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Steady Plodding

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
December 17, 2021 5:06 pm

Steady Plodding

MoneyWise / Rob West and Steve Moore

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December 17, 2021 5:06 pm

One verse in the Bible gives us much of what we need to know about wise investing. It’s Proverbs 21:5, which reads, “Steady plodding brings prosperity; hasty speculation brings poverty.” On today's MoneyWise Live, Rob West will explain how even though steady plodding may sound a bit boring, there’s no better way to ensure that your long-range investing pays off. Then he’ll answer your calls and questions on various financial topics. 

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Rob West and Steve Moore
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Rob West and Steve Moore

What verse in the Bible gives us much of what we need to know about wise investing? Long-range investing pays off. I'll talk about that first today, then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial decisions. There's no question that the stock market has been exciting over the last couple of years. We've seen many record highs, breathtaking falls, and rapid recoveries. At times, people have poured everything they had into stocks and other times pulled everything out to sit on the sidelines.

That certainly isn't steady plotting. To invest wisely, you must take a long-term view of the market. You only invest in stocks or index mutual funds with money that you don't need for at least five years, and 10 is a whole lot better. That way, you can ignore the ups and downs, because given enough time, the market always recovers from any downturn and begins to move forward.

You can stick to your long-range plan. Now, the market has another term for this steady plotting. It's called dollar cost averaging.

And what is that exactly? Well, it's something that most investors are probably already doing. If you contribute a consistent amount each month to your retirement account, you're dollar cost averaging. That could be in stocks, mutual funds, or whatever.

And here's the key. You do this no matter what the market's doing. Dollar cost averaging is a beautiful thing for several reasons.

First, there's no guesswork. You're not trying to figure out what the market is likely to do next month or next year. You've already made your investing decisions based on your long-range plan. Second, it's easy to set up with your bank. Once you've begun having your contributions automatically sent to your retirement account, you can sit back and relax. You might be thinking, that's too easy. You're just mindlessly buying each month.

But it's not mindless. It's actually very smart buying. That's because by investing a consistent amount each month, you're automatically buying fewer shares when prices are high and stocks are expensive. When stocks are down and you're still contributing the same amount each month, you're buying more shares. So no matter what happens on Wall Street, you're always building maximum equity at minimum cost. True, there's an element of delayed gratification with dollar cost averaging, but it's important to accept that when investing in general. Dollar cost averaging doesn't give you big wins overnight. It gives you long-term gains. If you stick with it and don't pull your money out when things look bleak, those eventual gains can be substantial.

Here's what I mean. As I said, when the market's down, your monthly contributions are buying more shares than when the market's up. But let's say a bear market lasts six months, a year, or even longer. With dollar cost averaging during that time, you're laying the foundation for significant gains down the road. When the market recovers, all those extra shares you bought when prices were low will be worth more. And that greatly increases the value of your portfolio.

And there's another benefit to steady plotting. Most of us work pretty hard to save and invest. It's just human nature to have some emotional attachment to those dollars. But emotions are dangerous when it comes to investing.

They tend to crowd out logic and reason. Steady plotting or dollar cost averaging takes the emotion out of investing. It also eliminates the possibility that you'll make a bad investment decision, like mistiming the market. It forces you to think long-term.

Now, what does this look like in practice? Well, when your dollar cost averaging, you're buying when other people are reacting to a market downturn and selling out of fear. We often hear that this is exactly what the big boys on Wall Street do, but you don't have to be a big boy to buy smart. You can be a little guy who buys more when the market's down, setting yourself up for those long-term gains. When the market goes back up, which it always does, you profit. Once you grasp that, you begin to see that a market downturn, even a lengthy bear market, is actually a terrific opportunity.

Your friends might think you're crazy, but as the saying goes, crazy like a fox. But there is one catch, and I mentioned it before. Dollar cost averaging is a long-term proposition. To do it safely, you must have an investment horizon of at least five or 10 years. Then as you near retirement, you'll want to decrease your position in stocks and mutual funds, eventually getting it down to about 20 to 30% during retirement.

That way you'll have a hedge against inflation. Your calls are next, 800-525-7000. I'm Rob West, and this is MoneyWise Live. Thanks for tuning in to MoneyWise Live.

I'm Rob West, your host. We're delighted you're along with us today as we mind the scriptures and apply God's principles to the financial decisions that you're making each day. We've got some room for your phone calls today.

Perhaps you have a question, something you've been wrestling with financially speaking and you'd like to get in on the conversation. We'd love to hear from you. The number is 800-525-7000. You can call right now, Eric standing by to receive you, 800-525-7000. We're going to begin today in Green Bay, Wisconsin. Matt, we're so glad you've called today.

How can we help? Yeah, thanks for taking my call. I was calling with a question about student loans. I have gotten my student loans down to $50,000, and that's with federal loans at a low interest rate. I have not been paying during the pandemic when it's been no interest accumulation. I've just been saving that money. I'm wondering if I should make a large payment now when we start repayment in January. I have about $40,000 in savings. I'd like to keep $20,000 of that for six months plus of expenses, but then I'm wondering if I should make a large payment, like maybe $10,000, or if I should hold on to that money because I could be looking at maybe getting a house at some point. I don't have to, but I'm just looking to what's the best thing. Would it be better for me to pay the loan off or get it down faster, or maybe save that money for a house in the future?

Yeah. Well, it's a great question, Matt, and both would be excellent goals. I think it really comes down to, first, do you have a conviction to be completely debt-free as soon as possible? And if you did, then I would say you could certainly prioritize the student loans. I like the fact that you're going to hang on to six months expenses.

I think that's great. So you could, in effect, take $20,000 and put that against your $50,000 student loans or $10,000 some number that would get that going in the right direction. If you, though, were comfortable hanging on to that a bit longer, I realize ideally it's gone, but if you didn't have a conviction to just be out of debt as soon as possible, I would say if you have a goal to buy a home in the next, let's say, three years, let's prioritize that in terms of really focusing on saving for that down payment.

As you said, the federal student loans are at a low interest rate. If you go ahead and start repayment in January, if you're on a path to get that paid off in, I'll say, 10 years, then I would say just make those scheduled monthly payments as you will be starting next month, and then let's really focus on adding to what would be an initial $20,000 that could be used toward that down payment. What do you think you'd want to spend there in Wisconsin when you buy a home? Well, the prices right now seem really ridiculous, so I'm hoping they're going to come down, but I think I'm looking at around $200,000 probably initially. Okay, yeah, so you'd want to save at a minimum $40,000, which means you're halfway there, so if you've got, you know, good margin each month, you could keep adding to that, and the good news is that when the time is right, both you're ready financially and you're ready to make that move and take that, you know, that extra expense on by buying the home, that money would be there, and your debt, you know, on the student loans would be coming down each month, even though, you know, you wouldn't have put that big chunk toward it.

So give me your thoughts on, you know, what I've laid out. I really like the sound of that because I would like to get a home, and as you said, I could pay off the loan in 10 years, and if I keep overpaying at the rate I had been, I could even do it in nine years, so I think that does make sense. My question, I guess, would be, what should I be, where should I be keeping that money that I'm saving? Because right now, it's just in a money market account for checking. Yeah, yeah, I'd probably look to an online savings account.

You're not going to get a whole lot there, but at least there'll be something coming in in the way of interest. You know, online savings right now are paying, of course, more than their brick-and-mortar counterparts, so you might be looking at, you know, 0.55%, something like that on a high-yield savings. I would look at Marcus or Capital One 360. You could also look to Ally Bank would be another one that I like a lot. Great customer service, no fees, and you're going to see the highest interest rates around, and they will move up over time as rates head higher.

So, that's what I would do, and then I'd link that to your checking account so it's never more than a couple of days away through an ACH transfer, but it's separate, so you're not inclined to spend it for monthly spending, and at least you're getting a little bit of interest each year, even if it's only one half of 1%, okay? Great. Thank you so much. You're welcome, Matt. Listen, all the best to you in the days ahead. We appreciate your call today.

To Wellington, Florida. Hi, Norma. Thanks for calling. How can I help?

Thank you. I'm planning to retire next year, and I will start collecting Social Security, and I have a 401k that has, I would say, a medium amount of money in it, and I'm kind of concerned a little bit about the possible recession that will be coming, and I was thinking that I want to ask you if it's going to be a good idea to take that money out since it is an investment in mutual funds based on my age. I'm 61, so I'm supposed to get that money out when I'm 70, and if a recession is coming, like watching TV saying, I won't have enough time to get recovered the money, you know what I mean? Because usually a recession takes 10 years. In 10 years, I will have to get the money, and the money will be probably 50% of the amount it is right now, so what would you advise me?

Yeah, I'd be happy to weigh in on that, but let me clarify something. When you said you've got about 10 years until you're 70, what happens at 70? Are you talking about a required minimum distribution at 72 or some other triggering factor that would require you to start taking money out? Oh, most probably I will need it. I will need it for my daily expenses. Okay, so what are you going to do when you retire next year to cover your expenses? Oh, I do have properties rented. Okay, and so you've got rental income coming in over and above any expenses related to the property, and you're going to live off of that, is that right?

Yes, that's correct. Okay, and have you been doing that long enough to know that there's enough that you can count on every month over and above your expenses that it would cover all of your bills? Yeah, I have those properties for 17 years and I went to do that recession.

Okay, very good. Well, here's the thing, I mean when you get to 70, things are going to get better not worse in terms of income because you're going to be able to collect social security. Let's say you waited until full retirement age, that's going to be additional income on top of the rental income, and let's say at that point you were not able to keep up with the properties, it's just too much work. Well, even then if you sell the properties, you're going to have the proceeds of the sale that could then also be invested. We'll talk about where it would be invested in a second, but at least you'd have that asset that you could convert to an income stream.

So, it seems like when you get to age 67, 68, you're going to have more income than you'll have next year and your situation will actually be improving. Would you agree with that? Probably, most probably, but you know that we are not sure if we're going to be here tomorrow.

That's right. No, no, I totally agree. Our trust is in the Lord and we don't know if we're not promised our next breath, so our faith is completely in him. But while we're here and while we're in his service throughout the whole of our life, we take the resources he's entrusted to us and we're to be found faithful with those knowing that we're not promised tomorrow, but he may tarry and he may have another couple of decades in store for you.

So, we need to make the best decisions we can. I think based on what I'm hearing though, Norma, you're doing a lot of things right. You've obviously saved for the future. I'm not hearing that you've got a lot of debt.

You're clearly living modestly. You've been managing these rental properties really well. You've built up this 401k with a significant sum of money. You'll be able to earn social security down the road.

That's all good. The question is, how do we manage these assets in the meantime? You're already doing that with the real estate.

What about the investments? And what I would say to you is, yes, there's probably some headwinds on the horizon. The economy does work in cycles and we're due for a recession. Are we going to see hyperinflation? Probably not.

At least that's not on the radar right now with the people that I rely on. Yes, inflation has ticked up and I think for that reason, we want to stay invested. Now, does that mean 100% of your 401k should be at the risk of stocks at 61 years old, nine years out for a year out from retirement?

No, I don't think so. Perhaps 30%, maybe 40% at the most, you would want at the risk of the stock market and the rest, you'd probably want in a fixed income portfolio. And then as you get closer to 70%, maybe that 40% becomes 30% or 25% in stocks. Here's the thing, the average recession doesn't last 10 years.

It typically lasts a couple of years. And so even if we got into a real difficult spot, the stock portion of that portfolio, you wouldn't touch. You'd let it just ride through that and it would recover over time and you would wait for that to happen, knowing that you're not going to take anything out. But you exiting those accounts, namely that 401k by pulling your money out, if you pull it out of stocks and leave it in the account, you're not generating any tax, but you're losing purchasing power because given that inflation is higher than the typical 2% at 5% plus, although I think it'll normalize around three, you're losing purchasing power every month. And the way to offset that is through a disciplined and well diversified stock and bond portfolio.

That's appropriate for your age. I'm not saying take unnecessary risk. So I think given all of that, Norma, and all the, what you've accumulated, I'd be looking to hire an investment advisor to work with you to manage this money. You could find somebody who holds the certified kingdom advisor designation on our website,

Just click, find a CKA. Stay on the line. We'll talk more off the air and we'll be right back. Thanks for tuning in to MoneyWise Live, biblical wisdom for your financial decisions.

I was just talking to our previous caller off the air. One of the things she raised is she'd like to be able to take her understanding and experience in investing in real estate and move her 401k into that. And she was thinking she had to take a withdrawal and pay the tax on it. We actually talked about using what's called a self-directed IRA to invest that money inside that tax deferred retirement account, the IRA, directly in real estate, which is something a lot of people don't realize they can do. Again, it's called a self-directed IRA.

And she has demonstrated a proficiency in managing real estate and wants to add to her portfolio. And I think that'd be a great idea. Phone lines are open today, 800-525-7000. Before we head back to the phones, let me just remind you that as we head toward year end, and yes, it's just around the corner, we're inviting our friends, our MoneyWise community to invest in this ministry.

MoneyWise Media is entirely listener supported. And so we rely on your gifts to do what we do. And here at year end, they're now more meaningful than ever as we're trying to finish the year strong and plan and prepare for next year's ministry activities. So if you would consider a gift, we'd be grateful. Just head to our website,, click the donate button, and thank you in advance. To Cleveland, Ohio. Hi Deb, how can I help you?

Hi. I have a question about keeping money in the bank versus putting it back in an IRA. I am 71, so I know I have to start taking that out anyway. But there's $100,000 in the IRA and there is $134,000 in the bank with some of it's a money market part and some of it's checking. You know, at this age, I don't have life insurance, but we're debt free. I own a $300,000 house and I have a car that has 88,000 miles on it, so sometime we're going to need a new car. But I'm not sure whether to keep it in that low interest bank situation or should I give some more to the IRA?

What should I be doing here? Yeah, so the IRA money, the money inside the IRA, you said it's in money market, is that right? I have a financial advisor at Chase Bank and he does the stocks with it.

Oh, he does. Okay, so it's invested. And then the $137,000 is in cash, right? Bank, yeah. In the bank.

They have a money market part, 88 of us in the MMA, whatever, money market. Yeah, sure. Okay, yeah, very good. And then are you, is anyone still working? I work very little, but I do work some and I am on social security. I get, I sometimes, I'm a nurse and I sometimes stop here and there.

Okay, all right. Well, if you have earned income and you wanted to put more away and keep it growing, you could put it into a Roth IRA, which doesn't have that required minimum distribution that you're going to run into starting after you turn 72. But I think the bottom line here is if you don't need the money because your expenses are covered apart from the 100,000 and the 137,000, right? You have other sources of income? Well, yeah, social security.

Social security and your little bit of work. Okay. And that's enough to pay your bills given that you all are debt free and so forth? Yes.

Okay, great. Yeah, so I would be thinking about keeping somewhere between six months and a year's worth of expenses in that savings account, whatever you're most comfortable with. And then whatever that number is, I'd add to it what you believe you want to spend or will need to spend to replace that car. And that will give you the amount that you want to keep in cash. I'd put that in a high yield savings account linked to your checking where you're getting at least a half a percent a year on that money.

Marcus, Capital One 360, Ally Bank, any of those would be good. And then the rest you could begin to put into a Roth IRA and build that up over time or just turn it over to that advisor to invest conservatively so you have some additional funds growing and then you've got plenty of reserves. So I hope that helps you. We appreciate your call today. I know it can be overwhelming to make all these decisions and hopefully we've given you some peace of mind. God bless you. We'll be right back on MoneyWise Live. Stay with us. We're grateful you've tuned in to MoneyWise Live, biblical wisdom for your financial decisions.

Just a moment, we'll head back to the phones. But first, are you thinking about getting on top of your finances as we begin a new year just around the corner? You know, beginning of the year is a time when a lot of people think about repurposing their plans in their financial area to get on top of their finances, to control the flow of money in and out, to invest more regularly, to pay down debt.

Well, at the foundation of all of that is living within your means. And if you don't have a way to track your spending plan and control the flow of money, I would encourage you to check out the MoneyWise app. It's a great way for you and if you're married, your spouse, to stay on top of your finances, to develop your plan, to download automatically your transactions and put them in digital envelopes so you can always see exactly where you stand in each category of your budget. We have a special offer going on right now to become a MoneyWise Pro subscriber, which allows you to easily automate and customize the app to fit your stewardship style. Check out that special offer when you visit our website, slash Pro. That's slash Pro to take advantage of this limited time offer and you can read all about the MoneyWise app. Check it out today, slash Pro. All right, let's head back to the phones. Pensacola, Florida. Hi, Bella.

How can I help you? Hi, yes. I was wondering, I have not really prepared for retirement. I am a school teacher and I just had my calculations done, but I'm only going to have a pension of 30,000 a year. Little concerned about that and started putting 500 away every month. I'm debt-free.

I own my car, but I am renting and just wondering what else can I do to try to catch up? Yeah, yeah. Well, I think the key here is that you just are diligent in the years you have remaining. As you think about your working life, Bella, how long would you anticipate you'd be working? I mean, it's a rough career, but maybe another five years, but I think the max is 62 until the drop program, but I'm not sure if I can last that long. Yeah, I understand.

All right. And with putting away 500 a month, if you start today at zero and you did that for five years and let's say that grew at an average of 8%, I mean, that would give you $36,000 roughly that you would have if you delayed that perhaps by another five years and you did that for 10 years, you'd have about $90,000. So let's say you have another 100,000 by the time you're done working because maybe you'll find ways to add a bit more than 500 a month along the way and then you have the 30,000 a year. At some point, you'll be able to add Social Security to that. That 100,000 we would typically look at you having about 4% a year that you would be able to take off the top without ever impacting the principal if it's invested properly. So that would add another 30,000. So between the 30,000 pension, the 4,000 a month or excuse me, 4,000 a year, you're pulling off of the savings through let's say a Roth IRA.

We'll talk about that in a minute. On top of Social Security, then the question would be would that be enough kind of for you to fund your lifestyle and if so, then the goal is okay. What do I need to do to get to that $100,000? If it's not, then how do I need to reorient myself to be able to save more or I'm going to have to work longer and that's ultimately what it's going to come down to.

So I think the key is to start now. A great tool to be able to put money away to accumulate for retirement would be a Roth IRA. You can put in 7,000 a year because you're or once you turn age 50, you can.

This year, you could do 6,000 if you're not yet 50 and if you do that every year, that would give you a place to put that $500,000 a month, get that money growing for you over the next 10 years plus and I think that would kind of be the base retirement account on top of the teacher's pension that you would be relying on. And then I think the key is just to keep your lifestyle in check so that perhaps over time you could bump that $500,000 up to $600,000 or more. Does that make sense? Yes. Yes, it does make sense. Okay.

Yeah. And I think the key would then to be are you going to take Social Security early? The earliest age you can do that is age 62. The challenge is you're going to take about a 30% reduction from that point forward in your Social Security benefits if you take it early. So then the question would be, well, can you make that up another way? Maybe you're working part time in another field that's not as taxing to you so you can delay that or you may decide, no, I'm going to go ahead and take it because the reduced Social Security plus my retirement savings plus my teacher's pension is enough to cover my bills. But I think that's the way you need to be thinking.

You need to develop a plan, kind of know what you're aiming for so that you can cover your expenses in retirement and then just be really diligent about saving every month from this point forward. And I'm confident if you do that and keep your lifestyle in check, you'll be in a pretty good spot. Okay, great. Thank you so much. All right, Bella, thank you for calling. God bless you.

Rowdy's in Morristown, New Jersey. Rowdy, how can I help you? Hi, Rob. I've been trying to reach you for me in a couple of days, but I could not. Okay. I have a pretty straightforward question.

So okay. I have been following your podcast or your MoneyWise program from last couple of years. And you know, from from that, so I learned to save my six months of salary like $40,000. And I have also planned like 20% of my mortgage.

I mean, half of the amount I gathered by doing second job and then I have some funds back in India. So my father is willing to send me here. So that's how I met those two parameters that you that you have been constantly repeating in your talk. Yes, sir. Yes. So my question is, so I give my 10% to the church, to the different ministries that I visit and whom I like, whom I feel that they're sincerely serving God. So I do that.

Okay. My pretty question is, see, now you know, inflation has skyrocketed. I mean, it's going high. Now you know, is it the best time to invest? Let's say if I if I want to invest, what is the best approach to investing mutual funds? Or you know, I simply find that I mean, I really don't know, how do you not push those investments?

Is there any framework or how? What? Yes. Yes. Very good.

Sure. Well, first of all, right. Let me just encourage you.

I mean, I love what I'm hearing. Not just because you're taking my advice, but you're following biblical principles. And you've done the hard work. And now you're able to move beyond kind of the first few steps and get into some longer term investments because you've been working at this. And that's great. I love that you have six months expenses and you have a mortgage that has at least 20% equity and you're giving regularly and consistently proportionate to your income.

That's awesome. And now you're thinking about investing for the longer term. I think that's right.

And I would agree. Yes, inflation has jumped from a 2% level that we kind of just thought was there forever up to where it is today. You know, six or 7% where, you know, depending on the area you're looking at, most people that I rely on that are forecasters and economists think it's going to settle down at around 3% still elevated from where we have been. But the best way to offset that is to be a long term investor.

So you're thinking the right way. I would be opening a Roth IRA or taking advantage of a retirement plan at work with a goal of setting away 10-15% of your take home pay every month. And in terms of where to invest, I'd visit with our friends at They'll give you the mutual funds to use through the Soundmind Investing newsletter and stay on the line and I'll send you a copy of the Soundmind Investing Handbook as my gift to you.

Hang on the line. This is MoneyWise Live. We'll be right back. Thanks for tuning in to MoneyWise Live. I'm Rob West, your host. We're glad you're here today. Let's head right back to the phones. Marvin is calling from Indianapolis, Indiana. Marvin, Merry Christmas, sir, and thank you for calling.

How can I help? Merry Christmas, Rob. I was just calling to see if I can get your opinion on selling my personal investment account because I just recently got married. And my wife, she has a car that she recently got because of an accident she was in. But anyways, she owes about $7,000 on it. And I have about $4,000 in my investment account with Vanguard. And I was thinking about selling it to pay off the car. I just wanted to see if that would be a good idea.

It has only been in there for about four months though. Okay. All right.

Let's back up just for a second. So you just got married. That's great.

Congratulations. Do you guys have any other debt other than the car? I have about $300 in credit card debt, but I plan on paying that off soon. Okay, great. And then what do you have in savings other than the $4,000 in investments? I have about $2,000 in savings.

And then we also have a piggy bank that has I think at least $1,000 in it. I'm not sure. Okay, cool. And are you both working?

Yes. All right. And have you guys done a budget and do you have a plan to control the flow of money each month? A budget, not exactly. We did combine bank accounts so we can see how much we're spending each month. And it's all coming from one account and that's all one savings account, but not exactly a budget.

Okay. I need you to do a budget because really you need to develop a plan that may require that you track your expenses for 30 days. When we're done here, if you hold the line, we'll get you set up with a MoneyWise Pro account at no cost to you.

We'll give you six months on that. And if you are used to using smartphone apps and that would work for the way you want to handle money, there's three different systems in there. You can find the one that's the best fit for you and your wife, but that would allow you to start downloading all your transactions from your institutions, seeing where you're spending your money. Then you can develop your plan and begin tracking to make sure you're staying on plan. The goal is to free up margin because the first priority before I want you to pay off the car is to save up at least three months' worth of expenses. So if you guys are spending $3,000 a month, I'd love for you to have $9,000. If you're spending $4,000 a month, $12,000.

That's going to be your goal. In terms of paying off the car, it'd be great to have that paid off, but I'd also love for you to, as long as you can cover that monthly payment in your budget and still have some margin, I really want you to be setting something aside for the longer term. Do you have a retirement plan at work available to you? We have a 401k plan. Yeah, 401k. I haven't signed up for it though, but I've been planning on it. But the reason I ask about selling my investments is because I assume I'm going to be taxed for it and it just doesn't make sense to be taxed even though I'm trying to save money on the other end.

Yeah. Well, you only pay tax if you have a gain, which means you've made money over and above what you invested and you don't pay 100% tax. So you're going to get to keep the majority of that. So we don't want to pay any more taxes than we have to, but the fact that you have to pay taxes is symptomatic of income or profit in the case of the investment. So I'm not terribly concerned about that, but I do think I would prioritize for you guys investing in tax deferred retirement accounts over just taxable investment accounts.

So if you wanted to go ahead and pull that out, set aside whatever you'd need to set aside to cover any taxes for any gains you have, and then add that to the car to drop that balance down, even though that's not going to reduce your payment, it's obviously going to help you pay it off that much quicker. So I'd be fine with that. I don't have any problem with that.

I think that's a good move. But after you all do your budget and after you build up the three months expenses, then I would be looking to start funding your 401Ks at the very minimum if there's any matching, I'd love for you to take full advantage of that. For instance, if they say the first 3% will match it, well, make sure you've got 3% going in because that's free money. But ultimately, I'd love for you guys to be putting away 10 to 15% of your take home pay in those 401Ks every month. So I think the priority order here is, yeah, go ahead and pull the investments out, set aside the taxes, pay down the car, do the budget, focus on what you're spending, see where you can cut back, free up margin to build up that emergency fund. And then once you hit three months expenses, let's start working on the salary deferral into the 401Ks, okay? Okay.

All right. Well, listen, all the best to you guys in the days ahead. Stay on the line as our gift to you. I'd love to send you a copy of Howard Dayton's book, not Your Money Counts, but Money and Marriage God's Way.

I think that'll be a great resource for you guys to read over the next couple of weeks, maybe as you have a little extra time while you're celebrating Christmas, and we'll get you that pro subscription to the MoneyWise app. So stay on the line, and we'll be right with you. Thanks for your call today. Shawn is in Rockford, Illinois. Hi, Shawn, how can I help you? Hi there.

Thanks for calling or thanks for taking the call. My wife has recently been on Social Security disability, and our children are five and six years old. And they're getting a monthly income just as an offset.

And I'm looking to see what's the best route that I should go with for either investing or saving for them during this time. Yeah. So obviously, this money that is now available because of the disability is not needed for living expenses. Is that right, Shawn? Pretty much. I try to save. I mean, I take a little bit from it to help, but I'm trying to, each kid, I try to have them have at least $400 a month, is my goal.

Yeah. And would you like to earmark this for something specific like college, or do you want to keep it available more generally? I would like to kind of keep it later for them. I mean, I honestly want to have them, when they turn at 30, I would like to have some investments. And so they could get up to a couple hundred thousand dollars or even more is kind of the mindset that I'm looking at.

Okay. Well, if you don't want to earmark it for college, then I think your options are either a custodial account. The challenge with that is it becomes their asset at the age of majority, so you lose control over it.

So if they're not making great financial decisions at 18 or they're not mature enough to handle it, you think they'd go buy a sports car or whatever, you don't have the control over the funds. So it sounds like if you're saying perhaps even as late as age 30, then you probably want to just keep it in your name but keep it in an account that's earmarked for them. So I'd probably, Shawn, set up just an individual account or a joint account, you and your wife, in your name and then have a different account for each child so you know which one it's for and then just begin to automatically add money to this every month. I'd probably use one of the robo-advisors to start with just because they're very low cost, like one-fifth of one percent a year. There's no charge for it to be automatically reinvested every time you make a contribution. Then the money would be invested in ETFs that, again, are low cost. You'd capture the broad moves of the stock and bond market through the indexes and you could just automatically fund it every month through dollar-cost averaging and it would just do its thing in the background. So I would check out Schwab Intelligent Portfolios, Betterment, and the Vanguard Advisor. Those are the three that I like the best.

I think that'll give you what you're looking for and you'd just be opening a joint taxable account to begin to set that up. And we appreciate your call today, Sean. All the best to you.

Now we're going to finish today in West Palm Beach, Florida. Hi, Pat. How can I help you? Hi. How are you?

Yes. My daughter recently graduated from college and she's a good student and was a good hard worker. So she got a really good job in like consulting and it's in Cincinnati. So we looked initially Cincinnati had really a low cost of living, but now it's increasing. We talked to a realtor. One room apartments are now, one bedroom apartments are now $1,200 to $1,500 a month. So I thought maybe it's better to buy a condo instead of, because the interest rates are low. So you'd be paying about that much for your own property and she could get a two to four bedroom condo depending upon the area for approximately the same cost as renting with the HOA.

Well, my husband's a big investor and he doesn't really believe in properties, although we've done pretty well with properties and he's with her. And I think who's right, who's wrong. Oh boy, here we go.

So I've got to pick one or the other. No, that's fine. Let me ask you, so Pat, would this be the condo? Would this be something you're buying and then allowing her to kind of pay some rent to you or are you looking for her to buy it? What are you thinking? We'd have to initially help her with a down payment and then she could take over payments. Yeah. Yeah. Well, I think the key there, I mean, obviously this makes sense.

I like the fact that you're right. Rental prices are up dramatically as a result of, you know, what's going on in the housing market. So given that if you all have the financial wherewithal to do this, and this isn't going to put a strain on you financially for you all to come in and what I'm hearing is you'd make a gift to her, which I love. I'd rather you not loan the money to her. You make a gift to her of the down payment and then she's responsible for covering the mortgage every month. The first question is, is it in your name or hers and are you ready, willing and able to step in and cover the mortgage if you know she's unable to through due to some unforeseen event down the road?

I want to make sure that's already defined in advance so it doesn't create a relational strain. But in terms of whether or not it makes sense financially, as long as you all have enough financial stability to do it, then I love it. I would agree with you, Pat, rather than throwing the money away on rent.

You know, you all take advantage of investing in some real estate and let her take her income and pay the mortgage every month along with maybe a couple of roommates. So I think I'm on your side. I appreciate your call.

We're out of time. So that's going to do it for us today. Folks, thanks for stopping by today for Money Wise Live.

It's a partnership between Moody Radio and Money Wise Media. Thank you to Eric and to Dan and to Amy and to Jim Henry as well. Thank you for being here and hope you have a great weekend. May God bless you. Bye bye.
Whisper: medium.en / 2023-07-08 04:07:47 / 2023-07-08 04:24:43 / 17

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