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Who Needs A Budget? with Chad Clark

Faith And Finance / Rob West
The Truth Network Radio
January 7, 2025 3:00 am

Who Needs A Budget? with Chad Clark

Faith And Finance / Rob West

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January 7, 2025 3:00 am

“Precious treasure and oil are in a wise man's dwelling, but a foolish man devours it.” - Proverbs 21:20

God’s Word couldn’t be any plainer on the need to live below one’s means and to be able to save for the future. To do that, you need a budget. Chad Clark is here to share some interesting facts about budgeting.

Chad Clark is the Executive Director of FaithFi: Faith & Finance and the co-author of Look at the Sparrows: A 21-Day Devotional on Financial Fear and Anxiety. 

More People Budget Than You Think—But There's a Catch

A recent NerdWallet survey revealed that 75% of Americans have a monthly budget. Encouraging, right? However, the same survey found that 84% of those individuals regularly exceed their budget.

What happens when people overspend? For 44%, it means relying on credit cards, while 56% dip into their savings. Both paths can lead to financial instability, highlighting the importance of creating a budget that works—and sticking to it.

Why Do People Avoid Budgeting?

We have heard a variety of reasons why people avoid budgeting, including:

  • “It takes too much time.”
  • “I don’t like math.”
  • “I can’t stick to it—it feels like a diet.”
  • “I don’t need a budget; I’m doing fine.”
  • “It limits my freedom.”

Most of these reasons stem from misconceptions about what budgeting truly involves.

Busting Common Budgeting Myths

Here are a few common misconceptions about budgeting—and the truth behind them:

1. “A budget is about cutting expenses.”

Not true! A budget is a decision-making tool to help you prioritize spending and make wise financial choices. It’s about aligning your spending with your values, not just slashing costs.

2. “A budget is too rigid.”

Your budget can be as flexible as you need it to be. It’s meant to adapt to your circumstances and help you make adjustments when necessary.

3. “I don’t need a budget because I make enough money.”

Even multi-million-dollar companies use budgets! A budget helps you steward what God has entrusted to you, regardless of your income level.

How the FaithFi App Can Help You Budget Better

The FaithFi app is designed to make budgeting accessible, effective, and Christ-centered. Here’s how it can help:

1. Tailored to Your Money Management Style

The app offers three different ways to manage your money so you can choose the method that works best for you.

2. Establishes Healthy Financial Rhythms

Whether you prefer daily check-ins or weekly reviews, the app helps you build habits that keep your finances on track.

3. Focuses on More Than Money

FaithFi integrates financial management with spiritual growth. Its content and community features encourage you to be a faithful steward of God’s resources.

Ready to Get Started?

The FaithFi app is more than a budgeting tool—it’s a resource to help you manage your money intentionally and grow in your relationship with the Lord. It’s about bringing order to your finances and aligning your decisions with God’s principles.

Download the FaithFi app today at FaithFi.com or find it in your app store by searching for “FaithFi: Faith & Finance.” Make this the year you take control of your finances and honor God as a faithful steward.

On Today’s Program, Rob Answers Listener Questions:
  • I separate my giving in three ways—to my church, InTouch Ministries with Charles Stanley, and a ministry that works with autistic children. Is there anything wrong with splitting up my giving like this if that's what's on my heart?
  • I have a self-directed IRA, called a "checkbook IRA," that I used to invest in a rental property. I have both traditional 401(k) and Roth 401(k) savings. When I retire in under two years, I plan to roll my 401(k) into the IRA to pay off the loan on the rental property. Is there any issue with commingling the Roth and traditional 401(k) funds to do this?
  • I've been retired for a number of years, and my one daughter is a few years away from retirement. I would like to know the tax implications if I withdraw the money from my Roth IRA now and give it to her versus letting her accept it as a beneficiary when I pass away. Would she have to pay any taxes on it either way?
  • I have a 14-year-old child and a newborn, and I've opened brokerage accounts for both of them. What are the best investment options, especially for newborns with a longer time horizon? I'm not looking to earmark the money specifically for college, but I want to invest it for their future. What are some good options to consider?
Resources Mentioned:

Remember, you can call in to ask your questions most days at (800) 525-7000. Faith & Finance is also available on the Moody Radio Network and American Family Radio. Visit our website at FaithFi.com where you can join the FaithFi Community and give as we expand our outreach.

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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. You want to share some interesting facts about budgeting, 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, it's always great to have Chad Clark with us on the program. He's the executive director here at FaithFi, and that gives him a great perspective on all that we do to teach and reach God's people with this important message of biblical stewardship. Chad, great to have you back with us.

Thanks for having me. Chad, one of your many duties here at FaithFi is keeping tabs on our app, leading our app development team, and we'll talk a bit more about that in a minute. But first, you've actually been doing some research on budgeting in general. Share that with us. Yeah, there's some new numbers that came out in a survey from NerdWallet that found a lot more people budget than you might originally think. In fact, the poll of 2,000 Americans ages 18 and up, three-quarters of them say they have a monthly budget.

All right. That's good news, right? Yeah. So here's the next stat, which shows that 84% of those respondents sometimes exceed their monthly budget. So it doesn't seem like the budget's doing a very good job of helping them out.

No. So of those who do overspend, 44% cover that difference using credit cards, which we can then assume 56% are using their savings in order to overspend their budget. Yeah, it's really scary, but it makes sense because we always tell people that if you aren't living on a budget, you'll eventually go into debt once you use up any savings you have. So why do you suppose some people don't budget at all? Well, I've been doing this for quite some time, Rob, and I've heard a lot of different excuses and reasons. Some of the common ones I hear a lot are, it takes too much time, it's too difficult, and people don't like doing math.

Right. One that I hear a lot is that people just don't seem to stick to it. It seems like a diet to them and they just aren't able to be successful at being consistent. I often hear people say just, I don't need a budget, I'm doing fine.

And so that's one that we want to obviously unpack a little bit. And others I often hear say it limits me. So those are some of the common excuses I hear why people don't have a budget. Yeah, and as I think through each of those that you just mentioned, it seems like a lot of those excuses are based on misconceptions, right? Yeah, absolutely. There's plenty of misconceptions.

And let's unpack just a few here and see if we can dispel some of these. One is a budget is about cutting expenses. It's not really about that. It's about prioritizing your spending. It's about making good financial decisions. That's really what the budget is.

It's a decision making tool. It's not just about cutting things out. The other common misconception we hear is a budget is too rigid. And the truth is a budget is only as rigid as you make it. So you can make as many adjustments as frequently as you need to to allow the budget to, again, help you make good decisions.

One we just talked about previously was that I don't need a budget. And often people say I don't need a budget because I make enough money to not need a budget. And again, there's a little bit of pride that sometimes comes in that that doesn't recognize that, again, a budget is a decision making tool.

And it's there to equip you to be wise and faithful with what God has entrusted to you. So everybody needs a budget to help them make those good decisions. Yeah. Well, that's really helpful, Chad. And to take that one step further, even multimillion dollar companies have budgets.

So I make enough is definitely not a viable excuse. All right. Now, we mentioned the FaithFi app.

We've got a minute left. So how can the FaithFi app actually help folks who want to get on a budget and stick to it in the new year, perhaps for the very first time? Yeah. Again, I think with the FaithFi app, we've designed it to be a tool that is there to assist you. It's there as your assistant. It's there to help you stay organized and be intentional with every dollar you have. But there's a few unique elements of the FaithFi app that I want to highlight here with just a few seconds left. It's designed to meet your needs. There are three different ways you can manage money in the app to fit your unique money management style. The next point is that it's designed to establish rhythms that work for you, whether that's daily check ins or weekly reviews. The app will help you develop good money management habits.

And finally, it's about more than the money. The content and community elements of the FaithFi app are designed to help you grow in your relationship with the Lord and help you to be a good and faithful steward for his glory. Folks, you need to download this app. Julie and I use it to manage our money. It is that decision making tool that Chad mentioned. It's better than ever.

And when you blend the content and the money management tools and the rhythms, it'll be a game changer for you. Chad, thanks for stopping by. Thank you, folks. You can check it out at FaithFi.com. Click app or go to your app store and search for FaithFi.

We'll be right back. God has entrusted his finances to you and we at FaithFi have designed our FaithFi app to help you live, give, owe and grow with that perspective. Our FaithFi app is the leading biblically based finance app. You can manage your money, get top biblical financial resources and interact with a community of like minded believers where you can ask questions, get answers and share what you're learning.

Go to FaithFi.com and click the word app to get started. Have you ever wondered where your money goes when you deposit it in a bank? Christian Community Credit Union believes in helping advance God's kingdom through everyday financial transactions. For over 67 years, they have provided values aligned banking solutions to thousands of Christians and ministries. Consider Christian Community Credit Union as your banking institution by visiting joinChristiancommunity.com membership eligibility required. Each account is insured up to two hundred fifty thousand dollars.

This institution is not federally insured. Well, I'm so thankful you've joined us today for faith and finance. We're ready to take your calls and questions here in just a few moments. But now is a great time to call. Get in on the conversation today.

Our team is standing by. We'll get you on in the queue, I should say, and get you on the air quickly. That number to call eight hundred five to five seven thousand eight hundred five to five seven thousand, whether it's your spending plan. How do you stay on budget and how is a married couple?

Do you navigate a budget and how do you have a system to control the flow of money that you don't abandon within within one to two months of putting it in place? What about the market? You know, we've seen an incredibly strong bull market despite thinking a recession was looming. And now here we have the prospect of a new administration with pro growth policies. What does that mean for the market?

What if you've been on the sideline? Let's talk about your 401k and long term investments or paying down debt, giving generously, improving your credit score, whatever it might be. We'd love to help you think about it biblically through the lens of God's word and make those practical, actionable decisions. You're looking to make eight hundred five to five seven thousand calls on any financial topic today.

Eight hundred five to five seven thousand to Lakeland, Florida. Neil, you'll be our first caller. Go ahead, sir. Yes, sir.

I want to be real quick. My tie, I separate in three different ways. I give to my church. I give to In Touch Ministries with Charles Stanley.

I enjoy his devotional and his work that he used to do, unfortunately fast. And then there's a ministry with an autistic or a woman that works with autistic children and tries to teach them and their parents, you know, spreading the word. And is there anything wrong with splitting that up if that's on my heart? You know, it's a great question. And, you know, this is this topic of the tie that's been long debated on the part of well-meaning believers who want to honor the Lord in their giving. And I think that's a good thing. You know, it's a beautiful and ancient practice, giving a tenth or 10 percent. And I think it's become a standard as to the way many Christians think about their giving. I will say it's ultimately about what we keep because it all belongs to God.

And I think we are to enjoy and to provide with what God is entrusted to us, but clearly we're to be givers. And I love what Randy Alcorn, the author, says about giving is that the tithes should be the training wheels of giving, not an ending point, but a beginning point. Now, if we're going to give the tithe, which is clearly in the Old and the New Testament, I mean, going all the way back to Abram giving a tenth of his war spoils to Malchizedek, the priest of the Most High God, and Jacob, and then Leviticus, and Deuteronomy. We see it in the New Testament as well. Matthew and Mark both capture parallel passages where Jesus condemns the Pharisees. But I think one of the big ideas and takeaways is, as we look at the Old Testament tithe, clearly there was a desire to give faithfully to the local church, to advance the gospel and rightly compensate our spiritual leaders.

So I think we need to start there. I would say ultimately whether you do 100% there or you break it up, that's between you and the Lord. This is not about legalism. It's about giving us out of gratitude and worship to the Lord. But I would say clearly the priority would be the local church.

I would say with the full tithe and then give beyond that. But ultimately you need to make that call in prayer and before the Lord. Thanks for calling. Missouri is where we're headed next. Mark, thanks for calling today.

Go ahead. Several years ago, I moved my retirement savings into a checkbook IRA. So the idea being I was going to find a piece of property, a rental property to invest in. A year ago or so, I found a piece of property that was listed for $700,000 plus. And so I invested $500,000 of my own cash and took out a non-recourse loan for about $210,000.

So that property is doing great. Good income generator and all that income that it generates just goes back into my 401k, rather my checkbook IRA. So I'm not paying on any income until I take it out as income personally. So all that's just savings now in my checkbook IRA.

So meanwhile, I'm still working for a living. I retire in less than two years. Meanwhile, I am saving money in my 401k to the max and also an additional 5% in makeup contributions. And so half of that money that I'm saving currently is traditional 401k money. And the other half is is Roth after tax savings. So my question then to you is in a year and a half or so when I go to retire and my plan is to roll over my existing 401k with my employer into my checkbook IRA. And then use that money to pay off this loan, this non-recourse loan. So my question then is, is there a challenge with taking Roth savings after tax savings and the traditional 401k savings and commingling that to pay off a loan within the 401k or the IRA?

Yeah. So, yeah, you can't mingle Roth and traditional IRAs. And so you're using a self-directed IRA, which you're calling the checkbook IRA, another term for it. But essentially, for the benefit of our audience, you know, with a self-directed IRA, you can put the money into non-traditional assets. So in this case, he's using the IRA self-directed to put it into a piece of property. You would not be able to commingle the Roth and the traditional IRA money. Do you have enough in just your traditional 401k to pay off the loan or would you be short?

Well, that's a good question. And I think between the traditional 401k savings that I've got and that will continue to grow and contribute to over the next year and a half and the income that the property itself is generating, I'll still be able to pay it off. So I won't be able to roll over the Roth portion into my checkbook IRA is what you're saying. Well, but what about opening a second one? Because there is a self-directed Roth IRA, just like there's a self-directed traditional IRA. So perhaps you have both. You know, you'd have the this what you're calling the checkbook IRA and then the checkbook Roth IRA. And you could, you know, pay off the loan with both of them to satisfy it in full.

Yeah, I guess I'm not sure. Maybe that's just logistics IRA, you know, logistics and getting the money into the same account or using it to pay off a loan. Yeah, the key is it just got to go into the Roth funds have to stay in the Roth and the traditional have to stay in the traditional.

And so if you're using a self-directed IRA, you're going to have to roll it from the Roth 401k to the self-directed Roth and then the traditional 401k to the self-directed traditional. And then from that point, you could then invest it in those non-traditional assets. Even though it would be paying off the same non-recourse loan. Exactly, because you'd have a split interest in it. A portion of it would be in, you know, in coming from one account and a portion from the other. So you're going to want to work with the CPA on this just to make sure you do this correctly.

I mean, the only issue there that I would see is you're paying off a loan that's not tied to the property because you said there's not collateral associated with it. So you just need to make sure that that is a proper use of those self-directed funds. But assuming it is, then as long as the initial rollover stays Roth to Roth, traditional traditional, then there's no reason why you can't, you know, pay it off with a portion from one and a portion from the other. As long as it comes from, you know, the self-directed Roth and traditional initially.

Makes sense. Yeah. So, but I would check with your CPA just to make sure that based on what you're trying to do in terms of not buying a property, but paying off a loan that was used to purchase the property. So essentially, once you do, you'd kind of own this property free and clear, but all with IRA funds from the self-directed Roth and traditional. Just make sure that because it's not tied directly to the property, there's not any issue there. But as long as you work with your CPA on that, I think you can end up doing what you're trying to accomplish here in the way you want to, but just maybe with a little different approach. Hey, it's very creative, Mark.

I love where you're headed with this and I love that you're, you know, in multiple asset classes, not only stocks and bonds, but real estate. Thanks for calling today. All right. A quick break and then back with more of your questions just around the corner. Call right now, 800-525-7000. We'll be right back on Faith and Finance. We'll be right back. Great to have you with us today on Faith and Finance. We're taking your calls and questions today. Lines are open, 800-525-7000, 800-525-7000.

Down to Nashville. Hi, Barbara. Go ahead.

Hi. I have a question concerning a Roth. I've been retired for a number of years and my one daughter is a few years from retirement. I just wondered as far as tax implications, would it be better if I withdraw the Roth now and give it to her? Or should I wait and let her accept it as a beneficiary? Are there things that she would have to do, be required to do or pay taxes on the Roth?

Yeah. Well, if it's a Roth IRA, there's never going to be any tax whether you take it out or she takes it out because you've already paid the tax. So if you take it out now, as long as you're 59 and a half and the money's been in there at least five years and it is in fact a Roth IRA, not a traditional, then you're going to pull that money out tax-free and then at that point it's in your checking account and you can absolutely gift it to her. And if you gift her less than $18,000, you don't have to tell the IRS about it. If it's more than $18,000, you will have to fill out a gift tax form to let them know. But even then, it's not taxable until you gift over your lifetime more than $13 million based on the way the law reads today. Now, let's say you don't do that. She gets it as a beneficiary.

Then what? Well, there is no inheritance tax, at least at the federal level, and so she would have no federal inheritance tax. And then because it's in a Roth, again, she's pulling it out tax-free. So there really shouldn't be any difference to the tax treatment, you know, with the exception of do you want her to have it now as a gift or do you want her to get it later as an inheritance?

And that's really a timing issue in this case. Okay. Okay.

Well, that's just what I needed to know and I appreciate your help on that. Okay. You're very welcome. Thanks for your call today, Barbara. Let's go to Fort Lauderdale, Florida, my hometown. Tavia, thank you for calling.

How can I help? Hi. Hi, Rob.

Thank you for taking my call. So I have two kids. I have a 14-year-old and I have a newborn, and I just opened a brokerage account for the newborn, and I have one established for my 14-year-old. I only have like a couple of shares of Roblox in his account, but I just wanted to know like what are some of the best options for investing for them, especially the newborn, because he has a longer time horizon than the 14-year-old. Yeah.

I love that you're thinking about this early, Tavia, and congrats on that newborn. That's great. Are you wanting to earmark this specifically for college, or would you like for them to be able to use it for anything? Anything. I know there's 529 plans and different things like that for college, but I just kind of wanted to set up something for anything and just like the best options for that.

Yeah. So I would probably, if that's the case, I would probably open up accounts in your name or the name of you and your husband separate from other investments or savings accounts that you have, one for each child, so you can kind of earmark them for that purpose. And then it's not a custodial account, which the only downside there is it automatically becomes the child's asset at the age of majority, which is 18 in the state of Florida. So depending on where they're at, each of these children, in terms of their maturity, both spiritually and financially, you may or may not want to drop however much you've put away in their lap.

And so you keeping that money in your name, even though you've got in your mind allocated it to them, allows you to have control over at what point they actually receive it. So that would be one consideration, and you could open that account at Fidelity or Schwab. I probably, I know I see here in my notes that you were wondering about savings options.

And, you know, as long as your time horizon is at least five years, and we could talk about what the 14 year old weather it is, it certainly would be with the newborn, then I think investing it would be a great option. And, you know, to get the proper diversification on a very small amount that you're starting with, you've got a couple of options. One would be, I could give you a list of faith based investing mutual funds. So a mutual fund is just a basket of stocks or investments. And in the faith based investing mutual funds, you've got a basket of investments, but they've all been screened for faith alignment. And you could teach the principle of diversification, you could have the 14 year old look up the top 10 holdings and get to know the companies and just kind of watch that grow over time. And you wouldn't be in one particular company. Now, the other approach with kids sometimes, even though we're violating the diversification principle, is to teach them about investing being ownership, and have them help to pick the companies and maybe they would pick a company to invest in that they actually like, you know, they do business with maybe it's a company that makes their favorite food or, you know, game or, you know, whatever it might be, and you'd have to help them think through that. But that's going to make them a little more invested in it, and probably excited to see how well it does.

You know, it could be Apple computer if they like, you know, Apple products. But the downside of that is you've got even though you can do it through something called fractional shares, now you're very highly concentrated. So if Apple has a bad quarter, or the just the, you know, the high growth tech sector is out of favor, because it's been raging on the upside, we've just got a lot more risk now because if one sector or one company declines, it could decline rapidly. And you could, you know, lose a pretty significant percentage. So that makes the case for the mutual funds that I was talking about.

The other option would be what's called a robo advisor. And that's essentially where you and your son would answer a series of questions about the time horizon of the money and your risk tolerance and the age of the investor, you know, and it would basically build a very low cost portfolio. And every time you put new money in there, it would be reinvested. And it would use what are called ETFs.

And I'm sorry that I'm getting technical here. But these are basically baskets of investments that mirror the broad market indexes. So you might have the S&P 500, maybe you have the Russell 1000, you might have a bond index, a tech index, domestic, international, so you've got a wide swath of investments covering lots of different sectors, but allocated from a risk standpoint, in a way that matches the goals, the age of the investor, the time horizon, and it's all kind of done for you with an algorithm that's driving all of this.

So it takes all the guesswork out for you. And I would probably consider either the Schwab intelligent portfolios, or a company called Betterment. And either of those could work. So let me just summarize, I put the account in your name, one for child one, another one in your name for child two.

And then either in set up an automatic contribution, if you're going to do it monthly, or one time if you want to do it one time, and then either buy a couple of mutual funds from a faith based investing list of funds or do a robo advisor with Schwab intelligent portfolios or Betterment. Does that make sense? Yes, that makes absolute sense. I'm actually in the finance. So I understand all of those. I just wanted to know which ones, like you said, you'll send me a list of the mutual, the faith based mutual funds. And that's great.

Because I'm just kind of like wondering which ones to invest in. But that's great. Thank you so much.

Excellent. Let me give you that link to download that list of funds. It's faithandinvesting.com. I'll say it one more time, faithandinvesting.com. That'll give you a list of basically all of the faith based investing mutual fund families out there. You can open the account at Fidelity or Schwab and invest in any one of them.

And anytime you add money to it, you could just add more shares. And hopefully that helps you, Tavia. Thanks for calling. You sound like a wonderful mom. Big thanks to my team today, Sandy, Devin, Jim, Taylor.

Couldn't do it without them. Thanks for being here with us. Come back and join us tomorrow. We'll see you then. Bye bye. Faith and Finance is provided by Faith Buy and listeners like you.
Whisper: medium.en / 2025-01-07 04:20:31 / 2025-01-07 04:30:55 / 10

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