Back To School Shopping Tips

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Thank you in advance for your support and partnership. 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 July for some retailers. A new survey by NerdWallet shows that parents of K-12 or even college students will spend an average of $540 on school supplies and clothing for their kids. One in ten shoppers say they'll go into debt for those purchases. Another 20% say they'll use buy now, pay later schemes to get what's needed for school.

Now, obviously, you want to avoid doing that and that means making the most of your back to school dollars. 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 two to seven percent 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 not only for what states have tax-free holidays and when, but also what items will be tax-free.

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 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.

Of course, major online retailers like Amazon and Walmart also participate in state tax holidays, and they'll automatically deduct sales tax 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 a 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. Now I realize there's great pressure to buy everything you need for the entire year at once, especially kids' clothing.

But with average credit card interest rates now at 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 pair of jeans for now instead of half of a closet full. So you know how much you have to spend and you've pared down your list of what you 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.

We'll be right back. Like-minded believers where you can ask questions, get answers and share what you're learning. Go to faith five dot com and click the word app to get started. Paying too much for health insurance, frustrated by high deductibles and increasing premiums?

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I'm Rob West. It's time to take your calls and questions today. We're ready for those questions at 800-525-7000.

That's right. Anything on your mind today financially speaking, 800-525-7000. You know, our approach here around the money conversation is that money issues are ultimately hard issues. You remember Jesus said where your treasure is there, your heart will be also. And so really beneath the surface of our financial decisions are our values and our priorities that drive those decisions. So we of course, like every facet of our lives, want to look to God's word and understand a biblical worldview which begins with God owning everything. Our role is that of steward or manager and money is a tool. In fact, it's a good creation from God. He created it for our enjoyment, for us to provide for ourselves and our families, for us to give generously and meet the needs of others. So we look at money through that lens, maintaining an eternal perspective, recognizing that money and the things that money can buy will never meet our hardwired desire for abundance and fulfillment. That can only be found in God.

But money can be a very effective tool to accomplish God's purposes and we realize you have very practical decisions you make each day around money management. So we want to help you make those decisions in light of biblical wisdom. Let's do that together. You can call right now at 800-525-7000.

Let's go to Ruth in Indianapolis. Hi there. Thanks for calling. Go ahead. Hi.

Thank you so much for taking my call today. My son has back taxes he owes and was and is looking for possibilities of obtaining some type of tax relief. He knows he owes the money. He found a company who advertises on a national TV station with a well-known spokesperson and their advertising stated that they have saved over a billion in tax dollars for individuals and close to 72,000 individuals they've helped. The website says they're listed with the Better Business Bureau, which does show them as having a rating of four point five four in a plus and their members of the NAP. My son was looking reached out to them and was persuaded to sign up. They required that he go into an agreement of making three installment payments upfront with his credit card, which now they have, as well as also sign a POA for representing him with the IRS. The company at first glance looks good in the majority of the reviews.

At first, they show they've got great customer service. However, peers, as we started diving deeper into the reviews, they rarely obtain any tax relief or any assistance with the IRS. My call to you today is and just seeking guidance not only for him, but possibly other listeners when dealing with relief and tax situations with the IRS.

What is there to do? And then second, do you have any suggestions on what he's gotten himself into or is it just a very high cost lesson learned? Yeah, thanks for that, Ruth. It's a great question.

I appreciate the thought you put into the way you asked it. Does he have anything in the agreement that allows him to get out of it if he wants to? The only way is paying them upfront. And that's per each attorney that is on the POA.

And it looks like there's close to seven. Okay. And there is no cancellation. That is an option.

Is that right? Unfortunately, no, there's no money back guarantee. Like I said, it was on a national TV with well-respected and him being young and a farmer and trying to help get himself a little bit out of debt. Well, I would probably see it through. I mean, if you had called me before you did it, I'd say let's go another route. But I'm not saying that these don't ever work. I'm just saying that I haven't had a great experience and have heard from a lot of listeners who haven't had a great experience.

But I'm glad to hear you did the homework. And there are it sounds like legitimate people that out there that were served well by this company. Bottom line is you can do this yourself. What I typically recommend is that you work through either a CPA or enrolled agent that has reasonable fees, that has experience representing taxpayers before the IRS, and let them work with you on your behalf rather than a national company making all kinds of claims. And I've got a few godly CPAs that we've worked with over the years that really specialize in this that have done a great job for a lot of folks. But I think given the cost that you've already put into this, I would see it through. As long as you don't see any red flags about, you know, any issues, let's just let them work through their process. Bottom line is the IRS is willing to work with you. At the very least, they would put him on a payment plan. Hopefully, they would even, you know, do an offer in compromise where perhaps he could pay less than was, you know, originally owed with taxes and I mean, with fees and interest.

So I think at this point, I would stay the course and try to get it paid back kudos to him for wanting to get this taken care of and get into a compliant state with the Internal Revenue Service. And I think given how far you've come, I would just see it through and a good lesson learned that hopefully, he can apply to other situations in the future. But hey, let us know how it turns out. And God bless you. We appreciate you calling today.

Let's go to Virginia. Hi, Cynthia, how can I help? How are you? I'm doing great.

Thanks for your call. Yeah, so I was wondering, we have a realist, my husband and I have this real estate opportunity, a gentleman from our church, he has a friend, he's disabled, and he's getting ready to be taken from his home, because he has no money and he owes back taxes, he owes about 2600 in back taxes. And by paying the taxes, my question is, what are the tax implications of that?

You know, I mean, on our federal taxes? Yeah, so essentially, it would be a gift from that individual to you, because he's relinquishing 50%, potentially, if it's a shared, you know, you're equally on the deed, he's potentially releasing 50% or more of the ownership of the property as a gift to you. And so he could do that up to 18,000 each of you for this year. And then beyond that, he'd have to file a gift tax form that would essentially chip away at his lifetime gift exclusion, which today is $13 million. So it really isn't an issue and would not create a taxable event for you or him. If the Trump Tax Cuts and Jobs Act expires as it's set to next year at the end of 2025, then that drops to 5 million, but there's still a $5 million lifetime gift exemption available.

So that would just chip away at that. So again, not taxable to him, not taxable to you, you just be receiving that as a gift. And then you would be a partial owner of that property at his death, depending on what his will says, either you all would inherit the rest of the property or he could give it away to somebody else. And you'd be a co-owner. And then at that point, you'd have to decide, are we selling the property? And if so, then you'd each take your portion upon the sale. The only other tax implication is that when it's gifted through a quitclaim deed, you retain the cost basis. So when you sell it to determine the capital gains tax that would be due, you would inherit his original cost basis as your cost basis.

But obviously, you know, that tax at least today is not going to be more than either 0%, 15% or 20%. And you're getting half of the property right now, you know, for nothing other than you paying the back taxes. I think the only other thing would just be for you to talk to an attorney about the liability of you being a partial owner of this property with him in it. What if somebody, something happens on the property and now you're sued for it?

So before I do this, I would talk to a real estate attorney and I'd talk to your CPA just to make sure you've got good counsel all the way around before you go through with this. Thanks for your call, Cynthia. Back with more after this. Stay with us. Grow in wisdom and knowledge by connecting with a community of thousands of Christians striving to be good and faithful stewards at faithfi.com or by downloading the Faithfi app. We are grateful for support from the Eventide Center for Faith and Investing.

ECFI is an educational initiative of Eventide Asset Management that seeks to help Christians understand and practice biblically faithful investing. They do this through their podcast and online journal featuring articles from industry thought leaders and their course called Discover God's Story for Investing. More information is available at faithandinvesting.com.

That's faithandinvesting.com. Great to have you with us today on Faith and Finance. We're taking your calls and questions today on anything financial as we head right back to the phones. Cleveland, Ohio is where we're headed next. Jim, you'll be next up, sir.

Go ahead. Hey, Rob, thanks for taking my call. My question is, I have a whole life policy that I've had for over 30 years, closer to 40, and I'm retired. I have money built up inside there and it's set up so that I could take a loan against it, but I don't see myself doing that. And my children are grown and I just heard and I don't know how accurate it is that I could sell this policy and then collect the money from there or just turn it in and alleviate, you know, or get rid of the policy. But I was hoping you could give me some insight and the best way to use this policy or get rid of the policy.

Yeah, very good, Jim. You know, if you no longer have dependents and no longer need the death benefit, you can absolutely surrender the policy and take the cash value. You probably won't have much, if any, of a penalty since you've had the policy 30 years and then you could invest that money. You know, keep in mind that the amount you receive back that's above the policy basis will be taxable. And so you'd want to calculate the taxable amount upon surrendering it and then subtract the cost basis from the cash value received. That's generally going to be taxable income. But do you know what that amount is?

I'm not sure at this point. I know the policy is about $100,000, but I think the amount above and beyond that I have in it is closer to, you know, maybe $5,000 to $8,000 in excess. So I put into it so that I could, you know, borrow more if necessary. Yeah. So what are they saying your cash value is today?

Like $8,000 that is above and beyond $100,000 plus the $8,000 if I was to pass. Yeah, yeah, yeah. Okay. So if you collapse the policy, you lose the $100,000 in death benefit, you no longer have the premium, and they write you a check for $8,000. Yes. Yeah.

And that probably makes sense. I mean, the key is this, you're going to end up chewing up that money. I mean, either those premiums are going to increase or you're going to deplete the cash value. I mean, I know you've had it a long time, but you did have the death benefit.

Fortunately, you didn't need to use it. But given that you've got other assets, nobody's counting on you for this money, you could probably use that money by recapturing that annual premium back into your budget for other purposes, saving or giving or investing. And so I'm on board with that idea of just letting this policy go.

Very good. And there's nobody that actually purchases these so they can take advantage of the low cost loans that they put on or they would give to me, right? No, I mean, there is something called a viadical settlement, where they could buy policies, but typically, you'd have to be, you know, have a terminal condition of some kind, or, you know, this policy would, there'd have to be a reason why they would want to buy it. And if you're in relatively good health, I mean, this is not going to be an attractive policy for somebody to buy.

So generally, you would either just continue to pay on it for the purpose of earning the death benefit, or you just surrender it, take the cash value and, and let it go at that point. Thank you very much. All right. God bless you, Jim. Thanks for calling today, sir. Let's go to Tampa. Hi, Ryan, go ahead.

Hey, Rob, I'm 38 single, I just recently lost my good paying job and trying to figure out what to do with my house, thinking maybe about selling it, running out the whole thing, running out a room and just trying to get some wisdom and advice here. Yeah, well, I'm sorry to hear about losing the job. I mean, the good news is that we're still in a relatively strong job market. But let me ask, do you have a new job at this point?

I do. I had to take something. Well, I decided to take something that's paying significantly less. And I think it would, you know, the chances of finding another job that paid as well, you know, if I was able to find one would, would probably take a significant amount of time.

Okay, yeah, no, that makes sense. So let's talk through kind of where you're at. So, I mean, one approach would be to say, you know, if we look at your new budget based on your new lower income, you know, one gauge that would tell us kind of how far out of whack, if you will, this, this home is in terms of the payment is to use the gauge of 25% of your take home pay for principal interest taxes and insurance. I mean, do you have a sense of kind of where this fits in light of your new income and what the gap is there that you're solving for? Yeah. And I think, you know, it'll probably be eating up around 50% of my new income.

Okay, yeah. So we either need to sell it or get a renter there. So what tell me the situation on the home? What is it worth? And what do you owe on it? It's worth about anywhere from 350 to 380.

And I owe around 300 on it. Okay. All right. And so you're single, correct?

Yes, sir. Okay. And do you have anybody at church or a friend or family member that is looking for a place or would you just be kind of advertising this to the general public? Yeah, I imagine I'd advertise it to the general public.

And, you know, if I were going to rent it out, yeah, either one room or rent out the whole house. Got it. Yeah. And do you have any kind of savings? I do. I've got, you know, probably around $50,000 in savings across a couple of, you know, one 401k and then the rest is in the stock market. And I've got an emergency fund as part of the savings as well. Yeah. Okay.

Yeah. I mean, the challenge is if you try to go buy something else, you know, you don't have a whole lot of equity in this because after you sell it, you're going to eat up a good bit of that equity that you've got. I mean, if you end up paying that kind of the traditional 6% or even let's say it's lower than that, let's say you just, you know, pay 3% because the buyer is paying their real estate commission. I mean, you're you're going to have at least probably 10 to 15,000 in expenses, I would imagine with moving and everything else. So you'd have 35,000 remaining. Would you be looking to rent for your where you would move to assuming you didn't stay and rent out a room? Or would you be looking to buy? Yeah, I think renting would would be most practical. Yeah.

Okay. I mean, the downside of this is if you just try to make it a straight rental, I mean, we're in a pretty good economy right now. The challenge is what if a year from now or two years from now, we're in a pretty deep recession. And, you know, you, you're not able to rent it out, and you're trying to cover the mortgage and a lower paying job. And so probably what's a bit safer is either to stay and rent out a room, because I would imagine you have a low mortgage interest rate, or just to sell it, be done with it, you add 35,000, you know, or 42 your savings, and then, you know, rent something and try to get back to a situation where maybe you look to improve your job situation over time. I think that's the lowest risk opportunity right now, just because we don't know what we have going on in the future. And we've got the budget not right sized at this point, just given how much debt you're carrying, and you probably don't have enough in the way of assets to really justify being a landlord.

So I would say, unless you have a real good prospect on renting out that room, I'd probably be looking to move to sell it, get into a rental, bolster your savings, and let's work on getting your income back up over time. That's the best advice. Thanks for your call, Ryan. Folks, that's gonna do it for us today. We covered a lot of ground. Thank you for calling and for inviting us into your stories. And we always love for the opportunity to be alongside you. Thanks to my team today, Taylor, Devin and Robert. We'll see you next time. Bye bye. Faith and Finance is provided by Faith Buy and listeners like you.