A Hybrid Envelope System

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Not licensed in Alaska, Hawaii, Georgia, Massachusetts, North Dakota, South Dakota, and Utah. You can buy a box of envelopes online delivered to your door for just a few dollars, but using them to budget, well, that could save you a fortune. It's true the old tried and true cash envelope budgeting system will help you spend less, but many folks still prefer to use credit and debit cards instead. So today, Kingdom Advisors President Rob West has a way to get the best of both worlds. Then it's your calls at 800-525-7000.

800-525-7000. I'm Steve Moore, a hybrid envelope system, next on MoneyWise Live. All right, Rob, so how exactly does the envelope budgeting system help you cut back on spending? Well, Steve, I guess the easiest way to describe it, it makes spending real. You see, studies consistently show that when you have to take actual dollars out of an envelope at checkout, well, you naturally want to spend less, usually 10 to 30 percent less than you would if you use a credit or debit card. Yeah, but as we said, many folks we know still prefer to use plastic these days.

Yeah, that's right. Probably because it's far more convenient than getting cash out at the bank and filling up those physical envelopes for each of your budget categories. Yeah, so how do we get the best of both worlds? Yeah, well, as you indicated with a hybrid system that incorporates both, you can continue to pay some of your bills online using a credit or a debit card like your mortgage, utilities, and insurance, things that tend to be the same from month to month. But for truly discretionary categories, I'm talking about food, clothing, shopping, and entertainment, you would use the envelope system and pay with cash. That allows you to still save money in a significant part of your overall spending plan.

Yeah, I like that too because there are times when I go in to buy a, oh, I don't know, a cup of coffee or a bagel or something. I hate to use my credit card for a dollar and 10 cents or something like that. So, all right, so how do we get started? Well, as you would when setting up any budget system with research, you need to track your spending for a couple of months to see where your money's going. Now, a very easy way to do that is by downloading the absolutely free Money Wise app in your app store, which is actually based on the tried and true envelope system. It enables you to track every penny you spend and assign it to the appropriate category.

Okay, and then what? Well, once you have a good idea of where you're spending your money, you can decide which categories you'll commit cash to. We mentioned that food is a good cash category because you're usually in a checkout line when you buy it, whether at the grocery store or even eating out. Utilities, on the other hand, wouldn't be a good cash category because you'd have to drive to an office somewhere to use cash, so it's easier to pay utilities online. Try to come up with three to five budget categories where you can conveniently use cash. Okay, all right, so now I have my cash categories, then what do I do?

What's next? Yeah, then you stop using credit cards for them. Instead, you'll load cash into the appropriate envelope for each category.

You can do this every week or perhaps every payday, whichever you like. When the money runs out in an envelope, well, you have to stop spending or pull dollars from another envelope and just knowing that helps you spend less and hopefully stay on budget. Yeah, that's fine, but folks are buying more and more things online these days, even food, so in that case, I guess you can't use your cash envelope system. Well, au contraire, my good man, consumer expert Clark Howard's team has come up with a handy workaround that lets you use the envelope system even when shopping online. Listen to this, you simply set up one more envelope marked, of course, online, but you don't load any money into it. Here's an example, so you order a $15 case of beans online with a debit card, but since food is a cash category, you have to take 15 out of your food envelope and put it in the online envelope.

That then holds you accountable to the cash system. Okay, but what happens to that money in the online envelope? Yeah, one of two things, you can either deposit the cash back into your checking or savings account or just use it to reload your envelopes for the next go-around, meaning you'll withdraw that much less to refill your envelopes. Either way, you've stayed on budget.

Huh, okay, that's a pretty handy trick. Any other tips for the hybrid cash envelope budgeting system? Yeah, keep a little money on you at all times.

I'd say $20 to $50. That's your, I forgot my envelope money. It'll keep you from using the plastic. Remember, the whole idea here is you want to get the benefit of spending less with cash, and if you don't want to give up the rewards from using plastic, think about giving up 2% in rewards to gain at least 10% in reduced cash spending. And there you have the hybrid envelope budgeting system, courtesy of Rob West, 800-525-7000. Nice to have you out there today. It's MoneyWise Live with your host, Rob West.

I'm Steve Moore, and this is a place where we meet each day to encourage each other, to manage our money biblically and effectively, practically, if you have any thoughts or suggestions, things that work for you when it comes to manage your money. Actually, I'd like to camp out for a minute on something you said just a moment or so earlier, Rob, and you mentioned, let's see if I can, I wrote it down here. Yeah, you said if you order a $15 case of beans online with a debit card. How often do you actually do that, Rob? A $15 case of beans?

Could you? Well, you could probably save on the price per bean if you've got a $15 case of them. You know, it's a good deal.

Well, to be honest with you, Marcia and I have been married for quite a while now. I don't know where we get our beans, but when this program's over, I'm going to check it out and report tomorrow. Please do. Yeah, I'll be waiting for that.

Definitely do that. Okay. 800-525.

Wait a minute. Where are we? 800-525-7000.

Let's begin by going out to Donahue, Iowa. Quinn, nice to have you there, my friend. How can we help you? Hi.

Thanks for taking my call. I have money, and my wife and I have some money in a few different kinds of investments and retirement funds. There's two different retirement funds and two different mutual funds. We had a son about two months ago, so we have a little bit of credit card debt, about $5,000.

There's a medical bill from the hospital, about $4,000. And then we have a vehicle loan for about $13,000, and we just refinance our mortgage to a 15-year fixed. I guess my question is, my dad has always been very strong about leaving money in mutual funds. It gives me the longer that it's out of the market, the more the compound interest you're missing.

Sure. But then I've also been told, I've read a lot, I've listened to a lot, that you can't really even begin to invest. I've never actually contributed to the mutual funds because I haven't been able to get ahead enough beyond debt to do that.

So would you advise for or against withdrawing money and paying the capital gains to pay that stuff down, or do you leave it? Yeah, yeah, it's a great question. And by the way, I hear that cute little guy in the background. Congratulations on that. Yeah, I'm at home.

I debated on even calling because I'm at home. I'm so glad you did. No, we always need a few baby sounds in the background.

That's great. Hey, you know, this is a great question. And you know, as you think through it, and you know, as you think through it, Quinn, it really all comes down to just the priority use of God's money, because everybody has limited resources, right?

And we've got an unlimited number of alternatives. So we lean into this recognizing first God owns it all, therefore we're his manager, we want to be faithful stewards. And then we want to know the principles from God's word that really help us to navigate ensuring that our spending, our allocation of God's money, does in fact not only line up with his principles and his word, but also with our values, with what's most important to us. And, you know, we recognize that the longer term the perspective, the better the decision we're going to be able to make today.

And financial maturity is giving up today's desires for future benefits. And so, you know, it all comes down to lifestyle, how we rein in our spending, and make sacrifices in the short run, so we can realize those things that are really important to us in the long run, like, you know, saving for the future, and being able to give generously, and, you know, at some point being able to fund a college education for that little guy that we hear in the background. And, you know, all those other things that are just really important to you all, and by the way, enjoying God's money as well, taking a vacation every now and then to build some memories, you know, as you're able and as God provides.

So how do you kind of navigate all of that? And I think you've got to come back to just that day-to-day, month-to-month spending plan and say, okay, how do we take the resources we have and live with contentment within God's provision and begin to allocate what we have according to what's most important to us and what we want to accomplish in the future? So you've got 100% coming in. Obviously, some of that's going to come right off the top if you're a W-2 employee for taxes, and, you know, you're probably going to have, you know, a few other things deducted out of there. And then you've obviously got your net spendable income at that point. So I would give first right out of that off on the gross and then I would next look, if you don't have an emergency fund, I'd look to fund that with any surplus. And by the way, you've got to have something left over after the bills are paid, both discretionary and fixed expenses, if you're ever going to pursue any of these goals and the extent to which you're living right up to the edge or beyond it every month, you know, is really going to limit your ability to pursue any of this.

But assuming you dial the spending back such and you track it, that you can actually, you know, have some margin left over, then then here's the priority use of that. Emergency fund first. If you've got credit card debt, which you do, you said you've got about $5,000. I'd cap that emergency fund at $1,500 while you really go after that emergency fund. Excuse me, yeah, go after the credit card debt with every bit of margin that you have. Once you get the credit card debts paid off, then I'd get that emergency fund up to three months. After that, I would be looking at systematically starting to contribute to a retirement plan up to the matching portion of your, you know, company sponsored plan, if you have it, with a goal of trying to get up to 10 percent. You know, with regard to the mortgage and the medical debts and a car, you know, obviously we want to continue to pay on those systematically at the very minimum, making your minimum monthly payment. But I would go after the medical debts next before even I would push my retirement plan up beyond the matching portion. Once the medical debts are gone and we've just got the car and the mortgage, I think it's then time to start focusing more on adding more to the investments.

Should you pull out anything to go ahead and pay any of these debts off? I'm not a big fan of that unless you absolutely have to. And here's why.

Two reasons. Number one is it's expensive money in the sense that not only do you have the lost, you know, opportunity cost where that money is no longer compounding for the next 10 or 20 or 30 years, but you also have to pay the taxes, as you mentioned, capital gains. And if it's in a retirement plan, early withdrawal penalties are added to your taxable income for the year, those types of things. The other downside is it takes away this need to really fix perhaps what is at the root of the problem, which is overspending, not living on a budget, not reining in your your expenses. And I'd rather you do the hard work to do that and get it right for your future than I would go ahead and pull it out of the investments, continue to live right up to the edge, and then you call me back six months or a year and you say, Rob, the credit card debt is back and we have 10,000 less in our investments.

I've thrown a lot at you there, Quinn. Tell me your thoughts. Yeah, I mean, there is the base problem with spending and I started taking steps to look at that using NerdWallet and a few other things. And yeah, it is kind of like the quick fix to draw money out.

I guess I'm just torn as to whether I should try and clean the slate and change my habits because knowing that I don't want to be in the same place in a few months or like you said, carry the debt and work to pay it off and then while changing my habits. Exactly. A real upside or not. Well, I think there is just because of human nature and just, you know, the thousands of calls we've taken over the years. Let me just tell you, you may be the exception, but typically you're going to be the rule, which is you take the pressure off with the quick fix. We don't solve the underlying issue.

It's coming back. And so as much as I hate credit card debt and I'd love for you not to be paying that high interest rate, I'd rather you go back, trim the budget and start attacking that debt using the snowball method with just sending as much free income as you can at it beyond the minimum payment. The other option you could look at would be a credit counseling program, which would basically it sounds perhaps worse than it is.

Essentially, the account would be closed. You get the interest rate down, you could pay it off 80% faster. And our friends at Christiancreditcounselors.org can help you with that. But if you want to do it yourself, I would just go that approach. I would encourage you not to pull it out of the investments though right away. Do the hard work.

It'll pay for itself in the next 20 and 30 years as you make some of these really important decisions. Gwen, we're glad you got through today. God bless you and that cute little boy there.

And we'll be back with more after this. It's MoneyWise Live 800-525-7000. This is MoneyWise Live.

That guy over there, the good looking one, that's Rob West. And he's taking your calls, questions, comments today on anything financial at 800-525-7000. Talking about anything today that's of interest or concern to you, but for a few minutes here also talking about budgeting, which is really, I mean, other than Christ himself, it's kind of the cornerstone on which we build everything else when it comes to personal finance. Rob, sometimes that word budget is just kind of offensive almost unto itself. And I want to get to the app here in a second, but can we call budgeting anything else that makes it more palatable? Yeah, a lot of people don't like that word budget. And so, yeah, we do refer to it as a spending plan. I'm not sure how much more exciting that is, but perhaps it's a little better. All right.

All right. Well, let's make it better by talking about the app because that's a little more contemporary. Well, you said make budgeting cool again, and that's exactly what the app does. Perhaps maybe that should be our slogan moving forward. But yeah, if you haven't downloaded the new MoneyWise app, what are you waiting for?

It's there for the taking. Just head over to your app store in the Apple App Store, the Google Play Store. Here's what you want to search for. MoneyWise Biblical Finance.

Free to download. Here's what you're going to find. Three things. Number one, the very best digital envelope system on the planet.

Take my word for it. Second is our MoneyWise community where you can ask questions, have comments and responses from our Certified Kingdom Advisors. I'm in there periodically. Our MoneyWise coaches stop by regularly.

We'd love to have you engage with us there. And then thirdly, coming next week, Steve. Yes, I said coming next week. Our brand new Discover tab where all of the premier content providers in Biblical Finance, all of them are going to be there with all of their content, stories, videos, articles, podcasts, feeding in to our app so you can find everything you need to find on any topic.

Again, all related to Biblical Finance in one space. It's going to be in the app and on a brand new website we're launching next week. So go ahead and download it now so you're ready when it comes out and you'll have it in your pocket. All right. And that's cool that we're going to get all these people together with all of their information.

And I mean, talk about ultimate flexibility when it comes to budgeting. But you did say a few moments ago that the phrase making budgeting cool again is something that emanated from me, right? I did. Yeah. I could put this on my resume.

I think I think you could. Yeah. All right. Originator of makes budgeting cool. Go ahead and trademark that.

A dollar 15 every time it's mentioned on the air. OK, got it. All right. Eight hundred five to five.

Seven thousand. Let's go. Wow.

OK, let's go north to Alaska. Sebastian, what do you have for us, sir? Hey there, guys. Can you hear me? Hi. Yes, sir.

Loud and clear. Yes, we're talking about budgeting stuff. And one thing that my family, we figured out that works really good to help reconcile things is instead of entering, if you have a digital envelope system app, entering each purchase when you make, say, an online large retailer that starts with a M.O. Z making some of those purchases every month, we make a lot of them up here in Alaska instead of entering each one into each individual category every every time. And then in doing that instead, we buy a gift card for a certain amount every month to three hundred dollars, whatever it is.

And then that number one, it caps our limit for spending on that online retailer. And then number two, it makes it so much easier to reconcile at the end of each month because we don't have to and we don't have to enter it each time either. But at the end of the month, sometimes if the old way, we would I think we would charge your card and then it would come off and then would charge, charge again or not again, charge for the final time in post once it's been received.

So at the end of the month, there's always gaps in there. It was hard to reconcile your budget when you're re-selling your envelopes. And so by just buying a gift card each month, boom, problem solved. And it also caps the limit that we could we could spend on that site each month.

Yeah, I like that, Sebastian. I do want to encourage you, though, to check out the Money Wise app specifically, because I think we've solved for this. You know, when you buy, you know, and you mentioned Amazon, you know, the challenge with Amazon is you can buy so many different types of things that go in any number of categories. The great thing is about the Money Wise app, you can say which vendors you want to automatically categorize and which you don't. So in my app, my digital envelope system in the Money Wise app, I don't automatically categorize Amazon. And then I attribute it to the envelopes manually. The great thing is, though, you can even split a transaction among multiple envelopes just to stay on budget and know exactly where you stand at any given time. So let me do this. I'd love for you to try it out and then call us back and let us know if it solves the challenges you've had in the past with these types of transactions. So you stay on the line. We're going to give you a six month pro subscription to the Money Wise app for calling in with that great idea. And then let us know how it works for you. Sebastian, before you hang up, up there in Alaska, you mentioned that one company, I think you referred to them as AMOZ.

Do you get your shipments as quickly up there as we get here in the Atlanta area? You know, due to the fact that you're a big dis... Absolutely not. Okay.

Very interesting. Okay. Well, hey, Sebastian, stay warm. We're glad you called today. God bless you, brother.

We appreciate it. And God bless you for listening and for calling in today, if that's what you're planning to do right now, because we have open lines. So dial us up, 800-525-7000, talking about anything money related that's of concern to you.

800-525-7000. This is Money Wise Live. Hey, we're tackling the themes or the topics of budgeting today or investing, giving generously, how to save, to help your kids go to college, any of those things and much, much more.

Anything financial at 800-525-7000. Let's go up to Cleveland. Hey, Dave, thanks for holding, sir. What do you have for us today?

How can we help? Well, I hear you guys talking about budgeting, a bad word, I guess. But back in the day when I started on my own, I did what they... I just wrote down my bills on envelopes. And then I wrote down how much the bill was each month, how much needed to go in each check. And then someone says, you're doing a letter of regret system.

I'm like, oh, I didn't know that. But then what happened was it's like being in elementary school. You teach a child the way it should go. I'm today not on a budget because it's in the back of my head.

I'm budget minded. Does this make sense? Oh, absolutely.

I mean, just a little bit of boasting in Jesus. I save two paychecks a month. In other words, I put in my savings half what I make. Okay. And I've got a lot of... I make okay money. I work in the trades, right? But yet at the same time, I hang dry my clothes. No cable.

I've never had cable in my life. Instead of buying coffee to go, I always make it here at home and take a thermos. These will trickle down economics, you know what I'm saying? And that's the way... Okay. One question you guys, you know, I'm about to start cutting a check for overseas.

Hear me out. Because our brothers and sisters need that. I was either a martyr's voice or open door.

Do you have... I mean, are these good, reputable places to be supporting our brothers and sisters overseas? Yeah, yeah. Well, first of all, Dave, let me just affirm everything you're saying about how you have been a faithful and a tither, but also someone who's just handling God's money frugally. And, you know, obviously you've developed those disciplines and habits over the years, and that's paid significant rewards to you to the point where now you're living modestly and saving a bundle, which means you have the opportunity to do more giving. As the Lord pricks your heart and there's something that you're really passionate about, like the organizations you just mentioned, you can lean into that. And I love that opportunity.

You know, our friends at the National Christian Foundation would love to weigh in on whatever your passions are and then perhaps give you some suggestions on ministries doing the name, doing that work in the name of Jesus with excellence around the globe. And it could be two of the ones you just mentioned. It could be some others. So I'd check that out. Just head over to ncfgiving.com. They actually have a local office there in Cleveland as well.

And just ask them to perhaps weigh in on some ideas related to the particular area of ministry or need you're interested in around the world, and they'd be delighted to help you. But I appreciate your encouragement today. I know some folks listening are saying, man, if Dave can do it, I can too. And that's what this is all about. That's for sure. Dave, God bless. We appreciate that call. We appreciate that testimony going all the way back to Larry Burkett.

But, you know, to be honest, somewhere, someplace, sometime, someone started an envelope system before even Larry and God bless them. But whatever works for you. You know, I'm looking at your list and I'm thinking of me and my lifestyle and my wife. No cable? Check. Open door, martyr's voice? Check.

We've given in the past to these organizations. Drying your own clothes. I'm going to run that past Marsha tonight. I don't know if I'm going to get buy-in at least right away. But hey, if I do, I do. If I don't, well, I blame Dave, but we're glad you called today.

God bless you, buddy. I noticed how you skipped the making your own coffee at home on that list. Oh yeah, I do. You just didn't mention that one. I'm sorry.

These days with COVID, I make my own coffee at home. Well, there you go. That's for sure. So I'm good to go. God bless you, Dave. Appreciate it, buddy. Miami, Florida.

Demetrius, thanks for holding, sir. What's on your mind? Hey, good afternoon.

My name is Demetrius from South Florida. I was reached out because I've been actively working on my credit and I made some great improvements. However, maybe four years ago or so, I had a repossession and there was a judgment as it relates to the repossession. And more recently, they actually started to garnish my wages. So my question is, is there any way to prevent them from garnishing my wages? Well, it ends up becoming a legal question here, Demetrius. And I'm sorry to hear about the challenges you've had, but I'm encouraged by the fact that you want to get this cleared up, take proactive steps moving forward to get a solid financial foundation under you and manage God's money wisely. We've all made plenty of mistakes.

And so the key is, how do we move forward from that and be found faithful with what passes through our hands from this day forward? With regard to the garnishment, the first thing you can do is ask the court to stop the garnishment and allow you to set up an installment plan. You'd probably have to show some extenuating circumstances. You know, this would be a financial hardship or something that resulted in the repossession and that you're now capable of resuming regular payments. The other way is obviously to pay off the loan in full.

It's theoretically possible to get a personal loan that you would then use to pay the car note off with, but that will likely be difficult with a recent repossession that is in the last year. You know, with regard to your credit report, I know I have a note here on my screen that you asked our producer about getting that removed for your credit report. There's really no way to have a repossession removed from your credit if it's accurate.

And in this case, it clearly is. It will typically stay there for seven years. Anybody who will tell you if you pay them a little bit of money, they'll get that, quote unquote, cleaned off your credit report.

I wouldn't trust because it's just not possible legally. So the key is, I think, moving forward is as this becomes further and further in the past, you know, the new information, as long as you're an on time payer with whatever active accounts you have, that's going to, you know, just slowly rebuild your credit over time and minimize the impact. And then after seven years, it'll fall off entirely. I think the key is, can you get to the place where it's either paid in full, settled in full, which means they take an amount less than what you actually owe, or get on a payment plan where you're back current every month based on the plan they agree to? And those would be the best case scenario for you, both with your credit and with the garnishment. Demetrius, does that make sense to you? Does that make something good?

Yeah, it makes a hundred percent sense. The repo was about four years ago, and I'm currently making payments. So even once I pay it off and get done with the courts, is there any way to have it removed at that point? No, you wouldn't be able to have it. I'm paid off in about a year.

Okay. What would happen then at that point, Demetrius, is that it would be noted on there that it was paid in full. It would show the repossession, the R9, which is the category on your credit report, because that is in fact what happened. And remember, your credit report is supposed to be an accurate record of your repayment history. And this is a part of that history, at least for seven years. So it would still be on there, but it would help the fact that it shows that it has a zero balance, which means that you took care of it and that you're now improving your situation by being an on-time payer moving forward. That in and of itself is going to cause your credit report to repair itself over time.

But getting it deleted or removed, unless it's inaccurate, which in this case it's not, it in fact happened, you're not going to be able to have it removed until that seven years elapses. Demetrius, we wish you the best with that. Thank you very much. We're going to pause here and then we'll come back and take some calls on anything that's of concern to you. Let's see who's up. Roseanne is coming up next. She wants to know how to pay off her credit card without making her credit score go down. Daniel's interested in opening a Roth IRA. That and more when MoneyWise Live continues.

When it comes to total and complete honesty in the marketplace, Proverbs 2023 reminds us unequal weights are an abomination to the Lord and false scales are not good. Back to our phone lines. Orlando, Florida. Roseanne, we appreciate your patience and what's your question for Rob? Hi there guys. Thank you so much for all you do.

Thank you. So I'm a single person to begin with. You know with COVID I am not working and I am trying, I only have about $60 left on the credit card that I have, which I don't use very, very often. But I want to pay maybe $50 out of it just to keep the card, just to keep the card instead of letting it go. But what do you suggest that I do? I do also have two other store cards that I don't use.

I haven't used them in years. Yeah, yeah. Well, a couple of things. I mean, so are you trying to avoid your credit score going down or what's your main concern, Roseanne? That would be my main concern if I were to pay off the credit card, which is like I said about $60 left on it.

Yeah, yeah, yeah. Well, I like having a zero balance. In fact, paying it off in full every month would be the ideal because then you make sure you're not paying any interest. So there's the paying it off or paying it down and then ultimately paying it off.

And then there's closing the accounts. So let's talk about paying them off each month. You know, the great part about that is what's reported to the Bureau is the balance when the statement is generated prior to the payment coming in.

So it'll show you having an active account with a balance that's moving up and down based on what you add to that card each month. But then the fact that you pay it off in full, make sure that you don't have any interest charges because you would be in that grace period until the full payment is received. I think the other thing to consider there is that, you know, as long as you have a recurring charge that's a budgeted item, even if it's a small dollar item every month, the key there is that it's going to be reported as an on-time payer. And that's, you know, what's most important because that's going to be the largest portion of your credit score.

35% is allocated to payment history and so you want to make sure that you're an on-time payer every month. So paying it off in full isn't really not going to affect anything. The reason why you may see a temporary reduction in your credit score when you actually close an account is that, you know, three of the five categories of your credit score are affected when you close an account. The more kinds of accounts you have that raises your score, the longer you have those accounts, the higher your score, and the more credit you have and the less you use it.

That raises your score. So by closing an account it could bring down the overall credit limit, although if you don't have any balances that shouldn't be an issue. It will reduce potentially the different types of accounts you have. If for instance you didn't have another you didn't have another credit card open, it sounds like you do. And then the third issue would be if in fact it's no longer reported as a part of your history once you close it and it happens to be one you've had for a long time, it's going to reduce the overall history represented on the credit report which, you know, that length of credit history is 15% of your score. Bottom line though is if you're an on-time payer and you're managing your money wisely, you don't have balances in excess of 30% of the limits that are available to you. I wouldn't worry about it too much, Roseanne. Any decline is going to be short-lived.

It's also going to be modest. I think the benefit in closing these accounts, including these old store accounts, is these are just three less or two less accounts you have to keep up with because these days when accounts get compromised then people use them fraudulently and if you missed it you may end up paying for something you didn't buy. You may pay interest charges or they may charge it. You don't know about it because you don't actively use it. Then it gets delinquent and now you've got a mess that you've got to clean up on your credit report because there was a balance there that you didn't pay because you didn't know about.

You didn't actually charge it. So getting the number of active accounts paired back over time and I would say over six or twelve months by systematically closing them is going to work to your advantage by just simplifying your financial life. So the bottom line is I like the idea of you keeping these balances paid in full. I like the idea of you pairing the number of accounts you have active over time and any fallout from that on your credit score I wouldn't be too worried about.

Roseanne, thanks very much. Chicago, Daniel, thanks for holding and your question for Rob is what? Hey guys, thank you for taking my call. So I opened an IRA five years ago and it was a traditional IRA. Now I'm in a different bracket and I don't know if I should roll it over to a Rob or open another account.

I see. What tax bracket are you in, Daniel? 35%. Wow, okay, so you're a high income earner. You know the opportunity here with the traditional IRA makes a lot of sense to me because you get that 35% savings if in fact that's your tax rate right on the front end and then you get that benefit. That money continues to grow and then the idea is that when you pull it out in retirement you are in a much lower bracket because perhaps you're earning less because your needs are less and you're no longer saving. You paid off all your debt and you know those kinds of things are taken care of so you're what you're beginning to pull out and which would be counted as income as you withdraw it is going to be at a lower rate.

Now obviously we don't know what the tax rates are going to look like down the road. It could be that you're making less money, you're in a lower bracket but the overall tax rate brackets are higher across the board. We just don't know so we have to base this on what we know today which is you're in a pretty high tax bracket so you're going to benefit from the traditional IRA deduction that you're going to get both on the Roth, excuse me, traditional IRA or a traditional 401k. So I'd probably stick with what you have just given what you're describing to me about your taxes rather than opening the Roth at this point.

Daniel, yes go ahead. Yes I was just wondering because when I opened the traditional IRA I was in a different bracket so it helped me at that time but now it doesn't help me at all even if I contribute to the maximum. I'm only 37 years old so I'm like you know I don't know if I should open the Roth and just start paying taxes now.

Yeah why is it that the traditional is not helping you now? I mean you're getting that deduction. Yeah I think I exceeded all the deductions and even if I contribute the $6,000 this year it won't help me at all.

Interesting. Well I mean it's going to be excluded from your taxes as income so that's you know that portion you're not going to be paying you know at that highest tax bracket if that's in fact the bracket that you're in. So I'd probably circle back with your tax preparer Daniel just to see what he or she recommends that's going to be most effective for you.

Obviously they'll have all the information that I don't but I suspect you are getting quite a bit of benefit if that's the tax bracket you're in but go ahead and run that by your tax preparer and see what they say. Let's go to Cleveland, Ohio and Lorraine your question today for Rob West. How can we help you? Good evening.

I consider both of you the dynamic duo. Just want to say that up front. I have a nephew who has maxed out two credit cards having to care for his mother. His debts are his own and that of his mother and both of which together exceed his income. We are in a place, my mother and husband and I, are in a place to eradicate his debt whatever it is but I don't want to enable him.

How would you suggest we do this? Yeah, yeah. Tell me Lorraine what it is that's going on in his situation. What is it that's causing the debt? Some of it is poor decisions on his part.

Buying a new car instead of an old one and having debts in the past before he had to start taking care of his mom but with his mom her income, her pension does not equal the nursing home costs so he has had to pay for that and insurance and medicine and those things. I see. Okay, very good. Well, first of all I love what you're trying to do here. You're trying to be of help with a real practical help which is helping financially but you're wanting to do it in the right way which is always the the right approach. You know I think the key here Lorraine is to do it in such a way that rewards or incense the right behaviors and disciplines. So you know one opportunity would be to say listen whatever you'll put towards your credit cards will match it. The other thing you could do is to say listen you really need to get on a spending plan because you've got to rein in your spending given the situation that you're in and you know the extent to which you're willing to connect with a MoneyWise coach which won't cost him anything and meet every other week for the next three months. Our assistance is predicated on that. You could say listen we're going to start saving in a savings account and as you you know do you know do certain things reach certain milestones then we're going to come in with the assistance. I think you know communicating that in love that listen our desire is to help you to set you up for the future and to encourage you to make the right decisions because listen if we come in and just take care of this and we've treated the symptom and not the problem we're setting you up for failure down the road because you haven't learned the hard lessons we all have to learn and that is that there's limited resources and we've got to have a plan to live within God's provision so I think the key right now is to really try to incent those right behaviors get some good dialogue going transparency his willingness to either show you what's going on or be accountable to a third party like a MoneyWise coach. Last thing is hold the line I'm going to get your information and send you a copy of Howard Dayton's book Your Money Counts and perhaps you encourage him again predicated on this assistance to read through this material one chapter a week and talk about it with you and I think all these things are going to help set him up to really move in the right direction and handle God's money wisely. Lorraine great question on your part and we'll pray that God blesses your activities and your responsibility to help out here thank you very very much. This program MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. My thanks to our technical crew today Amy, Dan, Aaron and Jim. Jim also preparing to spread the tarp for another football season 11 months from now. We'll be here tomorrow hope you'll join us for another edition of MoneyWise Live.