P2P Lending

You may have heard a friend or family member say they made upwards of 10 percent on their money through an innovative new investing idea, P2P lending.

But did they tell you about the risks? Many people fed up with low interest rates at banks are turning to P2P lending, which can easily beat a traditional savings account, but not without some risk. Financial planner and teacher Rob West has the pros and cons, and it's your questions on anything financial at 800-525-7000. I'm Steve Moore, P2P lending.

That's next right here on Money Wise Live. Okay, Rob, let's start with the definition, if we might. What is P2P lending? It's spelled P, the digital or the digit two, and then another P, P2P lending. Well, first off, P2P stands for people to people. It's where investors make unsecured personal loans to individuals and businesses.

And as you pointed out, Steve, it's not unusual to get average annual returns of seven to 11 percent. But make no mistake, if you take money out of your savings account and invest P2P, you're no longer a saver, you're an investor and all investments carry risk. Yeah, and these are unsecured loans, right? Well, let's say you want to borrow money.

And by the way, yes, they are. You go to a P2P website and fill out an application. The site then gives prospective lenders that basic information plus the loan amount and purpose and an assessment of the borrower's credit worthiness.

Well, let's switch horses. Let's say you're the lender. You go to the site looking to invest. You look through the information provided by borrowers and choose the loan or loans you want to invest in. That could be all of a loan or just part of it. Borrowers are usually limited to around $35,000 in what becomes an unsecured personal loan.

And the terms usually run three to five years. Okay, you mentioned credit worthiness. How do P2P sites determine that? Well, they base it on several factors. The borrower's credit score, income to debt ratio, the amount and purpose of the loan and the term. All those values are then converted into a single number, usually from one to 10 or so. And that indicates then the risk to the investor. It's also used to determine the interest rate, the riskier the loan, the higher the interest rate, and the higher the potential return.

Sure, okay. Well, it seems like this would be plenty risky because these sites will attract borrowers who can't get a conventional loan, I suspect. Well, you'd think so. But typically, that's not the case. P2P sites have many of the same credit requirements as banks. So for example, they won't accept borrowers with a credit score below 600.

The average is around 650. Also, these sites won't accept applications from borrowers with a recent bankruptcy, judgment or even a tax lien. Well, that's a plus. Oh, what are some of the other advantages to P2P lending? Yeah, we've already mentioned the potential for a bigger return than you can get at a bank. There's also the option to invest in just a piece of a loan. So you're actually buying notes or shares of a loan and you can do it and denominations as low as $25. So it allows you to, in effect, dip your toe in the water without having to put a lot of money on the table. And one more advantage, Steve, the P2P site handles the entire administrative end of the loan like underwriting, closing, even distributing the proceeds and collection, all of that for about a 1% management fee. Okay. Who are these P2P sites?

Yeah, well, you could Google to find any number of them. The two biggest are the Prosper Marketplace and Lending Club. Between them, they've issued, listen to this, more than $22 billion in loans. Wow, $22 billion.

All right. And no wonder with investors sometimes making 10% of their on their money sometimes, but it doesn't always happen, right? So what are the risks? Well, I think it was Will Rogers who said, I'm not so much interested in the return on my money as I am in the return of my money. And you definitely need to consider that before investing in a P2P loan. These loans, as you mentioned earlier, Steve, are unsecured, meaning there's no collateral behind them that you could go after in a lawsuit. It's entirely possible for a borrower to default on a P2P loan, meaning you could in fact lose all of your investment. Of course, that's why the potential returns are so much higher than with a savings account at a bank. And unlike your bank savings account, P2P loans are not insured.

So if a bank goes under your savings are insured up to $250,000 by the FDIC, not so with a P2P loan, you could in fact lose everything. Is there a scripture or two that might apply here? Or three or four?

Yeah. Matthew 10 16, be wary and wise as serpents. Also Ecclesiastes 11 two, give a portion to seven or even to eight, for you do not know what disaster may happen on the earth. You want to be diversified. Don't put all your eggs in one basket and don't take too much risk.

Okay, sounds good to me. This is MoneyWise Live, and we'll be right back with your call. Many people are experiencing financial challenges such as credit card debt, downsizing, debt in jobs, and depleted savings. In fact, more than half of all divorces are the result of financial pressures at home.

But there's hope. In Your Money Counts, biblical financial expert Howard Dayton shows that the Bible is a veritable blueprint for managing your finances. And you'll discover the profound impact it has on your relationship with God. Your Money Counts is available when you click the store button at MoneyWiseLive.org. If you're investing for retirement or any other goal, you may be wondering if it's possible to enjoy both profit and peace of mind, no matter what's happening in the market. SoundMind Investing has a short video webinar on that topic at SoundMindInvesting.org. SMI has helped tens of thousands of Christians learn to be wise and faithful stewards in the area of investing.

Profit and peace of mind, no matter what's happening in the market, at SoundMindInvesting.org. Do you remember that old ad from the 1970s for Clayton's? It's the drink you have when you're not having a drink.

Hi, I'm Bernie Dymott. Clayton's has become part of our language. A Clayton's drink looks as though it's alcoholic, but really it isn't. A Clayton's anything is something that looks real, but isn't. Question, is it possible to have a Clayton's person? You know, a person who's not really a person. A baby in its mother's womb, is that a Clayton's person?

Or maybe the street people we walk around on the footpath, they're almost always smelly. Are they Clayton's people? Or maybe those workers in the factories across Asia who make the toys our kids play with and the clothes we wear, all for a few cents an hour. Are they Clayton's people? Jesus said, I've come to bring good news to the poor and to set the captives free. I wonder when he looks around, whether he sees any Clayton's people on this earth.

I wonder. 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 christiancreditcounselors.org.

That's christiancreditcounselors.org or call 800-557-1985. Welcome back to MoneyWise Live. We're so glad you're along with us today.

We were talking about P2P lending just before the break. And we're so glad that you're here today. Let me give you the number if you want to call in with your questions.

800-525-7000. We're going to be taking all of your calls today and also some emails. We do take on occasion emails that come into us and we've got a few that we'd like to get to today.

We don't always have a chance to do so. So let's do that now. The first one comes from Betty and Betty just says I'm paying in advance on my car. I received a notification asking if I want to pay toward principal only. Is that a good idea?

And Betty, I appreciate that. You know, we certainly do want to pay against principal whenever we can. That is over and above the scheduled minimum payment. And when we do that, it's always a good idea to ask the lender how they want to receive that. Oftentimes it might be if you're sending a check with a coupon, you'll actually note that. If you're making that payment online, you can note it there as well. But I think the key is you don't want that payment applied to future payments. You want it in fact to go to principal if that's your intention. And so just make sure that's applied appropriately, that it's not being applied to perhaps next month's payment. But in fact, that extra amount is going directly to principal if that's your desire.

And by the way, keep up the good work on that, Betty. Let's also take Greg's question. He sends this by email. He says, I'm afraid of getting my credit cards hacked. Do I need to have a credit card protection service or is that just a waste of money for most people?

And here's what I would say about that. You know, using the freeze option with the credit bureaus is one way to protect yourself against somebody opening a new account fraudulently in your name, which would be identity theft. And so take advantage of that free service. But Greg, as to this particular question about your credit cards being hacked, that meaning perhaps that somebody is using a card of yours. They've gotten the information somewhere.

I think a couple of things there. Number one, always be monitoring your credit accounts, your financial accounts to see if you see transactions that aren't yours. And if you do, obviously notify them immediately. Good news is the credit card companies are becoming very savvy to all of these tactics being used by these fraudsters.

And oftentimes, they will alert you to the fraud before you even know about it. But do your part, stay on top of them. Also, be sure you use strong passwords and change them regularly. But there's really nothing that you need somebody to do for you, Greg, you don't need to pay for a service. You can do all of this yourself. And you can do it all for free.

So just stay on top of it. Once again, you're listening to MoneyWise Live. He's Rob West. I'm Steve Moore.

And we have lots of open lines 800-525-7000. These fraudsters, as you call them, Rob, these fraudsters, these scammers, these bad actors, who are they? Why did they do these things? And what do you say we get one on the program sometime and interview him or her? What do you think?

No, yeah, no, no, I don't think that's a good idea. I will say though, Steve, you know, most of the times they are in other countries. Obviously, they're leveraging the internet in a very sophisticated ways to take people to out of their money. And, you know, you've got to stay on top of it because it seems like as quick as the advancements in the security take place, they're one step ahead with a new scheme or tactic.

So we've just got to stay on top of that. Let's begin by going to Akron, Ohio. Hello, Amy. How can we help you today?

Hi, thanks. My mom had transferred some stocks to me probably over 20 years ago and some like original AT&T and I don't know Linton or something like that Northrop Grumman. And so some of the split and everything and I wanted to donate them. But when I donate them, they still ask for a cost basis.

I don't know what the best way to go about getting that. Yeah, well, obviously, the cost basis for you for a stock that was an inherited goes back to the value of the security at the date of the inheritance. And so it's a stepped up basis essentially. But given that the inheritance occurred a long time ago, is that right? Not the original purchase, but when did you receive these? No, I received them while she was still alive.

So I didn't even get that step up in cost basis. So I have to go back to when she caught them. Yes, I see. Okay.

Yeah. What makes this often very difficult, Amy, is, you know, that there may be splits, you know, a typical stock split could even be a reverse split. And there are some cases there's name changes depending on how big this company is. So one thing that may be helpful is just to go to the investor relations department.

Every publicly held company that issues stock has an investors relation department, give them the date that you actually received these and they should be able to help you determine that cost basis, which will be pretty critical. Now, if you're planning to donate these, obviously, that's going to be a great idea because they will, you know, there won't be any tax there. You'll get the value of the amount that you're giving without, you know, having to focus on, you know, the tax that would be due normally as capital gains. So that could be a very effective way to bless a ministry and you not to have to pay a whole lot of tax on this money.

And if you need help with that or more information, connect with our friends at the National Christian Foundation, ncfgiving.com. Okay. Amy, does that help? Does that kind of cover it for you?

Do you think? Oh, great. Yeah, very much. Thank you. All right. Thanks very much. God bless.

Casey is in Coconut Creek, Florida. Casey, what's on your mind? Hey, how you doing? Thanks. Great. Thank you. Hey, I was just calling because right now you got about $36,000 in debt between student loans, credit card, and car payment.

Yeah. And I'm just trying to figure out, you know, right now we're renting too, and it'd probably be a couple of years before we could pay everything off. Would it be a bad idea to get a house with a mortgage right now while having all this debt, or would it be better to try and pay it off?

Yeah, give me a... Casey, give me a rundown of what you have here. I heard you say car payments, student loans, and credit cards. Give me the value of each of those loans. Sure.

So the student loans, $26,000, car payments, $7,000, and then credit card is $30,000, $34,000. Wow. Okay. And are you adding...

Sorry. $3,400. $3,400. $3,400.

That's a little better. So are you adding to the credit card debt each month, or are you living within your means? Tell me kind of what's your current state of your spending plans. Yeah, we started a budget at the beginning of the year. We paid off a lot of credit card already, and we're not adding any more credit card debt. We're not adding any more student loan debt anymore either, so... Okay.

And do you find yourself able to stick to that spending plan, and if you are, do you usually have a little bit of margin left over at the end of the month? Yeah, we do. We do. Great. Great. Well, that's excellent.

A couple of things. Number one is our new MoneyWise app will really help you track the spending with the digital envelope system. You can download your transactions.

Make sure you stay on budget. You and your wife can share an account. And I'd love to give you six months of a pro subscription so you can get all those transactions coming down automatically. It's the MoneyWise app. It's on the Apple Store, the Google Play Store. Just search MoneyWise Biblical Finance.

You can download it. If you stay on the line, our team will get your information, and we'll make sure you get a six-month pro subscription so you can download everything automatically and have it automatically categorized. Number two, I'd love for you to connect with our friends at Christian Credit Counselors to see if it makes sense for you to put this credit card debt into a credit counseling program. It'll close the account, but you might get the—well, you'll probably get the interest rate down, pay it off a lot quicker. I think, though, I'd like to see you stay on this plan, definitely get those credit cards paid off in full, and then start saving for the house. Have you put anything aside for the down payment yet?

No. I had some money aside. I just used that to pay off a credit card.

Now I'm down to my basic $1000 emergency fund. So I think there's a couple of other priorities here before we think about buying that house, Casey, as much as I know you'd like to get in to your home. I think, number one, we've got to pay the credit cards off in full. Number two, let's get the emergency fund up to three months expenses, and then we need to really save 20% for that down payment, which I know is going to take some time, especially in South Florida with real estate prices the way they are. But you'll be glad you did because you'll have some equity going into the home. You won't find yourself upside down, and you won't be taking on a major mortgage without some really solid pieces already in place on your financial situation here.

So as much as I'd like to say go for it, I think it'd be better for you to wait and do that down the road. Casey, we're glad you called today. We wish you the very best as you work through these various dynamics. Thanks again for your call. When we come back, a call from Boynton Beach. Is this a good time to sell my house? Also, Henry, Harry, and Josh on hold as well.

We'll be back with all of that and more right after this brief break. You're listening to Money Wise. Many people adopt an attitude toward marriage and finances that it'll all work out somehow.

But sadly, it often doesn't. Financial woes can devastate a marriage, but there is a better way. God's Way. Money and Marriage God's Way by Howard Dayton will help you discover God's approach to growing your finances, strengthening your relationship with your mate, and cultivating Godly joy.

Money and Marriage God's Way is available when you click the Store button at MoneyWiseLive.org. Hebrews 4-12 says, For the word of God is quick and powerful and sharper than any two-edged sword. Here's Beth Moore with a quick word. My girls were little. They were as different as night and day.

I just still are, but they're the best of friends now. But oh, they fought themselves half to death when they were little bitty girls. And Melissa was just one of the... I mean, Amanda was just one of those who just... I mean, she just obeyed. She just did.

Very, very sweet natured. And all I'm going to say about Melissa is she was not that way. She was the epitome of a strong little child. I've said so many times, she would have made James Thompson cry his eyes out, and I have to leave it with all my heart. But I can remember when she would do something to Amanda, and Amanda would come in and she would say just exactly this way.

She'd go, Melissa hit me and she's glad she did. She always added that part. Always.

Always. Because to Amanda, it was just the motive, the heart, was so... It was not just that. She didn't just hit me, she's glad she did. Melissa called me stupid and she's glad she did.

And for everything, she's glad she did. He saved you and he's glad he did. He called you and he's glad he did.

He set his affection upon you and he's glad he did. In fact, if you never get that through your head, and I never get that through my head, we'd stop taking our tours into the ditch. Because I'm telling you, our magnet back to the pit of sin is our own unbelief that we have really been made different and are completely loved by God.

You can take that one to the spiritual bank, it will never change. You've been listening to A Quick Word with Beth Moore. The study of Galatians is now available as an online experience. Sign up today at BethMoore.org, or join Beth in January 2021 for the release of the printed workbook edition.

Again, that's BethMoore.org. Many people adopt an attitude toward marriage and finances that it'll all work out somehow, but sadly, it often doesn't. Financial woes can devastate a marriage, but there is a better way. God's Way. Money and Marriage God's Way by Howard Dayton will help you discover God's approach to growing your finances, strengthening your relationship with your mate, and cultivating Godly joy. Money and Marriage God's Way is available when you click the store button at MoneyWiseLive.org.

Welcome back to MoneyWise Live, finding God's plan for your financial life. If we can help you with that, we'd like to try. Give us a call first, 800-525-7000, down to Boynton Beach, Florida. Orlando, thanks so much for holding my friend. How can we help you?

God bless you. Thank you for taking my call. I have a house still paying for. My balance is about $210,000. I hear from the market that maybe I can get $5, $5.50 for the house. We are praying for guidance to see if it's God's time to sell it or keep it. And I don't know, what do you think about the market today? Should I do it now?

Should I do it later? Now tell me what you're trying to accomplish. I mean, there's one thing to say, is this a good time based on the housing market and the part of the country you live in, but it's also your home, right? This is not an investment. This is where you live.

Is that right? Yeah, this is where I live and we're trying to downsize. Oh, you are trying to downsize. Okay. So you've decided, yeah, you don't need this much house. You want to try to buy something a little smaller, maybe less upkeep, less expense. You know, if that's the case, Orlando, I wouldn't hesitate to go ahead and proceed.

Here's the thing. It happens to be a really strong seller's market in most markets in the country. And I would certainly include South Florida in that because there are more buyers than there is inventory. And so things are moving typically very quickly. We had a housing market that for the last decade has been incredibly strong.

It temporarily cooled off a little bit in the height of the pandemic, but it's already now picking back up significantly. So it's a great time to sell. It's going to be a more difficult time to buy for the same reason.

And usually that's the case. You know, unless you're entering the housing market for the first time, you had been a renter and now all of a sudden you're buying your first home, then it probably has a little bit, you know, it could work more either for you or against you depending on what's going on. But if you're selling one and buying another, it really doesn't matter what is going on in the housing market because you're going to do well on one side of the equation and you're going to not do so well on the other.

You're either going to get top dollar and then pay top dollar or you're going to sell at a discount and buy at a discount. I think the big idea is where is God leading you? What do you have in the way of resources? What does your spending look like? And what values do you have and how can you reflect that in how you're managing God's money? And if you want to downsize, to have less going toward housing, so you have more margin for giving and savings goals and other things that the Lord has laid on your heart, then I would say, don't think twice about it.

Move forward. And I would encourage you to get a realtor in there to help you stage the home. Think about any minor maintenance you need to do before you sell and then go ahead and list it and then really be thoughtful about how much you want to spend on the next house based on the budget that you have and what God is leading you toward.

But I think at the end of the day, this is as good a time as any for you to go ahead with these plans if this is where you feel like you should be heading. If you really want to downsize, Orlando, when you downsize, don't forget you'll be moving into a house that is maybe more expensive than it was a year or two ago when you were thinking of downsizing. So do your due diligence, do your homework before you put the current house on the market, all right? Okay.

I appreciate your advice. And yeah, my major goal is to get rid of the mortgage. Sure. Yeah. Well, that's a great goal.

I love the idea of you trying to become debt-free and obviously you've got, looks like potentially $240,000 minus the cost of the transaction that you can put into your next home, hopefully with a much smaller mortgage or even buying for cash. God bless. We're glad you called today.

Thanks very much. On to, well, let's stay in Florida. Deerfield Beach, Florida. Harry, what's your question for Rob West? Hi, Rob.

Hi, Steve. My question is regarding credit score. I've got apparently seven credit cards, which all have a zero balance, but I opened a few of them.

They had one of those come ons where if you spend so much money in so many months, you get a $200 bonus, whatever. So I signed on for a couple of those and took advantage of that. But now my credit score where I've got excellent in five of the six areas, the last one I'm below average because I had seven within two years, new accounts. I didn't know it was such a penalty for opening a new account. What's the best way to get rid of those or clean those up and help clean up the credit score? Yeah, well, the good news is that unless you're going out looking to take on a new mortgage or qualify for a loan, you probably have excellent credit and any temporary dip in your score as a result of closing these cards is going to be minor. And it probably doesn't even impact you at all, again, unless you're out seeking new credit. And there's going to be a benefit, as you said, by reducing the overall credit that's available to you just because every one of these has a credit limit, even though you're not using it. The other issue that often will hurt people in these situations is if they're carrying a balance, reducing the overall debt pushes their credit utilization up, that won't affect you. So I would take the total number of cards you want to cancel and maybe do half of them now and then wait a few months and do the other half. Any impact is going to be minor, and I think you'll be glad you did it because it's less to keep up with. Harry, we're glad you made it through today, and I hope that information helps you as you work through those seven cards.

We'll be right back. Investing is more than just returns. It's an expression of who you are and what you value. Does the way you invest your money reflect your identity as a Christian? At Eventide, we design investments for performance and a better world, so you can invest with the confidence to reach your financial goals while remaining true to your Christian values and commitments. We call this investing that makes the world rejoice. More is available at investeventide.com.

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Go to mymoodyradio.org, mymoodyradio.org. Money and life run on the same track, but unfortunately, sometimes it seems like your money is heading in a different direction from your goals. In Never Enough, Three Keys to Financial Contentment, author Ron Blue helps you to break down all your financial options to a basic four and then shows you how to keep it all chugging along in the right direction on the same track.

Never Enough, Three Keys to Financial Contentment, available when you click the store button at moneywiselive.org. With SRN News, I'm John Scott. The White House is boosting its offer in up and down COVID-19 aid talks in hopes of an agreement before election day. President Trump taking to Twitter to declare COVID relief negotiations are moving along, go big. A top economic advisor says the Trump team is tipping its offer in advance or upping its offer in advance to a conversation between Treasury Secretary Steve Mnuchin and House Speaker Nancy Pelosi. President Trump says the Federal Emergency Management Agency is prepared as Hurricane Delta continues to churn toward the southwestern Louisiana coast. It's now about 50 miles south-southwest of Cameron, Louisiana, with top sustained winds of 105 miles per hour.

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New Lenox, Illinois. Henry, how can we help you, sir? Good afternoon. Thanks for taking my call. I've got a question and that is about 10 months ago I lost my job and at the time the mortgage company kind of said, hey, look, you know, if it was due to COVID, things of that nature, you no longer have to pay your payments. We can postpone the payments. So things dragged on and it's been a total of 10 months.

I am working now. But during that time, I've accumulated about nine months of nonpaying the mortgage and they were the ones who kind of like provided that option, no penalties or anything of that nature. But during that time, you know, my credit cards, I increased the balance and things.

So just survival mode, if you will. And now I'm at that point where, okay, I'm back in the workforce, not making as much money as I used to make. And my wife is not making as much money as she used to make.

However, we'd be able to kind of like stretch things tight and be able to afford our expenses. My question, if you're able to answer or not, is the mortgage companies, will we need to re-qualify for this to kind of maintain the mortgage or they haven't really said how they'll do something like that? Yeah, you won't have to re-qualify, Henry, for the mortgage. You know, if the lender was the one that worked with you on the forbearance that resulted in you being able to miss these payments without any penalty, you should be fine. The CARES Act doesn't spell out your rights on repayment and different banks are establishing different requirements. And if the mortgage is federally backed, there could be certain protections there. But bottom line is you'll have to make up those payments.

You'll want to contact the mortgage company to find out how they'll want you to do that. I suspect they're going to just add it to the end of the term. And so you'll just continue on past the current term until you pay off what was added to the mortgage and you'll be paying interest on this additional money for the life of the loan. So it's going to result in obviously more interest paid and a longer payback period.

But in terms of re-qualifying, that will not be a part of the equation. And it was in their interest to do this, not only to be helpful in a very desperate situation for so many Americans in the midst of the pandemic, but also, you remember, if they would have foreclosed on it, they would have lost a lot of money. And the cost of that plus the, you know, the sale of the property at a discount. And so, you know, the fact that they could keep this mortgage, you have you're exercising good faith here saying, I want to be an on-time payer. And as soon as I have income to do it, I will. It sounds like you're about to resume that.

So this works out in everybody's favor, despite some very difficult circumstances. So I would just go and contact them, let them know if you haven't already that you are working again. You want to resume payments and whether you just go back to your scheduled monthly payment or there's going to be some change in the monthly payment. But I suspect it will be the same one, especially when they know it's going to be a stretch for you to do it, although you've made provisions to do so.

And then the amount that's owed will be added to the back end. Henry, we're glad that you've found work again, and we hope it's a job that you find as satisfying and that meets all of your financial requirements as well. We wish you the best. Thanks so much.

Vassel, Minnesota. Hi, Josh. What's your situation?

Hi, thanks for taking my call. I got a whole life insurance policy question. I've heard you guys talk for the last couple of years on your views on whole life insurance policies, and I tend to agree now. However, about 13 years ago when I just got out of college, my wife and I each got $100,000 whole life policies and then $400,000 term policies, and now we're 12, 13 years into it trying to figure out, do we keep going? Each one of our policies got about a $12,000, $13,000 cash value. I talked to one financial advisor and he said, well, if you cancel your whole life, take that money and invest it, roughly 8% over the next, you know, 20, 30 years, you'll come out ahead, then the current about 4.5% that we're getting right now. I'm kind of wondering you guys' thoughts on that.

Yeah, I would concur. I mean, I think the biggest thing here, Josh, is to make sure, first of all, that you have the right amount of coverage to protect you and your family on both your life and your wife's. And, you know, as a rule of thumb, we would say just as a starting point would be 10 to 12 times your income. And then if you have, you know, a major expense coming like, you know, college education for a child, you might want to add to it, you know, being able to pay off certain amounts of debt. You want to just make sure that you have the right amount of coverage so that your family members are protected in the event of your death, that she would be able to replace your income and provide for the family. And the same would be true if she's bringing income into the home or if there'd be added expense as a result of her death.

And most often that's going to be, you know, full-time childcare or something like that. And the most cost-effective way to do that, provide the right amount of coverage is term because it's pure insurance. But separate from that is this whole life policy with a cash value.

You've been paying on it a long time. And I think I would rather see you take that money out, invest it in a well-diversified portfolio for the long haul, and then perhaps recoup the amount assuming you're still paying premiums and it's not being paid out of the cash value, redirect that premium to perhaps a larger term policy if in fact you need coverage beyond what you have today. So I like that plan. I would concur with the advisor that you were speaking to and I would proceed accordingly. Josh, thank you very much. Oh, I'm sorry, Josh, didn't mean to interrupt you there. Go right ahead.

No, I was just saying thank you very much for your thoughts and appreciate it. Absolutely, Josh. Thanks for your call, sir. Thanks, buddy. Appreciate it. To Indianapolis.

Hi, Jill. You have a housing question for Rob? Yes.

Go right ahead. So we are considering selling our house right now and we met with an agent and for what he's telling us, we could probably ask. We feel like we would get about $60,000 to be able to, from the sale, to be able to pay off all of our debt and have perhaps about $8,000 to $10,000 less.

So our question is, do we do that and buy a house right away where we probably would only have about 5% to put down, or should we rent, or should we wait until we have more equity built up and sell later in another year or so? So what is this debt that you'd be paying off? It sounds like you have, what, about $50,000 in debt you'd be paying off, maybe a little less?

Yes, yes. So we have about $35,000 in student loans, about just a few other small things, like about $2,000 on a home equity loan, about $12,000 on my husband's car, and about $1,800 on a credit card. Okay. And tell me about your spending plan.

Are you able to meet all of those monthly minimum payments on all the debts you just mentioned and still have something left over at the end of the month? Yeah. We've been paying extra, like two or three times extra on each thing each month.

Okay. And tell me about this home. Do you feel like it's too much home for you?

Do you feel like the, either the size is more than you need or the payment itself is too much that it's placing a burden on you on a monthly basis? Actually, the home is a perfect size for us. We actually just finished redoing the entire basement.

It's just that with the market the way it is, we thought perhaps we could sell it and pay off everything. Let's do this. We got to take a break. Hang on the line. I want to finish talking right around the corner. Stay with us.

Thank you, Joe. We'll be right back with more MoneyWise Live. Do you know if you have enough? Enough money? Enough house?

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You'll find it all in Master Your Money by Ron Blue, available when you click the store button at MoneyWiseLive.org. Hi, I'm Barry McGuire. I'm here to help you understand how urgent and how fun it is to share your faith at every opportunity through the eyes of a layman. These are interesting times that we live in with a global pandemic, racial tensions, rioting, murders, division, and lies abounding nationwide. Who knows what's true anymore? So many politicians report are endorsing those who promote evil and shifting blame to the righteous who stand for truth. Those of us who serve the Lord live in truth. We have God's word to guide us in that truth. And on November 3rd, every Christian has the responsibility to exercise that truth when they vote, not by being political or partisan, but by using the truth of the Bible as your voter's guide. Exodus 18 21 says, select from all the people, some capable honest men who fear God and hate bribes. Appoint them as leaders. Your responsibility is to select the right leaders by voting for honest people who fear God and hate bribes to govern our nation. There is nothing more exciting than knowing God is using you to move people closer to him.

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He gave us a free will, the choice to choose him or reject him. That's love. But at the end of the day, there are consequences. Justice goes hand in hand with love. So does forgiveness. That's why he sent his son Jesus to pay the price for our failures. And whoever believes in him will receive eternal life.

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Yeah, Jill, I appreciate that. Just to recap for the benefit of our listeners here, you own this home, you've got about 50 or 60,000 in equity. And you're looking at because of the strength, at least what I'm hearing is because of the strength of the housing market, and some appreciation, you're looking at this as an opportunity to perhaps sell the house, pull the 50 or 60 out in equity to pay off primarily a student loan, but then also some credit cards and some other debts, you'd pay it all off, you'd have perhaps, you know, somewhere around eight or 9000 left when it's done. Here's the thing, take this with a grain of salt. But I'm going to throw out another alternative here.

And let me just give a caveat to this that I don't want to get in the way of what the Lord is doing. If you and your husband have prayed about this and really feel like you need to sell this home, then I would say absolutely proceed. But here's what I want you to consider. You know, number one, you just put a lot of money into the basement and finishing it out, you're not going to get that back in full, you'll get some of it back, it'll help you to sell it at a higher price than if you hadn't done it.

But you're probably not going to get the full amount of what you put into it. Number two, it sounds like at least you've said, this house really is a good fit for you all in terms of the size, it fits well within your budget. And you have margin on a monthly basis that you've been using to chip away at these debts over and above the minimum payments.

Number three is any debt that you have other than the student loan, I realized why you would get into that, but any debt you have, that's a result of perhaps overspending. I kind of like the idea of some hard work going into paying it back, like dialing back your lifestyle and making some sacrifices and deciding, you know what, we're not going to eat out one night a week that we would have otherwise, because we're going to take that money and really focus on our spending plan so we can get more money going to the credit cards. And then you get that sense of satisfaction once you paid it off that, hey, we've done some hard work here and it's gone.

And look at that. And by the way, we still have our home. So, you know, just because the housing market is strong, I'm hesitant for you to sell, take all this money that you had in the home and pay off the debt. And then you're renting, rent prices are, you know, a bit high right now because the housing market is so high. And I don't like the idea of you getting into a home with less than 20% down because of the housing market goes the other way.

Now all of a sudden you're upside down. So I think my preference, again, apart from the Lord really providing you some clear direction here, that's counter to this advice. My inclination is you keep the house, you're really focusing on that spending plan and you and your husband set a goal to attack that credit card debt. Once that's gone, you move on to the next thing. And, you know, you keep this house and, you know, once that debt's paid off, look at perhaps even accelerating the mortgage payoff over time. But but tell me your thoughts on that.

Yeah, I mean, that sounds like a good idea. We keep we have been praying about it and we keep going in our basement and looking at everything and saying, do we really want to get rid of this? You know, like, we're so happy with it. But we're also tired of paying on, especially that student loan debt, just such a large debt. Yeah, and that's real. And so struggling through it.

Yeah. And I totally get that. I guess the thing I'd if you were calling me saying, Rob, we made a mistake, we bought too much house and this is really putting a strain on our finances and our marriage. And we've got all this debt. If we could sell it, we could buy something smaller and get out. But that's not what I'm hearing. I mean, although you have a nice basement that you just finished, which probably cost a good bit of money, I don't hear you saying this is way more than we need or it's creating some strain.

In fact, you've got money that you're using to accelerate your debt payoff. So I think that would be the direction I would at least think about, talk about with your husband. You guys prayed through and we'll ask the Lord to give you some wisdom. We will indeed. Jill, thank you very much. And let us know how things work out. OK, we'll pray with you about this.

Chicago, Illinois. Daniel, how can we help, sir? Hey, guys, thanks so much for taking my call. So when my wife and I got married four years ago, we decided to plan ahead and open a 529 plan with me as the beneficiary. And we were putting in just twenty five dollars a month. I at the time I picked an out of state 529 plan with the state of Iowa. The simple fact that the Iowa plan offered low cost Vanguard funds. And it was my understanding that the Illinois plan had a bit more expensive fund. So anyway, as of today, that 529 plan with state of Iowa has a few thousand dollars in it.

Well, fast forward to this year. The Lord blessed us with a little one. We're now planning on changing the beneficiary to our son and increasing the contributions to one hundred a month. And so the question is, should we keep the 529 plan with state of Iowa or switch to Illinois for a tax benefit now that our contributions are a bit larger?

Yeah, well, it's definitely something to consider, and I don't have the answer right off, but I can tell you where to go to get it because you're right, Daniel. There is often a greater benefit of the in-state plan if your state has state income tax, which yours does, and quite a bit of state income tax in the form of a deduction versus what you might get in the form of a benefit of either lower fees or better performance inside of a 529 in another state. And the way to evaluate that is a website called saving for college dot com. If you haven't seen it, it's got the best calculator out there where you'll put in your state, the age of your child, how much you're going to put in all kinds of information. And it will run an analysis to look at the benefit of you using the in-state plan there in Illinois versus all of the other plans around the country that allow out-of-state participation, which most do, and look at historical performance fees and then come back to you and say, here's what we recommend.

So I would go that route in terms of how you evaluate whether or not to stay put or open a plan somewhere else. Does that make sense? Yeah, yeah, it does. I appreciate it. Thanks so much. Okay. Appreciate your call today. God bless you. Thanks, Dan.

Scottsboro, Alabama. Hi, Gary. Just a little bit of time. What's your situation? I've been blessed and 35 years in 401ks and IROs and we have about a million and a half in there. And I've had a couple of investment advisors trying to sell me on moving away from portfolio funds into, I'm sorry, into mutual funds into having my own portfolio.

And I'm wondering if that's actually good advice. Yeah. So they're saying that they'd rather you not invest in mutual funds and instead they want a portfolio, perhaps that they would assemble themselves, of stocks as opposed to funds. Is that right?

One just general stocks and the other preferred stocks. Yeah, I see. Okay. Well, first of all, Gary, it sounds like you've over a lifetime done some hard work to limit your lifestyle and be a consistent saver. And you now are seeing the benefit of that. We talk about it all the time here, the power of compounding and being an investor in your future regularly. And and you're enjoying the fruit of that.

So congratulations. I think, you know, there's nothing wrong with mutual funds. Some investment advisors, some investment professionals will use individual equities, stocks to build portfolios. I think there's a case to be made for preferreds in your stage of life where you're looking for a little bit more income, perhaps with a little more stability in the underlying stock.

Preferred stocks are often an underutilized tool in your tool belt. But there's nothing wrong with mutual funds, whether it's a passive strategy with an indexed approach or an active manager who has a unique skill set or expertise. I've got mutual funds in my investment accounts and love them. And so especially if you find some really good ones that just have a unique expertise in a certain sector or something like that, I think the big question for you, Gary, first of all, is do you want to manage this money yourself? Do you feel like you have the time and the expertise to build the portfolio, whether it's funds or individual equities or preferreds? Or do you want to hire an investment professional to do that for you? Obviously, with you, you know, closely involved in that, but somebody else where you're delegating that decision to a professional and his or her investment strategy, which by the way, plenty of investment advisors use mutual funds themselves.

But answer that question for me first. Do you feel better doing it yourself or are you wanting to hire somebody? I don't feel like a trader. I mean, I've known people who research the stocks and I don't know that I have expertise in doing that. I'm an engineer. I'm not a finance person.

Yeah, yeah. Well, and I would concur, actually, you spend your whole life amassing some wealth and this is not a time to perhaps kind of go it alone if this is not your particular bent or expertise in the same way you'd hire a professional to do all kinds of things, whether it's a medical procedure or selling a piece of real estate. I think the same is true here. But again, there's nothing wrong with mutual funds. There's nothing wrong with individual stocks.

There's nothing wrong with preferreds. I think it's really finding the advisor that you have the right match with the right temperament that's going to communicate with you, the frequency and the method that you want, has the track record and the experience and really can help you manage this money in such a way that reflects what God is doing in your life. It's not a matter of beating the market. It's a matter of getting the return that you need to fund your lifestyle with taking as little risk as possible. And that might be done very well through preferreds, but another advisor might use mutual funds. So what I would recommend you do there in Scottsboro, Gary, is if you don't already have somebody, I'd go to our website, MoneyWiseLive.org, click on find a CKA and visit with a couple of certified kingdom advisors, perhaps as many as three in that area, get a feel for who they are, how they operate and how they manage money. And I think you'll find clearly some varied approaches and then pick the one that's the best fit for you.

But I would concur having somebody walk alongside you and perhaps even make these decisions for you as a fiduciary would be the way that I would encourage you to go. As a fiduciary, what's that mean, Rob? Where they're going to put your interest above their own and they're going to manage the money based on your needs, not what's going to generate the most commission, the most compensation to them or anything else. And these days, if one goes in and says, ah, 50-50, I'm middle-aged, I don't want to lose too much, I don't have to make a lot, what kind of a return would one expect to get from someone who's helping you from ground zero these days? Well, it just totally depends on your age and your objectives. So somebody like Gary has worked his whole life, he's now trying to generate an income, assuming he needs to generate an income off of this, they might target 4% a year to be able to supplement his income.

If he says, no, all I need is social security and a pension, this money can continue to grow, they may take a little bit more risk or less because the money is not needed. It all depends on what your goals and objectives are. Rob West, always a pleasure. It's been a great week. Hope you and yours have a wonderful weekend as well. Thanks, Steve. You too. MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. For Rob West, I'm Steve Moore. Thanks for listening.