To Lend or Not to Lend

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Maybe it catches you off guard. A friend or family member asks to borrow money and you're not sure what to do. It's wise to consider your options.

Hi, I'm Rob West. Your decision whether to lend money could have lasting consequences, so make it carefully. First up today I'll go over some practical considerations for you. Then it's on to your calls at 800-525-7000.

800-525-7000. This is MoneyWise Live, biblical wisdom for your financial journey. There's no question that the decision to lend money causes stress for many people, and that's understandable. When you lend money to another, it changes the nature of the relationship.

Proverbs 22-7 really nails this. The borrower becomes slave to the lender. Lending money has the potential to damage a relationship well into the future.

Actually, that's true whether you lend the money or not. When you're hit with the question, it seems like there's no good answer. Either way, someone may end up resentful, and the odds may be stacked against you to begin with.

Here's what I mean. Once a football coach explained why he never liked throwing the ball. Because three things can happen, and two are bad.

An incompletion, or interception, versus a completed pass. It's like that with lending money. If you decide not to, the other person could be upset. If you do lend the money and the other person doesn't repay it, you'll probably be upset. That's two out of three bad.

It's only with the third possibility that everyone's happy. You lend, they pay back. But they may not be in very good financial shape to begin with if they're having to borrow. Now, what does the Bible say about all this? Well, first, God's word tells us to help those in need, lending money if necessary. Deuteronomy 15 8 says, you shall open your hand to him and lend him sufficient for his need, whatever it may be. And in the Sermon on the Mount, Matthew 5 42, Jesus says, give to the one who asks you, and do not turn away from the one who wants to borrow from you. And a verse that makes many think the only proper response is to lend money to a family member, in particular is 1 Timothy 5 8, which reads, but if anyone does not provide for his relatives, and especially for members of his household, he has denied the faith and is worse than an unbeliever.

But those verses imply a couple of things. First, that there is truly a need. And second, that lending the money would actually help the borrower and not simply enable more unwise financial practices.

Scripture says a lot about that too. Proverbs 13 11 indicates one possible outcome to lending money. It reads, wealth gained hastily will dwindle, but whoever gathers little by little will increase it. A loan is often described as a lifeline, which it may be, but it's also easy money, and the borrower may not appreciate the effort it takes to create the wealth. When you have to work hard for something, you tend to want to hold on to it. Hard work produces character and wisdom. Proverbs 21 20 reads, precious treasure and oil are in a wise man's dwelling, but a foolish man devours it. So before you get out the checkbook, you have to determine that there's really a need that lending money will actually help.

Here are some questions to ask yourself. Can the borrower repay the loan? If there's not sufficient income or ability to repay, good intentions to repay will come to nothing. What shape will you be in if the money isn't repaid? If you can't afford to lose it, you can't afford to lend it.

Can you help in some other way? If the would-be borrower needs money to repair a car, for example, could you give rides instead until they save money for repairs? Finally, could you make the money a gift instead of a loan? That way you're not expecting it to be paid back so you can't be disappointed and your relationship won't be damaged. But again, only do that if the gift doesn't encourage unwise practices. If you decide to lend the money, draw up a written agreement, even if you're lending to a family member. That has a way of clarifying things and making it known who's responsible for what and when. The loan agreement should specify the amount, interest rate if any, payment structure and collateral if any. That will help eliminate misunderstandings later on. It's easy to do by the way, just search for promissory note template and fill in the blanks.

You'll find plenty of samples online. One final thought, if you lend to another, I would always put the relationship above the money. Air on the side of forgiving the loan to preserve the relationship if you can. And that's only possible if you lend with the ability and willingness to lose it in the first place.

So there you have it. Things to consider before lending money to a family member or friend. We hope that helps you make a wise decision if you're ever faced with that dilemma. Your calls are next at 800-525-7000.

Call it 24 7 800-525-7000. This is MoneyWise Live. Biblical wisdom for your financial journey. We're delighted to have you with us on MoneyWise Live today.

I'm Rob West. We'll be taking your calls and questions in just a moment. Here's the number. We have some lines open. 800-525-7000.

That's 800-525-7000. We started today by talking about lending money, especially as it relates to family members and friends. And we asked that question on Facebook. How do you feel about lending money to family and friends?

And we got a number of responses. Brenda said it depends on who it is. I've done it, but only with folks I'm really confident may need a bit of help for a short period of time and are faithful to repay it.

April said, just don't do it. People soon forget once they get it and you usually don't get it back. However, if I have extra and you're in a bind, I'll give you the money.

That way there's no hard feelings. And I think that's great advice. In fact, April, the Federal Trade Commission says 50% of the time someone co-signs for someone, essentially they don't get paid back, which is kind of in the same ballpark there. Doug said, I'd rather lend the money than co-sign. That's great counsel.

He cites Proverbs 22, 26. He says, always think about a loan as a gift. If repaid, great.

If not, move on. And I think that's great advice. If you go in knowing you are ready, willing, and able to make it a gift and forgive it, then you're going to avoid yourself all kinds of hard feelings. Rhonda said, I heard years ago, if you loan money to family members and friends, have the attitude that if the money is never paid back, you can maintain the relationship.

If someone tries to guilt or force it on me, it's an automatic no. And I think we're seeing a consistent theme here that we always want to value the relationship over the money. It's a great thing to help when somebody's in a desperate situation, but it's better to make it a gift or at least be in a position to do that if the situation requires it. So I hope that's helpful today.

If you have a question about borrowing money or lending money to friends and family, certainly give us a call that or whatever's on your mind financially 800-525-7000 is a number to call. We're going to begin today in St. Augustine, Florida. Hello, Rick. How are you, sir? Hello. We're glad to have you on the program. How can I help you? Thank you for having me.

So I was just calling. I had a question about me and my wife. We wanted to move to Ohio and we didn't know if we should sell our house or rent.

And then should we rent while we're in Ohio or should we look for something to buy? Yeah, very good. Talk to me about this move that you're making. Is it temporary? It depends. My father-in-law, his health is declining and we kind of just want to be there for my wife's parents. Okay.

Yeah. And do you have any idea what your plans would be? I mean, obviously you don't know their health situation, but just based on what you know today, would you expect that you'd go for a couple of years and then move back less, more?

What would be your best guess at this point? Florida is always home. So I probably would move back if I could. So I would probably say three to five years. Okay, very good. And the home that you have now, would you want to try to hang onto that in Florida, that specific home, or would you be looking to sell it and then buy something when you return? Well, it was our first home that we bought and I think we would want to come back to it if anything. And it's appreciated over the nine months we had it.

Okay, very good. You know, I think, you know, you're in a spot where depending upon the time horizon really is the driver here. So I would say, you know, if we're talking one to five years, then you're probably going to want to rent on both ends. Certainly if it's less than a year, you probably have to rent that long in Ohio, but you're talking more than a year. And so, you know, we're going to be beyond a short-term rental. But given where housing prices are right now, I think the idea that you would perhaps rent something there in Ohio makes some sense to me and then hang on to your current home in Florida and rent that out. I'd probably connect with a realtor in your area who specializes in rentals, especially in your part of town, that can advise you on what you might be able to expect to get in the way of rental income. And also think about because of the fact that you'll be an absentee landlord, unless you have other family there in Florida, you may want to have a management company or somebody overseeing that rental for you, doing the marketing, going in and cleaning it if somebody has to move out, being able to handle minor repairs and take care of things if, you know, there's something that needs to be addressed on a short period of time.

You know, you've got a clogged toilet or an air conditioner goes out, something like that. I think that will give you some added peace of mind. And then, if you really are uncertain about the timeframe that you'll be in Ohio, I would look to rent, you can at least start that way, while you get to know the area and find out exactly how long you'll be there. If it becomes clear that you're going to be there for more than five years, I think that's the opportunity, if you can afford it, to go ahead and look to buy something.

But I think especially in this housing market being so high, if you can just hang on to your Florida house, which no doubt has appreciated, get it rented, and then look for a rental in Ohio while you figure out exactly how long you'll be there and let this housing market cool off a bit, perhaps into the fall or next year. I think that's going to be your best situation. Does that make sense? Yes, sir. Thank you so much. You're very welcome. Listen, delighted to hear that you're going to be there for her parents. I know that we'll honor them well, and that will please the Lord. And we'll wish you all the best in this new endeavor and chapter of your life.

I'm sure you'll be back in Florida in no time. God bless you, Nick. Thank you for your call today. Well, all the lines are full, but we've got some great calls coming up.

So we're going to be tackling a whole host of issues. You're going to want to stay right with us here on Money Wise Live. This is the program where God owns it all. You're the steward, and money is a tool to accomplish God's purposes.

I'm Rob West. We'll be back right after this. Stay with us. We're so glad to have you with us on Money Wise Live today, biblical wisdom for your financial journey. We began today by talking about lending money to family members and friends. We've got a couple of thoughts, comments related to our opening topic.

Let's go to Lake Worth, Florida. Margie, you wanted to weigh in on that opening discussion. What were your thoughts? Well, my thoughts are that I'm 75 and I've had numerous family members in the past borrow money from me, and I found that, you know, they were very bad about paying me back. So I learned quite shortly after that that anyone in my family needed to borrow money, and especially the members that were basically moochers. I knew that I was unlikely to get some money back, but I was suggested to try something, and I was to get an IOU from any money over $100 that I was loaned to a brother or a sister, and I would have them sign an IOU, and oh, they were going to pay it back and all that. So I had this IOU that they had given me, and they never did pay me back, but I wasn't worried because the very next time, even if it was a year later, if they came to borrow more money, I brought up the IOU and I said, I'm sorry, I can't loan you the money. You haven't paid me the last IOU for coming. And that became the greatest carrot at all. There was no hurt feelings.

There was not any frustration. If they really needed it and I knew they really needed it, I wouldn't mind giving it to them, but I will not loan money unless I have an IOU from friends or family. And it's been a great way and helpful maybe to not to become frustrated over people who don't intend on paying you back. Well, Margie, I think that's a wonderful idea. And in fact, I always say if you're going to lend money, a couple of things, and you've done all of these, number one, value the relationship first.

Number two, make sure you put everything in writing because despite everyone's best intentions, if we don't document the amount, any terms that were agreed upon related to the payback, whether there's interest involved or not, those kinds of things, it's amazing how we quickly forget. And so just having that simple documentation that everybody's agreed to, as you described in IOU, I think that's great advice. And clearly, your desire is to put the help above anything else, but we need to do it in a way that's wise because we're responsible as stewards for God's resources. And I think the way you've approached it certainly values the relationship, gives you the opportunity to help someone in need, but does it in a way that's prudent.

And I think that's really the key. We appreciate you weighing in today, Margie. May the Lord bless you. To Hudson, Florida, Dean, what were your thoughts on lending money? Well, Rob, everybody's going on the same one here, but I really appreciate your show. I appreciate all you guys do.

I just can't tell you how much. I hear you every day coming home, but I've always tried not to loan any type of money, even though the person that's asking for it may say it's a loan. I always, you know, I seek the Lord and make sure that it's something that I should even give before I give them the money. And I just pray that it's honored, and I know people who may not have good intentions, and then you have to be discerning in that way, even if you're just giving somebody money, because you can do a lot more harm by giving something away than even loaning them something.

But that's just where I wanted to share. Well, I appreciate that, Dean. Number one, for your encouragement. Number two, that you really are approaching this from a spiritual standpoint, to say, you know what, first of all, I'm going to pray and ask the Lord to give me discernment and wisdom to know what's the best thing to do in this situation.

And then, as you said, if there's a real need there and you're in a position to do so, make it a gift, or at the very least, be willing to do that if the situation warrants it. And I think the Lord will clearly honor that. Thanks for weighing in, Dean. We appreciate it, very, very much. And between the comments on the phone and Facebook today, sounds like we have some pretty good alignment around this idea of how we should approach giving money to be able to be helpful at a time of need to somebody in our sphere of influence, but to do it in a way that's wise and puts the relationship first and is prudent as we manage God's money. Let's head back to the phones today, to Wichita, Kansas. Trina, tell us about your situation. How can I help? Hi, well, thanks for having me on. Well, I am a recent widow, and my husband left a $250,000 life insurance policy, and I've already given 10% to the church, but I have this left over.

We don't have very much debt, just our house debt that we have a 2.5% mortgage on for 10 years. And so I'm just wondering what I could do with that to grow it, but yet to keep it going. To grow it, but yet to keep it relatively safe.

Yes. Well, first of all, Trina, I'm so sorry to hear about your husband's passing. I'm delighted, though, to hear that you're thinking carefully about how to steward the resources that has been entrusted to you. And clearly having these life insurance proceeds will be a blessing to you moving forward. Did you say you have minor children at home?

Yes, I have a 10 year old and a 15 year old. Okay. Trina, first, tell me about your income and expenses. What income sources do you have and is what you're bringing in enough to cover your expenses, including your home mortgage, without dipping into the life insurance proceeds?

Right. So the income that we have coming in is going to be able to meet our expenses. Part of it is his social security benefit for my children. So part of that will drop off when my 15 year old, you know, when they turn 18. So we have years of that. So then I'm not sure after that, if we will need to need it, I'm hoping to put a little bit extra on the house to have the house paid off within eight years instead of 10 years.

So that when the second Social Security, like my 10 year old Social Security drops off, that the house will be paid off. Yes. Okay. Well, obviously that would be helpful.

And then you'll get a survivor's benefit at some point down the road. Are you familiar with that? Right. Yeah.

I'll be, I'll get that when I'm 16. Correct. Yep.

Yep. So I think at this point, what you need to be looking to do it just as you are, is get a real accurate spending plan in place. So you know exactly what's coming in and going out. If you need help putting that together, Trina, our MoneyWise coaches will be delighted to walk alongside you as our ministry to you to help you think through not only the fixed monthly expenses, but those discretionary expenses that we don't get a bill for and the non-recurring expenses that come quarterly or semi-annually, things like that, just so that everything is accounted for. And can be allocated into the spending plan. Beyond that, I think it's going to be really important that we do a couple of things. Number one is, do you all have a savings account, what I would call an emergency fund separate and aside from the insurance proceeds?

So we do. And we, I have used quite a bit of that for the, like funeral expenses and also for to, because the money hasn't, you know, the money hasn't come in for a couple of months. I'm still waiting on, he worked for the federal government, so I'm still waiting on his like final paycheck and some monies to come in for that. And that probably won't come in for another at least month to two. But I am able to sustain with what's now coming in, you know, with Social Security and with that.

Very good. And what do you have left in the emergency savings? So right now we have about $8,000 left in an emergency.

Okay. So what I would probably be looking to do is take from that $250,000 or what remains after you're giving and shore that up to three to six months expenses. And then I'd be looking to connect with an investment professional that can begin managing the remaining, let's say it's $200,000 and putting that to work on a very conservative basis.

So it's protected, it's not high risk, but it has the ability to grow because as you said, we'd like to get to the place where between now and when your youngest is 18, that money has the ability to grow so that you could convert that to an income stream if you needed to prior to beginning to collect your own survivors benefits through Social Security. You can connect with somebody at our website, MoneyWiseLive.org. Just click find the CKA. You hold the line. We'll talk a bit more off the air and we appreciate your call today. Stay with us. We'll be right back.

We're so thankful you've joined us today on MoneyWise Live, biblical wisdom for your financial decisions. I'm Rob West taking your calls and questions today. We've got a couple of lines open. Here's the number 800-525-7000. 800-525-7000. Right back to the phones to Cleveland, Tennessee. Hello, Bonnie. How can I help you today? Hey, thanks for taking my call. We listen to you guys regularly.

Oh, thank you. We have a lot of financial wisdom and our 15 year old grandson, Tucker, is interested in investing. And I think this is awesome because this is going to get him on a good track. And we need some advice on what to give, some advice to give him on investing.

His parents will be getting this child tax credit thing. You know what I'm talking about? I do.

And they don't really need that money right now. They're both working, praise the Lord. So Amanda said, hey, let's teach him how to invest. So let's hear something. Very good.

Well, I'm glad you called. And I think both you and his parents are thinking very wisely as you think about setting Tucker up to begin investing and understanding how that works. You know, if you can learn the value of putting money away, living on less than you earn, the value and the power of compounding, which has been called the one of the most powerful forces in the world, especially over a long period of time. And at 15, he's got quite a bit of time on his side. This could be a valuable lesson that will pay dividends throughout his life. Now, does he happen to have any earned income? Does Tucker have a part time job or anything?

He doesn't yet. He's 15. But at 16, he'll be working somewhere because he wants to make money.

Okay, very good. Well, the reason I ask is, you know, one great opportunity for money that he does truly want to put away for the long term would be to open a Roth IRA, which you can do as soon as you have earned income. And you could contribute up to the amount of earned income you have with a max of $6,000 for this year, that will not be an option until he has earned income. So in the meantime, I think the, you know, the next question is what type of account, it could either be a custodial account, that becomes his property, his asset at the age of majority in his state, which is probably 18, or 21, or an account in the name of his parents or you that specifically earmarked for him. The difference is, with the custodial account, it becomes his property. So depending on what kind of decisions he's making, when he turns 18, that's his money.

And if he wanted to pull it all out and buy a sports car, he'd have the ability to do that. So I think it's going to come down to, do you all want control over when and how the money is used until he's an adult and you feel like he is demonstrating that he's making wise decisions? Or are you comfortable with a custodial account that's automatically his at the age of majority? You know, I think that's the way we would go if we see that he's, you know, making good choices. I think that's the way to go.

Okay. So you would look at what's called a custodial account. It's usually called a UTMA, Uniform Transfer to Minors Act, a UTMA account. And basically, it would be in the name of the adult, but for his benefit as a minor, but then as soon as he reaches the age of majority, it's his, the money gets deposited into the account, and then it needs to be invested. So that's the second question what to invest it in. And I really like when we're just starting out, what's been come to be known as these robo advisors, you could use betterment, you could use the Schwab intelligent portfolios, you could use Vanguard advisor. But essentially, what would happen, Bonnie is you and he would open this UTMA account, this custodial account, you'd get the money deposited. And then a series of questions would be answered, what's the time horizon, the objectives for the money, how long before it's needed? And what type of risk level do you want to take?

Well, because of his age, you could be as aggressive as you want to be. And at the end of that process, the money that's invested in any subsequent amounts that are added to it, for instance, as he gets a job, or maybe some birthday or Christmas money would automatically be reinvested using what are called indexes. These are tracking exchange traded funds that mirror the broad market indexes. So one you might be familiar with would be the S&P 500, the 500 biggest companies in the United States.

Well, that's an index. And you can own all 500 companies with a real small percentage through the S&P 500 index. So I think this type of investing, although you're not owning individual companies, which has a little bit more fun to it, if you will, for a young man, because he could say, Well, yeah, that's Amazon, I own that. And there's McDonald's, I own that.

And I realized kind of some of the intrigue behind that. But the downside is we're teaching him to be highly concentrated in one or two companies. And if they happen to have a bad quarter or a bad annual result, their stock may be down significantly. And the Bible encourages us to diversify. And using these robo advisors with these tracking indexes, I think will give him much broader diversification. And he'll be able to capture the broad trends of the market in terms of the ups and the downs, which by the way, it's the long term trend is in his favor, especially given how much time he has. So what I would do is either go to Betterment Schwab intelligent portfolios, or the Vanguard advisor, open the custodial account, deposit the money, and then it will just be a few minutes in front of a computer together to get that money invested.

It's very low cost. And then every time money is added, it would automatically be reinvested. Does that make sense? Yes, that sounds good. All right. Well, you you get that account open, let us know how it goes. And next time you call us, call us with Tucker on the line.

I'd love to say hello. All right. Okay, thanks a lot. All right.

God bless you body to Chicago, Illinois. Kathy, thank you for your patience today. How can I help you?

Hi, I have a two part question. We had some money from the sale of our family home that was split three ways among my brother and sister. However, we're trying to keep it liquid for my parents needs because it originally was their home. So if the money is just sitting there right now, and I want to question is, should we just invest it in something but you know, we don't want to lose it all. And we don't want, excuse me, if my parents need it tomorrow, I don't want to have to pay some kind of big penalty fee.

So that's one, one thing. The other is I would love to take that money or part of it, not all of it, and, and loan it to my children. And they wouldn't give us interest back. But they would then pay it for their student loan. And then it would take them five and a half years to pay it back. I believe they can pay it back. I just listened to all that you said about loaning to family. I believe they can pay it back. They would just pay us instead.

And they say save $18,000. But I feel like in a way I'm taking my parents money and using it. So I wasn't sure if that was a good idea. We do have the money in the bank where if, you know, they don't have it paid back in time and parents need it, we can give that to our parents.

Yeah. Well, a couple of thoughts. Number one is, you know, before we talked about loaning it, I would have said just put it in an online savings account at Marcus or Capital One 360, or Ally Bank, you're going to earn about a half a percent a year, which is not much, but it's going to be secure, so that if your parents need it at any time, you've got it available.

So I think that's the place for it, barring some other scenario related to loaning the money. But let's unpack that a bit more. We've got to pause for a brief break. So if you can hold the line, Kathy, we'll come back and talk about that second scenario you painted just around the corner. This is MoneyWise Live biblical wisdom for your financial journey. Stay with us.

We'll be right back. We're delighted to have you with us on MoneyWise Live today. I'm Rob Lass, taking your calls and questions on anything financial. Just before the break, Kathy from Chicago, Illinois was with us talking about some proceeds from the sale of a home from her parents that is liquid and she wants to keep it available, but she has some other ideas while that money is sitting there. Kathy, tell me just a bit more about these funds. When the home was sold, what was the intention of your parents in terms of those proceeds? Was that money gifted to you and your siblings or are you all just holding on to it for them? We're holding on to it and the house was actually gifted to us. They took our names off and so it's actually our money, but we three decided we're hanging on to it. We feel like it's their money. So as you said, you're wondering, you want to keep it liquid, but you're also wanting to consider perhaps loaning it to your children, allowing them to pay off their student loans and you would in a sense become the banker. They would pay you back at zero interest, saving them a lot of money.

And I think we've just got to reconcile these two ideas. If you all truly have that amount of money in savings and you want to do that with your money, I think that's great. But I think given your desire for these funds to be available when your parents need them, if that is in a short period of time, I just want to be sure that even though you have the right to do that because this money was gifted to you and it's yours to do with what you want, given your desire to have those funds available to meet their needs, that in fact it will be there on a timely basis. So I think that's always going to come down to do you have other funds that you could tap into?

And if you had to because your kids haven't paid you back yet and you tap into your savings, is that going to put you in a difficult financial spot? So I appreciate your desire to help them save money and interest but I also know that they've got a long working career ahead of them. They should be able to pay this money back. It's money that they borrowed and I don't want you all to find yourselves in a real tight spot where you've used all of your savings to help mom and dad with their needs and you haven't been paid back on the student loans and now you're sitting here cash poor in a sense with your own potentially unexpected expenses coming your way.

So talk me through just kind of how that would play out. Well they have been paying for at least five, six years or my son-in-law has been paying so I'm not worried about that pain and we've talked to them openly about this and they didn't ask. So we were gonna like use the gift you know gift it to them even though we're not really 29,000 this time and 29,000 in 2022 and then they would start paying us back their same payment and put it in writing and so barring them losing the job that type of thing they should be able to pay it off in five and a half years.

We'd be fine for retirement. It's just you're right that money set aside we can do without you know because it's just sitting there as our emergency fund so we'd have to make sure that's what that money is and we could cover it plus my parents won't need this all we all three have the money and they have long-term care so it would be that first hundred days that we would have to probably use the money. Okay well it sounds like you've thought through it I think you know keep in mind though everybody goes into this with the best of expectations and we just don't know what the future holds and so there is the possibility that a child could lose a job or come into other you know extenuating circumstances that make it difficult so I just want to make sure you know going back to our opening topic today we put the relationship first you all are financially in a position to do this both with your own situation and given the desire to support your mom and dad and that you don't get over extended out of a desire to help and I realize that's genuine I just don't want you to find yourself with the unexpected coming and then you really find yourself in a bind so I would just commit it to prayer perhaps you and your husband take the next week pray separately and then come together and make a good decision I don't think it's a wrong thing that you're trying to do here I just want to make sure you've thought through it fully so we appreciate your call today if you decide to leave it there liquid I'd put it in a high yield online savings account so it's protected fdi insurance and you can give a little bit of interest and we appreciate you checking in with us let's head to Cleveland Ohio Joy thank you for your patience how can I help you hi I'm curious about your thoughts on our current situation we're 40 and we have five kids we are debt-free including our home which I value conservatively at like 110,000 my husband is in ministry and I'm a stay-at-home mom so he currently has a small income last year I would say our just our adjusted gross income was about 34 we are considering investing in considering two options that we have one would be the Cleveland housing market is low so we would consider investing in a second house putting 20 down and then air being being it which would it potentially take care of the mortgage or we are considering whether we should just instead put that money towards our retirement and investments yes okay well a couple of good options here I think the key is you know you all are living on a modest income the key is to really have a great spending plan where you're tracking the flow of money in and out I love the fact that even on that income you've been able to save and you're looking to put that to work for you are you actively contributing to a retirement account apart from putting the savings into a retirement plan yeah we actively contribute to our 403bs for okay for my husband not for myself because I'm currently a stay-at-home mom okay and do you know what percent of his income he has going toward that 403b it's the max amount what I can't remember what the exact percentage is very good it's the max amount that is doubled by his employer okay excellent now that may be let's say three percent and then they match another three percent I would look at perhaps trying to get that up to 10 to 15 percent as you're able to over time with the airbnb there's obviously a lot of folks that have done quite well with that I think you just really need to do your homework because of the debt service that you'll have given the high real estate market although you said there's some opportunities in Cleveland I just want to make sure that you're not being overly optimistic with regard to your ability to keep that rented and therefore cover that mortgage every month obviously if you've done your homework perhaps you've got some family members or friends that have done this and you've really looked at it you've extensively done some research on similar type properties in your area on airbnb just to see exactly what they're getting perhaps even find one that's similar and reach out to the owner and say you know can I buy you a cup of coffee or can we have a phone call I'd just like to understand how this was worked for you doing that kind of due diligence with people that will give you honest input I think is critical because the only thing I wouldn't want you to do is take on a huge mortgage with expectations that are faulty or faulty and then you get into a situation where you're barely covering the mortgage or you're not getting the rental income you're having to come out of pocket and now your tight budget's even tighter because you're in a business and that's what this would be that is not cash flowing properly so I think if I were you I'd probably spend a bit more time doing some research and make sure you have the reserves so that you could cover six months of this you know of it not being rented or at least some period of time that you were comfortable with because the last thing I'd want you to do is add additional hardship to your already tight budget does that make sense Joy? Yeah and now when you say have the reserves for the six month coverage would that be above and beyond our six month emergency fund? Well I think you could go down to three months on your own but I would have some number of months that you've that was specifically allocated to this business you know anytime we start a business we want financial reserves there and those reserves would be over and above your own financial reserves so if you want to kind of pair yours back to three months I would have six months specifically for the business so a total of nine months although that that six months for the business is really just for the expenses related to keeping that property afloat does that does that make sense?

Yes yep you're allocated yes very good great yep all right well thank you for checking in if that's the direction you decide to go let us know how it turns out we appreciate your call quickly to Chicago Illinois Lori thank you for your call today we have just about a minute left how can I help? Yeah I thank you for taking my call I lost my job they closed their business and I have a four three be with that organization and I had a advisor from the financial place that I had the four three wanting to you know if I wanted to move it or you know leave it or change it and I really you know didn't know what was the best option for me should I just leave it where it is and when I retire just draw from there or should I all dump it into an IRA I also have a Roth with that company so I was just kind of seeing what my best options are. Yeah Lori I like the idea of you rolling that out to a traditional IRA it's going to have less fees and you'll open up your investment options do you have an advisor that you've been working with that could advise you on how to invest it once you roll it out? Well he did I did meet with one and he wants to kind of be aggressive with it and I'm not near retirement but I have about five years worth of work left in me he wants to do a 70-30 kind of percentage but I'm not really comfortable with that and then he said you know of course there's a fee if he manages my money so I just was trying to see if I could do it without that. Yeah have you been happy with the performance of the 403b where it is? Yes I have I have it at a moderate level at the at this point now and then it changes over time it's kind of what they call I think a target. Yeah okay very good well you could roll it out and just choose another target date fund from Vanguard or another firm or you could go back to that advisor and just say I want to be a little bit more conservative but I think rolling it out is the best option if you want to do it yourself perhaps look at rolling it to an IRA at Vanguard and you could pick a target date fund that's very similar or revisit that conversation with the advisor and go from there. Lori we appreciate your call today very much thanks for checking in with us folks that's going to do it for us today so glad that you stopped by and participated with us we'll be back tomorrow to do it all over again.

MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. For my team I'm Rob West we hope to have you back real soon. May the Lord bless you. Bye-bye.