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Go to faithfi.com and click App to get started. If you have school-aged children, you know that we've entered into one of the busiest shopping seasons of the year. Hi, I'm Rob West. It's true, families are gearing up to send kids back to school, and that means a lot of spending. So how can you make the most of yours without going into debt? I'll talk about that first today, 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. Well, as you can imagine, it's Christmas in August for many retailers. I checked with the National Retail Federation, and they're saying that back-to-school K-12 spending will be a bit more than $40 billion this year. And get this, back-to-college spending will be about $94 billion.
That's a lot of laptops, futons, and mini-fridges for dorm rooms, I would think. Now, obviously, you would want to make the most of your back-to-school dollars, and that starts with knowing everything you can about sales tax holidays in your state. Deadlines really matter, and it seems like every state has set up different tax holiday periods.
In many cases, these are set up as weekend events, but not always. Some may start on Friday and end on Saturday, so you've got to know exactly when your tax holiday starts and stops. In states with a sales tax, this could mean saving anywhere from 2-7% right off the bat. Okay, so now you know when to shop, but it's also important to understand just what will be tax-free in your state. NerdWallet has a handy guide for dates and tax-free items by state.
We'll put a link to that in today's show notes. The challenge is, there seems to be no rhyme or reason to what individual states have declared tax-free during these holidays. For example, clothing and computers are generally tax-free, and they're big sellers. But accessories for those items may or may not be tax-free, so you may want to purchase some items later when you can get a better deal. And if things weren't complicated enough, some states allow cities and other taxing districts to opt out of these tax-free holidays, so you have to check to make sure stores in your city or town are actually participating. If they're not, you can always drive down the road to shop somewhere else.
But do you need to do any driving at all? You may be able to do all of your shopping online. Most states with sales tax holidays allow for tax-free online purchases as long as the items are ordered and paid for during the holiday, even if they're delivered later. So if you don't feel like fighting your way through thousands of other shoppers, check your local stores' websites for tax-free items. And of course, major online retailers like Amazon and Walmart also participate in state tax holidays, and they'll automatically deduct sales taxes on eligible purchases, so you may want to check them out too. And if you haven't bought a membership in one of those big warehouse stores yet, now might be the time to do it.
A membership might pay for itself in the savings you can get with back-to-school sales, and of course, they're all participating in sales tax holidays. Okay, now for some tips that apply even if you're not shopping during a tax holiday. First, you've got to determine how much you have to spend. That means how much do you have to spend without using a credit card.
Then, make a list of everything you have to buy, and your kids' schools have probably given you lists of everything they'll need for the entire year. If you can't make all of those purchases with cash, divide the quantities in half or quarters and purchase only what you can afford now. But what about the tax holiday you say? I'll have to pay sales tax on the other items I buy later. Well, that's true, but does it make sense to save maybe 5% in sales tax now, and then pay 20% or more in credit card interest on those items later?
Of course not. So purchase only what you can with cash during the holiday period, and then start saving so you can make the rest of your school purchases with cash in the months ahead. I realize there's great pressure to buy everything you need for the entire year at once, especially kids' clothing.
But with the average credit card rates now around 22% or higher, you've got to resist the temptation to pull out the plastic. Maybe you can get away with one new outfit or a pair of jeans for now instead of half a closet full. Okay, so you know how much you have to spend and you've pared down your list to what you actually need to purchase, now you just have to stick to that list. That won't be easy because retailers will bombard you with special promotions and sales.
And by the way, some of those items may not even be tax-exempt during the holiday period, so stick to your list and don't be an impulse shopper. All right, your calls are next, 800-525-7000. That's 800-525-7000. I'm Rob West, and we'll be right back.
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Membership eligibility required. Welcome back to Faith and Finance. I'm Rob West. All right, it's time to take your calls to questions today on anything financial. The number to call is 800-525-7000. We've got some lines open today. 800-525-7000. Let's dive in.
Chicago. Hi, Mike. Thanks for calling, sir. Go ahead.
Hi, Rob. Thanks. First of all, thanks for taking my call, and thank you for all the work that you do and listening to your program. Thank you so much. I appreciate that.
No worries. But my question is, I accumulated about 1.2 million, of which about 800,000 is in 401k. But the remaining is in energy stocks that I inherited. And I'm about 57 now, about six years away from retirement. My question is, with those energy stocks, do I just continue to leave them where they are as I get closer to retirement? Do I cash them out, turn them over? Just curious, because I am counting on that as part of my retirement savings.
Yeah, very good. The energy stock that you received, is it just in a taxable account currently? So it is actually, in the corporations, it is actually stock.
And I had them transferred over to my name after the death. But it's not inside a retirement plan? No, it is not. It is not just straight regular stocks.
Yeah, very good. And your total investable assets is how much? About 800,000 in 401k, and about 400,000 in those stocks. Okay. All right. So you've got about 1.2 million total, is that right? That's correct. Okay.
All right. Yeah, I mean, I think the only thing I would say there is, you know, that's a little much in terms of you being properly diversified. So I'd probably, even though energy has done well, will probably continue to do well, I would look at diversifying out of that, as you're able to. And you want to be strategic about that, just in terms of the tax implications.
But I think not being so highly concentrated with, you know, roughly 40% of your portfolio being in one sector, you know, is probably more highly concentrated than you want to be. Do you have an advisor? Are you managing all this yourself? I'm pretty much doing it myself. Gotcha.
All right. And do you want to continue to manage it yourself and pick the investments, especially as you, you know, inside your 401k, you have limited investment choices. If you were to move away from and begin to diversify out of this highly concentrated position in these energy companies, you'd have unlimited investment options. Would you feel comfortable at that point building your portfolio?
I'm interested in looking in that direction. Yeah, I think that's the way I would go. I mean, you've obviously built up quite a nest egg here. At some point, once you separate from your company, it sounds like, you know, you're six years away from that. You're going to want to probably roll this out to an IRA, which would give you the ability to have more discretion over the investments you choose. So I think beginning to look at an overall portfolio that, you know, at your age maybe is about 50-50 between stocks and bonds. If you've had some loss in these portfolios, then maybe I'd wait for it to fully recover.
So we're maybe a year or two down the road. But at that point, I would begin moving toward having more fixed income in the portfolio. You could do some of that now if you wanted to get more conservative, but if you had some unrealized losses, I might wait. But I would probably go ahead and begin interviewing some advisors. And if you did find an advisor that you really felt comfortable with that could not only help you today with the energy portion of the portfolio, but down the road, perhaps managing the IRA, the rollover from the 401k, I think that would make a lot of sense. And that way, you know, if energy has a tough go a year from now, you're not experiencing significant loss just because you've got that risk spread over a number of different sectors. And I would begin moving on that more quickly, even if you wanted to wait on the 401k and, you know, begin to diversify that out of probably a highly concentrated stock positions and including more fixed income type assets. Does that make sense?
Yeah, it makes perfect sense. Yeah, I just don't want all of your eggs in one basket there. And as much as, you know, it may have done well in the past, and I know it's an inheritance, so it brings with it, perhaps even some emotional connections to these investments. You're the steward now. So we really need to look at the total investable assets of 1.2 million and say, okay, as a, you know, coming up on 60 years old, I'm six years away from retirement, I want to be a good steward of these resources, how do I properly position this money, which is significant, so that I'm not taking unnecessary risk.
I've got good diversification, you know, I'm less volatile than the market, but I still have the opportunity to grow it over time. We recommend if you listen to this program, you'll know us the Certified Kingdom Advisor designation. And so I think your opportunity would be to reach out to a CKA in your area on our website, faithfi.com. That's faithfi.com. Just click Find a CKA.
You could do a zip code search, interview two or three. But even if you wait on that 401k, I'd probably start diversifying out of those energy stocks fairly soon. Okay, sounds like a real good plan, Rob. I appreciate it. Thank you. Absolutely, sir. God bless you. We appreciate your call today.
800-525-7000. We've got a few lines open. Let's head to St.
Cloud, Minnesota. Go ahead, Tom. Thanks for being on the program. Yes, Rob.
Thanks for taking my call. The question I have is, I'm looking at buying property, so I wanted to pay all my credit cards off. I paid all of my credit cards off, and my credit score dropped 40 points. Yeah. That doesn't make sense if I'm to not be in debt to anyone.
You would think, wouldn't you, Tom? Unfortunately, paying off your credit cards does have a tendency to lower your score. Now, did you close any of them, or was it just paying them off? Just paying them off. Okay, so the accounts are still active. They just now have a zero balance, is that right? Yes.
Okay. Yeah, that's a little surprising. I mean, if you would have closed them, I would have understood. The thing about paying them down is, if they're still active, it's still a part of your history, it's still a part of your credit mix, the only thing you've done is improve your credit utilization. Because now you have a zero balance, which means you have a lower utilization at zero versus the available limit.
So that's a little confusing. There's probably something else going on there in your credit report. Has there been any recent changes, any new accounts, any accounts that went away, any hard inquiries where you authorized somebody to pull your credit for the purpose of evaluating whether to extend you a loan, anything like that? No, not yet.
I was about to do that at the credit union, and I watch my credit through my bank every week. They say it's updated every seven days, and yet, when I looked at it, it dropped 40 points. Okay. And I'm like, how is this possible?
Yeah, and when you were comparing it to the score that was 40 points higher, that was pulled from the same source? Yes. Interesting. Yeah, you've got me on that one. I'm a little bit at a loss.
I would probably chalk it up to some sort of an anomaly there because just paying off those cards and not closing them should actually help you, not hurt you. I suspect, Tom, and you let me know, I suspect next time you check it, it'll bounce right back. You just keep doing what you're doing, my friend. You're doing a great job. Hey, let us know how we can help you further along the way.
Sorry I don't have a definitive on this one. We'll be right back. We'll be right back.
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. All right, back to the phones. Let's head to Benton Harbor, Michigan. Hey, Rick. Go ahead, sir. Yeah, how you doing, Rob? Doing great. Thanks for your call. Thanks for everything you do.
I've got a question. My wife and I have both just turned 62. She has worked, but mostly at home raising our kids, and we're trying to decide whether she should draw our Social Security now or later because I plan on retiring in the next three to four years. And her Social Security right now, we get the statements every year, and hers is substantially less than half of mine. And my understanding is once I start drawing, she has the option of drawing hers or half of mine. Is that correct? That's exactly right.
Yeah. So your wife can file for Social Security benefits based on her work record at 62 and then switch to the spousal benefits when you file to claim benefits. However, her monthly benefits based on her record and then spousal benefits later will be reduced because she took them before full retirement age.
And so you may want to hold off and try to delay this as long as you can just so you don't lock in any kind of reduction. Okay. In other words, she doesn't just automatically get half of what I get whenever I decide to retire. She doesn't unless she waits until full retirement age.
Okay. Now, if I pass before her, which family history is, I probably will, will she receive my benefits at that time instead of hers? She will. Yes, she'll get the death benefit there.
And so they will switch to the amount that she would be entitled to based on your work record as a spouse of the deceased. So yeah. So I think, you know, it's important to have a plan going into all this, Rick, and I love that you're thinking through this now. Do you all have an advisor that you work with on retirement planning and these kinds of things?
We've talked to a couple, but we haven't locked it in with anybody. We're kind of at the point to where we feel our retiring early, well, for at least myself, retire early and that way we can still do things, you know, just in case you're never guaranteed for tomorrow, you know? Yeah. Yeah, that's exactly right. My wife, she's always worked just during tax time. So her job is, you know, seasonal.
I see. Well, the reason I mentioned that is it just may make some sense for you all to do some more comprehensive retirement planning just to look at both Social Security in terms of when's the optimal time for you to take it as well as how long you need to work in order to be able to have enough in the way of assets plus Social Security to cover whatever your retirement, you know, expenses are going to look like. I just want you to be really well planned before you make some of these really big decisions. And it may require at the end of that for you to work a little bit longer than you were expecting. But I think the bottom line is if she were to take, you know, the spousal benefit at 62, it would only be about 32 and a half percent of what she would be entitled to versus waiting to full retirement age and to be about 50%.
So there is going to be a reduction that's locked in there, and she will just want to be aware of that. So hopefully that helps you, my friend. I think you guys are doing a great job in thinking through all this.
If you want an advisor or a planner to help you consider the full picture, you can find a CKA at our website at faithfi.com. Thanks for your call today. To Red Oak, Texas. Hey, Clarence, thanks for calling. Go ahead. Hey, how's it going? Good.
I just got a question. We have two businesses. We opened up one January of 2021. And then we opened up another one.
No, 2022 January of 2022. And then we opened up the second one, September of 2022. And we put all of our funds in there that we had saved, and we had a nice amount left over, and we've been paying our employees with that money as we're getting established with the business. So now my question is, we have a $380,000 mortgage, and we have almost $100,000 equity. I want to sell the home and get like a fifth wheel and live out the fifth wheel for about two years as we're growing the business. Take that equity, buy a fifth wheel, just pay cash for it, and just save up as much money as we can for them two years.
And then when the market changes and be a buyer's market, hopefully within the next two to three years, we come back and buy and the interest rates are lower. Yeah. What does your wife think about this plan? She don't like the fifth wheel idea.
Well, she's unsure about it because our house is 4,200 square feet, and we're talking about going to maybe like, I don't know how big those fifth wheels are, but I would get a nice one that's a nice size for about $80,000. Yeah, yeah. Well, I think that's the key because remember, there's the financial side of this and then there's the non-financial side. I mean, this is where you all live, right?
And I know it sounds good. Well, we'll just kind of muscle through it for the next couple of years and really save some money and the market's going to go in our favor with the housing market and interest rates. And there's a lot of assumptions being made in that regard. Number one is we've already kind of moved to a buyer's market. Could the housing market soften a bit more? Sure, it's probably not going to soften too much more because there's still a shortage of houses in this country.
Could interest rates improve over the next couple of years? Absolutely, I'd give you that one. But I'd really think and pray through this. I mean, maybe an alternative approach is for you all to maybe just downsize a bit as opposed to going all the way to the fifth wheel. I mean, this is something I'd want you both to be on the same page about, feel really good about, and know what your plan is and that you're not making assumptions that if they don't come through, we're going to kind of make all this for naught because there's a lot of expense in buying and selling properties in the process that you've got to factor into this as well. So I'd take some time, you guys think and pray through it before you make this big decision.
But I think generally speaking, I would count the cost before I'd go ahead with it. Thanks for your call today. 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 faith by 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 faith by and listeners like you. Thank you.
