Nephi (and the contrast of his brothers) provides an interesting comparison, the consequences of which can be well documented throughout the rest of the Book of Mormon. My goal is to be more successful in my endeavors by attacking each challenge and trial with this attitude and belief.

My Testimony of Trials – Adult Session Stake Conference Talk

I was born to two amazing parents who taught me principles of the gospel from a very young age. Growing up, I always felt very blessed to be a part of my family and to have been given the opportunity to grow up with a fairly comfortable life. I remember feeling like everything was going right my senior year of high school: I was going to graduate at the top of my class, I had been accepted to my dream college, I was a good athlete, and I had the chance to serve in many different leadership positions in seminary and in our ward.

My ardent love for athletics had me very involved in numerous sports, including cross country, track and field, and basketball. During my senior year of high school, my race times were not improving as I hoped, so my coach suggested that I do blood tests for anemia, a fairly common ailment affecting distance runners speed and stamina. The tests came back negative, but doctors noticed that some of my other protein levels seemed unusually high. After almost weekly blood tests, a liver biopsy, and a multitude of doctors appointments, the doctors seemed stumped. Then, I remember coming home from school almost exactly 8 years ago and finding my mother in tears in our living room. Looking at me through her tears, she said that my most recent blood test had revealed that I likely had a rare form of muscular dystrophy.

In what was one of the hardest moments of my life, I ran downstairs to my room, closed the door and got on my knees to pray in a way that I had never prayed before. As I sobbed and offered up my soul to God that afternoon, I had a sacred experience that I can best describe as a warm hug that filled my entire soul when there had previously just been intense pain. In that moment, I felt “encircled about in the arms of His love” and gained a witness that He, my Savior, lives. I also came to understand that the Atonement of Christ was never meant to simply erase our sins. It was meant to transcend all of our weaknesses, to bring light in our darkest moments, and to bring hope when all seems lost.

I would be lying if I said that after that moment, everything has been easy. I have spent many nights wetting my pillow with my tears in despair. I believe that faith was always a natural gift of mine. Growing up, I always trusted that God had omnipotent power and that He could do all things, and I fully believe that at the moment when I knelt down and communed with God, I had the faith to be healed if that was his will at that time. However, the toughest test I have faced in my life is trying to develop, as Elder Bednar describes, the faith not to be healed. I learned that it is much easier to have faith when God’s will aligns with your personal desires. It is much harder to have faith and accept God’s will when it seems contrary to everything you desire and yearn for. Struggling through this process of accepting my unique challenge and trial has been difficult, but it has taught me many lessons.

I would like to briefly share with you two of the many lessons I have learned from this particular trial.

  1. Many of the toughest trials are not immediately apparent, so treat everyone with kindness. For several years, almost no one knew that I had this disease, and that I felt my legs slowly getting weaker. That I was no longer able to run like I loved to do or play basketball, which was a favorite pastime. On the outside, I think I probably looked like I had no trials, and yet there were days of incredible sadness and anger for me. Similarly, we never know when a friend, coworker, or ward member has just had a death in the family, or is experiencing depression, struggling with sin, family problems, or illness. So treat everyone with kindness–as if they are struggling with something–because they probably are. Just like we, at different points in our life, have all struggled with heartache, or frustration, or doubt.  
  2. Life is not fair, but it was never meant to be fair. Elder Dallin H. Oaks said, We are all acquainted with other kinds of mortal opposition not caused by our personal sins, including illness, disability, and death. President Thomas S. Monson explained: “Some of you may at times have cried out in your suffering, wondering why our Heavenly Father would allow you to go through whatever trials you are facing.…“Our mortal life, however, was never meant to be easy or consistently pleasant. Our Heavenly Father… knows that we learn and grow and become refined through hard challenges, heartbreaking sorrows, and difficult choices. Each one of us experiences dark days when our loved ones pass away, painful times when our health is lost, feelings of being forsaken when those we love seem to have abandoned us. These and other trials present us with the real test of our ability to endure.

I testify that our trials can refine us like hot fire purifies drossy metal. I prayed every night for years to be like the sick and disabled Nephites in 3 Nephi 17, whom Christ healed one by one. I yearned with all my heart for that physical healing that I felt would make me whole again. Nevertheless, I have come to learn that in some ways, an even more incredible miracle is our Savior’s power to heal our broken hearts. I have felt Him heal my heart, and I know that He lives. I know that because of His atonement, we will all be brought to stand before Him and our Father in Heaven again someday, and I hope to kneel at His feet and, like those Nephites in ancient America, bathe His feet with my tears in gratitude for His tremendous sacrifice. In the name of Jesus Christ, amen.

The Chick-Fil-A Debate

Over the past several weeks, a controversy has erupted over the comments Dan Cathy, president and COO of Chick-Fil-A, made in regards to the company’s Christian values. Among other things, Cathy stated,

We are very much supportive of the family—the biblical definition of the family unit. We are a family-owned business, a family-led business . . . We know that it might not be popular with everyone, but thank the Lord, we live in a country where we can share our values and operate on biblical principles.

The uproar that followed has been incredible. Conservative activists lauded Cathy and staged Chick-Fil-A appreciation days. Many pro-gay marriage supporters organized their own protest days. Some gay Americans and supporters of gay marriage have proclaimed that they will not eat at Chick-Fil-A anymore. Even mayors of some major cities have expressed opinions that Chick-Fil-A would not be welcome in their cities.

I have been disappointed in seeing how this situation has been blown completely out of proportion and degraded to hateful words being said on both sides of the issue. I want to analyze quickly the ramifications of the recent actions by those trying to boycott Chick-Fil-A and deny them business. I believe that regardless on your position on the issue of marriage, common sense tells us that the actions have been inappropriate.

Many pro-gay marriage supporters have decided to boycott Chick-Fil-A completely because they don’t want to support a “hateful company”. (See Adam Smith of Vante and his deplorable actions toward a  Chick-Fil-A worker). I want to make it very clear that doing so is completely within the right of individuals who are upset by Dan Cathy’s remarks (just as it was completely within his rights to express his personal views). However, imagine a world in which everyone stopped doing business with people they disagreed with. Over time, traditional marriage supporters would only do business with other traditional marriage supporters, gay marriage supporters would associate with only other gay marriage supporters. The possible ramifications are much more extensive than simply politics. What Chick-Fil-A boycotters are doing is creating a dangerous precedent for the way to handle situations in which two parties disagree. Instead of creating a healthy dialogue, boycotters have radicalized the climate for political conversation. Civility is being taken out of the political environment and we have been degraded to outlandish solutions for minor problems.

I also find it very interesting how one-sided the argument is in the media. Dan Cathy expresses his views on marriage and is martyred for doing so. This has made national news for weeks now. However, the media and many others have completely ignored similar news that came out at the same time that CEO Jeff Bezos and his wife pledged $2.5 million to the cause of gay marriage in Washington. For some reason, I don’t see thousands of heterosexuals claiming to boycott Jeff and I think most common sense individuals recognized the actions by Bezos at face value. He was expressing his opinion, and he has the funds to support that opinion with millions of dollars. That is exactly what Dan Cathy has tried to do with Chick-Fil-A. Thus, I think that we need to make sure that when we receive information, especially via the media, that we understand the whole picture.

I am grateful that we live in a country where so many different views can be appreciated and expressed. I think, however, that we need to make sure that we express our views in a constructive, not destructive, manner. Hopefully, we can make our decision to go to Chick-Fil-A on how good the chicken sandwich is (I love it!) and not on what the COO believes should be the definition of marriage. Instead, let’s have a constructive debate and dialogue in the political arena about such issues.

Here are a couple of links to places I got my information as well as a good article written in the Huffington Post by a gay man.

The Pay It Forward Experiment

So, this past week I watched the movie Pay It Forward, and I was deeply touched by the movie and its message. Maybe it was because I have been thinking a lot about trying to make a difference in the world or maybe it is just because it is a great movie . . . either way, it has had me thinking a lot about the impact I (and we) can make on our surroundings.

If I can make one person’s life a little better, who knows what the ramifications may be for good. Conversely, by treating someone a little better, what ill acts could be prevented in the world? This train of thought has occupied my mind over the past week or so and it has gotten me thinking a lot about what a difference I can make just by working to make my immediate surroundings (people, environments, etc..) a little bit better.

Therefore, I want to do an experiment of sorts, and if you want to join in, I would appreciate it. In the movie Pay It Forward, the seventh grader Trevor McKinney makes it his goal to do something for three different people that they cannot do for themselves. The hope is that these people will then do three things for three different people as well. This exponential growth means that five degrees of separation from the original act will result in 243 people being affected, ten degrees of separation will result in 59,049 people being affected, and so on.

Thus, for the next few weeks, I am making it my goal to look for opportunities to affect people’s lives for good. My goal is to affect at least three people, but the more the merrier. I hope if nothing else, I will be fulfilling the Savior’s command in Matthew 25 to serve those around us who are suffering. I think this world could use much more love and service, and it has to start somewhere.. so let’s decide today to be the catalyst for something bigger and better than ourselves. I am grateful for all the people who have made my life so amazing and it is time to pay it back, by paying it forward.

The beginning of my remarks…

My freshman year at Brigham Young University, I created a blog with the effort to put some of my ideas on paper (digitally). I wrote about things that I am passionate about–from politics to BYU sports… and for those of you who know me, you understand that I can be very passionate (sometimes too passionate) about my ideas, political stances, and even random gizmos and gadgets that I think need to be invented. So I am at it again, this time with a brand-new webpage because I wanted that fresh feeling you get when you start a new semester or a new year. I would liken it to the fresh chalkboard, blank notebook feeling. You know, when you have a 100% in class for the one homework assignment you turned in and received a 5/5 for. So these are my ideas…my “remarks” as it were. I hope you enjoy them.

(and I hope that you catch that remark is Kramer spelled backwards).