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All the Insurance You Need

Faith And Finance / Rob West
The Truth Network Radio
May 13, 2024 5:37 pm

All the Insurance You Need

Faith And Finance / Rob West

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May 13, 2024 5:37 pm

The word “insurance” isn’t in the Bible, but it does say that it’s wise to protect your financial holdings— and insurance is one way to do that. On today's Faith & Finance Live, host Rob West will talk about the different types of insurance and identify all the insurance you need. Then he’ll answer your questions on various financial topics. 

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Proverbs 27, 12 reads, The prudent sees danger and hides himself, but the simple go on and suffer for it.

Hi, I'm Rob West. The word insurance isn't in the Bible, but it does say that it's wise to protect your financial holdings, and insurance is one way to do that. We'll talk about all the insurance you need today, and then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is Faith and Finance Live, biblical wisdom for your financial decisions. Well, unless you have tens of millions of dollars spread across dozens of investments, you're going to need insurance for several things. So, what insurance do you need?

Well, let's start with policies that you don't have much choice about purchasing. Auto insurance, for example, is usually required by law if you own and drive a car. Homeowner's insurance is also required if you have a mortgage, and it would be quite foolish not to have it even if you don't have a mortgage. You can usually save money by bundling auto and homeowner's insurance. While you're at it, look into the option of an umbrella policy. For $300 or $400 a year, you can add a million dollar policy to protect your assets in case you're sued and the settlement exceeds the limits of your auto or homeowner's policies, which is easy to do these days. By the way, if you're a renter, you need to have renter's insurance. It will probably cost you less than $200 a year, and it's well worth it.

It not only protects your property inside the rental unit, but also covers you if you're sued by your landlord or someone else for negligence. Obviously, another must-have is health insurance. If you think it's too expensive, consider not having it. The average cash cost of a doctor visit is $100 to $150.

Paying cash for an emergency room visit will cost you around $2,500, and a one-day stay in the hospital without insurance can set you back around $9,300. You know, a lot of folks call asking if they need life insurance. The truth is you don't need life insurance unless someone is depending on your income. When the kids are grown and out of the house, you may not need it at all, or perhaps you can downsize your policy to provide for your spouse only. And in most cases, I would advise you to get a term life insurance policy, not whole life.

Don't mix insurance with investing unless there's a specific reason to do it. Once you reach your 50s, you really need to look into long-term care insurance. If you don't think you need it, consider that 70% of 65-year-olds will need some type of long-term care, according to the latest data from the Department of Health and Human Services. Women typically need this care for 3.7 years.

Men need it for 2.2 years. That's plenty of time to wipe out all of your assets before Medicaid takes over paying for your care. Long-term care insurance is generally expensive, but again, consider the cost of not having it.

Most people purchase it between ages 55 and 65. Start looking at policies in your early 50s, and select one with the longest term you can find. Another form of insurance you probably should have is long-term disability insurance. If you are incapacitated due to an accident or illness, you could be without a paycheck long enough to wipe out your emergency savings. A long-term disability policy will cover you in that event. Plan on it costing between 1 and 3% of your annual salary.

Premium amounts are tied to how much you make, so the higher the salary, the higher the premium. Now, let's look at a couple of types of insurance you probably don't need. First is title theft insurance. These policies don't really lock your title, and if someone files a false deed and takes out loans on your property, you can't be foreclosed on because it won't hold up in court. Also, you can sign up for free monitoring now with most county deed offices. By the way, don't confuse title theft insurance with title insurance, which you really do need when you purchase a house.

That protects in case there's a legitimate challenge to your ownership of the property. And finally, there's identity theft insurance, another type of policy that claims to, quote, lock your credit. You can freeze your credit all on your own for free with the three credit bureaus, Experian, TransUnion, and Equifax, and you really should do that. You can freeze and unfreeze your credit anytime you want.

Identity thieves won't be able to open accounts in your name because lenders can't check your credit if it's frozen. Still, credit monitoring services can be valuable. Many times when there's a data breach somewhere and you have to get a new credit card number, for example, you'll be offered free credit monitoring perhaps for a year. Always sign up for that.

It'll alert you if someone tries to open an account in your name. All right, I hope that helps you today. By the way, be sure to check your credit report and credit score regularly.

Credit report, annualcreditreport.com, credit score, credit karma, or credit sesame. Your calls are next, 800-525-7000. Stay with us. We'll be right back.

Great to have you with us today on Faith and Finance Live. I'm Rob West. All right, it's time to take your calls and questions. The number to call, 800-525-7000. We've got lines open. We'd love to hear from you, 800-525-7000.

Let's see, let's head to Connecticut to begin today. Hi, Bella. Thank you for calling. Go right ahead. Hi, Rob. I like your advice and wisdom.

I have a question. I recently graduated from college, and I have a better job now. With a better job, I needed a more reliable car, so I got the car. I still owe the car. I owe all of it, like $16,000. I'm making monthly payments, and then I have my college loans that are, you know, the payments are coming in. I work for a nonprofit organization, so those payments have gone down to $16 a month. And I've been educated that as long as I stay with the nonprofit, as long as I stay with my job for the next 10 years, they'll be able to forgive the loan. And my question was, I have so that, you know, the extra $500 that I had to pay for the school loan, I wanted to ask, should I use those $500 to pay off the vehicle quicker and get rid of those $500, I'm sorry, get rid of, like, that interest?

Or should I invest them in possibly renting a parking lot so that I could provide my dog training services that I did before I graduated from school? Yeah, very good. And so you believe that you will be covered under loan forgiveness, would that be the public service loan forgiveness program or something else? Public loan forgiveness. Okay. Yeah. And if you're on track for that, have you have you called the Department of Education and just gone over your specific situation?

And has somebody confirmed to you that you do qualify just based on the work that you're doing and so forth? Yes, at least I quantified the mojila. That's the loan company that I don't know if there's another number that I should call. Okay.

Yeah, no, that's fine. I would just make sure because there is some fine print related to the public service loan forgiveness, and I just want to make sure that you are correct that you will qualify as long as you make those 120 payments, 10, you know, monthly payments or over 10 years on time. But if you meet the requirements and you know you're on track for that, then I would just continue making the scheduled monthly payment. I think this is different than, for instance, the Biden administration, what they're doing to forgive student loan debt more broadly.

This is a very specific program to incentivize people in the public or private sector to work in a very specific market segment, and they're willing to offer loan forgiveness in exchange for you doing that. And so if you qualify for that, I'd say take full advantage of it. And if that's the case, then I would take this extra income that you have and pay down the car.

Let's accelerate that payoff as quickly as you can. That's going to save you interest. And as soon as you get that paid off, you're going to be able to recapture that monthly payment in your spending plan for your other goals and priorities, whether that be additional giving or continuing to build up your savings, or maybe putting that aside, you know, for investment, or maybe investing in a loan. Maybe investing back in your small business for additional equipment or marketing or whatever that might be. So I think I would just pay the scheduled monthly payments on the loan forgiveness once you verify that.

Yep, I'm on track and I do qualify and then accelerate the car with that surplus. Does that make sense? Absolutely. Okay, very good.

Yeah, go ahead. Thank you so much, Rob, for your wisdom. You are welcome, Bella. We appreciate your call today. May the Lord bless you. Let's go to Cleveland, Ohio. Hi, Ellen.

How can I help? Ellen, are you with us? Yes, I am. Great.

Go right ahead. Okay, thanks. I'm working on opening up a new Roth IRA through my school system.

I can't remember. It's like a 457 or something like that. It's comparable to a 403B. But the question is, she said there's like a new feature, I think, that you can choose to be protected with certain percentages from drops in the market. So I think that one of the choices was like, it's like a 40, 60 maybe. So I would be protected from drops unless it went below 40 percent, unless it went less than 40 percent or greater than 40 percent drop. But then I couldn't get gains if it rose over 60 percent. And then there was another option where it was like, the gains was if it went over 115 percent, and then if it dropped more than, it was either 40 or 60 percent, then you'll be protected from that. And I'm wondering, that sounds like a good idea to me. I didn't know which one would be the better choice or if it's even a good idea. Yeah, it's a great question, Ellen. And here's what I would say. First of all, the 457, you're right, is the government plan similar to a 401K in the private sector or a 403B in the not-for-profit space.

So they all basically act the same. And there is both a traditional and a Roth variety of those. And I like the Roth, especially if you're younger and you've got 20, 30 years for this money to continue to grow before retirement.

What you're describing sounds more of like an insurance product, maybe a retirement annuity of some kind. The only challenge I hear in that, I mean, I understand why you'd be attracted to the downside protection, is that when you look at the historical data and you look at the average returns that people get, you know, you might hear it cited that the S&P 500, the 500 largest companies, that index of the S&P 500 over the last 100 plus years has averaged like 9% a year. But that factors in the highest highs and the lowest lows. I mean, that would include, you know, the 1927. That would include 1987, the stock market crash. That would include the dot com bubble bursting in 99, 2000.

It would include the financial crisis of 07, 08. But it would also include those kind of boom years, if you will, where we had some incredible growth in the stock market. And my experience is when you try to protect on the downside and you give up the upside, it's the upside in those years where it really went up significantly that gets you up into those higher average annual returns.

And if you take that off the table in exchange for the downside protection, yes, you're limiting your risk, but the data will say that the long term annual growth potential is going to be minimized. And I think if time is on your side, for instance, what age are you, if you don't mind me asking? I'm 55. OK, so you're 55. So, you know, if you're in good health, we need this money to last if the Lord tarries until age 95, probably. You know, people are living longer these days, so you might have four decades for this money to grow. Now, I would say that you should get more conservative over time as you get closer to retirement. You know, once you're 60, you probably want to be thinking in terms of having a 50 50 portfolio, 50 percent stocks, 50 percent bonds. And then as you, you know, 70, you flip that 40 70 40 stock 70 bonds. So you get more conservative over time, but you still take a long term perspective. And my preference is to go that approach rather than trying to protect on the downside in exchange for giving up the upside. At the end of the day, you're the steward. You need to pray about it and I'll support you in whatever decision you make.

That's just my take on it. I hope that helps. 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. It's great to have you with us today on faith and finance live. I'm Rob West. We're taking your calls and questions today.

Eight hundred five to five seven thousand. We'd love to hear from you. Let's head back to the phones to Topeka, Kansas. Hi, Steve. Go ahead.

Hey, Rob. Hey, I drive a charter bus and I just wonder what would happen if I got into an accident as so to speak. I know my bus company would the insurance would be provided for a situation like that. But can they come personally after me? Because all my home and everything's all paid off.

I don't know anything on anything. And I don't want to have an accident and then have be in a lawsuit for, you know, they can always find negligence in anything. They could say, oh, well, you was two miles over the speed limit and therefore you were speedy. So my question is, what type of insurance or how could I be covered for something like this?

Yeah. Yeah, I would definitely look into this. This is where an umbrella policy comes in, although because you're talking about a situation where you're actually on the job, you just need to make sure that it is, in fact, going to cover you. Because to your point, they can absolutely go after the the bus company first, which they would because you're acting in an official capacity as an employee or an independent contractor working on behalf of the bus company. But assuming they find negligence and you're right, anybody can claim anything and the court system and jury may go along with it. Now, all of a sudden, you could be sued personally.

And I'm not an attorney, so you need to get legal counsel. But this is where an umbrella policy comes in, where it can cover you and make sure that your assets are protected. Now, you'll also want to get with your insurance agent just to make sure that they understand that you're looking for this to cover you personally beyond what might be paid for from your employer. And make sure that that doesn't disqualify you from being able to collect on this policy if your personal assets are attached under a lawsuit. Because the last thing you'd want is to think that you're covered and that you know that, OK, if they get beyond my employer and they find negligence and they come after me, you know that this umbrella policy will actually pay out. Now, assuming you confirm all of that with the insurance agent and an attorney, I would say it's a very cost effective way to protect yourself. I mean, the average cost of a million dollar umbrella policy is three hundred eighty three dollars. And, you know, you are talking about another seventy five dollars a year for every additional million dollars in coverage.

And you'll probably want quite a bit because if there was some sort of accident, you know, obviously it could exceed pretty quickly the the limits of the policy that the that your employer has. So I would definitely take this next step. It's certainly something worth looking into.

Again, it's very cost effective, but you need to do your homework given the the situation in your that you're in to make sure that the fine print isn't going to take away what you're expecting to get in the way of coverage. Does that make sense, though? It does.

It does. And I have looked into it and I really never had anybody can answer my question on that. I've even talked to my employer, you know, so I it's kind of one of those things that I put on the back burner and forget about it.

And then all of a sudden, like, you know, may happen. So, yeah, well, a great place to start is with whoever handles your property and casually currently. So whoever has your homeowners policy and or your auto insurance coverage, you know, that's the way I've done. And I've just added on to that bundled policy for me personally as an umbrella policy. And I'd get your agent on the line and just say, listen, you know what my line of work is and I want to make sure that if I'm sued personally beyond the limits of my own coverage and my employer's coverage.

Will this actually provide the coverage I'm looking for for my personal assets if I'm acting in a work related capacity? And they'll be able to answer that question one way or the other. And I would do that correspondence in writing. Other question.

Quick question. If you be so glad is my wife, my wife and I own our home together. So I would be the one at fault. Could they take our home from us even though she wasn't involved? Yeah, I mean, generally your home is protected, you know, from, you know, from a lawsuit, especially where this is a marital property. And so, you know, but again, this would at the end of the day be a legal question that I would talk to an estate planning attorney about. And that's where having sufficient liability coverage is really an important thing, because, you know, these these expenses can run up so significantly. And we certainly want to pray that we're never in a situation like that, but we know that they do happen and it can quickly exceed the limits of a of a basic homeowners auto insurance policy. So, you know, could they take your you and your wife's home out from under you?

Probably not. But at the end of the day, that's going to be a question you'd want to talk to an attorney about. Listen, it's it's a good thing to be thinking about, Steve. So I'm glad you called.

And I would really encourage you to take the next step and explore this a bit further. Thanks for being on the program today. We appreciate it.

Let's go to Chicago. Hi, Ashley. Go right ahead. Hi. How's it going, Rob? I'm doing great. Thanks for your call. Good. Good.

Yeah. So, unfortunately, I am going through the process of divorce with my husband and I have a three year old. And pretty much, you know, I'm just kind of entering unknown waters and just, you know, time and place in my life where it's very unknown of what to do. We had plans to buy a house. We had plans to just do some breaking in our future. But unfortunately, that's not where, you know, we're at anymore now. And so, you know, I'm just thinking a bunch of things. Fortunately, I paid off my car. And so it's just more so like thinking about either going back to school or just getting a job so I can get back on my feet because my lease is up in August.

And then after August, you know, I just I don't know necessarily what my financial, you know. Let's do this, Ashley. I have a couple of questions for you.

I've got to take a break, but I want to get into those right around the corner and then give you my thoughts. So stay right there. We'll talk a bit more. We'll be right back. We're so thankful to have you with us today on faith and finance live. I'm Rob West. We've got a few lines open today. We'd love to hear from you. Eight hundred five to five.

Seven thousand is the number to call. Now, before the break, we were talking to Ashley in Chicago. She's in the midst of getting a divorce. Her lease is up on her apartment in August and she's going to be a single mom with a three year old child. She's just wondering, kind of how do I get my financial footing under me and what are the best next decisions to make?

And actually, I'm so sorry to hear about what you're in the middle of. Where are you at with regard to the divorce? Is that has that been finalized? It hasn't been finalized. We're at the very beginning process of the divorce.

So, you know, we haven't had like a court appearance or anything yet. OK. So we're at the very beginning of the process. Yeah, I see.

And do you have a sense of what assets you'll have available to you and whether there will be any sort of payment being made to you from your former husband? Yeah. So, I mean, we just have an agreement. We do have an agreement for after August. You know, him continuing to pay for most of the rent until if I renew the lease and then he just gives me half and then I start to pay the other half. That's more so like a verbal agreement. But, you know, I don't know through like like legally what I would be getting from from him in that in that way, in terms of I know there's a couple different things.

There's like child support alimony. So I don't necessarily know what route I'm going to end up going taking. You know, again, just very new to me. So, yeah, I just I'm kind of just entering that that part of my life right now where I just have to figure those things out. No, I certainly understand.

Yeah. So there's going to be an alimony payment. There'll also be some child support and then there'll be the division of the assets and a lot of that comes down to the state you're in and whether that's divided equally or whether it's it's not. And all of that will be a part ultimately of the divorce decree. Well, listen, here's what I'd like to do, because I think we need to take this in two pieces.

The first piece is one of those decisions you need to make immediately just to keep the bills paid and keep you moving in the right direction. And then there's kind of the new reality of, OK, what will I be receiving every month in terms of alimony and child support and what assets will I have available to me? And then once we know what that's going to look like, if that's where this ends up, then, you know, obviously you can build a plan around this. But I would love for you to have somebody that's a godly sounding board that's just kind of journeying with you in this process. And so if you'd be open to that, what I'd like to do is provide you with a certified Christian financial counselor. This would be somebody who's been trained to work with folks like you in a situation where you're working on your spending plan, you're looking at assets and liabilities, thinking about the best way just to structure your finances again in the near term. And then longer term, once some of these question marks have been resolved about the various income sources you'll have and then the assets that will be available to you.

Also, what to do about your housing beyond August. Would you be open to working with somebody in that regard? Yeah.

Yeah, definitely. And we'll cover the cost of that for you, Ashley, just as our gift to you. And so what I'd like to do is have you hold on the line. We'll get your information. We'll get a certified Christian financial counselor in touch with you.

It won't cost you anything. And, you know, they'll work with you over probably a weekly meeting for six weeks or so just to try to get all these pieces in place and get you on a plan moving forward. Do you have a good family support structure with your family and or your church family? I do, yes. So I really appreciate that. Thank you, Robin. Yeah, fortunately, I do have a pretty good support system right now and church as well.

So, yeah, I'm glad to hear that. Well, listen, we'll certainly be praying for you. I'll ask our faith and finance community to do the same.

And you stay on the line. We'll get somebody in touch with you. Thank you for your call today. And if we can serve you further, don't hesitate to reach out. Let's go to Knoxville. Hi, G.W.

How can I help? Yes, I appreciate that and appreciate the ministry that you have. Well, thank you very much. The question will be about annuity. So a quick background is I'm going to return 65 next month. I can retire. I'll have a pension coming first of July.

And I'm hoping that it'll be, you know, it won't be great, but it'll be good enough. I'm going to try to put off my Social Security for a few years. I'm sure that you've said it grows like eight percent a year every year I wait. So, yes, sir, I'll probably try to let that bill do better than I could do anywhere. But my annuity, I haven't had it a lot of. It's through work.

So when I retire, I have to do something with it. A friend of mine took the lump sum. He said he lost 18 percent. I assume that was taxes. It could have been penalties.

I don't know. But I would like to know what's the best move for me to do with that annuity so that I don't lose money. And maybe it can continue to grow and where to put it, where to put it and how to keep from losing the 18 percent he lost. Yeah, well, that should be a fairly simple solution to that. And that is, you know, if you take the lump sum option and it's in a tax deferred annuity, meaning it went in pretax, you should be able to roll it out to an IRA, an individual retirement account, which is not a taxable event. And so as long as you leave it in the IRA, you could reinvest it at that point. And you're only going to pay tax as you take the money out beyond fifty nine and a half.

There shouldn't be any penalty. So it would just be taxable and whatever the prevailing tax rate is for that calendar year. But again, you could push all that down the road by just rolling it to an IRA. I think the question is, what's better, the monthly payment or the lump sum payout against staying inside the IRA?

And it could go either way. You know, I think having an adviser help you compute the internal rate of return on the income stream if you take the annuity versus the lump sum. I prefer the lump sum just because it gives you access to the money if you need it. And if you don't need it because you're living modestly and your pension plus your Social Security, when you take it covers all of your expenses, then you could just let it continue to grow and start giving it away or leave it as an inheritance or both. And you'd have access to that money, you know, for throughout the rest of your life, and then you could pass it to the next steward.

So I like that. The only downside might be sometimes that lump sum just doesn't make sense in light of what they're willing to give you as a monthly payout. And so you'd need somebody to just kind of analyze both numbers and say, yep, the monthly makes a lot more sense and here's why or no, we think the lump sum makes sense.

And, you know, here's our calculation. So I'd love to have an adviser walk you through that decision. But at the end of the day, if you decide to take the lump sum, you should be able to do it without creating a taxable event. Does that make sense?

It does. So I don't really know the differences in IRAs. I know there's traditional and there's Roth. But what do I have to, if I take the lump sum, and I put it in the bank, figure out what to do with it, or just I have to have an account set up for it to go directly to? Yeah, so it would be a traditional IRA, not a Roth, just because if you put it into the Roth, you got to go ahead and pay the tax on it. And you would want to, if you decided you were going to have an adviser manage that for you, you'd want to pick that advisor first, because then he or she would open that IRA wherever they custody their clients assets, and then you just have it rolled over directly into that new account.

Otherwise, if you're going to do it yourself, you'd open the IRA first, and then you'd roll the assets in. If you need an adviser, head to our website, faithfi.com. God bless you, sir. We'll be right back.

Helping you see God is your ultimate treasure and money a tool. I'm Rob West. This is Faith and Finance Live on Moody Radio. Let's go right back to the phones to Lakeland, Florida.

Hi, Clinton. Thanks for calling. Go ahead.

Yes. Hi, Rob. Thank you for taking my call.

I'm calling because I really needed your help. It's more so about the whole life insurance policies that I've been introduced to. And I've been told that there's a whole life insurance policy that you can buy and also use it to save. And as you save on it, you're able to basically with time, you're able to even borrow against it.

So it's like it's a two in one. What do you think about that? Is it a legitimate thing? Well, it is legitimate, but I'm just not a big fan of it for most people. I mean, there are some situations where you need permanent insurance could be for a buy sell agreement for a business that you have could be for a lifelong dependent. But for most people who are just looking to save and invest and also make sure they have appropriate life insurance coverage in the event that you pass away and you have somebody who's depending upon your income, who would face a hardship in the event that you at your death, your income goes away. You can solve for those things separately, I believe more effectively than you can in a combined product like whole life insurance, because whole life insurance is life insurance with a savings vehicle. You're correct.

It is two in one. And you are correct that you do have the ability to borrow from these policies. However, they tend to have higher costs, smaller death benefits because of the higher costs and lack of investment control.

But a lot of folks like them because they're permanent. And if you have a reason to have a permanent policy, you know, that can make some sense. And then again, you can borrow against the cash value.

So what would I prefer for most people? Well, when you separate these two things, then what you would do is you'd say, okay, for my insurance coverage, I'm going to buy life insurance, I'm going to buy pure insurance. And that's really term insurance. It's the most cost effective, it might be one fifth of the premium of a whole life policy. And you're just you're just offsetting the risk based on the mortality tables of your age and health status and the amount of coverage you need. And the idea is that you never collect on it. And you only have it during your working years. And then when you stop working, because you've saved enough in the way of assets, you drop the policy and you don't need it anymore. Because if you were to pass away, it doesn't create any hardship at all for any kind of dependent like a spouse. And then with your savings, you save in other vehicles, namely company sponsored retirement plans, or IRAs, or real estate, or all three of those. And you do that without limiting your upside.

Yes, you assume some downside risk if the market declines the housing market, the stock market, the bond market. But what we see is that over the long haul, that is 20 3040 5060 years, you're going to do really well, by taking advantage of the high highs, even counting the low lows, you know, you should grow your wealth over time, and not pay as much in the way of fees, have more control over the investments have greater access to the money. Whereas with an insurance product, you know, you're going to have not as as good of options in those three areas, cost, flexibility and access to the funds.

So for those reasons, Clinton, unless you have an unusual situation, you know, like I mentioned, with a needing a buy sell agreement on a business or a lifelong dependent, I would not advise whole life insurance for the average person. But I've given you a lot of information. Does that make sense to you? I mean, it does very much. So yeah, I think you've blown it out of proportion. But I appreciate because it opened up more for me to understand where someone will come from to say they do not.

They are against it. So I understand it. So I appreciate it so much.

Absolutely, Clinton. Well, God bless you. And thanks for calling. If I can serve you in any other way in the future. Don't hesitate to reach out.

Let's go to Murfreesboro, Tennessee. Hi, James. Thanks for your call, sir. Go ahead. Good evening, sir. I'm great. Thank you.

Yes, I was calling. I have a mortgage and have four years to pay left on it. And the balance is about $25,000. The mortgage payment is about $1,000 a month. I'm saying how can I pay it off in two years or less?

Yeah, yeah, very good. What I would do, James, is I would just go to your internet search engine and type in mortgage payoff calculator, and you'll find 100 of them. Bankrate.com has a good one, by the way. And what you can do is you can put in your current balance, and you can put in your current interest rate. And you can put in the length of payback that you want, and then you can solve for, when you click the button, what do I need to send every month?

And it will actually calculate the amortization to tell you here's exactly what you need to send every month in order to pay this off in however many months or years you would like to do that. Now, the only question I would have is once you have that information, let's just make sure that's the best place to use your excess surplus. And the only thing that I would say comes before that is one, if you have any high interest credit card debt, I'd pay that off first. Number two is if you don't have an emergency fund of, I'll say, a minimum of three months worth of expenses, I'd probably put that before the house just because as soon as you put that money on the house, it's not very accessible. And if you have an unexpected expense, I don't want you to have to fall back on the credit cards if you don't have any emergency savings. But assuming you're putting money in and taking advantage of any matching in your 401k, assuming you don't have any high interest credit card debt, assuming you've got some emergency fund in place, then I love the idea of you getting this $25,000 on your home paid off because that's going to eliminate that $1,000 a month and put that back into your budget. That's great. You're going to save the interest on the money that you still owe.

And that free mortgage calculator, any one of 100 of them that you'll find online will help you determine exactly what you need to send every month in order to accomplish your goal. Does that make sense? Yes, sir. Awesome. Is there any other questions you have?

No, that was it. All right. You're very welcome. May the Lord bless you.

Let's go to Indiana. Hi, Renee. Thanks for calling.

Go ahead. Hi, I'm currently looking for some advice. I recently been laid off of my job. I am married. My husband works full time. We own our home, but we're still paying on a mortgage, but we have over together over $40,000 worth of credit card debt. And I do have a little money in a 401k savings.

That's probably about 43,000. And when he retired, he'll receive a pension. I think I'll get one, too. But my question is, I just want to I'm not sure when I'm going to go back to work and if I want to find work quick enough to get back on track with paying down cards.

But my question is, I should I use my 401k to pay down like all of our debts so that we can start off like zero and then, you know, build back up once I find a job? Yeah. You know, I would say, Renee, it should be a last resort. And here's why. Most often it sounds good. And I'm not picking on you.

I'm just saying this is generally what I see is that we say, OK, I want to take the pressure off. So I'm going to pull the money out of the 401k, which, by the way, is expensive money in the sense that if you're under fifty nine and a half, you're going to have a 10 percent penalty and then it's all going to be added to your taxable income. So you're probably talking a minimum of thirty two percent coming right off the top. So if you pull forty three thousand out of your account and you're going to pay thirty two percent, that's thirteen thousand seven hundred and sixty dollars.

So now all of a sudden you're forty three thousand just became twenty nine thousand. And so you're given a lot of that money away to the IRS. Number one, number two, it's not there to continue to grow for your future. And number three, and this is perhaps the most significant of the reasons why I wouldn't do it, is because that quick fix is not going to correct the problem that likely led to the credit card debt in the first place, which generally is lifestyle spending beyond your means. And I'd rather you do the hard work to right size the budget, eliminate unnecessary spending today, cut back everything that you can.

I mean, we're canceling subscriptions and we're eating at home. And I mean, it's not going to be pleasant, but we do that to get expenses down to free up margin so that you can attack the credit cards. But you're doing it in such a way that when you're done, you've got habits that have been formed that are going to ensure that you never get back in that situation again. And my experience is that when you wipe it out with a 401K and you take the kind of the easy way out. Number one, it's expensive.

But number two is we don't kind of form the new habits. And then six months later, you're going to call me and say, guess what? Credit card debt's back and now it's 20 grand. And so I would rather you not do that. Now, here's the one exception. I realize you just lost your job.

So here's my question for you. Given the income that you have today, if you guys did some serious work on trimming your budget, do you even have the ability to continue to keep these credit card minimum payments current with the income you have today? Yes, I believe at least up until June, I'll be able to keep up with the minimum payments or else my husband will have to take on like more hours at work in order to make up for the income that we won't have. Yeah, but June is two weeks away.

I mean, so that's right around the corner. Do you think he has the ability to take on the extra work? Is that available to him?

It is available to him, but he, you know, kind of doesn't want to put that amount of pressure on his body, but he is willing to do it. Okay, are you actively looking for a job? I am. Okay, so here's what I would do. I would rather you leave that 401k right where it is. And I'd rather you call my friends at Christian Credit Counselors.

You'll find them on the web at ChristianCreditCounselors.org. They'll work up a budget for you. They'll get those interest rates on those credit cards cut in half.

He takes on some extra hours until you get a job. You get that job. We're going to trust the Lord for it. And when you do, you pick up those payments. We'll get that paid off 80% faster and we'll keep that 401k.

That's my best advice. We're going to pray for you in this process, Renee. ChristianCreditCounselors.org. God bless you. Faith in Finance Live is a partnership between Moody Radio and FaithFi. Folks, we'll see you tomorrow. Bye-bye.
Whisper: medium.en / 2024-05-13 18:23:23 / 2024-05-13 18:40:04 / 17

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