Many people are using the FaithFi app to help provide the wisdom, community, and money management to stay on track, financially speaking. To date, over 37,000 members are using its digital envelope system, participating in our community forums, and engaging in virtual workshops. And one of the most convenient features is the ability to keep all your accounts in one place for an easy-at-a-glance view. You can choose from one of three options, depending on your management style, and it's available on desktop or mobile.
Go to faithfi.com and click app to get started. Well, a lot of folks are feeling uneasy about the future. How many more interest rate hikes can the economy take before sliding into a recession? What about the rollercoaster stock market? Well, if you don't know what the future holds, it just means you should prepare and set certain priorities for managing your money. Here are some of them.
Not all will apply to you, but there's probably something here for everyone. First, if you've been procrastinating about getting out of debt, now's the time to buckle down and do something about it. Interest rates on credit cards and variable rate loans like HELOCs have risen dramatically, so make paying down consumer debt an absolute priority. You can avoid the sting of rising credit card interest by contacting Christian credit counselors. They have pre-negotiated agreements in place with credit card issuers to lower your interest rates, and you can take advantage of them when you sign up for a debt management plan. They'll help you get rid of credit card debt 80% faster than trying to do it by yourself.
You can get more information at christiancreditcounselors.org. Now, your next priority, and this affects everyone, is readjusting your budget. I say readjusting because you've probably already tweaked your spending plan to allow for last year's breathtaking inflation.
But even though we're told inflation has fallen to 4%, food prices have increased close to 7% over last year. So check to see where you're overspending and make adjustments. By the way, if you haven't downloaded the Faithfi app yet, this is a great time to do it. It offers three different ways to budget your money and provides the best biblically-based financial content on the web.
So download it today at faithfi.com. You might also have to add money to your housing category. Lenders are raising monthly mortgage payments to accommodate for higher property taxes. Those tax hikes are the downside of rising property values, which are only on paper.
Property tax increases are quite real, however, so you have to account for them. Now, you'll probably need to make up for these higher costs, and you can do that by shopping more carefully. Take advantage of weekly sales and coupons at the grocery store.
For online purchases, use an app like Honey or Capital One Shopping to find the best deals and coupon codes. Now, if you've done all that and find you now have a few extra dollars, don't throw a party. Use the extra cash to beef up your emergency fund. Oh, you don't have an emergency fund?
Well, that's your number one priority now. You've got to start putting money away for unplanned expenses, or you'll always be forced to borrow and go into debt when they occur. Open a savings account at an online bank to get the best interest rate, and start tucking away something from every paycheck. Set a goal of $1,500, then one month's living expenses. Eventually, you want to have three to six months worth of living expenses.
That way, you'll be able to ride out a job loss or medical condition that prevents you from working for a time. Okay, so the next priority is for prospective home buyers, especially those looking to purchase their first home. Don't let rising interest rates keep you from buying a home if, and only if, you're prepared to do it.
Now, what does that mean? Well, you should have 20% saved for a down payment to avoid private mortgage insurance. You also need to work up a budget that ensures that your mortgage payment is not more than 25% of your take-home pay. That will also show you how much house you can afford within that budget. Stick to that number.
Many lenders will be willing to loan you more than that number, but don't get carried away. Keep your payments within your budget, not the bank's. Now, the last priority involves your job. Employment remains relatively strong, but monthly job creation numbers are starting to come in below expectations.
That tells us two things. First, if you've been planning to look for a new job, do it now while the economy is still creating jobs. And second, if you plan on staying where you are, do what you can to increase your skill set to make yourself more productive and valuable to your company.
It's always a good time to do that, but now specifically, ask the boss for an opportunity to do more and be willing to take on a few new assignments. So those are your priorities for the uncertain times we live in. We hope you find them useful. Your calls are next, 800-525-7000.
I'm Rob West, and we'll be right back. Absolutely free. We know you've learned to be suspicious of those words, but really you can get biblical financial wisdom delivered to your inbox each week, absolutely free articles, videos, podcasts and special offers on biblical resources. Nearly 60,000 people receive our free weekly wisdom email, and you can too. Create your free faith buy account by going to faithbuy.com and click sign up to begin receiving weekly wisdom in your inbox.
Welcome back to faith and finance. I'm Rob West, your host. We're taking your calls and questions today with a few lines open. 800-525-7000, you can call right now. 800-525-7000. All right, we're going to get through a lot of calls here between now and the end of the program. We do have a few lines open, so if you have a question, I've got three spots for you.
800-525-7000, you can call right now. Let's head to Florida. Hi, James. Go ahead, sir. Good afternoon, sir.
Nice to be able to talk to you. I have a question. My friend, he has about $49,000 on his house. He's 60, like 65. He's been retired for a few years, and basically his only amount of income is Social Security and whatever he gets for retirement. His interest rate is 4.99, I believe it is. He's debating about whether to take, I think it's the money out of his retirement account or savings, one or the other, to pay the house off or to maybe pay $30,000 and only have $20,000 to go on it, roughly. Do you have any recommendations along those lines?
Yeah, I would need a good bit more information. Here's the underlying principles, and maybe we can find a path forward here with this. Number one is I love the idea of him being debt-free in retirement. That's just going to get his lifestyle expenses down as low as possible.
That just makes the budget balance that much easier. Number two, I don't want him to deplete all of his liquid reserves, so I want him to have something to fall back on because the unexpected will come. That's just a reality that we all have to accept, and so if it's going to involve depleting his savings, that emergency fund, which in retirement should be probably six months' worth of expenses, then I'm not a fan of that. Also, if he doesn't pay off the whole thing, even though he's getting himself closer, he still isn't getting rid of that mortgage payment, so it's not like he could take the amount he was sending to the mortgage by paying it off and then redirecting that to build up his savings.
So in the case of just paying down $20,000 or so, yeah, he's that much closer to paying it off, but he's depleted his reserves, and he doesn't pick up the mortgage payment because he still has that same scheduled payment. With regard to the retirement account potentially, I think I would just want to know how dependent is he on the income from the retirement account to meet his monthly obligations. So if he's living on Social Security plus drawing an income stream from his retirement account, I would hope that that income stream is no more than around 4% of his balance so that we can preserve that for the rest of his life. And if pulling this money out of that account is going to drop him down and just erode that account even quicker, especially with the market being down and not giving it a chance to recover, I'm not a fan of that on top of the fact that it would all be taxable. No penalty, but it would all be taxable, which means at the very least he'd probably want to do it over two tax years, maybe take half of it this year, half of it next year.
But I guess with all of that, give me your thoughts. And then I'd love to know if you know, kind of is he funding his expenses out of drawing down that retirement a certain amount each month? Or does he have other retirement income sources that he's using to supplement Social Security? I think basically just the retirement account is getting money from that and it's still Social Security as far as his income goes.
Yeah. But it sounds like you're suggesting just keep the mortgage or maybe pay half of it possibly? I probably wouldn't pay half because again, that's going to just deplete his reserves and he doesn't pick up the savings of the mortgage payment that he doesn't have once he pays it off. But by paying half of it, it doesn't change his monthly mortgage payment. So he still has the same outlay every month in his budget, the same scheduled mortgage payment. But now he's got, you know, let's say $25,000 less in reserves. So I'm not a big fan of that strategy. So I think it would come down to either staying the course that he's on now, even at $4.99, as long as he can fit it into the budget, or if by pulling this money out and paying it off and getting rid of the mortgage payment, and you know, that still leaves him enough to cover the rest of his bills at a 4% withdrawal rate or less plus Social Security, then I could get on board with it.
But I'd pay it all off, but I do it over two tax years. Okay, I see. Okay. And then a question for myself, if you don't mind.
Sure. I have three retirement accounts, basically, IRA, 401, and the FRS, which I'm involved in the school board here in Sarasota, and I'm with one financial advisor. I talked to other guys that are involved with fiduciaries, and they tell me, well, my account never goes down, but it seems like mine always does. So do you have any recommendations as far as a fiduciary goes versus just a regular, you know, average everyday Joe? Well, I like the fact that your advisor would be a fiduciary. That just simply means they have to put your interests above their own and choose what's best for you.
But I would be suspect that somebody telling you their account never goes down. That's something we normally hear from our brother-in-law. And, you know, when we dig into that, and I say that a little tongue in cheek, no disrespect to my amazing brother-in-laws. But, you know, the bottom line is markets go up and down and everybody's been down over the last year. Now, does that mean that we shouldn't have a fiduciary?
No, I like the idea that your advisor would be a fiduciary. But the fact that you have a fiduciary doesn't mean your portfolio is not going to go up and down. That's just the nature of stock market investing. And that's why we take a long view. In the last year, stocks and bonds have been down, and bonds have been down a lot.
So if it's time to look for a new advisor who's a fiduciary, great, but don't think that that means you're never going to lose money. Let's head to Fort Myers. Hi, Eunice. Thank you for calling.
Go ahead. Hi, Eunice. Okay. Eunice, my apologies. Thank you for taking my call.
That's okay. My question is, I'm retiring in three years, and I will be enrolling over my retirement instead of taking my whole lump sum. And I would like to know what is the best thing to do.
Now, I had a meeting, like a Zoom meeting with Dragon Financial Services, and I am debating if this is the right way to go. And also, like, he was telling me that I could start putting, adding money towards my mortgage, like $200 extra. And also, he said to start saving for emergency funds, and this is before retirement.
And he said to try, you know, with whatever money I have left, I could go ahead and pay my house off, which that's what I really would like to do. Okay. So I just want to know about what is your advice.
Yeah. Well, I don't know anything about Dragon Financial. I do like the direction he's been describing that you might head. I like the idea of you having an emergency fund. I love the idea of you being debt-free as soon as you can, as long as it doesn't take too much of your liquid assets. And I like the idea of you putting money into a Roth IRA.
Those are all good things. In terms of the assets that you have heading into retirement, what do you have available? I know you have the roughly $2,000 IRA. What else do you have?
Okay. So from my retirement, you know, when I retire in three years, they're going to give me about $47,000, close to $50,000 most likely. So I also would like to know if, if I should go ahead and, and, you know, just, just put half of it.
Like I heard about gold, precious gold and precious metals, something like that investment. What do you think about that? You got a lot of moving pieces here. Let's do this. We're going to take a quick break and come up with a plan moving forward. So you hold the line, Eunice, and then we'll come back and continue to talk. 800-525-7000 is the number to call. We've got some lines open. Give us a call.
We'll be right back. That's Christian credit counselors.org or call 800-557-1985. We are grateful for support from sound mind investing in the faith and finance program. If you have money in a retirement account or just a general investing account, you know, the stock market can sometimes seem like a roller coaster, but it is possible to enjoy both profit and peace of mind and investing no matter what's happening in the market. You can see a short video webinar on that topic at soundmindinvesting.org. Since 1990, sound mind investing has sought to offer financial wisdom for living well. Soundmindinvesting.org.
Welcome back to faith and finance. I'm Rob West, your host, delighted you're along with us today. We have some lines open for your calls and questions today. 800-525-7000 is the number to call. Again, 800-525-7000.
Just before the break, we were talking to Eunice. She's about three years out from retirement based on her current plans. She's got about $50,000 in the drop program.
That's the Florida retirement system. She's got about a $3,000 IRA. She's got about $1,500 in emergency savings. She's just wondering how to position these assets as she thinks about retirement. She's talked to an advisor and he reinforced the idea of her getting out of debt completely, which would include about $1,000 left on a consolidation loan that she's been paying down and then $24,000 remaining on her home.
Eunice, this is really helpful information. Let me ask you, what are your monthly expenses roughly? Do you have a good sense of what you spend on a monthly basis? I would say about close to $1,000 or a little bit more than that. Let's say it's $2,000. What you'd ultimately like to have in emergency savings is a minimum of $6,000 in emergency savings. Right now, you have about $1,500 total between the $900 and the $600 that you have in those two savings accounts.
So we really need about $4,500 more. Are you contributing to that IRA every month or was that just one time? No, every month. Every month until I retire and they said that then they will give me the money back. Now, I don't know if I should reinvest that money or keep that money and use it for other things that I may be needing.
Here's my best advice. What I'd like for you to do, how much are you putting into that, the Roth IRA every month right now? That will be $90 a month. $90 a month. Right now, I have $2,742.
Got it. And how much do you have left over in a typical month after your bills are paid? Well, lately, I would say about $1,000. About $1,000 left over at the end of the month? Yes.
Okay. Here's what I would do. I would stop contributing to that Roth IRA for the moment. And let's take that $90 plus whatever you have at the end of each month and let's try to really buckle down on your spending to get that up at least $1,000 if not more. And then you'd have about $1,100 a month going into your savings. Right now, your savings is at $1,500 and we want to get it to $6,000.
So, five months from now, you should be there if you really focus on it. And once you get to that total of $6,000 in emergency savings, which is three months' worth of expenses, then at that point, I want you to take everything that's available and let's start going after that mortgage. Because what I'd like for you to do is try to work long enough so that by the time you reach retirement, the mortgage is paid off, the consolidation loan is paid off, you've got six months' expenses in the bank, and we didn't touch the drop. You didn't use any of it because I want that drop program retirement account to be fully available in retirement so you can use that to supplement your Social Security. And the good news is that if the mortgage is gone and the consolidation loan is gone and because you're living modestly, you should be able to live on, I would hope, Social Security plus whatever you could generate from the retirement account. Typically, we would say you would pull about 4% a year, which would be an extra couple of thousand dollars a year from your drop program. If you took the lump sum and you invested it and you pulled 4% a year, that would give you about $165 a month that you can add to your Social Security. And hopefully with no debt, because now your house is paid off and your consolidation loan is paid off and you've got that emergency fund for the unexpected, now I would hope that you could balance the budget with the $165 a month from the drop and Social Security. Does that make sense?
Yes, thank you so much. Okay, so just to recap, I would not pull anything out of the drop. I'd work as long as you can. I would focus right now on putting 100% of your surplus toward your emergency savings until you get to $6,000. Then let's redirect all of that money to the mortgage so we can try to have that paid off by the time you retire, but not by pulling your retirement assets, but you're doing it out of current cash flow while you're still working. And then you're entering retirement debt free and you still have the full drop available to you.
And at that point, when it makes sense, you could start taking Social Security. I hope that helps you, Eunice. God bless you and thank you for calling us today. We appreciate you being on the program.
To St. Petersburg, Florida. Hi, Mark. Go ahead. Hey, I'm thinking about converting my garage into an efficiency apartment. What do you think about that idea?
I like that a lot. I think the question is just, number one, you're going to need the permits in order to do that, just so you make sure that you do that in a way that complies with the construction requirements and so forth. And then you're going to need to let your insurance company know that. Make sure there's not any issues with regard to you being able to convert this into something that can be rented out. You shouldn't have any issue with that.
Make sure you do it in terms of getting the proper permits and in terms of the dwelling, you're going to want to check with the county and just make sure you've got all that or you could get a general contractor to handle all that for you. And then it's just a matter of saying, okay, if I'm going to add $40,000 in debt, obviously interest rates are high right now, they're going to be even higher for a second mortgage or a home equity loan, if that's the way you go. Or line of credit, since there's high interest rates now, that would allow them to come down as rates come down. Then it's just a matter of how long is it going to take for me to get it rented?
Can I cover the debt service and am I putting myself in a position where I could be putting my primary residence at risk if I can't make the mortgage payment? But if all that fits in line with your budget, and it makes sense to you, then I'd say there's no problem with that. I think it's a great idea where you can take a portion of your property and turn it into an income generating endeavor.
I like that a lot. I would just say don't rush into it, both check out the legal side from the county and the construction standpoint, as well as the financial side just to make sure you're not placing unnecessary burden on you financially. And then finally, once you do it, talk to your property and casualty insurance agent just to make sure you have the proper coverages.
I might look at getting an umbrella policy in addition to some other policies as well. We appreciate your call today, Mark. All the best to you as you explore this. Well, once again, our time went by way too fast, but tune in next time and we'll do it all over again. Before we go, I'd like to thank our incredible production team, Amy, Devin, Jim, Robert, Brandy, Rob, and Ben. Couldn't do it without them. Have a great rest of your day, and I'll see you again next time for another edition of Faith and Finance. Faith and Finance is provided by Faith Buy and listeners like you. .
