6 Common Money Mistakes That Are Hazardous to Your Wealth

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Hi, I'm Rob West. Sometimes we make conscious mistakes with our money. Sometimes they're the result of just not paying attention. Either way, they can be hazardous to your wealth. I'll talk about those missteps first today that it's onto your calls at 800-525-7000. This is Faith and Finance, biblical wisdom for your financial decisions. Now, if you think you've made some poor financial decisions, don't let that opening verse discourage you. But take this opportunity to learn from your mistakes. And here's a verse to encourage you. Proverbs 19 20 reads, listen to advice and accept instruction that you may gain wisdom in the future.

Who can't use more wisdom, right? So here are some common money mistakes you can correct, or better yet, avoid them in the first place. The whole idea is to hang on to the money you've worked hard to earn and to get that money working for you. So the first mistake that's hazardous to your wealth is living paycheck to paycheck or put another way, spending all or most of what you earn.

If you do this, you're guaranteed to have nothing left at the end of the month. Sometimes this is called paying yourself first. No matter what, put a little something aside each month where you don't see it and don't spend it. Set up an automatic transfer of some amount of money from your checking account into savings. Then adjust your spending so that you meet all of your monthly obligations. You'll probably have to cut out some things that you've grown accustomed to. Now, sometimes people will say they just don't make enough to save.

Well, that's true for some, but it's a small minority. Almost everyone can cut something from their spending. A worthy goal is to save 10% of your income. If you can do that, you'll very soon start to see your savings grow. Once that happens, all you have to do is leave it alone, which leads to our next money mistake, not having an emergency fund. But if you've begun to set something aside in savings, that becomes your emergency fund.

Keep going until you have at least three months living expenses, but six months worth is definitely better. Which leads us to the next thing that's hazardous to your wealth, and that is paying interest on consumer debt like credit cards. And you get there by not having an emergency fund. So when an unplanned expense pops up, you have to go into debt.

You eliminate that mistake by not making mistakes one and two. But if you already have debt, the mistake is paying only the minimum monthly requirement. If you look closely at your monthly statement, you'll probably see a box that tells you how many years it will take to pay off your balance if you pay only the minimum.

Don't be surprised if it's 15 years or longer. This is a good opportunity to rethink how much things really cost. Let's say you go out to dinner by yourself and you end up putting $30 on your credit card.

If you were to pay that off according to the minimum monthly payment, it would end up costing you $50 or $60. The next decision that's hazardous to your wealth is buying a new car. Now we have nothing against buying a new car. It's a fact that some people have to buy new cars or at some point there wouldn't be any cars left on the road. But you should only buy a new car if you've saved up enough to pay cash for it.

In fact, the goal should be to always pay cash for a car whether it's new or used. You can only do that if after you've paid off a car loan you keep driving that car but continue to make payments to yourself into a savings account. You then use that money to buy your next car when you need it. Eventually, by continuing to make payments to yourself after a loan is repaid, you'll have enough to buy the car outright. It may take a few cars to get there but eventually you'll make it. So buy dependable late model used cars until you can pay cash for a new one.

Won't that be a glorious day? The next money mistake that's hazardous to your wealth, especially if you're young, is not setting up a Roth IRA. Once you have your emergency fund in place, start putting money into a Roth. And you can do this even if you're contributing to a 401k at work. You can contribute up to $7,000 annually to a Roth IRA using after tax dollars or $8,000 if you're 50 or older.

In retirement, your withdrawals from the Roth account are completely tax-free. Now the last thing that's hazardous to your wealth is buying too much house. Paying too much for a home can put a strain on your finances so approach home ownership with wisdom and caution. By keeping your mortgage manageable and saving diligently, you'll set yourself up for greater financial stability and the freedom to honor God with your resources. By the way, if you'd like to read more about ways to manage your money wisely, check out our new quarterly magazine, Faithful Steward. When you become a Faithfi partner, you can receive it directly to your mailbox. Just go to faithfi.com slash give.

We'll be right back. We are grateful for support from Praxis Mutual Funds. Praxis Mutual Funds has seven impact strategies that are designed to create positive real world change. More information is available at praxismutualfunds.com. The funds investment objectives, risks, charges, and expenses are contained in the prospectus and summary prospectus. This and other information is available at praxismutualfunds.com. Investments involve risk.

Principal loss is possible. Foresight Fund Services LLC. Great to have you with us today on Faith in Finance. I'm Rob West. We're taking your calls and questions, helping you manage faithfully God's resources. Let's go to Susan.

Susan, how can I help you? Yes, to give you a little background, I have a transfer on death deed to my granddaughter for my house that's paid off, and I have my 401k going to her to refurbish it. I have no debt.

The house, the cars, credit cards, everything's paid off. I have my funeral all paid for, but my question is, I have a disabled son and I would like to leave him some money without attorneys or the government taking it away from him. Is there a way to do that?

Yes, well I'm glad you're thinking about this now, and there are two tools that can work very effectively for this purpose. One is called an ABLE account, A-B-L-E. It stands for Achieving a Better Life Experience. It celebrated its 10th year anniversary last year and is really for, it's an account that would have assets in it that would not then in any way prevent him from accessing government benefits. And so that could be a great resource, and there's pretty much a wide usage in terms of how those funds can be used, and that can be combined with a special needs trust, which is the long-standing solution again for families to support individuals with disabilities and again the primary thing preserving eligibility for government benefits. And it can hold all kinds of assets and the trust spells out how the trustee will manage the affairs and assets of the trust and who will get it when the person with disabilities passes away. And it has tremendous flexibility for spending on needs not covered by government benefits, and so that can be a great tool and using these two together can be very effective. So I think the next step is for you to visit with an estate attorney, Susan, who really specializes in special needs trusts and estate planning for these types of situations so that it can be set up properly to make sure that the assets are there for the rest of his life but not, you know, get in the way of the $2,000 asset limit, for example, on the government assistance.

Does that make sense? So he could still get assistance with that account? Yes, with both the ABLE account and the special needs trust, it allows the assets to be set aside for his purpose and spelled out in the trust for him to use for those expenses that go beyond what the government assistance would provide. But it does not in any way affect his ability to get that government assistance because it is not counted toward the asset limits. Okay, so the ABLE account would be the same way as special needs?

Yes, the special needs trust. The thing with the ABLE account is you can only put so much in it. So for instance, you can only have $100,000 in an ABLE account at any given time, or your SSI or Medicaid will get suspended. So I would have the ABLE account up to $100,000 for a lot of flexibility with certain expenses. And then the special needs trust really doesn't have that same cap.

It can really have an unlimited amount of money in the special needs trust and not affect those government benefits. And that can be used, you know, for paying for things like food or rent and you know, that type of thing. Yeah, okay, that I think that helps me then. I appreciate your time.

Absolutely. I would reach out to if you don't have one, one of the certified kingdom advisors in your area there. You can do that on our website at faithfi.com. And just ask for a referral to an estate planning attorney.

And in particular, what you want to be looking for is somebody who has experience putting these types of accounts in place. Hopefully that's what you needed. Call anytime, Susan. Thanks for being on the program. Clarin, thank you for calling. Go ahead.

Hi. My question is like I'm retired, but I'm still working a few days a week. And my Social Security is deducted from my paycheck. So what happened to that Social Security? Do I get it later? Or how does it work? Can you explain? I can.

Yeah. So your FICA continues to come out during your working years. Now, in terms of how it benefits you, it only will benefit you positively if you are earning more now than any of the high 35 years that are determining your benefits. So if you're earning more than you have in any of your high 35 previous years, then you'll replace those with your new current earnings. And that will result in a higher Social Security benefit. But if you're not, then it really is not going to do anything for you.

It's just going to continue to be paid into the Social Security trust fund and be there to help other folks or to contribute a portion to your own check. But at the end of the day, the only way it actually benefits you is if you're earning more than any of your previous high 35. Does that make sense? I am not making more than what I used to make it. So I don't think I can benefit from that, right?

You really can't? No. So your benefit is locked in. You're not replacing any of those high 35. So your increases in the future from Social Security are only going to come through cost of living adjustments at this point.

And that has no bearing on how much you pay into Social Security from this point forward. So unfortunately, no, there really is not a whole lot of benefit there for you. But I hope that extra income is helpful. We appreciate your call today, Claire, and may the Lord bless you. Before we head to the break, let's tackle a couple of emails.

By the way, if you want to send an email along, you can do that to askrob.faithfi.com. Karen writes, I have a 401k and I'm wondering how I can invest according to my values with the options that are available in it. Seems like the only options are big companies that I'd rather not be invested in.

Do you have any suggestions? Unfortunately, Karen, the 401ks are a little slower to adopt the faith based investing fund families. These are still relatively new, although the faith based investing space is growing rapidly. The 401k custodians, many of them have not yet been added. So you've got a couple of options. Number one, call your 401k custodian, give them the fund families like Eventide and Praxis and Timothy Plan and One Ascent and Guidestone and all of the others and ask them to add them to the mix.

That would be a great step and hopefully you'll see them. We are seeing some of these plans add them over time. The second would be to look for something called a brokerage window. This is where they allow you to invest beyond the limited options available in the 401k. And if you have that available, not all do, but that would allow you to select these fund families. By the way, if you'd like a list of those faith based investing fund families, just quickly go to faithandinvesting.com.

That's faithandinvesting.com. All right, this next one says from Hannah, we recently sold our house for a good profit and we're wondering how do we tithe on it? Do we tithe on the full amount we received or only what goes above the initial price and the interest we paid on it? I would not factor in the interest paid, but you do want to just look at the selling price minus the original purchase price minus any improvements that you made to the property that resulted in it increasing in value. That's going to be the gain.

By the way, that's what will be considered a capital gain if you don't have an exemption because that was your primary residence. But that same number could be the number that you look at in terms of determining a tithe on the increase that you would then give a 10th on. So hopefully that helps to clear it up, Hannah. All right, we'll be back with much more just around the corner.

Stick around. Financial fear is real, but so is God's promise to provide. As you discover how to overcome financial anxiety with faith, visit faithbuy.com slash sparrows and begin your journey with Look at the Sparrows today. If the heavy burden of debt is robbing you of freedom and peace of mind, Christian credit counselors can help. We're a nationwide nonprofit credit counseling organization that has helped over 300,000 individuals in the last 27 years get out of credit card debt 80% faster while honoring that debt in full. To learn how Christian credit counselors can help you visit Christian credit counselors.org.

That's Christian credit counselors.org or call 800-557-1985. Hey, thanks for joining us today on faith and finance, taking your calls and questions today. Let's dive right back in Spring Hill, Florida. Hi, Cindy. Go right ahead. Hi, Rob. First, I appreciate so much what you do every day on this show.

I learned so much. I have two potential questions for you. My first question is I left a job and rolled my 401k over into the company fidelity. Um, the current employer that I have, I have a different 401k. Would it be in my best interest to put those two together or to leave them separate as I have them now?

Yeah, it's a great question. And I actually do prefer combining them. And so if you have the ability to roll that old 401k into the new typically you do, although it's going to be up to the plan administrator, that's going to simplify the record keeping, keeping track of things, making sure that you don't have duplication of investments without without knowing it.

You know, I just think that's a great way to go. And then after you separate from employment into retirement season, that's where you would then roll it into an IRA. And then I would think at that point, you'd probably want an advisor to manage it for you, somebody who could oversee it and make the investment selections inside the 401k. It's it's a little simpler, just because there's a more limited menu of investment options.

And if you, you know, kind of don't know what direction to go, they typically have what's called a lifecycle or target date fund that takes a lot of the guesswork out where you just pick the fund that matches your expected retirement date, and then it just gets more conservative automatically, I would probably just this just my opinion, I'd probably pick a date maybe a little bit more a little bit further out than what you're actually expecting your retirement date to be maybe five years, just because those tend to be a little more conservative, especially now that people are living longer. But I think to answer your question, I would probably roll it together. That's great. And if I have time for my second question, yeah, go ahead. I'm getting a settlement from a car accident, not not a huge amount of money, but it's enough that I could pay off two car loans, and two credit cards that I don't pay any interest on the credit cards. So am I better to pay off all that debt, and then just take that money and then invest it, you know, each month? Or would I be better off just taking the settlement and just investing it into a CD or something and just continue to pay the debt as I have them?

It's which is not it. There's no financial struggle there. Yeah, I would just go ahead and wipe it out. So long as you've corrected the issue that got you there in the first place. So if it was just lifestyle spending beyond your means, and you're going to wipe it out, and then it's going to slowly creep back up.

That's not a long term solution. But if you say no, that was in the past, you know, I'm living within my means. Now, if I can get rid of this credit card debt, I'll only use it for budgeted items, pay it off every month, and I'll never go back there, then I would say even with that, you know, introductory, you know, or temporary 0% rate, I'd go ahead and wipe it out, because eventually that's going to run out. And for you to be able to balance transfer that to somewhere else is probably going to be a, you know, two or 3% charge on the balance. And so there is going to be an expense there. I'd rather you just get it wiped out now, not keep playing the balance transfer game.

And then if that now frees up what you were sending every month to the credit cards, let's start investing that systematically into investments into maybe a 401k, or excuse me, to a Roth IRA or something that, you know, lives alongside your employer plan. Excellent. That's great guidance. I so appreciate you. Thank you.

Absolutely. Cindy, thanks for your kind remarks. I'd like to send you a gift, just for being on the program today. So stay on the line. We'll get you a copy of the magazine that we send to our partners, Faithful Steward.

I think it'll be an encouragement to you. So stay right there. Our team will get your information.

Let's go to Indianapolis and round out the broadcast today. Sue, thanks for calling. Go ahead.

Hi, thanks for taking my call. I want to know, when is it appropriate to, it's time to redo my will. I'm 58, still working. My house and car paid for. I don't have debt, thankfully.

I've got a decent amount stocked away in my 401k. But when is it, if I redo my will, is it time to do a trust? Or when is that the wise thing to do?

It's definitely more expensive. And I wasn't sure how to approach that. You know, you don't really need a trust necessarily. I mean, where a trust would come in is if either you want to avoid probate, because either you just don't want, you know, to go through the time and the expense of running through the probate court, even though that would be overall probably less expense than you'd have in setting up the trust.

Some people want to avoid it. Other people want to avoid probate because they want their estates anonymous. Whereas when you have a will and go through probate, it's a part of the public record. The other reason you would have a trust is if you want a trustee to be able to step in if you were incapacitated, or even if you wanted the assets from your estate to stay in the trust beyond your life, and only be distributed to, you know, beneficiaries at certain triggering events. Maybe you had minor children, and you said, Okay, I want them to get X amount when they graduate college, and I want them to get Y amount when they turn 25, or you know, whatever that is. But apart from that, a basic will is going to really cover what you need. And it's going to make sure that whatever accounts you have and personal, you know, assets and property will get to whoever you want it to go to.

So I just say if you have an up to date will, that's probably enough, unless one of those other reasons applies with regard to a trust. Does that make sense? Yeah, makes a lot of sense. Thank you. Can I say real quick? Yeah, please. Sure.

It was about 30 years ago that I took by one of those crown ministry small group studies. Yeah, great. And completely changed the trajectory of just how I looked at finances and just stewardship in general. So that's really what got me on course to be in the position I am today that I'm so grateful for. So thanks for all the sound advice and options you give people that call in because it makes such a huge difference. Well, thank you, Sue. That means a lot as I'm very grateful that you know, our ministry here goes all the way back to not only Howard Dayton, who was the founder of Crown, but Larry Burkett and Christian Financial Concepts and the original program Money Matters that's now Faith and Finance today.

So I sit in a legacy of incredible men of God who just wanted to serve God's people and revered Scripture and wanted to encourage and equip the body of Christ to be wise stewards. And so I appreciate you affirming that today. Thanks for being on the program.

By the way, make sure your beneficiaries are up to date on that 401k and any other accounts. Well, folks, we're about out of time today. We covered a lot of ground.

You know what? I love being invited into your stories each day. It's an incredible privilege. It's the thing I most look forward to when I wake up every morning is just talking to our listeners because you want to be found faithful. You realize God is incredible. And boy, what a gracious gift He's given us, starting with found salvation before even the first dollar, we are rich. But then beyond that, He gives graciously differing amounts, but our charge is just to be found faithful, to enjoy what He's given us and to manage it wisely and to give it generously and to help others in need along the way.

I mean, what a privilege it is. Well, the whole goal of this program each day is just to help you do that. Come alongside you and say, you got this, you can do it. Maybe we've made some mistakes in the past, but going forward, let's make those wise decisions that align with the heart of God and the counsel of scripture. I hope that's been true about this program for you today. And I hope you'll come back and join us tomorrow. We'll do it all over again on behalf of my team today, Adam Sunneth, Pat Montague, Devin Patrick, Jim Henry, and the rest of the team here at FaithFie. I'm Rob West. Hope you have a great day and we'll look for you back here again tomorrow. Faith and Finance is provided by FaithFie and listeners like you.