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Must-Have Financial Skills for Young Adults

Faith And Finance / Rob West
The Truth Network Radio
April 18, 2024 5:11 pm

Must-Have Financial Skills for Young Adults

Faith And Finance / Rob West

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April 18, 2024 5:11 pm

Statistics show that young adults in the U.S. are sadly lacking in basic money skills. So, what’s going to happen when their turn comes to run things? On today's Faith & Finance Live, host Rob West will address this sobering question and remind us about some essential money management skills. Then Rob will answer your calls on various financial topics. 

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Statistics show that young adults in the U.S. are sadly lacking in basic money skills. What happens when their turn comes to run things?

It's a sobering question. Hi, I'm Rob West. Evidently parents in schools aren't doing their job when it comes to raising kids with financial savvy. Today we'll do some remedial work on essential money management skills. Then we'll take your calls at 800-525-7000.

That's 800-525-7000. This is Faith and Finance Live, biblical wisdom for your financial journey. Year after year, the annual survey taken for the TIAA Institute shows low financial literacy for the 18 to 25 age group. A majority of these young adults consistently fail to demonstrate a working familiarity with financial concepts like budgeting, saving, insurance, and investing.

Think about what this means. Tens of thousands of young adults are going off to college or joining the workforce today without knowing how to manage their money or how to avoid overspending or even how to build a solid financial future for themselves. When I was a kid, learning to balance a checkbook and pay bills on time were part of financial training for kids and teenagers, but today things look a lot different.

Now we have online banking and instant digital transactions. It's so easy to use credit and transfer money that many young people just live day to day without a plan until they need a bailout from mom or dad. The fact that young adults rarely handle cash also means they no longer have a physical connection to their money. When you don't actually see and feel your money coming and going, you might not realize when it's gone. This disconnect can lead to unintentional overspending and a lifetime of debt, not to mention a lack of motivation to save for the future. So if you're a parent of teenagers or a Gen Z just starting out, here are a few must-have financial skills and how to get them.

The first skill is actually an attitude. The Bible says God is the owner of everything, as in Psalm 24 one, the earth is the Lord's and everything in it, the world and all who live in it. Understand that nothing really belongs to you, even you. You are a manager of God's resources, which should change your perspective on money and material things. The number two financial skill you'll need is planning. A dream without a plan is just a wish, as they say, and wishes won't buy you a house. The fundamental planning tool we recommend is a budget, otherwise known as a spending plan. A budget keeps track of your income, giving and spending, and gives you a picture of your progress towards meeting your financial goals.

Download the free FaithFi app to get one started. The next fundamental financial skill everyone needs is work. Maybe your dad always told you that money doesn't grow on trees.

Annoying as that was, it's the truth. Employment is where your money comes from, not the oak tree in the yard. So start at the bottom if you have to, work hard and develop your resume.

Earning can really build your financial confidence. If you do have a job, make sure you keep it in perspective. Remember, your identity comes from Jesus, not from what you do for a living. In Colossians 3, 23 and 24, we see the key to successful work. Whatever you do, work at it with all your heart, as working for the Lord, not for men, since you know that you will receive an inheritance from the Lord as a reward.

It is the Lord Christ you are serving. The next skill is to open and manage a bank account. Then make sure you develop habits of giving and saving from every paycheck. Watching your balance increase will encourage you to stick to your plan. Keeping track of your bank balance will also help you understand your limits. You can't spend what isn't there.

The next skill will also help you understand your limits. Learn about credit. Don't fall into the trap of believing that a credit card equals permission to spend all you want. Instead, keep track of your balances.

Pay your balances in full every month and watch your credit score. Another basic financial skill you'll need is to understand about investing, including types of investments, risk, and return. Check out the great information at soundmindinvesting.org. Finally, admit you don't know it all and learn where to go for solid financial advice.

As it says in Proverbs 15, 22, without counsel plans fail, but with many advisors, they succeed. Visit faithfi.com and click on the Community tab to chat online about your money questions or ask someone you trust who knows about finances to help you. Now more than ever, young adults need financial skills to succeed in the real world, and we hope today's information has been helpful. All right, your calls are next, 800-525-7000. This is Faith in Finance Live. We'll be right back. The opinions offered during this program represent the personal or professional opinions of the participants given for informational purposes only.

Any information provided is not intended to replace advice from a financial, medical, legal, or other professional who understands your specific situation. Great to have you with us today on Faith in Finance Live. I'm Rob West.

I'm so glad you're along with us today. It's time to take your calls and questions on anything financial. Here's the drill. You call and we help you process and think through your financial questions in light of biblical wisdom.

That's right. Everything on Moody Radio is done through the lens of a biblical worldview, and that certainly includes our role as stewards in managing God's money. We want to be wise and faithful stewards.

We do that by looking to God's Word, but we also want to give you some hope and encouragement along the way. The number to call, 800-525-7000. Again, that's 800-525-7000. We've got lines open today. You can get through right now. Let's dive in. We'll begin in Hartford, Connecticut, and Robert's calling with a mortgage question. Robert, I understand you're going through something right now that I've done recently. You're at the DMV with your daughter, is that right?

That is correct. I love that. Now, you're not going anywhere anytime soon, so we could take our time with this question, I guess, huh?

Well, we'll see. She passed. She passed.

Hey, congratulations! That's awesome. Now, was this the driving test or the computer test? The computer or the permit, yeah.

Okay, for the permit. All right, yeah, that's a good one. So now you get the fun job of sitting next to her and coaching as she feels her way through that, huh? Yes, that's the next few months. All right, that's great.

Well, I'm sure she's ready to get out of there, so let me let you get to your question. Sure, yeah, so our question is that we sold our house in 2019 right before the pandemic, and we went overseas, and then we came back, and the pandemic hit, and the housing prices went up. Some dear friends of ours from church allowed us to rent at a very, very below market price. We have four kids, three-bedroom, one-bath house, and we're renting for $1,100.

Both my wife and I are teachers, so we have about 20% that we could put on a $300,000 house, but we're like, man, with these interest rates, we just don't know if this is the right time. We're like, maybe we should just wait, so we're kind of just trusting God and just waiting, but we thought it might be a good idea to get a little bit of advice. Yeah, well, I can certainly appreciate the dilemma, and, you know, you went out of the country. Did you go do some mission work, or were you all, what were you up to out of the country? Yeah, we were working with an organization called Mission Aviation Fellowship. Oh, yeah, yeah, we're teachers.

Oh, you are? Oh, yeah, we love them, and we taught a little school in Papua and, you know, helping translators and, you know, pilots and mechanics, you know, basically giving them a Western education as they served and, you know, getting the Bible to last, last, and least. That's incredible. I love that. That's awesome. And so, obviously, that had a season. The Lord's brought you back, and now you've got this great opportunity, but I realize it's cramped.

I mean, I know what it's like. I've got four kids. You're in a 3-1. It's a blessing that you're spending kind of below market rates, but you're probably looking for a little more space. Now, in terms of the housing prices, we don't expect housing prices to go down. The pace of increase has kind of tempered, and we've slowed the rate of appreciation, but I don't think we're in any kind of bubble situation. Even if we were to hit a recession, we don't expect housing prices to dip just because the supply and demand is still an issue. There are too few homes in this country for the demand that exists for a variety of reasons, and we are at a high point on interest rates. I just saw that, you know, we ticked back up to pretty close to the high watermark on interest rates. I mean, we're above 7%. So, you know, the challenge I think you're going to have is, you know, even if you were to find something, let's say you get in something that's 7.1%, I mean, you're going to be spending $1,900 a month when you look at principal and interest plus taxes and insurance, depending on what part of the country you're in. You know, the taxes and insurance might even be a little higher than my estimator, but the principal and interest alone is going to be $1,612 on a $240,000 loan when you put 20% down on the $300,000 purchase price, and then you've got taxes and insurance on top of that. So if your $1,100 goes to $1,900, kind of what percent of that is your take-home pay, do you know?

Not off the top of my head. Yeah, I can imagine. What do you think you guys bring home after tax? Well, we have all four kids in a private Christian school. Okay.

And so that's a huge chunk of our earnings because we didn't feel comfortable putting them in a public school in Connecticut. Yeah, I can certainly get that. Well, here's the reality, and I think you've got to go back to that budget because as much as you'd like to get into a place of your own and get some of that appreciation that's coming and just get a little more space, you know, if that what is today $1,100 goes to $1,900, even though, you know, if you factor in renter's insurance and some things like that, if you've got it, it may be a little higher than $1,100, but let's say you're adding seven or eight hundred dollars a month to your budget, can you afford that? Where would it come from? And if not, then continuing to save and waiting for the rates to come down may be the better option, despite the fact that you guys would like to get into something sooner rather than later. So I'm thinking, you know, the question would be if you continued at $1,100 a month and you said, okay, our goal is to buy something in the next 24 months, two years, how much could we free up, you know, per month to add to our existing savings? So maybe now we're putting down a 30% payment. And let's say instead of rates at seven, you know, point one to five, they're at, you know, in the fives, you know, a couple of years from now, that would be a game changer. Because now all of a sudden, you know, let's say you're putting down, well, let's just go with 70,000. And let's say that rate comes down to 5%. You know, now all of a sudden, we're at 1500 a month with taxes and insurance, you know, instead of 1900 a month.

And so that's $400 a month you're saving. So I think that may be the better option, but we've got to let the budget drive that. Does that make sense? That makes sense. Yeah. Yeah.

Okay. So I think it's probably let's hold off. But let's not wait to go ahead and do the hard work on the budget.

And if you find that, yeah, we just can't swing that right now, because 1900 is a little too rich. Well, then let's use this as an opportunity while you have this blessing of this home under market. Even though you're cramped, let's use that as incentive to say all right, we're really going to buckle down and we're going to save as much as we can out of surplus every month. But hopefully that's an encouragement to you tell your daughter on behalf of listeners to faith and finance live nationwide.

We're excited for her test score. Thank you so much. I will and I thank you.

And I appreciate your help. And, you know, it's just blessings to you and your program. And yeah, we much appreciate it. That means a lot, Robert, and thanks for your service to our Lord. And I know that continues even though you're off the mission field, but what a privilege that must have been to be able to serve in that way for for that season. So appreciate you being on the program, sir.

All right, folks, we're just getting started. You know, this is why I love what I do every day. I get to talk to wonderful people like Robert in Hartford, Connecticut. Just wanted to serve the Lord, be found faithful, serve his family, but also be a good steward of what God has entrusted to him. I know that's your desire as well. If you have a question today, give us a call.

800-525-7000. Hey, if you've been blessed by this ministry, we'd love for you to consider becoming a FaithFi monthly partner. If you do, we'll send you a quarterly update. You'll get a pre-release of all of our studies that come out quarterly. We'll keep you informed on the ministry.

Just check it out, faithfi.com, click give, and you can learn more. We'll be right back. So thankful to have you joining us today for Faith in Finance Live. My name is Rob West. I serve as host of this program, and we'd love to hear from you with your financial questions today. 800-525-7000. This is where we apply biblical wisdom to your financial decisions and choices. Let's go to Naperville. Hi, Ann. Thanks for your call today.

Go ahead. Yes, I am a 70-year-old retiree widow, and I have about 800,000 in a variety of investments, one of which is 280 in an annuity. It's a 408B. I've had it for over 15 years. I got into it before really knowing what an annuity meant. And so the average rate of return has only been 4.1% over all that time.

It's approaching the point in July where I have to make a decision either to turn it on or to surrender. And if I surrender it, there's no surrender fee, and then what I would do is take it and put it half into a money market or high-yield savings and 140 into conservative growth, so that at least I make more on this batch of money rather than being tied into an annuity with just a flat $5.5 or $1200 a month coming out. Yes, very good.

That was helpful background. Let me ask, is this qualified money? Did it go in pre-tax?

Pre-tax, yes. Yeah, so you could roll it to an IRA. Now talk to me about why you'd put 140 of it in high-yield savings.

I realize that's compelling right now. It won't be perhaps a year or two from now, but are you looking at this as your emergency fund or do you have some savings set aside separate from the 800,000? I have an emergency fund already, so it's just a matter of right now I'm on my high-yield savings.

I'm getting 4.3% which is at least it's a decent amount, but I could put more into money market. I don't know if that's it, you know, slightly higher or just put the whole thing into a conservative growth fund or IRA, you know. Yeah. The idea of it, just that amount just being frozen now for the rest of my life, just I'd like to have some growth on it, you know?

Oh absolutely, yeah. I mean, you know, even at 70 we still need to take a long-term perspective. If the Lord Terry's and you're in good health, we need to plan for this money to last to age 95 plus, right? So we're still looking down the road and, you know, I would say at a starting point, and that's all it is, this doesn't replace more specific planning for your unique situation, but I would say typically you'd want as much as, you know, for 30 to 40 percent in stocks and, you know, 60 to 70 percent in bonds and perhaps you work in by pulling from both of those, maybe some allocation precious metals, but that would be a typical portfolio. Now if you wanted to not leave it there frozen, but if you wanted to roll it into another annuity because you wanted some portion of the 800,000, you know, in this case, you know, we're talking about 35 percent, if you wanted some portion in something that was guaranteed as opposed to taking the market risk associated with stock and bond investing, then you could go look for a really high quality annuity, something with low fees where you're getting a guaranteed rate of return that you could feel good about and know that, okay, at least, you know, that's guaranteed.

I don't have to think about it. I actually prefer what you're thinking, which is to roll it to the IRA and then invest it. And if you want to take that portion that I said, you know, would be the fixed income portion, which, you know, is probably around 60 percent of the portfolio, typically could be as high as 70 if you want to be more conservative, that could include, you know, brokered CDs, that could include money market. It certainly could include corporate and government bonds as well.

Real high quality bonds that are going to do well as interest rates fall, but you're already getting a nice yield on them. So I think that makes a lot of sense. Who's managing the half a million right now? I have it with a fiduciary. Okay. And how's that going?

That's going well there. I mean, their average has been six to seven percent, so it's at least a decent, decent return. And what do you think about a variety of traditional and Roth and high old savings and I bonds? I mean, it's just another annuity, but I can't do anything with because it's still in the phase where you can't touch it. So got it. Yeah. What do you think about moving this into an IRA under the fiduciary's oversight? That's exactly what I was thinking.

Okay. Yeah, I like that a lot. And I just think that gives you ultimate flexibility because if you needed to tap into larger sums of this down the road, let's say you needed long term care or something like that, you've got access to it, but you're earning a better rate of return over the long haul.

You know, you could be as conservative as you want. You've already got a good relationship with your advisor. So, you know, I like the idea of you having the flexibility of access to the capital, but a growth rate, you know, you're assuming some level of risk. We always are, but we're taking a long view on it.

And as long as you're properly diversified and your asset allocation is right, then I think this is the best of both worlds, in my opinion. Sounds good. Okay. You're welcome, man. May the Lord bless you.

Thanks for calling today. Let's head to West Palm Beach. Go ahead, William. Okay. How are you doing, Mr. Rock? I'm doing great.

I was just in West Palm a couple of weeks ago, a couple of blocks from Worth Avenue there at Palm Beach Atlantic University. Oh, all right. All right. A good area there. Lovely. It is. Yeah. They're launching a new center for financial literacy for their university. And I had the privilege of speaking to some students there. It's beautiful.

That's for sure. But how can I help you? Okay, I'm calling okay about my 401k. Every year, it don't seem like it's growing. Okay. It just seemed like it just studied.

It just stays at the same place. Yeah. Do you know what it's in?

Because inside your 401k, you have a menu of investment options. Do you know what you've selected? No, I'm not right offhand. I don't have it with me right now. Well, yeah, yeah. And how much do you have in there?

Almost 30,000. Okay. All right. So I mean, you know, what I would typically do, I mean, so 401k, and I see in my notes here, you're wondering just kind of how does this work?

I mean, this is a good thing. We usually recommend you put 10 to 15% of your pay if you can get there in to this account on a pre-tax basis. So you're getting a deduction as the money goes in unless you've chosen the Roth version. And the nice thing is you can put away quite a bit. I mean, for 2024, you can put away $23,000 over the course of year, you don't have to, but that's going to grow between now and retirement. But you do need it invested and not all investments are created equal. There's probably a money market fund option, which isn't going to do a whole lot. And then there's probably a target date fund that you could choose, which is kind of a simpler approach.

And then there's probably a mix of mutual funds. So let's do this on the other side of this break, we'll dive into what your options are and talk about where you go from here. We'll be right back.

Well, I trust you're having a wonderful afternoon. I'm glad you've decided to tune into faith and finance live here on Moody radio. Hey, before the break, we were talking to William in West Palm Beach, and he's just wondering why his 401k isn't growing. And William, I was saying, you know, 401ks are a great option, because you can put away quite a bit of money, I'd love for you to target 10 to 15% of your income, that's going to help you just be on track to have enough accumulated by the time you retire so that it can be a meaningful asset to supplement social security.

But we do want to get it growing. And that's going to come down to what investments you choose. Now, given the amount of money you have in there, you don't have quite yet enough to have an advisor, you know, oversee it. And typically, that doesn't happen when you're in a 401k.

But your plan administrator should be able to connect you with somebody who can help you understand your options. And one of the most simple approaches is something called a target date or a lifecycle fund, where you just simply tell them what your expected retirement date is. And I would kind of err on the side of making it longer than shorter, because those target date funds tend to be in my view, a little more conservative than you might want to be just on the based on how long people are living these days. And so let's say you were to, you know, you're 20 years out from retirement, so you'd, you'd pick a, you know, normally, you might pick a 2035 fund, maybe you pick a 2040, you know, just to get because the further out that it is, the more aggressive it will be. The nice thing about that target date fund is it's automatically going to get more conservative as you get closer and closer to retirement. And so that then you take some of the guesswork out and ensures that you don't find yourself five years out of retirement in 100% stocks, and you've got volatility and, you know, too much risk while you're getting closer to retirement. So I would probably schedule a meeting with somebody from the plan administrator, whoever the plan administrator is for the 401k.

It's not your employer, it's whoever they've hired to administer the plan and see if they can connect you with you and help you understand the investment options that you have. Okay. Okay, that sounds good.

Good. And then what was the second part of your question, sir? The second part, of course, is the home that I have, I got a home for my mom to pass away. The home is paid for and everything, but the home needs work. So I didn't think about going ahead and selling it, or probably holding on to it and try to fix it up and, you know, get up because I can't get any insurance on it, because it needs a lot of work.

I see. And would you only fix it up to maximize the value when you sell it? Or would you think about fixing it up and trying to rent it out as a rental property? What are you thinking?

Yes, somewhere like either rental or either just yes, but basically fixing up as a rental. Okay. And what is the home worth? Do you know?

It's value, I think it was worth about, I'm not sure what they get. I didn't look into the fund yet. Okay. But there's no mortgage on it, correct? No, no, no. All right.

All right. And do you have any idea what it would cost to get it up to par for you to either sell it, or rent it out? And obviously, if you're going to rent it out, you may need to go even further in terms of the repairs and renovations to get it to a place where somebody would want to rent it as their own residence, right? Well, basically, what I was gonna do is try to get a, you know, a home inspection to come out and see what all I need on it was only to be done. That's what I was thinking about going for.

Yeah, I like that. You know, what I'd probably start with is connect with a realtor, a real estate professional that specializes in the neighborhood that this house is located. If you don't have one, maybe you drive around in the surrounding neighborhoods and see who has the most signs or, you know, do some research online, but that realtor could do two things. Number one is every realtor has a home inspection company that they work with.

And, you know, they don't work with anybody that doesn't consistently do a great job for them, because they're the ones usually selecting them on behalf of their, their seller, or their buyer. And so you could get the referral from that realtor. And then the second thing I would do is talk to the realtor about what things you think, what things they think you should fix up based on what your intentions are. If you're looking to sell it, they're probably going to say, okay, I'd fix these things, but I wouldn't touch those things. Meaning certain things you do to update a home, you don't get the money back out because oftentimes the buyer is going to want to choose those things. But there are other things that you absolutely do want to fix up because it could detract from the value of the home sale, like curb appeal.

And, you know, maybe you've got a loud wall paint color and, you know, or a mural on the wall and they say, let's, let's paint over that for a few hundred dollars, we can get rid of it and it'll, you know, make it more desirable. But if you're wanting to sell it, then, you know, you're going to need to obviously go a lot farther in terms of the renovations you'll do because you got to get it ready for somebody to come in and say, yeah, I want to live here. And then you're going to have to get a contractor in there to tell you how much all this is going to cost. And then you've got to decide, can I afford that? Because if you don't have a lot of excess funds, even though you're going to try to rent it out, what if we went through a recession and you went through a period of time where you couldn't get a renter in there and, you know, you don't have the money to carry the cost of the loan that you use to do all the renovations.

And so if that's the case, I'd probably move more towards selling it. But again, that realtor can tell you fix this. Don't fix that. Does that make sense?

Yeah, it makes sense to me. That's what I was looking for. All right. Very good. Hey, well, I'm glad. We're glad we can help you. Listen, I'm so thankful you called. You sounded like a wonderful man. And if I can help you further in any way, don't hesitate to reach back out.

May the Lord bless you. Let's go to Tulsa. Hi, Christine, go ahead. Hi, um, my I have to be real quick. My husband and I are 70.

And we both Hi, come on in. We own a home but it's not paid for. Okay. And we have I'm sorry, I'm No problem.

Yeah, you're fine on the home. And we still have 138,000 on it. And we're wanting to know if it would be better to pay that off, or to put the extra 2000 a month, we would be paying it off into investments.

We go ahead. And we have Social Security and Army retirement and he's still working. Oh, we have a couple of small IRAs.

Okay. Yeah. So he's got the IRAs. Now, let me ask if he were to stop working, would you be all be able to live on just his military retirement alone? With the mortgage? Well, with our Social Security? Yes.

Because it was 2% 3% interest rate mortgage. It's Oh, yeah. Yeah. So basically, what I'm Oh, go ahead. I'm sorry. I'm sorry, we would have to tighten our belt.

But yes, yes, you could do it. We don't have any debt. So that's great in the sense that you guys are living modestly. And he's continuing to work.

So you've got this surplus, I assume that the 2000 a month is basically what he's bringing in from his work. Is that right? Just about.

Yeah, he's a teacher at a special needs place. Okay. Oh, wow. That's awesome. Okay.

Yeah. So let's do this. I've got to take a break. We'll let you kind of get situated.

Sounds like you've got a few things going on there. But I'd love to weigh in on this. This was really helpful background information. And we come back, we'll talk about just kind of the pros and cons of you all investing at this point, that 2000 a month that you have at least while he's continuing to work versus you accelerating the payoff of that mortgage, which is sitting at around 138,000 today. So stay right there, Christine, and we'll pick this up right on the other side of the break, folks. So glad to have you along with us today here on faith and finance live, we're going to be back with our final segment here, just around the corner. By the way, the phone number 800-525-7000 stick around. So glad to have you with us today on faith and finance live.

I'm Rob West. Hey, before the break, we were talking to Christine and Tulsa, Oklahoma. She and her husband are around 70 years old. They own their home. They've got about 40,000 in savings. They've got about 2000 a month surplus because her husband's continuing to work at a special needs school they're living on and they can cover their lifestyle expenses with Social Security in his military retirement.

So basically, this income that he has is surplus. And so they're wondering, do we pay off the mortgage, accelerate the payoff of the mortgage with 2000 a month extra, or do we invest that? And, you know, here's the the reality of this, Christine is, you know, if you were because you have the low interest rate, you know, you could you could do better, at least on paper with the investment.

So let's say you were to take that 2000 a month, and you were to invest that for six years, because that's how long I'm guessing it's going to take you to pay off the mortgage. Do you think that's about right? Have you looked at that?

Yes, I have. And that's what I figured out. Okay. So let's say we were to you were to do that extra 2000 a month for six years. At that point, you would have exhausted $138,000 loan.

What's the alternative? Well, 2000 a month at a 6% rate of return, which is reasonable for six years is 173,000. So you know, could you come out ahead? Absolutely. Could could the market be sideways to down in six years?

Yeah, it could. So you're taking a little bit of risk. So I think the question is, would you all rather have the peace of mind of knowing that six years from now, let's say, and this may not work exactly this way, but let's say your husband is willing to work for the next six years. And so therefore, you can see this all the way through to paying it off in full. At the end of six years, at least you're guaranteed that that mortgage is gone.

With the investments, there is no guarantee, but you could end up with, you know, somewhere between 30 and 40,000 extra, you know, in the bank, you know, but you'd still have a mortgage because I imagine if you just continue paying the minimum payment, what do you have left 15 or 20 years on that mortgage? Probably 15. Okay, 15. So what feels better to you? I mean, are you do you all either a have a conviction to be debt free as soon as possible as you think and pray about this? Or is it really about where do we have the potential for the greatest return with which side would either of you come down on in that binary decision? You know, I think I think we have prayed about it. And we we really feel like we should pay the house off. But we wanted to get your opinion on it. Yeah.

To see if we're making right choice or a foolish choice, because we know that interest rate on this house. Amazing. Yeah. And well, here's the reality. I don't think it's ever a foolish choice, Christine, for you to decide that you want to get be out of debt.

I think the Bible affirms that I think it sounds I mean, clearly you guys have prayed about it. You like the idea of being debt free. And so I'd say go for it. And take that 2000 a month as long as the Lord would have him, you know, have the ability to continue working. And let's go after this mortgage. And at the end of six years, if you get there in that time, your mortgage is gone.

And I wouldn't think twice about what possibly could be in an investment account at that point. Listen, I've been doing this a long time. I've never ever had somebody call me after paying off their house six months later and saying, wow, we really wish we wouldn't have done that.

I mean, I just don't get that call. Because it's just a lot of peace of mind that comes from having your home paid for. And, you know, the other piece is just the flexibility that would give you in that season of life to follow the leading of the Holy Spirit wherever he might lead you, you know, after you're completely unencumbered. Does that make sense?

Yeah, that makes lots of sense. Thank you very much. You're welcome. I like this plan. I'd say you all go for it.

And don't worry about that mortgage interest rate. I love the fact that you prayed about it. And we appreciate you being on the program today.

Tell your husband thank you for his service to our country. Okay. Yes, sir. Thank you very much. All right. Bye bye to Davenport, Iowa.

Jan, thanks for your patience. Go ahead. Hi. I am 76 years old. I am going to sell my house. I have the possibility of getting 30 to 50,000 profit.

I am planning on renting going to like a senior housing place, but I don't qualify for any subsidies. I'm still working. I work in ministry. And I'm wondering, given that I should get some kind of profit, I'm planning on talking to a Christian financial counselor from my church to see if I can make this profit work for me. Yes. Yeah, and you're speaking about specifically the 30 to 50,000 you'll clear from the home sale? Yes.

Yeah, very good. And do you have what I call an emergency fund, Jan, separate from this 30 to 50 from the home sale in savings? I do have probably 15, 1600 in savings that I could leave in there, given I don't have any major problems between now and the sale of the house. Yes, ma'am. What are your total expenses over a one month period on average, roughly? Oh, gosh, I'm sorry.

That's okay. Is it 2000 a month? 3000? No, probably closer to 3000.

I wish I had just done your cash flow thing. So I should have should have had that answer. That's okay. Do you think it's maybe more like 4000?

No, it wasn't. Okay, I've got like a $857 mortgage. Okay, very good. Well, here's the thing is, number one, I kind of like you not investing this money. Because, you know, I would love for you to have, I'd really love for you to have a minimum of 20,000 in savings, just because that would give you six months worth of expenses. And if you had come in something coming out of left field, that was a major expense that you were not anticipating, I don't want you having to pull out of investments on a short term basis. Because, you know, we may find ourselves a year from now in a recession, and the market may be down 20% or more. And, you know, we really only want to invest money that we have at least a 10 year time horizon on. And, you know, in this case, I feel like, especially in this season of life, I just love for you to have a little bit more liquid and safe. And so I'd probably take, you know, if you've got 1500 now, I'd probably take another 20,000 15 to 20,000 and add to that, put it in a high yield savings account where you're earning four and a half percent with FDIC insurance, meaning it's backed by the US government, you may need to use an online savings account to get it.

But that would make me feel a lot better. And then if you wanted to invest the rest of it, I might look at some CDs, or, I mean, you could put it in a in a growth and income mutual fund, what they call a balanced mutual fund. But you're probably going to struggle to find an advisor who can make those decisions for you with an account that size because once we pull, let's say we pulled 15 out of this, you're probably only going to have 15 to 20,000 left. And, you know, oftentimes in order for that an advisor to manage it, they've got to have a good bit more than that. And I wouldn't want somebody to sell you an annuity because you really need this money more accessible.

So I'd probably just, you know, put 20,000 in high yield savings and then take the balance, whatever that is, and maybe buy a cup, maybe take half of it and put it in a six month CD and half of it in a one year or half in a one year, half in a two year, something like that. How does that sound though? Well, yeah, I mean, I'm so glad I got through because, yeah, I think you're probably right. I don't, I don't know much. That's why I had to call you.

But well, listen, you know a lot. And I'm but I'm delighted that you did get through because I, you know, I think in this season of life, the key is we just need you to have access to the money you need. So you've got flexibility. And that's what margin and, you know, and reserves do for you. It allows you to kind of handle the unexpected. And we know the unexpected will come, right? Right. How how do I know if a online savings account is safe?

I mean, what criteria? Yes, ma'am. The main thing you're looking for is what's called FDIC insurance. That stands for Federal Deposit Insurance Corporation. And that's a government.

It's backed by the full faith and credit of the United States government. And so if as long as it's FDIC insured, then you're good. But where I would go is bankrate.com. Are you comfortable on the Internet?

Well, someone can do that. All right. Bank Bankrate.com. Click on high yield savings and you'll get a list there of all the banks that are often the most competitive rates right now. They're all going to say FDIC, but you're going to want to confirm that. And then you'll want to look for the one that has as close to a five star rating as possible.

And some of them will. And any of those, I would feel comfortable with you opening an account. Okay. All right. Very good. Well, thank you. You are so welcome, Jan. And thanks for your call today.

We appreciate it. Harold and Zephyrhills, quickly, I know you're asking about Social Security versus disability. Is that right?

Yeah. Yeah, I'm getting Social Security disability right now. I'm 56.

I want to know is the price of what I'm getting now monthly. Will that change when I turn 67? It will automatically convert to the retirement benefits of the same amount. And so typically, you don't even have to do anything to make that happen.

If it didn't happen, you'd contact your local Social Security office and let them know that you've reached full retirement age. But it will convert and it will stay the same. All right. Thanks.

That's all I needed to know. All right, Harold, thanks for your call. Today, folks, that's going to do it for us. Deborah and Akron, I'm sorry we didn't get to you.

If you stay there, say, Harold, try to get you scheduled for a future broadcast. Folks, I'm so grateful that you tuned in today. It's always a joy to come alongside you and hear your questions, being invited into your stories and point you back to God's word as you answer your financial questions.

Faith and Finance Live is a partnership between Moody Radio and Faith File. Let me say thanks to my team today, Jim Henry, Tahira Haines, Amy Rios, and the rest of the team. I want to thank you all for joining us today. We'll see you next time. We'll see you next time. Bye-bye.
Whisper: medium.en / 2024-04-18 18:22:53 / 2024-04-18 18:40:05 / 17

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