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Proverbs 16 3. Hi, I'm Rob West. Do you have months left over at the end of your money? Are you slowly accumulating debt even though you try to control your spending? Maybe you need a plan, a spending plan. Howard Dayton joins us today to talk about that and then it's on to your calls at 800-525-7000.
That's 800-525-7000. This is faith and finance, biblical wisdom for your financial decisions. If you're navigating your finances God's way, you map out four phases to help people set goals for their financial discipleship journey. And in each phase, you suggest that people should be giving as they work down debt, create emergency savings, and invest all within the freedom of using a spending plan. Freedom and spending plan, now that's going to seem counterintuitive to some people, so maybe you should explain how that's possible. I sure will and maybe it is counterintuitive, but that's why I don't like to use the B word because so many people think that a budget is a restrictive loss of freedom. They also fear that a budget is going to require endless hours of monotonous detailed accounting. So I like to use the description spending plan.
It's a more accurate description really. It tells your money where you want it to go rather than wondering where it went. It enables you to use your money to reach your goals and life purpose. It helps you control impulse spending, and I love this. It helps you get out of debt. So if you're not used to the spending plan, chances are you're fine by the seat of your financial pants. You may be like the depositor who replied in disbelief to the banker, what do you mean I'm overdrawn?
I still have six checks left in my checkbook. Let me talk about a reality check. Yeah, it sure is. So I love this because what you're saying is a spending plan isn't something that has to be carved in stone. You have to be able to make adjustments along the way.
Absolutely. If you're spending more than your income or if you want to accelerate your debt repayment, you've got to ask yourself questions about every expense. Can I do this less expensively?
Do I really need this? And reducing spending means you've got to change your lifestyle, and this is never easy in my experience. You may have to make hard decisions if you're committed to getting out of debt. You may have to cut back on entertainment or eat out less, maybe even sell the car with a higher auto loan.
Making big cuts and small ones all really help. The good news, if you haven't made these adjustments before or not for a long time, you probably can discover you can trim hundreds of dollars from your monthly spending. Howard, that's well said. Now, are there special things couples in particular should do in setting up a spending plan?
There sure are, Rob. Husbands and wives really need to work together on developing their spending plan and engage in open, honest communication. The Lord intended the husband and wife to be unified, so be patient with each other, your different personalities and approaches to money.
Men often like to get things done quickly. Women tend to need time to process and discuss. The key is flexibility, and I think really appreciating each other, encouraging each other as you go through the process. Hard work now will pay huge dividends later. And I know, Howard, you encourage once couples have that spending plan, you've got to revisit it. You call that a money date, right? I do, and it's really a good idea to have a money date at least every other week, Rob, where you sit down, again, review what income came in, what went out, and encourage one another.
It's so important not to play the blame game, but to encourage one another through this process, because it's not easy. That's exactly right. Well, that's all we have time for today, Howard, but thanks for stopping by, my friend. Oh, I enjoyed the time, Rob. That's Howard Dayton, founder of Compass Finances, God's Way. Learn more at navstudy.org. We've got to take a quick break, but much more just around the corner. If you have a question today, call right now, 800-525-7000.
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Go to faithfi.com and click the word app to get started. We're back. I'm Rob West, and this is Faith and Finance. Thanks for listening today. Thanks for taking the time. As we head into our calls and questions, I want to take a moment to ask you if you've downloaded the Faithfi app.
You can use it on your desktop or your mobile device. All right, let's head to the phones. By the way, if you have a question, just call 800-525-7000.
That's 800-525-7000. Let's head to Washington State. Kevin, go ahead. Hi, sir. How are you today? I'm doing great.
Thank you. Hey, so I sold my house a little over a year ago, and I had a piece of property that I sold, and I paid cash for a house in Kennewick just a little over a year now. And I took some of the money out of my Roth IRA because the other property had to sell for me to be able to pay the whole thing in cash for the new house. And so when that property sold, I was going to take that money and put it back into my Roth, but then the market kind of just tanked. So I stuck all that money into a high-yield savings account along with my emergency fund. I have about $81,000 in there right now. So I plan on putting $40,000 back into my Roth IRA, but my wife and I have to stay in this house for one more year.
We want to kind of move to kind of a bigger house but be able to pay cash for it. But I would probably have to use some of that retirement money to get the new house just because I don't want a mortgage. What do you think, man?
You think this is a good idea? Well, I'm having a little bit of a struggle following you here. So you took the money out of the Roth. You only have 60 days to put that back in. Are you 59 and a half or older?
No, no. I am 45 years old, but the lady at Vanguard told me that once a year I could basically put it all back in. They give you like, I think it's once every 12 months to put all that money back in there.
No, you've only got 60. You can do what's called a rollover once a year, but when you pull money out, you only have 60 days to put it back in. So what I would do is I'd probably go back to your advisor, either at Fidelity or another advisor, and just understand the implications of pulling this money out. Because you can always get back your original contributions. There's no penalty or taxes there. But if any portion of what you pulled out was gains and you're not 59 and a half, you're going to have to pay the taxes on it plus a penalty. And this money is not able to be put back in after 60 days.
So I'd get some more financial counsel on this from an advisor or a CPA. Kevin, God bless you my friend. Thanks for calling today.
To Kenosha, Wisconsin. Hi Sam, go ahead. Hi, I was just curious if you had any thoughts or opinions on, my wife and I are wondering if we should tithe or whatever amount we want to give before or after tax. Yeah, you know the late Larry Burkett used to say, kind of tongue in cheek, well it depends on whether you want to be blessed, gross or net. And he would say that, you know, in kind of a joking way, but in some respects not. In the sense that, you know, if we go back to the principle of the tithe and look at the Old Testament law, you know, they were giving off of their increase. They didn't deduct out the cost of the grain or take anything out of it.
It was on the first fruits. And I think the most equivalent to that would be you tithing on the gross before anything comes out. It's just a recognition of God's ownership of everything and a demonstration that you're going to put him first. That would be the approach that I would encourage you to take. But again, this is not between me and you, it's between you and the Lord.
And so I would ultimately make this a matter of prayer, but that's at least my thoughts on it. Does that make sense? Yeah, thanks so much. All right, Sam.
God bless you, bud. 800-525-7000. We've got some lines open today for any financial question, whether it's living, your lifestyle, giving, that which you give to the Lord, owing, that which you pay for debt and taxes, or growing, your short-term and long-term savings and investments. Whatever you're struggling with today, we'd love to hear from you. 800-525-7000.
To Arlington Heights, Illinois. Phyllis, go ahead. Hi, Rob. Thank you for taking my call. I recently inherited some money, and my financial advisor is saying that I should not put all my eggs in one basket with being involved in mutual funds like we have been in the past. And she's recommending that I go into this fee-based account where you have the flexibility of buying and trading stock without having to pay fees, as well as, she said, having control over how much you would get taxed annually. But there is also a 1% fee on the balance of your account annually that they would be charging. So I'm not really comfortable with that, but I don't know enough about is that the way we are entering retirement. So a capital gains of, you know, $40,000 could be a huge tax bill, according to my financial advisor. So I'm calling to you to see.
I appreciate that. I'm a little not totally tracking with you, so let me try to clarify just a bit, if you don't mind. The $375,000, where is it today? Is it in a 401k or something? No, it's an inheritance. Oh, an inheritance.
Okay, got it. So you're receiving it in the form of what? In the form of stocks and bonds? Yes, my mother's trust. Yeah, and we would make some changes to my portion of it if I stayed with her. Okay, and when did you receive the inheritance? When did your mom pass away?
June. The distribution is just now taking place. Okay, and so why would there be a capital gain? Well, she wants to like take the money out of how my mother had it invested and invested differently for me in my retirement. Okay, yeah.
Well, I'm on board with that. I like the idea that, you know, if you don't have the time and the skills to invest this money yourself, you certainly could do that. But I think for most folks, this is a significant sum of money, nearly $400,000.
You probably, you know, are busy doing whatever God's called you to do. And, you know, having a professional in the same way we'd hire an attorney to, you know, design a will or a trust, we'd hire a real estate professional to sell our house. I think hiring an investment advisor to manage this portfolio makes a lot of sense. Now, you received that as an inheritance and therefore the cost basis was stepped up to the date of death.
So unless those stocks and bonds have moved significantly up higher, which with this market I doubt it, but unless they moved up significantly since June, you probably don't have much in the way of capital gains. So you'd be free to reposition this portfolio however you want. And so I think at that point then having an advisor who can help you take a step back and understand your values and goals and what are you trying to accomplish and what income needs do you have and how much risk are you willing to take and, you know, how are you doing toward your ability to have something, you know, to supplement your or provide for your income in retirement. And then building a portfolio that supports that to then manage this money in the stock market with a stock and bond portfolio, maybe an allocation of precious metals. That makes sense to me and I like the idea of that advisor charging you a fee based on the assets that are management and 1% of the assets would be very typical. So I don't have any issue with that whatsoever, but I want to make sure that covers what it is you're concerned about.
I know there was the fee portion. We can talk about that, but I want to see if there's anything else. Let's do this. I've got to take a break, but I want to finish this question on the other side. So you stay right there and we'll pick it up just after the break. I'm Rob West. You're listening to Faith and Finance and we'll have more of your calls and questions on the other side of this break. The number to call is 800-525-7000.
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Principal loss is possible. Foresight Fund Services LLC. Great to have you with us today on Faith and Finance. Just before the break, we were talking to Phyllis.
She was not able to hold. But I think when it comes to managing a significant amount of wealth, and certainly $375,000 would qualify as a significant amount of wealth, it's always a good idea to have a financial advisor weigh in who can really help go through that discovery process. And one piece I didn't mention is more and more believers want their values reflected in their investment decisions based on their own conscience and convictions. That might mean avoiding certain companies that conflict with their values. It might be embracing other companies, perhaps even engaging and expressing their values through shareholder advocacy. So there's just a whole host of opportunities there. And I think bringing a skilled professional to the table is really key. If you're looking for an advisor who shares your values, perhaps two or three to interview, head to our website, faithfi.com. To Greenbelt, Maryland. Susan, go right ahead.
How can we help? I'm 55. I make about $85,000 a year. And I own my own home. Only about six years in, so still a lot of high balance left. During the COVID issue, I did have a couple of debts that ran up on me, which I am paying them off. And I have a 23-year-old autistic son. So my question is, one, how do I and how can I retire or how can I prepare myself to be with this where I am now? And how do I make preparations for my son?
How can I set things up for him to be okay? Yes. Very good.
Well, a couple of thoughts here, Susan. So retirement is, you think, I mean, if you have the option, what, about 10 years away potentially? Yes. Okay. And you still have a mortgage. Did you say you don't have any retirement savings currently, correct?
I think I do have an IRA with about $6,000 in there. Okay. All right.
Very good. And do you have a retirement plan available at work? That's what I'm putting into. I put about $200 to $300 every two weeks. And it currently has about $6,000. But it's an IRA or it's a plan at work?
A plan at work. Okay. Got it. And do they match any portion of that? They do.
I think it's 1%. And they're matching. Yeah, they're putting in this. Okay. And if you were to, well, for instance, let me ask you, do you have anything left over at the end of the month?
Not really, but once I pay off the debt, then I will. Okay. And when will that be?
Maybe by next year. Okay. All right. Here's the thing. With $6,000 a day, if you were to add $600 a month, because you said $300 every paycheck to this account, and it were to grow, let's just say it grew at 8% a year, you'd have about $125,000 in 10 years when you get to age 65. And what we would expect is that if you had that $125,000, and I'm not counting on this going up next year either, so let's say you'd have $150,000 because you could put an extra $300 a month in.
But let's just take the $125 for a second. We would probably say typically you'd want to pull out no more than 4% a year. So that would give you an extra $5,000 a year or about $415 a month. So the question to start with is, before we talk about your special needs son, is Social Security plus $400 a month enough for you to cover your bills in retirement if you're no longer working? Do you know what you should receive at full retirement age? Have you looked at your Social Security benefit statement?
No, I haven't. Okay, so that would be a good thing to do. You could go to SSA.gov and log into your account to MySSA, and it will tell you that just based on your current work record and projecting what you will do over the next 10 years if you continue to pay FICA taxes based on the income you've been receiving lately, it'll tell you what your monthly benefit will be at full retirement age, which is probably age 66 or 67. And at that point, you would be able to say, okay, I at least know I'm going to receive this amount every month. And then if you add $400 to it, then the question is, can you build your budget around that? And at least then you would know if you do nothing more than what you're doing right now, putting in $600 a month into your retirement plan, you've already got $6,000 there, you want to really focus as soon as that debt's paid off of bumping that up instead of $600 a month or $300 every pay period to maybe $400 or $500 a pay period, that's going to put $1,000 a month in there. That would all of a sudden make a big difference because now if you grew that at 8% a year, you'd have about $200,000 in there. And instead of $400 a month, you could pull out about $8,000 a year or about $650 a month. So I think that's the kind of planning you need to do in really looking at what your budget will be in retirement and trying to just sock away as much as you can over this next decade. The other thing you can do would be to try to cut your expenses and put more in. The other thing you could do is work longer. So instead of retiring at $65, maybe you try to wait until $70. And actually if you did that, your Social Security check would be about 24% higher every month and it would give you an extra, let's say, five years to continue to build up your retirement nest egg. So these are the kinds of things you need to do. Now, the other thing you need to do is go visit with an estate planning attorney who can help you put your estate documents in place so that whatever you build up in terms of your nest egg could be left as a beneficiary to, let's say, a special needs trust, which would then be there to provide for your son and wouldn't affect his ability to earn or collect government assistance.
But that would mean that you have to visit with an attorney who understands that and could set up a special needs trust for his benefit. Does that all make sense? Okay. Yes. Okay. Good. So I think this is the right direction. You know, the only other thing I might suggest is you connect with a certified kingdom advisor, somebody who can help you do.
I mean, we're just spending about three minutes together here today. But somebody who could spend some real time with you, do some retirement projections, help you plan for what you're ultimately going to need in terms of a retirement savings goal, help you match that up with how many years you plan to work, and even connect you with a godly estate planning attorney. If you want a certified kingdom advisor, just head to our website, faithfi.com. That's faithfi.com and just click find a CKA and you can look for one right there in Maryland. I hope that's helpful to you, Susan. Thanks for your call today and may the Lord bless you. Bye bye. Hey, we're almost out of time, but I wanted to let you know that you don't ever have to miss a program. Just download our Faithfi app for your mobile device and take us with you anywhere. Thanks for joining us today. I look forward to talking with you again next time on Faith and Finance. Faith and Finance is provided by Faithfi and listeners like you.
