4 Ways to Lose Money

One listener that stands out that I worked with recently was this older couple that was interested in refinancing. They reached out to a few different lenders and you know their credit wasn't the best. I know some of these other bigger banks, you just won't hear back from them, which I cannot stand. Not everybody has the 780 credit scores and never had any hardships in their life.

I'll walk you through what you have to do. How can you end up being able to do this refinance, whether it's two, three, six months from now? Back to that older couple, we worked with them for months and months. To improve their credit. And we were able to get the loan done. We were saving them hundreds each month, thousands of dollars a year. Finally got themselves into a situation financially that they can handle and they could start saving money each month, saving for retirement.

At the end of the day, they just could not be happier, which just put a huge smile on my face. We are United Faith Mortgage. In the movie It's a Wonderful Life, Clarence the angel tells George Bailey they don't use money in heaven. Bailey replies, comes in handy down here, bub.

Hi, I'm Rob West. Money has its limitations. It can't buy you love, but it really does come in handy. So you don't want to let opportunities to make or save money slip through your fingers. I'll talk about that first today that it's on to your calls at 800-525-7000.

That's 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial journey. James 1-5 tells us, If any of you lacks wisdom, let him ask God, who gives generously to all without reproach, and it will be given him. God wants to be a part of your life, and that certainly includes how you handle money. To be a good steward, you need to be on the lookout for ways to save money and for areas where you might be missing out on the chance to hang onto money. Not for the love of money, but to be able to use more of it for God's purposes and for His glory.

Well, today I've got four ways you may be missing out. The first is not contributing enough to your 401k to get the maximum matching contribution if your employer offers one. But even if you're already getting the maximum match, you may not realize there's a way to get an even greater return on your 401k contributions. In addition to your regular payroll contributions, the more you front-load contributions at the beginning of the year, the more opportunity you have for compound earnings. Granted, that takes planning and diligence, but if you have the cash on hand to contribute a lump sum early, you'll be money ahead.

Just keep in mind that the total annual contribution limit is 19,500. The only hitch is if you contribute a lump sum early in the year, you still have to contribute enough each pay period to get the maximum match. That's because most employers put in those matching contributions on a pay period basis. So you don't want to front-load all of your annual contributions, just enough to get the best of both worlds. But what if your employer doesn't offer a 401k at all? You can't just say, oh well, I'll save for retirement at my next job.

Again, because of compound earnings, time really is money. Every year you don't set up a Roth IRA, money is slipping through your fingers. A Roth gives you five key benefits. The first is tax-free retirement income. That's not the case with a traditional IRA where contributions are pre-taxed. You deduct them from adjusted gross income on your tax return, but you have to pay income tax on your withdrawals when you retire. A Roth doesn't work that way. Your contributions are with after-tax dollars. True, you don't get the tax benefit now, but it's worth it because your withdrawals during retirement are 100% tax-free.

The IRS figures it already got what's coming to it. A Roth is especially good if you project your tax rate will be higher in retirement than it is now. Generally, that means the longer time until you retire, the better a Roth works for you. Also, we don't advise this, but if you had to get your hands on Roth funds and only as a last resort, the rules make early Roth withdrawals easier and non-taxable as long as they come from your contributions and not your earnings. Also, unlike a traditional IRA or 401k, you won't have required minimum distributions when you reach age 72.

And two more quick benefits. Almost anyone can contribute to a Roth, and if you bequeath one to your heirs, they won't have to pay taxes on withdrawals either. The next opportunity to lose money is by not taking full advantage of a flexible spending account if your employer offers one. A lot of folks shy away from them because they know that contributions not spent during the year are lost.

But with a little planning and calculation, you can set your contributions pretty close to what you can expect to spend on qualified items during the year. Now, there are actually two versions of the FSA. The first is for medical expenses, and the list of what's covered is too long to give here. The second is a dependent care flexible spending account, which covers child care, care for an elderly adult, in-home dependent care, before and after school care, and nursery school. Either one must be offered by your employer. You can't set up one on your own. You also have to sign up for and contribute to each separately.

Your HR department can talk you through the process. Bottom line, an FSA lets you pay for qualified expenses with pre-tax dollars, saving you a lot of cash. Okay, our last opportunity to lose money is by lending it to Uncle Sam tax-free instead of putting it where it can earn money for you. I'm talking about having too much with help from your paycheck for taxes.

By the way, the average tax refund is around $3,000, and that's money you could be using right now to pay down debt or increase your savings. So there you have it, four ways to avoid losing money, and I hope you take advantage of them. Your calls are next, 800-525-7000. I'm Rob West, and this is MoneyWise Live.

We'll be right back. Thanks for joining us today on MoneyWise Live. In just a moment, we'll be taking your calls and questions on anything financial.

Here's the number, 800-525-7000. We've got lines open. We'd love to hear from you. Tell us what's on your mind. Invite us into your story, and let's see if we can apply God's word to your financial decisions and choices.

And help you move forward with confidence. We started out today by talking about money mistakes, four ways you can lose money. And boy, we've all been there, haven't we?

We asked a question like that on Facebook today. What have you learned from your money mistakes? And we got a host of responses. Ed learned it takes a long time to recover, and isn't that true?

We can get into a money mess quickly, but getting out is hard work, and it can take a long time. Sandy said, I learned that I didn't need it anyway. And so often, buyer's remorse sets in after a purchase, especially when the new one, the shinier one is just around the corner. In fact, being that today was an Apple launch event day, if you're a techie person, you know what I'm talking about.

What was in your hand instantly became outdated, and you probably felt like you needed to upgrade. Try to fight that urge. Jeannie said, learn financial literacy at a young age, and that's really important. And Jennifer was sharing some of her woes from being a landlord.

She's decided that's not for her, and I can certainly understand if you've had some bad experiences. Here's the good news. As believers, we can put all of that right at the foot of the cross. God will redeem our mistakes if we turn it over to him.

The good news is he's given us his word, which has all the principles and practical ideas we need about managing God's money faithfully and effectively. That's what we're going to try to do today is help you do just that. Here's the line.

Excuse me. The number to call lines are open 800-525-7000. That's 800-525-7000. We're going to begin today in Richmond, Virginia. Della, thank you for calling.

How can I help? I purchased a car three years ago, and the warranty is almost up on it, so I have these people calling to put insurance on the car. It's either 48 months or either 60 months, and the amount is $3685 if you pay cash, or either $179.90. My question is, is that good, or should I put this money aside and have this money available whenever something happens to the car? Yes, ma'am.

Well, it's a great question, one that a lot of people ponder. Here's what I would tell you. When you look at Consumer Reports and their data, it would suggest that it is not in your best interest on the average to buy an extended car warranty. They asked, again, Consumer Reports, 8,000 of their readers, if in their experience extended auto warranties were worth the money, and they found that two-thirds of them spent a lot more on the warranty than they got back in repair savings. Now, of course, this is just on the average, two-thirds of this group.

There would be plenty in our listening audience that would say, it was well worth it. I had a major expense, and it kicked in. As long as you read the fine print and have the coverage you think you're getting, and usually it's best to get it from the manufacturer itself, you may find that you're an exception. But on the average, Della, at least Consumer Reports found, it doesn't make sense.

Here's when they went on to talk about it, what they found. Only about 18% of the money warranty companies take in goes back out for repairs. The rest goes to overhead marketing and profit, which means the vast majority of cars under extended warranty don't break down often enough to make buying a plan like this anywhere near cost-effective, again, for the average consumer. So if you were to take the money you'd use to buy that warranty and instead put it in your emergency fund on the average, you'd probably be way ahead.

And if you find that your emergency fund can't keep up with your car repairs, well, at that point, it's probably time to consider getting another car. So that's at least the counsel I would offer to you today. Does that make sense?

It makes a lot of sense to me. Okay, very good. We appreciate you listening, Della, and calling in today. May the Lord bless you. 800-525-7000 is the number to call. We've got some lines open. On to Chicago, Illinois, WMBI. Hi, Lincoln. How can I help you?

Hello, Rob. I have a fistful of United States savings bonds, and I just wanted to know whether or not they pay interest after 30 years and how to cash them in without creating a real big tax consequence. Yes. Well, it's a great question, and interest on the EE bonds, if that's what you have, is paid monthly and paid when you – or it accumulates monthly and paid when you cash in the bond. So you would probably want to look at how it was issued. Is this a paper bond or electronic? It's paper bond. Paper bond, okay. So you could go into your local bank and inquire as to your ability to relinquish those, or you can convert it to an electronic bond. The best resource, Lincoln, for all of this information, including the value of those bonds, is treasurydirect.gov. That's treasurydirect.gov, and you can type in the bond certificate number, get all the details and information.

As to the tax consequences of that, probably nothing – you're going to pay tax on whatever the interest is, depending upon the type of bond. When you redeem that, you want to check with your tax preparer as to what you should factor in on that. So I would check out treasurydirect.gov for more information, and we appreciate your call today very much. Thanks for listening. 1-800-525-7000. Let's hit an email real quick.

This one comes in from John, and John is in Birmingham, Alabama. He says, how do I strike the right balance between giving and providing for my family? And John, this is a great question, you know, one as believers that I think we should be thinking about. You know, often when we think about money as it relates to God's word, one of the verses we quickly come to is from 1 Timothy, where it says you're worse than an unbeliever if you don't provide for your family, and we might think that the starting point is in fact provision.

And I would perhaps push back on that just a little bit. Certainly we are to provide for our families, there's no doubt about that. But if we start there, and Paul David Tripp makes this point really clearly in his new book Redeeming Money, which by the way we're making available between now and the end of the year when you give to MoneyWise. He makes the point that provision can be an unending list of needs and wants that never allows us to move on to other things, namely generosity.

Paul makes the case that the gospel message, the gospel story is a generosity story. And so we should start there. So I would encourage you to flip the equation and say, perhaps I want to start as husband and wife by praying and asking the Lord, what would you have us to keep? And therefore, how much should we be giving away and then order your finances and the provision for your family in terms of the lifestyle you're going to live on what's left.

After you answer the given question, of course, you'll need to build into that some margin or savings for the future. But I would challenge you to perhaps take a week or two and just you and your wife separately pray and ask the Lord, Lord, what would you have us to do? What lifestyle have you called us to? And then come together and talk about that and see if you can't get to a place where as one heart and one flesh you move forward in confidence towards God's vision for your family. That's, I think, as believers how we need to approach it. And it always begins on our knees.

Well, we've got a lot more ahead on MoneyWise Live. Calls are coming in. We'll get to more of those just after the break. But I've got a few lines open. Here's the number 800-525-7000. We'll continue to dive into your questions, whether it's saving or giving or lifestyle, perhaps it's retirement questions or how do you handle college expenses?

Whatever it might be, we'd love to hear from you. Again, 800-525-7000. This is MoneyWise Live biblical wisdom for your financial decisions. We'll be right back. Thanks for joining us on MoneyWise Live.

I'm Rob West, your host. Have you visited our new website, MoneyWiseLive.org? If not, check it out on your mobile device or your desktop. And one of the things you'll see right at the top is the donate button. Let me remind you, MoneyWise Live is listener supported. We can only do what we do through your generous support. If you consider yourself a part of the MoneyWise community, maybe you benefit from this program or you've consumed some articles or videos or podcasts on our website.

Maybe you use the MoneyWise app or you've posted a question in the MoneyWise community and gotten a response from one of our coaches. If you would prayerfully consider a gift beyond the giving to your local church, we'd certainly be grateful. We could use your support. We're just a bit behind this month of September. If you would head over there at your convenience and consider a gift, we'd be grateful.

Again, MoneyWiseLive.org, just click the donate button. We're going to head back to the phones. All the lines are full, so you sit back and enjoy some great questions. In just a moment, we'll talk about tax refunds that are running behind. We'll talk about how you can pay down student loans. But first, Chicago, Illinois, Janet, I understand you have a question about a 401k and an IRA.

How can I help? Yes. My company matches 6% of the 401k contributions and I have up until September been contributing it all to the traditional 401k. I recently switched it to the Roth 401k and I heard something about having to put a certain amount in the traditional in order to get the match from the company.

Is that true? You know, I'm not aware of that typically and you'd want to check with your plan administrator just to find out the details on that. Typically, if they're offering a match and they're offering both the traditional version of the 401k and the Roth, they're going to match your contributions to either one. But if in fact they were only matching to the traditional 401k, I would fully maximize that match before I contributed anything anywhere else. Now, if you were already contributing the full 6% and you had more to put in, which that would be a good thing because the goal over time would be to get up to 10 to 15% of your pay going into retirement. Then obviously you could contribute to both and still take full advantage of the match.

But I'd ask that question just to clarify. And if in fact that's the case, let's get every penny of that free money that you're not going to get on a guaranteed basis anywhere else. Now, some listeners might be wondering, why would I contribute? Why would I split that contribution? And just keep in mind, having both buckets to pull from in retirement can be very advantageous.

Here's why. We don't know where tax rates are going to be down the road. If we're talking a couple of decades down the road, who knows whether it would make more sense to pull from the tax-free bucket and let the tax-deferred bucket grow or vice versa. What is your income going to be?

Are you working part time? Are you going to need the money or do you want to let it grow? And if so, the Roth bucket would work to your advantage because at least at this point there's no required minimum distribution. So you wouldn't have to pull it out creating a taxable event and you could then gift it to heirs.

So having the flexibility of both getting the tax deduction now as well as the after-tax contributions and then being able to choose which bucket you pull from either the tax-free or the tax-deferred can make a lot of sense. But we certainly want to maximize that match before we do anything. And Janet, we appreciate your call today. To Grand Rapids, Minnesota, I understand.

I didn't know there was a Grand Rapids, Minnesota. Hi, Tammy. How can I help you?

Hi. My husband and I are working on paying off our daughter's student loans and we've just been making the minimum payment on interest only. Nothing's going toward principal. I would love to be able to double up on that payment every month, but that is not feasible for us. So whatever a suggestion of an amount above the interest payment that you can give would be helpful.

Well, yeah. I mean, I think you're hitting on the key here, which is you want as quickly as possible to make extra payments above and beyond that monthly interest only payment so you can in fact begin to impact principal. Obviously, anything above that payment you're describing goes directly to the amount you borrowed and resulting in you paying off your student loans sooner than if you only make the minimum interest only payment, which means you're just kind of treading water, so to speak. So, Tammy, I think the best option for you right now is to first of all start with your spending plan, to go back to the budget and just look hard at what can we cut back on? What unnecessary expenses do we have? Do we need to sell an asset? Do we need to make a major decision like downsizing out of a home that's preventing us from achieving our goals if you are spending too much on housing?

You need to look at all options and try to realign your budget so that you have margin. That is money over and above your fixed and discretionary expenses that can be applied first to an emergency fund if you don't have one of three months expenses and then to principal reduction on those student loans. Are these federal loans, Tammy? Do you know? Yes. Okay. All right. So you're not going to want to disrupt that even if you had the credit score and the ability to get the interest rate down by refinancing these on a private loan basis, you're going to give up a lot of income-based repayment options and other flexibilities that come with the federal student loan.

So I think at this point, it's just a matter of reworking that budget to try to at least get something every month going to principal reduction. Does that make sense? Yes, it does. Okay. Very good.

Let's do this. You hold on the line. I'm going to get you access to a pro subscription of our MoneyWise app at no cost to you for six months. This will help you connect to your institution, download your transactions.

You can set up your budget, track your spending every month, you and your husband, so you guys can use the digital envelope system to make sure you don't go over in any categories, which will, once you have that information, hopefully help you get more going to those student loans. So stay on the line. We'll get your information, get that right out to you.

Folks, a lot more to come on MoneyWise Live as we apply God's word to your financial decisions. I've got two lines open, 800-525-7000. Just after the break, we'll be in West Palm Beach and Chicago and Chattanooga and Grand Rapids, perhaps your city as well. We'd love to hear from you.

Again, 800-525-7000. This is MoneyWise Live. Stay with us.

We'll be right back. Thanks for joining us on MoneyWise Live, biblical wisdom for your financial journey. Just before the break, I was talking about the MoneyWise app. If you haven't downloaded it, we'd love for you to download it today.

We've got a major update coming out next week. We're going to introduce three styles of managing money for the very first time. I've never seen it in an app. We've had our tried and true digital envelope system, which is the most, I think, advanced way to handle your money because you're always in sync with your checking and savings balances, knowing exactly what's in each envelope so you can stay on top of your spending plan.

But for some folks, that's more than they're looking for. So we're going to introduce two other money management styles in the app, a plan and track, where you create a monthly plan and track against it and it resets every month. Or just a track only option for some folks who are just getting started and saying, you know what, I just want to see where my money's going. I don't want to put it into envelopes and keep everything in sync. I just want to see where my money is going by category. Well, you'll be able to toggle through the three different options and change at any time. We're really excited about it, trying to put the most innovative tools for you to manage God's money effectively. So if you download the app today, you'll be ready to go when the new update comes out next week. Just head to your app store wherever you download apps and search for MoneyWise Biblical Finance. All right, let's go back to the phone's Grand Rapids, Michigan this time. Hi, Emma.

How can I help? Hi, I'm Colleen because I filed my own taxes this year and I know that I should have done that because I have not received a tax return. And everything that I read had said that they were going to take a lot longer this year because of COVID, but I think this has been like too long.

So I'm just curious, like I don't really know exactly what I should do about that and how to figure that out. Well, it's likely that it's just delayed. I mean, a couple of the reasons an income tax refund might be delayed would be if your return has errors or it's incomplete. But what's likely going on is you're just caught up in the backlog that the IRS is experiencing.

At the start of September, the IRS announced it still had 8.5 million unprocessed individual returns. And normally, refunds take about 21 days to process, but they say the delays now could be about 120 days, so a couple of extra months once they get to it. You know, they've been busy not only with the backlog due to limited staffing because of COVID, but on top of that, they've had to process stimulus checks and then the child tax credit payments and then refunds for tax overpayment on unemployment benefits. I mean, all of that has created just a significant backlog.

So I think what's going to be in order here, Emma, is just probably a little more patience recognizing this is an unusual year. Now, if you want to get more information, there is a Where's My Refund tool that will give you the status of your refund. You can go to irs.gov slash refunds. Have you tried that? I have tried that.

I can't remember exactly what it told me, but it was like there was no status that it gave me. Okay. All right.

Very good. Well, I would just continue to be patient, at least for the time being. You know, there is a refund status at irs.gov. Make sure you get into the one where you actually put in your social, your filing status, and your refund amount, and then it should give you exactly the information that you need.

Don't just read an article. There's actually a tool there. Now, if you use that and it just still came in incomplete, then there's not a whole lot you can do at this point. You could also call. Now, the wait times have been extremely long lately, but the number is 800-829-1040.

That's 800-829-1040. I hope you see that sooner rather than later, Emma, and I'm sorry to hear that it's taking so long. Let's head next to Chattanooga, Tennessee. Hey, Tom, how can I help?

I have about $150,000 in checking accounts due to some unusually fortunate things, and I'm wondering where would be the safest place, the best place to invest something like that. Actually, that will go into, I'm 88 years old, so it will go into some kind of, you know, into my children, the churches and the schools and so forth I'm involved with. I was wondering if there's some way, a good way, maybe even a faith-based program that I could invest that in. Yes. Well, I love the way you're thinking here, Tom, because you obviously don't need this money.

God's blessed you with it. You want to be a good steward of it, and you want to be able to get it into the hands of heirs and ministries down the road. A couple of thoughts. Number one would be I'd want to make sure, in addition to this, you have an emergency fund of at least six months expenses that you can fall back on. If you don't, let's carve out that portion and keep it in a high-yield FDIC-insured savings account. With whatever's left over, I would really ask a couple of questions. Number one is, do you want to take any risk with it, given that you don't need it, you want it to grow, and you want to pass it on?

I think you could look at this as money that you don't want to be unnecessarily risky with, but if you want to have the ability for it to grow beyond a very small guaranteed rate, like on a CD or a savings account, you're going to have to have some risk, but you could still temper that to your own risk tolerance goals and objectives. I would secondly look at what giving might you want to do now. If this is money that is beyond what you believe you'll need, or at least some portion of it, because you've established kind of a financial finish line, what about getting some of this into God's economy now, as opposed to waiting and giving it down the road?

That's only a question you can answer, and I would pray through that. As to how you go about investing these funds for whatever portion remains that's not going to be in your emergency fund or be used for immediate giving, I would look at using an advisor. And you mentioned faith-based investing, which I'm really excited about, an exciting and growing segment of the investing landscape where you can align your investments with companies that are having a kingdom impact, or at the very least, making a positive difference in the world and screening out companies that are misaligned with your Christian values. A certified kingdom advisor could help you with that. You would just head to our website, MoneyWiseLive.org, click Find a CKA. These are competent, experienced professionals who've met high standards and biblically wise professional financial advice. I'd interview two or three, Tom, find the one that's the good fit. And when you're there, talk about your desire to have your values aligned with your investments, and they can explain to you some of the investment choices that would be faith-based. But before we head to a break here, tell me your thoughts. Do you have any questions or follow-up thoughts?

No, I think that's pretty well answered. It's just MoneyWise.com and then look for a CKA. Yeah, let me correct you just one bit. It's MoneyWiseLive.org, so.org, MoneyWiseLive.org. And then you will see very clearly in a couple of different places, Find a CKA. And there's some wonderful certified kingdom advisors there in the Chattanooga area. Okay? Thank you. Appreciate it. Yes, sir. May the Lord bless you.

We appreciate your call today. You know, Tom's asking about faith-based investing. And as you think about being an owner of a company, and that's what you're doing when you're investing. You're owning companies. Now, maybe a very small percentage, but you're still an owner.

Here's the question. If you have the opportunity to make sure those companies you're owning are aligned with your values, would you want to take advantage of that? And if so, perhaps you should check out companies like Eventide Funds, investeventide.com, or Praxis Funds, or Inspire. There's some wonderful options out there for you to align your values with your investment choices using exchange-traded funds or mutual funds, or better yet, maybe connect with a certified kingdom advisor, as Tom's going to. Just head to MoneyWiseLive.org, click Find a CKA. Hey, much more to come still on MoneyWiseLive. Don't go anywhere.

We'll be right back. Welcome back to MoneyWiseLive, biblical wisdom for your financial decisions. Hey, did you know in the new MoneyWiseLive.org, we're aggregating what we believe is the very best content in Christian finance.

That's right. You can go there to get videos, articles, and podcasts from folks like Christian Credit Counselors, the Christian Stewardship Network, Compass Finances God's Way, Soundmind Investing, Generous Giving, Christian Healthcare Ministries. It's all there coming in in one place, and you can search by topic, by content type. It's all there, and we'd love for you to check it out.

Just head to MoneyWiseLive.org, and you can grow in your understanding of how God wants you to manage money based on biblical wisdom. Let's head back to the phones. West Palm Beach, Florida. Hi, Marie.

How can I help? Hi, thanks for taking my call. I'm just looking for your opinion on home. We have our own home.

It's like 43 years old, and it's in okay shape. You could always put more money into it, but we don't really want to do that because we're thinking about purchasing a lot that's about three and a half hours away from here. And when I retire in about a year, in six months, build a new home. And then that way, everything would be brand new.

We'd be in a different location with lower cost of living. And I'm just wondering what you think about that. Yeah, I don't have any problem with that. Would you plan to stay in this home, which I understand you own free and clear, and then get a construction loan and build while you're living in your current property? Yes.

Okay, yeah. So you'd probably want to look at a construction to permanent loan, which is a loan that allows you to fund the construction that you're doing and then convert that to a permanent loan when the home is completed. You're going to want to make sure you understand the cost of that since you don't have a mortgage payment now. Just make sure that fits into your budget, and then you'd obviously be able to sell your current property and use that to pay it off. The other option would be you go ahead and sell your place you rent while you're building your property and that way you don't have to take out that large mortgage. Hopefully you'd have all the money you need for the construction. Second thing is just make sure you get a guaranteed bid not to exceed a certain amount as you work with and find your general contractor. Especially these days, although it's been improving, there's just some real inflation going on in home building right now just because of some of the raw materials and the costs have been very high, although you're talking about perhaps a year or two down the road and things should normalize as the supply chains open back up.

Thirdly, I think just go in with your eyes wide open. There'd be a lot of folks that would say, yeah, building a home is great. There'd be more that would say, I may not ever do that again. It's just because you end up spending more in many cases than you planned. It's just a lot more work that goes into it. Some people enjoy that.

Others, perhaps, they're not cut out for it. So just make sure you understand what you're getting yourself into as you think about building a home on a piece of raw land as opposed to going out and finding something that just really fits what you're looking for in terms of location and style and actually buying something that's already completed where you don't have to spend a lot of money. But in terms of just the way you're describing the order of these things going down, whether you sell it first and then build out of the proceeds or you borrow to build and then pay it off, making sure you have the staying power to cover the monthly payment while you're waiting for that home to be built and then ultimately for your current property to sell. I think that's the key.

Finally, before you make any improvements or renovations to your existing home or even repairs, I'd talk to a real estate professional just to find out what things you should do and what things you shouldn't do because you won't get the money out of it before you sell given that we're so close to that point. Marie, all the best to you. Sounds like a fun project that you have coming down the road. I'm sure it will be enjoyable for you. We appreciate your call today. To Chicago, Illinois. Hi, Leanna.

How can I help? Hi, I'm calling just recently bought a home and I put down 5000 for the closing, but they gave that back to me after we closed on the house. I borrowed that from my Roth RA because I was told that I can get that as a free tax. I guess one of the things that I can get from my Roth RA is putting that in for a house, your first time house. So with the current situation going on, I did put in for a religious exemption and I'm not sure where things will stand. So I guess I'm just trying to figure out if I should put that back into my Roth RA or hold on to it for a couple more months to see where kind of things kind of go.

Yes. Well, there's a couple of things going on here and I'm going to encourage you to check with a tax preparer on your specific situation. You can use up to $10,000 from a Roth earnings free of both taxes and penalties for a home purchase if you meet certain requirements and you need to make sure that you do in fact meet those. You can always pull out your direct contributions at any time. That's the money you put in, not the gains, but up to the amount you put in because you've already paid tax on that money and now the government doesn't have to give you tax free increases as it's invested. In terms of your ability to put it back in, with some of the COVID CARES Act provisions, it extended the amount of time you had to put money back in if you didn't need it, but it had to be taken out as a result of a COVID financial hardship. Typically, you've got to put that money back in your IRA within 60 days and if you don't put it back within 60 days, you're not able to. So, because there's so many things going on here, first time home purchase and the COVID CARES Act and money that came out of a Roth that may or may not be a part of your original contribution, it would be very difficult for me to tell you precisely what your options are at this point. So, I think in light of the situation, I would connect with a professional, an accountant or CPA, go over your details and they can advise you the best way to proceed. If you have the ability to put that money back in, I do that because that's money for your retirement. It's already been taxed and it will grow tax free from here on out and you don't want to miss out on that compounding.

I really love Roth IRAs, but they don't do you any good if you take the money out of them. So, I would check to see if you can get it back in. Leanna, we appreciate your call today.

We're going to stay in Chicago. Anna is there and has a question about some credit cards. How can I help you Anna?

Hi, thank you for taking my call. I have four credit cards that need to be paid off. My question is that what will be the best strategy for me to ensure that my credit score is high or gets higher in order for me to pay either the lowest or the highest amount, obviously to take the interest off as well. Well, what I'm most concerned about is you just getting out of debt and there's two styles of paying credit cards down. There's the snowball method that we talk about often where you pay all the minimum mandatory payments and then you take any margin or surplus you have beyond that and you apply it to the lowest balance card and put everything extra you have toward the lowest balance. The reason is, although it's not necessarily the way you save the most interest, it's going to give you the quickest win which psychologically will help you keep going and the best strategy for you is the one that you can finish, meaning you ultimately get completely out of debt. So, that's the snowball method.

The other method is called the avalanche method. It's the same idea, pay all the mandatory minimums except with your surplus, you go after the card with the highest interest rate. That will probably not be necessarily the one with the lowest balance, so even though you might save a few dollars in interest over the long haul, you may not stick with it because studies say that if you can't see yourself making progress quickly, you may abandon the strategy altogether.

So, I'd go with the snowball method if it were me. In terms of your credit score, again, I'm not terribly concerned about that. If you really wanted to try to focus on getting your score up in the meantime, you'd want to make sure that any accounts where the balance was beyond 30% of the limit. So, if the limit is 10,000 and you owe 4,000, you're at 40% of the limit, that's going to pull your score down. If you can get that down to 30% and better yet 10%, that's going to raise your score. So, if you wanted to focus on your credit score, you'd look at it through that light, try to get those balances below 30%. But limit your lifestyle, cut back your spending, let's attack these credit cards and try to get them paid off and I'd go with that snowball method. We appreciate your call today.

Sebring, Ohio. Anita, I have just about a minute left. How can I help? Hi, thank you for taking my call. I just wanted to know if it is wise to take money from an IRA that's in the stock market and pay off a home equity loan.

No, I'm not a big fan of that strategy. Number one, is this a traditional IRA? One is a simple IRA and I have another one that's a Roth IRA, but that Roth has a guaranteed 4% interest every year.

The other one, the simple IRA is in the stock market and I'm concerned about the stock market. Yeah, and what is your age, Anita? I'm 68.

68. Okay, so you wouldn't have any penalties, but it would all be taxable. I'm not a big fan of this just in terms of pulling money out of retirement accounts.

You are going to create a taxable event and I just make sure you realign your investments if you're uncomfortable to make sure that you've got the right mix of investments for your risk tolerance goals and objectives and let's try to pay off the equity loan out of free cash flow. What do you have in that simple IRA? About $71,000 in the simple IRA and about $70,000 in the other, the Roth. Okay, and are you pulling anything out of those to cover your lifestyle, your living expenses? No, no. Okay, so this is just extra money. My husband has a pension and we have Social Security and we're okay. So if you can do it by just paying audit out of free cash flow, I'd do that.

If you absolutely want to, then I'd do it over two tax years to spread out the tax liability and then as you free up that monthly payment for the home equity loan, then I would reinvest that over time so you can rebuild that. We appreciate your call today. May the Lord bless you.

MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. I want to say thank you to Dan, Amy, Eric, and Robert. I couldn't do it without them. Thank you for being here as well. We'll look forward to having you back tomorrow, Lord willing. We'll do it all over again. Bye-bye.