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Investing’s Hidden Costs

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
August 20, 2020 8:03 am

Investing’s Hidden Costs

MoneyWise / Rob West and Steve Moore

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August 20, 2020 8:03 am

Hidden costs are everywhere, and they might even be affecting your investments. Most of us have money in a 401k, an IRA or some other retirement plan. But do we always know what that costs us in fees and commissions? On the next MoneyWise Live, hosts Rob West and Steve Moore pull back the curtain on investing’s hidden costs. Why fees matter when it comes to investing on the next MoneyWise Live at 4pm Eastern/3pm Central on Moody Radio.

Rob West and Steve Moore

In Christ.

You know, it's often said there's no such thing as a free lunch. Everything costs something and sometimes those costs are hidden. Could that be especially true with your investments?

Most of us have money for one K, an IRA or some other type of retirement plan. But do we always know what that costs us in fees and commissions? Kingdome Advisers President Rob West pulls back the curtain today and invest things hidden costs. And that's your calls on anything financial at 800 five Q5 five seven thousand. Jot that down. Eight hundred five two five seven thousand call right now. I'm Steve Moore.

This is Moneywise Live. And Rob, I think we have to get something out of the way or we should get something out of the way first here. We're not telling folks to consider the merit of investing for the future, are we?

No, absolutely not. But we do want people to understand that there's always a cost associated with any type of investment, even a qualified retirement account where taxes are deferred for many years. As you said at the beginning, Steve, there is no such thing as a free lunch.

So if every investment account has costs, why are we even mentioning it?

Well, because those costs can and do vary greatly. Some brokerages may charge more than others to manage a retirement plan, for instance, or even a particular mutual fund. When you know what types of fees or charge, you can then shop around for investments with perhaps lower fees and commissions.

Okay, well, let's dig into this a bit. Oh, what are some of the common fees?

Sure. Well, different investments have different types of costs. Mutual funds, for example, charge something called an expense ratio. This is the cost of managing the fund given as a percentage. Let's say we had a great year where the particular fund and someone makes 10 percent, but the fund has a one and a half percent expense ratio. Well, that means you really only made eight and a half percent. The fee isn't exactly hidden, but you'll never see it as a bill either. It's deducted from your assets, but other fees can be hidden within your expense ratio. One example is something called a 12 B1 one fee, and it's simply for marketing costs. That's where you get to pay your fund manager to promote it to other potential investors.

How very generous of us. OK. Yes. What what other fees are involved in investing?

Yeah. You also have the annual and custodian fees. Annual fees typically run from 25 dollars to ninety dollars a year. Custodian fees or what retirement plan managers charge for complying with IRS reporting regulations. They usually run from ten dollars to 50 dollars a year. Mutual funds tend to have other costs called purchase and redemption fees, and they're usually a percentage of the amount you're buying or selling. Often a particular mutual fund will be described as either load or no load. A load fund is where a commission is charged, and there's three types of those. You can have a front end load, which is a single charge you pay when you purchase shares in a fund, a back in load, which, as you might expect, is a one time fee you pay when you sell your shares. And then there's something called a level load fund where there's an annual fixed percentage taken from your assets.

OK, but there is something called a no load fund, right?

That's exactly right. And they're preferrable to a load fund, but so-called no load funds may still have some fees. And you may have to hold your shares for a period of time. In many cases, that's five years or you'll be charged a commission.

Is there anything the average investor can do about all these fees or it just comes with the territory?

Yeah, well, obviously you want to choose investments that have lower fees and commissions because those costs can add up.

But isn't there an argument to be made that a higher fee investment will have greater earnings?

In other words, you get what you pay for and higher fees may mean the fund is more actively managed, more time is spent on it. Something? Yeah, you'd think so.

But studies show that's actually not the case. Some of the cheapest equity funds have outperformed the most expensive ones over long periods of time. Morningstar, which is very well known in the industry, has determined that in most cases you'll have greater earnings over time by just choosing funds with lower expense ratios. Simply put, cheaper is better when it comes to fees and commissions. And of course, you've got to look at the track record. You want to understand how this fits into your overall investment strategy. You want to know who is the manager or if it's tracking a particular index. Make sure you understand really the objective of the fund. All of that would be in the prospectus. But clearly, we don't need to just overlook fees, whether it's buying a particular investment, like a mutual fund or ETF or choosing an investment professional who's managing the money on what's called a discretionary basis, meaning he or she is making.

Those decisions for you, they will have a management fee as well. You want to know what that is? Can you negotiate if I'm investing 20000 with you versus five million? Can I ask you to lower your fees? Because it's a lot more money. Yes, certainly. If you have 20 million rather than the 20 thousand eight hundred five to five. Seven thousand.

We'll be right back.

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That's money wise, like with your host, Rob. Last time, Steve Moore, for a few minutes today, we've been talking about the hidden costs and sometimes the hidden fees when it comes to investing.

And, Rob, my question to you just before the break was if I'm investing 2000 dollars with you versus two million dollars with you, could I suggest that you take less of a fee? Because in the long run, you might be making a lot more money. And you said, yeah, you could. You could you could try. Well, I mean, would that be unethical of me to at least ask you about that?

No. But let me be clear. You know, when you're talking about working with an investment professional who gets paid on the assets under management, typically they have a fee schedule and there are breakpoints depending upon the amount of the assets under management.

So it would likely be a higher percentage at one hundred thousand than it would at a million and it would drop further. You know, when you get beyond that. And so you would typically not negotiate those fees. They are what they are. But I will say for those in a kind of an ultra high net worth category, oftentimes those do become a bit more negotiable. But for the average investor, Steve, no, there will be a set fee schedule based on the assets under management. And you have the ability to shop that around. But you tip typically wouldn't negotiate that. Up or down.

OK. Got it. Understood. All right. Again, here's our phone number. We have open lines, if you'd like to speak with Robb today about anything financial that's going on in your life. Let's do that. Eight hundred five to five. Seven thousand St. Cloud, Minnesota. Caitlin, thanks for calling today. And what's on your mind?

I'm high. I was reading my Bible and I came across a couple of verses I was wondering about, like in Luke fourteen thirty three, Jesus says You cannot be my disciple without giving up your own time. When the rich man came to Jesus and Jesus taught him the one thing he was lacking. Well, I'm not giving everything to the poor. So I'm just wondering how literally you should be taking that.

Yeah. Should we be giving up everything we own and.

Yes. Well, it's a great question, Caitlin. I'm delighted to hear you've been searching the scriptures. Clearly, there's a lot in God's word on this topic of money. Twenty three hundred plus verses throughout the Old and New Testament that deal with money, possessions networth. And it allows us to begin to understand the heart of God as it relates to managing his money. And I think that's the beginning point. The Earth is the Lord's and everything in it. So all that we have, including our material possessions, belong to the Lord. Therefore, that puts us in this role of trustee or manager or caretaker. We also do clearly see this theme of giving or generosity throughout the Old and New Testament. We know God was the ultimate giver he gave us. His son were created in his image. So I like to say we're most like him when we're giving. I think in a way it calibrates our hearts to his. And clearly, Jesus affirmed this idea of giving. He said it's better to give them to receive. I don't think, though, that we can look at those examples which you cite very appropriately and say that was a command to all believers. I mean, clearly, he called the rich young ruler to give away everything. Clearly, he commended the widow when she put in two copper coins and gave out of her poverty everything she had. But I don't think we can take that and then say therefore, he's saying we all have to give everything. Zacchaeus was commended for giving away half of his riches to the poor. Barnabus, you know, was commended, forgiving, but wasn't asked to give up everything. And then the apostle Paul we see in First Corinthians 16 talked about this idea of giving proportionately on the first day of the week. You should set aside something stored up as he may prosper so that there will be no collecting when I come. The idea being that we should give in proportion and perhaps the more we're prospered, the more we should put aside. But not necessarily everything. So I think it's incumbent upon us as believers to be asking the Lord, what would you have me to do? And I don't think that we could say this necessarily is the model for everyone. I think clearly God wants our heart. He doesn't want these material possessions to in any way compete with his lordship in our lives. And by the way, it has a tendency to do that. And one of the ways we can loosen, in my view, the grip of money over our lives is to be generous because it requires that we hold it loosely. So I think you're right on to be thinking, praying, talking about what it looks like for you. For me. For all of us to really give as we see in scripture. But I don't think we can apply this idea with the rich young ruler or even the widow across the board and just say that's the standard for all believers. Do you follow that, though?

Yeah, I do just get tough sometimes because we can become legalistic. I think where I see myself, I can tend to do that. So, yeah, yeah.

Well, you're very welcome. And I think that's a great point there, Caitlin, to make. And that is we don't want to do something out of an obligation or to check a box, remember where to give cheerfully. It should be an act of worship. And as soon as we're either doing it to get something in exchange or we're doing it because we feel like we have to, then all of a sudden I think it really defeats the purpose of making sure our hearts are aligned with his. But I appreciate so what you're calling today and as you have other thoughts or questions, don't hesitate to call back.

Yeah. Thank you very much, Caitlin. I like what you said, Rob. Well, while God or while Jesus did tell the rich young ruler to give away everything, we also see principles in the Bible where God lays down other guidelines, forgiving, obviously, that the tie this one, in fact, in the Old Testament, there were multiple times. We're also told, don't give away your seed corn. So, again, there are some times when you might want to give a lot or a little or some of this, but not some of that. And then obviously, we also have guidelines when it comes to relationships. I think it's probably safe to say that if you and your spouse can't agree about giving, then the last thing I'd probably do would be to give away everything if my spouse wasn't on board with that. Because after all, God is capable of changing his or her mind in that regard. So lots of lots of different aspects about that.

Well, that's exactly right, Steve. And there were many wealthy people in the Bible, and we don't really see this talked about negatively unless they were to attain their wealth and by taking advantage of people. And clearly, we saw the wealthy called out when they were manipulating or stealing from one another. It wasn't just the fact that God had entrusted much to them. But then the question is, OK, what is my stewardship responsibility? To what end should I be giving sacrificially? And I think that's a question we should all be asking.

All right. Back to our phones. Dave is in Chicago listening to our good friends at WNBA. Well, Dave, we're so glad you called today. How can we help her?

Thank you. Yes. So I'm working with an older parent trying to get all the documentation we need. And, you know, there's a popular online financial adviser. She suggests that you need a will. Living a revokable trust. Financial power of attorney. Durable power of attorney for health care. So I have two questions. One is, is that the right list of documents? Second, do you recommend.

I'm not asking you to recommend a specific online provider of this kind of advice, but do you have any any advice around using an online, as you call it? You might call it a do it yourself approach?

Yeah. Yeah. Well, Dave, I'm delighted to hear that you're helping your parent to or parents who need this kind of assistance in navigating this.

I think that the list you cited is a great starting point. I mean, you need to make sure there is a will, possibly a trust, depending upon the situation where you want to be able to have a caretaker step in prior to death when certain conditions are met or if there's an ongoing need to have the assets managed even beyond the death of someone who is the creator of the wealth to provide for somebody who's a dependent, a durable power of attorney is very helpful in many of these end of life situations. Of course, beneficiary designations need to be up to date, and health care powers of attorney and living wills I think are really helpful just to make sure wishes are carried out in the appropriate way as to whether or not you can do it online.

Certainly there are some wonderful tools out there, some great Web sites. You know, this is just one area, though, Dave, where I feel more comfortable having a professional, having an estate planning attorney who's very competent, who I would hope would share your values, as well as a believer to be able to step in, provide some counsel, make sure that everything's appropriate, given the state laws there in the state of Illinois, as well as helping you make decisions or your mom or dad make decisions about the best tools to put in place given the situation. I think it's kind of like preparing your taxes or even managing your wealth. I think just having that wise counsel to speak into it, make sure everything's done appropriately, is money well spent. So I think your list is a great starting point. But I would seek a godly estate planning attorney who can help you navigate this, make the decisions on what you need, and then actually draft the documents.

If you need somebody there in Chicago, you could look for a certified Kingdome adviser who's an estate planning attorney if money wise lived out or just click find to see K.A. If you don't find one there, just connect with any C.K. there in Chicago and ask for a referral. And I know they'd be happy to do that. Dave, thanks very much. We appreciate your phone call and we appreciate you listening today.

We're going to pause for a brief break, but we'll be right back. The.

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Gwen, what's on your mind?

I was wondering if you could give me the pros and cons of colossi retirement.

Yeah, yeah. Gwen, explain what you mean by that term cois a retirement. Is that kind of a stepped down approach, if you will, toward retirement where you begin to reduce your hours over time or something different?

No, it would be something different. It would be the ability to cash out your retirement plan and secure it more or less. And then still continue to work and tend to start over again. I said before the time the company that did it, the reason deposits I retire was to protect it for your spouse because they didn't. If you died before you retired, they got nothing. Now they can have up to 100 percent of it.


And what type, Arenberg, what type of retirement vehicle would we be talking about in this particular case?

Defined benefit plans.

OK. All right.

Yeah, you know, it really will depend upon the plan. I mean, obviously, anything you can do to lock in the payout for not only yourself, but for a spouse is going to be pretty important. The challenge in this particular Kichwa situation with defined benefit plans is they get pretty complicated and they're unique in the sense that they're not all the same. So I would want to have an investment or financial planning professional. Gwinn, look over the retirement plan you're talking about, really understand not only what you would be able to receive by retiring at various points, but also how those benefits extend to a spouse and what the factors are that determine that. And so given the complexity of that unforeseen, I wouldn't want to weigh in on that just here in a couple of minutes over the radio. But I think this is important enough, Gwen, that you if you don't have one, that you connect with a financial planner or professional who can look over exactly what you have and really help you design a plan, a strategy that's going to allow you to maximize the assets that you have, not only for you, but for a spouse now and in the future. So I'd encourage you to go to our Web site Moneywise Live. Dawid, click on Connect with. Scuse me. Find a CPA and you could connect with one right there in Nebraska.

Grin. Gwen, we appreciate your call. Thank you very much. And let's continue on here. How about. Well, before we do that, let me give the phone number, because I noticed that we have several open lines. So call right now when we have time and space for you. Eight hundred five to five seven thousand eight hundred five to five 7000. Now down to Tampa, Florida. Melinda, what's your question?

Good afternoon, gentlemen, thank you. Frequent listener and love your show.

I'm calling because. Yes, you're welcome. I'm calling because I assumed a mortgage about seven years ago and I've been paying faithfully on it all that time. Now, the company, a hole held that mortgage has been bought out by another company. And they are telling me that I am going to have to refinance it in some way. That's not associated with the previous owner. OK, so I'm trying to figure out, do I get a personal loan? The loan is only thirty three thousand dollars left on the loan.

I need to get a personal loan. Do I need to refinance or do I need to get a home equity line of credit on my own home?

Yeah. So tell me just a bit about the home you're talking about. What is the value of it and what do you owe on this mortgage that you assumed?

The value of it is very small, it's about 70 sannyasin and the mortgage left on it is thirty three thousand.

Okay. All right. Very good.

You know, there are often minimums on these that you will have to deal with. You know, in many cases, the minimum for a first mortgage is 50000. So you may have some trouble finding someone to put a new conventional first mortgage in place. Obviously, rates are very low right now. So now would be a great time for you to go ahead and essentially refinance where you would replace the mortgage that you assumed with a new first mortgage. Obviously in your name that you would qualify for attached to the property. If he has struggled to find somebody that will do it for 33000 dollars, then you may be left only with the option of going out and getting a home equity line of credit. Or I would actually prefer you do a a home equity loan so you can get a fixed interest rate on that. That's going to be a better, more attractive rate, often with better terms than you want on a personal loan that would, because of the lack of collateral, typically have a higher interest rate.

So I think right now what you need to do is go to bank rate ARCOM, put in the specific terms of what you have in your particular mortgage and the property, and then begin to shop around and see who might be willing to do that with a new first conventional mortgage at the value that you have. And if you can't find anyone that I think your home equity loan is going to be your next best option. Millender, we wish you the very best with that. Thank you. Great question.

You're listening to Moneywise Live with Rob West. We'll be back with more of perhaps your call happiness.

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Welcome back to Moneywise Live or so glad you're along with us today.

We do have a few open lines you can call right now, 800 five to five, seven thousand. Let's go right back to the phones. And welcome Michael in Dalton, Georgia. Michael, we're so glad to have you on the program today. How can we help?

Thanks, guys. Hey, I was wondering if these time with coping with the election coming up. Is there an alternative to put our four oh one K in to for safekeeping for a short period of time? I am over 60. OK, yeah.

So I think the key here, Michael, when you're you're talking about the investments inside the Faurot and K, I assume and you're talking about whether there's a better place for the money inside the four one K in terms of more conservative investments. Is that what you're looking at.

Yes, sir.

OK, yeah. You know what? I actually would really focus on staying the course inside your four or one K. You know, when we go through seasons like this, oftentimes we can try and feel like we need to make a change, adjust our allocation. But here's the reality. If we were allocated appropriately from the start, meaning we had the right mix of stocks and bonds get based on our age, risk tolerance and so forth, then really we should be able to stay the course. And whether it, you know, even a long bull, a bear market would be, you know, 18 months to three years. And the idea there is if we're invested for the right reasons, we've got the right mix of investments. We wait it out and it's going to come back because this is long term money. But the moment we try to make a decision to help time the market where you're essentially going to decide the market is going to go through a rough patch here and I think it's coming down. And so therefore, I'm going to move to a cash position or an all bond strategy. At what point do you get back in and then you start to second guess that and invariably the studies will say you're going to you're not going to be able to pick the bottom. And so you're going to get in or out at the wrong time. And so really, the research would say invest for the right reasons, with the right strategy, with the right time horizon, with the right allocation, and then just let it go and continue to add to it. And here's the beautiful part, about a four one K. Michael, is your dollar cost averaging every time you make a new contribution, which I suspect is out of every paycheck. So as your stocks or mute portfolio or guess it be mutual funds in a four one K as they come down, you're buying more shares with the same amount of money. So bottom line is, I wouldn't try to move it to a more conservative place unless you were invested too aggressively. You realize that during this season of time, perhaps you're closer to retirement and you had too much in the way of stock allocation. And therefore, now that the market's come back, you're saying I'm going to take this opportunity to get more conservative. But apart from that, I would absolutely stay the course.

OK. Very good. All right, very good. We appreciate your crowd today. Yes, sir. Thanks, Michael.

Again, our phone number, eight hundred five to five. Seven thousand. We had a little technical thing happen a few moments ago. So if you heard a little bit of dead air, I think we're right back where we need to be.

Again, the number remains the same and working. Eight hundred five to five, seven thousand. West Palm Beach, Florida, Conchita. Go right ahead.

Oh, hi. I like this show and I listen to you. I listen and learn and I laugh with you a lot. That's a lie. All right. Yes. What I'm calling for. If the cash value that has accrued in my whole life policy is withdrawn. Does that cash value now decrease the amount of my policy if it is not retained?

Yes, ma'am. So typically, pulling cash value out will reduce your death benefit. So in terms of what the options are that you have with cash value, you can, of course, take a withdrawal. And depending on how much you pull out, it may or may not reduce reduce the death benefit. Generally, it will you'd need to check on that to determine the effect. And that will come down to your individual policy. You can use it to pay premiums as long as there's enough in there. And at some point it may not cash value may not be sufficient to cover the premiums. You can, in some cases, transfer it to a death benefit. So you could call your insurer in and ask them to trade that cash value for an increased death benefit. Or you can borrow against it, which I would encourage you not to do. But bottom line is, yes, you can take the withdrawal. You're going to have to understand the unique aspects of your policy and the impact on the death benefit. But generally, it will reduce it.

All right. Thank you very much. Yes, ma'am. Thank you for calling. Thank you very much.

Eight hundred five to five 7000. We'd love to chat with you today if you have a question or a comment for Rob West, Akron, Ohio. Hey, Joe, what's on your what's what's on your mind?

Hey, Joe, you with us? Oh, I don't hear Joe. All right. We will put Joe on hold and go south a bit to Florida. Carolina, how are you today?

Hi, everybody. Thank you so much for taking my call. Yes, I'm calling up.

I'm thirty six and I had a term insurance which is about to expire next year. It's me and my husband. We bought them insurance.

And now our insurance agent is just trying to push a little bit.

The whole time insurance, life insurance that Ron have is that they you go from modest payments to like exponentially more expensive payments and also the benefits that their benefits will lower.

So she's saying, well, yes, those that benefit is lower now, but you actually are going to get cash back. So I was wondering if that would be a good idea.

I mean, right now it's way too expensive for us to get into it. But she's saying, oh, well, you have to think ahead in the future. You've got to get the cash buy value for nothing else later in the future, like a savings account. But she's been better. And right now, we don't have the need for an extra savings account. I'm kind of curious, like if we would be a good idea because it would miss the payments in the first year, then we're screwed.

Yeah, well, Carolita, I'm with you on this. I'm reading between the lines and hearing you say, why would we go this direction? Here's the bottom line. There's also a lot more commission to be paid out on this whole life policy than that term policy as well. So you need to make sure that whoever you're talking to has your best interests in mind.

But here's why I'm a big fan of term insurance. I'd rather you pay for pure insurance as low cost as possible so you can get the right amount of coverage for the period of time you need it. Oftentimes, with a whole life policy, we try to mix savings with the policy, with the death benefit. We have to pay a lot more for a lot less benefit, as you said, and we're underinsured. And so I'd rather you pay for the pure insurance, get all the coverage you need for the period you need it while you're saving in your retirement accounts, in your emergency savings and other vehicles, and not try to mix your savings with your insurance. So I would say thank you, but no thank you. And I would get a new term policy that's going to line up, hopefully with your retirement date and then save, save, save in your other retirement accounts so that if something happens to you, the Lord takes you home. You have somebody who's depending upon your income, you or your husband, that that term policy can kick in. But at some point, you'll no longer have a need for life insurance because you're you're living off of your savings, your retirement savings and your Social Security and your pension and whatever else you might have. So I think just based on what I'm hearing and obviously I don't know all the details, I don't really hear a need for you to put a whole life policy in place at this point.

Rob, what's the rule of thumb, if there is one, for how much life insurance the bread winner should have in a family? Yeah, something like 10. Is it higher now?

Yeah. You would typically hear 10 to 12 times your salary that you would need as a starting point for your death benefit. And it can go up from there.

Okay. Eight hundred five to five 7000 is our phone number. You're listening to money wise with Rob West last time, Steve Moore. Back with more after this.

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So welcome back. Money wise lives.

If you've been holding a little bed, we want to thank you for your patience. Quickly going to be coming to Chicago and also Grand Rapids. But first, it's Danville, Indiana.

And Pam, what's what's on your mind?

Hi. I'm just elaborating on that call you got earlier about the will understand how a person can avoid their will going through probate. We have a living will and testament. And I'm trying to figure out if we need to get a trust to avoid probate.

Yeah, that is the way to avoid it. You know, with a will, you will go through probate, a living trust, with a living trust. Your property and assets will pass directly to the beneficiaries you name. So that's different from a simple will not subject to the probate court process, provided that the trust is funded by you with your assets during your lifetime. So that would be what you would want to look at. And I would encourage you to go see a godly estate planning attorney to talk through the benefits of having a living trust, one of which being skipping probate, the other being that it can go into place prior to death, another being that it can be kept anonymous, meaning that it won't be a part of the public record. So there are a number of benefits, but you just want to make sure that the cost is worth it in your situation. And if you're trying to avoid probate, that certainly would be one of them. So now if you don't have an estate planning attorney, you could certainly ask for a referral from your church. You can also connect with a certified Kingdome adviser there in Indiana and ask for a referral to a godly estate planning attorney. Just go to our Web site, Pam, moneywise, live dort click on Find a C.K..

Pam. Great question. Thank you very, very much. And Travis, what's your question today for Rob?

Hey, good afternoon. Just started recently listening to you guys this week. But question is it me and my wife have I've been following through the Dave Ramsey's plan. We haven't purchased the materials or anything from them, but just basically been reading articles and it's been going OK. I mean, we was able to save and purchase a car that we didn't have to finance or anything. But I just want to ask, with so many money management tools out there, including your guys, is is this a plan that it's a Christian plan? That's the plan that you guys would recommend for us to continue.

Yeah. Travis Dave is actually a personal friend of both Steve and me, has done wonderful things to share a lot of great financial truth and know Dave is a committed Christ follower.

And I assume what you're referring to is his seven baby steps, which I wouldn't argue with any of those saving a thousand dollars for your emergency fund, paying off your debt three to six months expenses, then putting 15 percent of your income in retirement, funding your college fund, paying off your home early, building wealth and giving.

I mean, these are all things that we would talk about regularly here on Money Wise Live. So I think if you're following that plan, you're well on your way to being a faithful steward of what God has entrusted to you. And I don't have anything negative whatsoever to say about Dave and what he's doing.

All right. All right. Thank you, guys. All right, Travis, thanks. Call of the day, my friend.

Great question. And as you pointed out, Rob, we're both good friends with Dave and we have been for a long time. And we love the work that he does. And he's just working in a different part of the orchard than we are right now.

That's exactly right, Steve. He's on secular radio, we're on Christian radio. And together we're sharing a lot of great biblical financial principles.

And I'm not sure really that I am still friends with Dave. I loaned him 20 bucks about six months, has never paid it back or even mentioned it.

So I'll tell you I'll tell you a little story about Dave Ramsey said Dave came and spoke at an event that we put on several years back and did a great job, as he always does. And after the event was over, everybody had gone. I was still there tying up some loose ends and on my way out, nobody's there. The audience is gone. I look over in the corner. It happened to be at a a country club that we were. The event was at and Dave was over in the corner with one of the servers who had stopped him on the way out with a question. And Dave sat there for probably 45 minutes to an hour. Nobody saw it. And he just invested in this man's life around his questions and the issues he had. And that's just the kind of guy he is. You know, he's you hear him on the radio and you think he's larger than life, and yet he's the real deal.

That's in my experience. He sure is. He has a real heart for people and for ministry. Grand Rapids, Michigan. Hello, Kelly. What's on your mind?

Hi, good afternoon. I have a question I have about two years left on my mortgage, a little bit under that. I have four kids that are in college and some will continue to be in college because they haven't any school yet. High school. I get FAFSA, so I get Grant, you know, the Pell Grant and everything when I'm done with my mortgage. Like, lose those grants. And if I do. Is it better to take out a home equity loan? Is that ethical or do you just say, okay, I'll buy a piece of property and refinance to keep getting the grants because you're getting close to six, we get about six to eight thousand dollars a year per student with grants. Yes. Yes. What you think about that?


Kelly, you know, the FAFSA doesn't count all of your assets in determining your expected family contribution for financial aid eligibility. And one of those assets it does not consider is the equity you have in your home, nor does it consider funds held in retirement account. So paying down or paying off your mortgage not only doesn't hurt you, it can actually help to improve your aid package. So I would encourage you to stay on the path you're on and try to pursue being completely debt free, including your home. And I don't see it having any negative impact on you.

All right, great. Well, thank you so much.

All right. Thanks, Kelly. Thanks, Kelly. Pompano Beach, Florida. Jillian, I know you've been holding a bit. Thank you for that. And how can we help you?

Hi. Yes. It's such a blessing to be able to learn about being that is Stewart listening to you? So I just this. You're welcome. You're welcome. I just wanted to find out.

What would you recommend if you have a home that has two mortgages and your appraisal amount is about only nine to 10, that you owe close to 150 on it. But you're paying two separate people to separate two separate companies without your consent, so to speak. But if it is in the contracts.

So what would you recommend? Should I refinance? Should I. Should I just, you know, so that I can pay one person.

Help me understand what's going on here. So how did you end up coming by these two places that you're sending your mortgage payment?

Apparently, I was a part of the Freney Freddie Mac, so where they did the 80 20 and they gave you a hundred percent financing but then pass. Yeah.

It's two separate lenders. OK, very good. Well, here's the good news, Gillian.

Only one. OK. Yeah.

Yeah. No problem. The good news is you have good equity. I mean, you almost have 30 percent equity in this home so long as you have good credit. You should be able to refinance and have one mortgage with one servicer and you should be able to get a tremendous rate. Right now, rates are at historic lows. I think the key for you is to make sure no. One, that you can, in fact, overall improve your situation in terms of at least I would say, three quarters of a point on the rate, preferably a full point reduction. Number two, that you're going to stay in the home for at least five years. And the number three, you don't increase the term because of any of those. Don't check out as much as it is a hassle. I wouldn't want you to pay a lot of money for refinancing when it's not going to benefit you. But if you can lower the rate significantly, you keep the term at or where it is now or shorter and you plan on staying in this home. Absolutely. Take advantage of these low, low rates. And one of the added benefit you'll receive as you'll now just have one place to send that check every month.

OK, Julia, thank you. All right. Thanks for calling you so much.

And let's try to get to one more here, Indianapolis, Travis. We have about two and a half minutes. Let's jam it in here, OK?

I think we can do that. All right. My questions about life insurance. I'm the breadwinner in our house and I know there's a multiplier that you could use, but it doesn't seem to take anything else into account. Like, for instance, Social Security, death benefits. Should I die? Would largely replace my income. And just that the formula seems generic. It doesn't necessarily take in to account our debt or our living expenses or anything like that. Is there is anything other than Social Security death benefits to take into account?

Yeah. I think the key is, you know what? First of all, what income are you trying to replace?

And you want to make sure that you have enough to cover the replacement of that. So we would typically say 10 times to 12 times the annual salary would be number one. Then you'd want to look at other things like, you know, caring as much as you need to pay off debts plus interest. You want to be able to not only cover your income, but provide a little hedge against inflation down the road. You also want to be able to factor in any major expenses that are going to be happening in the nearer term, like a college education you'd be wanting to fund or something like that. So I think you start with that multiple of your income and then look at the other factors here. Debt. Major expenses, inflation. And come up with a number that works for you and your budget. And that's where I think. Term insurance is gonna be the most certainly the most cost effective and hopefully allow you to get all the coverage that you need so that you have the death benefit. That really is going to provide for your family and dependents after your life. And lord willing, you won't ever need it. And you'll be self-insured at some point because you'll have the money saved up in other accounts.

Travis, great question and certainly a question that everyone needs to ask anyone who has a spouse and children coming along behind them. Thank you very much for your phone call today. And thank you very much for listening. If this is a program that you find helpful and practical and has one listener mentioned earlier something that keeps her laughing at a regular basis, we'd we'd love for you to share that information with someone else. That's one of the few ways that we're able to expand our ministry. So, again, thank you for listening. Please keep in mind that money wise Live is a partnership between moody radio and money wise media. And my thanks to our technical crew today in Chicago.

Now, that would be Amy and Deb and Gabby Tea and also Rich Rousell for Rob West. I'm Steve Moore again. Thanks so much for being there. Have a great remainder of your day. Drive safely. And then I hope you'll come back again tomorrow because we'll be back with a brand new edition of Moneywise Like.

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