When to File an Insurance Claim

This is Jamin Baxter and I serve as Business Development Director for Moody Radio. The only reason we're able to spread the gospel of Jesus Christ on the radio is because of financial support from listeners like you. We also have businesses support us too, like United Faith Mortgage.

Faith and family is at their core. It's why they choose to be such a close partner with our station. It's why they specifically advertise on Christian radio stations across the country.

It's why father and son John and Ryan still lead the company to this day. Check out United Faith Mortgage and their direct lender advantage at unitedfaithmortgage.com. Thanks to you and to United Faith Mortgage for supporting Moody Radio. United Faith Mortgage is a DBA of United Mortgage Corp. 25 Melville Park Road, Melville, New York. Licensed mortgage banker. For all licensing information, go to nmlsconsumeraccess.org, corporate NMLS number 1330, equal housing lender.

Not licensed in Alaska, Hawaii, Georgia, Massachusetts, North Dakota, South Dakota, and Utah. This is Jamin Baxter and I serve as Business Development Director for Moody Radio. The only reason we're able to spread the gospel of Jesus Christ on the radio is because of financial support from listeners like you. We also have businesses support us too, like United Faith Mortgage.

Faith and family is at their core. It's why they choose to be such a close partner with our station. It's why they specifically advertise on Christian radio stations across the country.

It's why father and son John and Ryan still lead the company to this day. Check out United Faith Mortgage and their direct lender advantage at unitedfaithmortgage.com. Thanks to you and to United Faith Mortgage for supporting Moody Radio. United Faith Mortgage is a DBA of United Mortgage Corp. 25 Melville Park Road, Melville, New York. Licensed mortgage banker. For all licensing information, go to nmlsconsumeraccess.org, corporate NMLS number 1330, equal housing lender.

Not licensed in Alaska, Hawaii, Georgia, Massachusetts, North Dakota, South Dakota, and Utah. Today's version of MoneyWise Live is prerecorded, so our phone lines are not open. Insurance is a great way to protect yourself from unexpected losses, but knowing when to file a claim and when not to, well, that can protect you from unintended consequences.

Hi, I'm Rob West. It's prudent to have life, health, auto, and home insurance. It's also wise to keep the cost of your premiums low.

I'll tell you the secret for doing that today, and we have some great calls lined up, but we won't be taking your live calls today because we're prerecorded. This is MoneyWise Live, where God's financial principles guide our every step. Insurance isn't specifically mentioned in the Bible, but God's Word does tell us that we should be prudent and wise. Proverbs 8, 12 says, I, wisdom, dwell with prudence, and I find knowledge and discretion. And Ecclesiastes 7, 12 tells us, for the protection of wisdom is like the protection of money, and the advantage of knowledge is that wisdom preserves the life of him who has it. Having insurance is wise, but knowing when to file a claim and when not to requires wisdom as well.

Sometimes the payout just isn't worth the cost down the road to you personally and to consumers as a whole. Let's look at roof damage from hailstorms as an example. Have you noticed roofing companies showing up in your neighborhood after a storm? Now, for the most part, roofers are honest people, but a few bad apples can spoil the reputation of the bunch.

Sometimes those bad apples will try to convince you that a hailstorm has damaged your roof when it hasn't. They'll tell you that your insurance company will pay for a brand new roof and it won't cost you anything except maybe your deductible. But the truth is, an insurance claim will always cost somebody something and it won't be the insurance company.

Those costs are always passed on to the consumer, raising premium rates for everyone. You may also find that your premiums go up the next time you have to renew just because you made a claim. So, when should you file a claim? Well, there's a good rule of thumb for home and auto insurance. Only file a claim if the damage comes to $500 or more on top of your deductible. So, if you have a $1,000 deductible, file a claim only if the repair bill comes to more than $1,500. Try to think of home and auto more like catastrophic health insurance. Use it only for the big things, not to nickel and dime the insurance company whenever you dent a fender or lose a shingle in a windstorm.

You're better off paying for those things out of pocket. Filing multiple claims with an insurance company is a sure way to get your premiums raised or worse. You could find that when your policy is up, the company declines your renewal. And if you think that you'll just go to another insurance company, you're probably in for an unpleasant surprise.

They talk to each other in a manner of speaking, no pun intended. You've probably never heard of it, but the insurance company has a secret weapon that it uses to weed out frequent filers. It's a shared database called the Comprehensive Loss Underwriting Exchange or CLU, if ever there was an appropriate acronym.

So, here's how it works. When you file a claim, it's noted on an industry ledger of sorts called your CLU report on how many times and how frequently you file claims. Too many claims in your CLU report and insurers may refuse to give you coverage and that period could last up to three years. And even if another company does decide to insure you, you'll probably find yourself paying higher premiums. So, you don't want to file a claim unless you're facing significant out of pocket losses.

But there's a way you can avoid even the temptation of filing. The next time your policy is up for renewal, raise your deductible to the highest amount the insurance company allows. Let's say that amount is $2,000. Next, you want to make sure you have that $2,000 in your emergency fund plus another $500 or $1,000. With that accomplished, you're now insuring yourself against minor losses. This will not only avoid the temptation to file, the high deductible will also help lower your premiums, which will save you a lot of money over time. So, to recap, file an insurance claim only when your loss is at least $500 more than your deductible. When it's time to renew, up your deductible to the highest amount the insurance company allows. And finally, keep that amount, your deductible, plus at least $500 in your emergency savings. Do all that and you'll save yourself a lot of money and grief down the road. Now, when we say make sure you're self-insured, therefore you have your deductible $2,000 plus at least $500 more.

That's on top of your three to six months expenses. We need that there as your reserve for any unexpected expense. But if you do this, you'll have the margin and the foundation under you to be a great steward of God's resources. Hey, this is a reminder that we're not live today, but we do have lots of great information coming up in the rest of the program. So please stick around.

It's great to have you with us on MoneyWise Live today, but unfortunately, today we're not live. We're prerecorded and therefore won't be taking your calls. However, we've lined up some calls in advance that we think you'll find helpful.

So stay tuned and enjoy the rest of the program. You know, we began today by talking about when to file an insurance claim, and often when we talk about insurance, the question comes up, is insurance really biblical? Shouldn't we trust the Lord?

And absolutely we should. I think the idea behind having insurance is to be sure that we recognize we want to do our part. Yes, our trust should be in the Lord, but what is our role in terms of providing and offsetting risk? And I think, you know, as we think about our stewardship responsibility to care for our families, to manage the resources that God has entrusted to us, and to look out for our neighbor. You know, if we were in an accident and we caused, you know, something medically or a damaged piece of property or an automobile, we want the ability to make that person whole. And I believe that's where insurance really comes into play.

It's not a lack of trust. I believe it's just a stewardship responsibility. So when it comes to having the proper amount of insurance, whether it's for property and casualty or even to provide for our families through life insurance, it's important that we have sufficient coverage.

It has to fit well within the budget, but we need to make sure we're properly insured. You know, so often when it comes to this area of life insurance in particular, the people that I've counseled over the years are underinsured. They simply just don't have enough in the way of resources to adequately provide for their families. If they were to be called home, if the Lord were to take them home, they were to pass away, their income goes away, especially during those working years, they wouldn't necessarily have the ability to continue to provide for their families after death. Well, that's where I believe having a proper amount of term insurance, which is pure insurance, which means it's the least expensive approach that you can have, allows you to have that proper amount of coverage.

So I would encourage you to really take a look at that, perhaps get an independent agent that can come alongside you to make sure you have the proper coverage, be it for property and casualty or life insurance, or in a later season of life, even considering long-term care insurance, if that fits into the budget. So think about that, pray about it, and then find somebody who can walk alongside you to give competent counsel. We're going to begin today in Port St. Lucie, Florida. Hilda, thank you for calling today. How can I help you? Hi. Yes.

Nice to talk to you. I have a question. We bought a lot about like four years ago, and we paid about $26,000 for it. And now, you know, we have a potential buyer. A friend, we would probably be selling it for $80,000. Yeah. Do we have to pay capital gains tax on that?

And like, how much would that be? Yes, you will, because it's not your primary residence. So you have an exclusion if it's a primary residence.

And the definition of that is you've lived in it two out of the last five years. Not going to be the case with a lot that you bought as an investment. So with a property like this that was bought for an investment, it's gone up in value, you're going to be looking to pay capital gains on the gain, which is simply the amount of profits you have, the proceeds from the sale minus the original purchase price, and then you'll subtract any transaction costs or any improvements that you've made to the lot itself. You know, and then the difference is really your gain. Now for most folks, they're going to pay a long term capital gain of 15%. If you make, you know, under around 450,000 a year in income that has nothing to do with the amount of gain, that's purely your income. So typically, you're going to be looking at 15%. You're going to want to plan for that Hilda, because you don't want to get caught off guard with that, and not pay that in on a timely basis. And then, you know, have a tax bill that you're not ready to pay.

Good news is you're going to keep the lion's share of that that you can use to reinvest elsewhere, whether that's another piece of property or paying down debt, or maybe you want to invest it for the long term in the stock market. Does that help though? It does. But I have another question. When you say like, to pay the taxes, do I have to pay the taxes before it's time to file my income tax next year?

Or? Yeah, you know, I typically would. I mean, I think as you realize that gain, it's a good idea. It could be that the amount is just not enough to trigger any kind of, you know, additional liability if you don't pay it sooner than your tax filing. So you could check with your tax preparer on that. But it's not a bad idea once you know what that tax liability is, just to go ahead and make that estimated payment in advance. That way, the money's already there, based on a calculation that your tax preparer would provide. And then you could recognize that payment that's been made when you file your tax return. So there's not anything additional owed. And if you overpaid, you'd get something back at that point. But always a good idea to go ahead and get that in and not wait.

And that way, you wouldn't have any kind of interest accrued. Does that make sense? Yes, it does. Can I ask you another question? All right, one more. Okay.

All right. We also have another lot that we would like to build a home. Now, we do have our home here that we'll probably have it finished, paid off within the next year, because we're sending extra money every month. You know, so I think it was a 15-year mortgage, and this is probably like going on the eighth year. We'll probably have it done by next year.

And my husband and I, I'm 65, and he's 67. You know, so it was just to build a house, like for our, like my son. You know, like use the proceeds from that one lot.

I don't know if that's a, you know, kind of wise thing to do. You know, because we will be kind of, like you could say, debt-free by the time we, you know, we pay off the house that we have now. But I was thinking of, you know, giving that to him and using the proceeds as a down payment. Yeah, so I'm just trying to make sure I follow. So it's another piece of property, and you're looking to gift the property to him prior to the sale?

Is that right? Well, I don't know what would be the better thing, you know, because we have to kind of, like build a home. So it's probably going to be under our name, you know, for the mortgage. Okay, all right.

Yeah, and so what is the question you're trying to answer related to this property? I'm just thinking it's like, hold on, if it's the right thing to do. I'm in my, like my 60s, and my husband too. You know, kind of like, you know, I'm deciding I want to do this, should I do this? Kind of like, like I say, once we finish paying our home here, you know, it's an extra like $2,000 that I have every month, every month, you know, that I was paying towards the mortgage that I won't have to be paying anymore. You know, so even if I had to use $1,000 to help out pay that mortgage.

Yes. Well, I like the idea once you pay off your mortgage, if you have surplus income, you have some extra cash flow, as long as you're giving at the level you feel good about, and all of your debt is paid off, you're on track and saving for the future. Continuing to reduce debt on this other property makes a lot of sense to me. If you can be debt-free and unencumbered, you're going to get a lot of peace of mind as a result of that.

And then as you get into that retirement season, Hilda, it'll keep your lifestyle and expenses as low as possible. So I appreciate your call today. Thank you for the questions you've had.

And we'll look forward to talking to you again real soon. Hey, before we head into our next break, let me remind you to check out our new MoneyWiseLive.org website. There are a number of resources there for you to take advantage of, beginning with all of our content. That's right, we're aggregating content from the Leading Voices in Christian Money Management. There are podcasts, videos, and articles that are practical and biblical.

I know there'll be an encouragement to you. You can also jump into our MoneyWise community, perhaps post a question, get an answer from a coach, and maybe even find some encouragement from other stewards on their journey with you. Now, all of this is accessible with your free MoneyWise account, which you can create when you get there. Just click sign up.

Again, the website is MoneyWiseLive.org. Our team is taking some time off today, so we're prerecorded. Don't call in. But after we come back from this break, we have some great calls lined up for you to enjoy. Stay with us. We'll be right back. Welcome back to MoneyWise Live. I'm Rob West.

This is where God's word intersects with your financial life. So glad to have you along with us today. Hey, our team is taking some time off today. This program is prerecorded, so don't call in today. Wait till we're live in the studio. But we do have some great calls all lined up ready for you today. I'm sure you'll enjoy them. Hey, let's take an email question.

We haven't done one in a few days. If you have a question, by the way, and you'd rather send it in, you can send that to questions at MoneyWise.org. Questions at MoneyWise.org.

And we try to read as many of them on the air as we can. This comes from Lee and Heather in Albuquerque, New Mexico. And Lee and Heather want to know, should we pay down credit card debt or build our emergency savings first?

And Lee and Heather, this is a great question. I'm going to say do both. But here's my approach. You know, if you don't have anything in your emergency savings and you've got some credit card debt, let's start with the emergency savings. Let's pay at least the minimum on those credit cards. Keep them paid in full every month or at least the minimum. So you're an on-time payer.

Let's establish, though, with any margin that you have. And by the way, to get that margin or surplus up as high as you can, let's be sure you're using a spending plan. Dial into that spending plan. While you have credit card debt, we need to be looking for every opportunity to cut because everything you eliminate from that budget, and by the way, you need to be tracking it. That's more money you can apply to debt reduction. But let's pay the minimums on the credit cards. Let's take every bit of surplus you have and let's sock that away in an online savings account until you get to $1,500.

That's going to be my target for you. Once you reach $1,500 in emergency savings, then let's pivot back to the credit cards and use the snowball method. Pay the minimums on all of them, but let's attack with every available dollar over and above your expenses that smallest balance until it's paid off and then move right down the line. Once those credit cards are paid off, then we're going to go back to the emergency fund and try to get that to three to six months expenses. Why $1,500? Well, I want you to have something so we can break the cycle of using the credit cards to fund your lifestyle. The unexpected will come, and if we don't have anything, you're going to rely on those credit cards. So that $1,500 is going to give you a bit of a buffer until we can get the credit card debt paid off and get that emergency fund to its proper level. I hope that helps.

Again, questions at moneywise.org. If you want to send a question to us, we'd love to hear from you. All right, back to the phones.

Tampa, Florida. Robert, thank you for your patience, sir. How can I help you? Uh, question. Last week I heard, I thought I heard you say that if you were married and your wife doesn't remarry, we divorced her 15 years ago, but she has not remarried. I thought I heard you say that she could collect social security on me or from me. Yes, that's true, but that has no bearing on your, uh, social security, Robert. So that does not decrease your benefit whatsoever. Uh, any payments by social security to a family member, including an ex spouse doesn't affect your retirement benefit, but, uh, they are eligible to collect spousal benefits. As long as the marriage lasted 10 years, they haven't remarried.

Uh, they're at least 62 and, um, you are entitled to collect social security, then they can collect as a spouse, but that's not going to affect your benefit whatsoever. Does that make sense? That's the answer to my question, sir. God bless you guys for you and your ministry. Thank you very much. Yes, sir. Thank you for calling today to Pennsylvania.

Scott, thanks for your call today. How can I help you, sir? Hi, I'm trying to decide on where to buy a house. I want to live in the country, um, but I've got enough money. I couldn't afford a 15 year loan in the country. I could in town. Um, I'm just wondering if it's, if it's better to postpone moving to the country.

I mean, it does cost money to sell a house and relocate, or if it would be a good idea to just, uh, try to be conservative in my purchase, but you know, to do the 30 year loan now. Yes. Um, so what is your age, Scott? 47.

47. All right. And so you're looking to move from, from in town to more out into a rural area. Are you looking to accumulate a little bit more land?

Is that why it's more expensive? Yes. And actually I'm moving from Iowa to Pennsylvania.

So I'm starting from scratch and yeah, I would like to have a little land in a little more private. Okay. Yeah.

Very good. And tell me about the rest of your financial life. Do you have an emergency fund? Do you have any credit card debt and have you been saving for the longer term beyond the down payment for this property? Um, we've got a little bit of an emergency fund, um, cause we just sold our house. So I want to set aside like 10,000 for that. I haven't looked at, um, yeah, so free and clear other than a mortgage. Okay. Very good. And what would you have leftover after the 10,000 is carved out for emergencies that you could use for this additional purchase?

Around 75 or 80,000. Okay. And where are you living now that you've sold the house?

Have you closed on the sale? Uh, tomorrow. Okay. And what is your plan at that point? Are you all going to rent there in your current location? Yeah, we have a short term solution that can last, you know, pretty much as long as we want.

It's, it's not ideal, but it'll work until we can, you know, find something that works for us. Okay. So let's say you're to make the move. How much would you be expecting to spend for the property you're looking for in Pennsylvania? Oh, probably around 300.

Okay. So if you put 80,000 down on that, you'd have about a $220,000 mortgage. I think the question is, uh, you know, where does that payment fit into your overall budget in terms of the income that you're relying on? As a rule of thumb, I'd like to see that payment.

It's got to be no more than 25% of your take home pay, including principal interest, taxes, and insurance, which would leave 75% for the rest of your lifestyle and expenses, beginning with your giving and then all of your fixed and discretionary expenses. It could be that you're going to need to go with a 30 year mortgage in order to get that down low enough, which I would certainly be comfortable with given that you're putting down, uh, you know, well over 20% on this property. So I think you just need to look at, um, you know, you've, you've already committed to this sale.

It's happening tomorrow. You're going to have the proceeds, you know, you want to make this move. And so where are you going from here? And I think the idea that you would go ahead and make that move once, as opposed to, you know, buying something else locally and then making a move down the road is going to save you money, but you don't want to get overextended. And that's where using that 25% rule of thumb and then actually fleshing out your budget to make sure it works, I think is the right way to go.

If that needs to be a 25 or 30 year mortgage, then I would do that. Uh, it sounds like a good plan and I think you're right on track. Let us know how it goes. We're going to pause for a brief break, much more to come on MoneyWiseLive just around the corner. Stay with us. We'll be right back. Thanks for tuning in to MoneyWiseLive. I'm Rob West, your host. So glad you're along with us today.

Our team is taking some time off today. That's right. No one's here, so don't call in, but we lined up some questions in advance that I know you will enjoy. Before we get to those questions, hey, let me just remind you that MoneyWise Media is in fact listener supported.

That's right. What we do on the air each day is only because of your generous support. Would you consider a gift? We'd certainly be grateful. Just head over to our website, MoneyWiseLive.org and click the donate button and we'd be grateful. Hey, have you checked out the new MoneyWise app?

If not, it's available and ready for download. You can use our digital envelope system. You can ask questions in the MoneyWise community and get answers from our MoneyWise coaches and others, as well as our Discover tab, where you can get the best content in Christian finance from all the leading voices. It's all in one place and you'll find it in the MoneyWise app.

Just search for MoneyWise Biblical Finance when you visit your app store today. All right, back to the phones. We have, let's see, three lines open.

800-525-7000 to Naples, Florida. Edison, thank you for your call today, sir. How can I help you? Thank you, Rob. Our question is about our kids. We want to be able to, you know, set them up for the future and we went from zero kids to four in a year and a half. Wow. And so, you know, yes, from going from the oldest being seven years old to the youngest being, you know, we're doing two weeks. Incredible. So, you know, we, like I said, trying to see what will be the best way that we can set up our kids.

Yeah, so you are a blessed man, Edison. How exciting. Thank you. I thought, you know, we went, we had four in four years and we did that because our boys, the first two, were 18 months apart and then a couple of years later we had twins and so we had four in four years. Four in a year and a half and I realize that involves adopting as well as natural birth, but that's exciting. You're going to have a busy household. Thank you.

Yes, sir. So when you say set up accounts for your kids, tell me what you're thinking. Are you wanting to begin to fund college accounts or did you have something else in mind? That's probably what I'm thinking, but I mean, I don't know what the best option will be. I mean, I don't know, like, you know, if saving is the best thing or setting some kind of account for them that, you know, whichever, you know, whatever you think that it will be kind of, I guess, the most beneficial to them and, you know, for us to be able to be something that we can actually do.

Yeah, makes sense. Well, I think the key here, Edison, is, you know, your expenses are going to go up as you have these four precious children in your home. So you're really focusing on that first to make sure you're doing what you need to do to take care of your family before you even set aside something for them for the longer term, be it, you know, a fund you can give them to make a first car purchase or, you know, get into an apartment or pay for college. I want to be sure you guys are, you know, doing the giving you want to do and that you don't have any consumer debt and that you have an emergency fund that's funded at three to six months expenses and that you're taking advantage of the power of compounding to save for retirement. So putting in, you know, upwards of 10 to 15 percent of your pay and some sort of tax-deferred, you know, retirement plan, preferably a company-sponsored plan with some matching.

You know, those are kind of the key building blocks, if you will, of your financial life that's going to give you a solid foundation to kind of navigate and journey whatever the Lord has for you in the days ahead. Once those pieces are in place, again, you're giving emergency fund, living on a, you know, less than you earn in your spending plan, and you're saving for retirement. Then I think, you know, the next step is to start think about thinking about some medium-term savings goals, which could be, you know, a down payment or, you know, money toward a bigger home because you obviously have more people in your home now.

And so, you know, if that's something you're looking to do, you might want to be saving to put some money toward that additional or larger home. Another goal would be to begin to systematically fund an account for the kids. I like the idea of you putting money aside in a college fund, and my preferred choice would be a 529 college savings plan. There in Florida, you have both the prepaid plan as well as the 529 education savings. I like the 529 education savings plan better. You can make systematic contributions of whatever amount you want, so you'd want to build it into the budget.

And again, make sure you've taken care of those savings plans. You'd be taking care of those other things first, but then you'd have four accounts, let's say, one in each of the kids' names. That money would grow on a tax-deferred basis, and all the gains you would have when you're ready to use it for college would be tax-free as long as it's used for qualified educational expenses. If those children, any one of them got scholarships or grants, you could pull the money out on a pro-rata basis with no tax impact. And if one didn't need it, you could transfer any portion of one account to another child. And it could also be used up to a certain limitation, $10,000 for K-12 education as well. So, you know, I think that would be perhaps the best approach. And if you started it early, you could really have a meaningful amount when they're ready to go off to college. So again, it's the 529 education savings plan, and I think that would be what you're looking for. Does that help? Yes, thank you.

I mean, I guess they're kind of referring to that. So we do have the savings, we do have the emergency plan. I do have a 401k and a pension. I have two jobs, so I get them from both, and I do match.

I do the max-match that I can do, so they can match me the highest. So we do have all that set up. So is there a specific kind of company that we should go with, or, you know, to the Florida, to the state, or, you know, how do we get it? Yeah, the way I would look at that would be to go to a website, savingforcollege.com. Now, because you're in the state of Florida and there's no state income tax, you're not going to receive any kind of benefit for using the Florida plan when it comes to the education savings. So you can pretty much choose from any state's plan. And the reason you may want to go outside of Florida is they rate these plans every year. They all use different fund families, you know, inside the plans, which means different investments, and some have better historical performance than others. So I'd go to savingforcollege.com.

I'd run some calculators based on the number of kids you have, the ages that they are, what your savings goals are, and it'll actually recommend the best 529 plan for you. And then you can perhaps take their recommendation and open the account online. So hopefully that helps. God bless you, Edison, you and your wife in these exciting days as you bring four kids into your home in a year and a half.

That's phenomenal. We appreciate your call. Let's see, to Illinois, and we welcome Miriam. Go right ahead. Hi, hi.

I love your program, and I've definitely learned a lot. Thank you. So I do have four property rentals. I technically don't have a mortgage anymore, and that's when I decided to buy these rental properties.

Okay. Now my question is that I've been trying to pay this off with my own money. I just don't know as far as tax purposes if it's good for me to pay it off or if I should just... The interest rates are pretty low. They're only like 2% to 3% on each property.

Yeah. Well, you certainly could talk to your CPA about that, Miriam, to determine exactly what benefit you're receiving by being able to deduct certain expenses, because this is a business enterprise. I think this is a permissible use of debt because these are for appreciating properties that are income generating. I think the only aside to that would be if you have a conviction about being out of debt or you just want to be completely unencumbered. I actually think that outweighs the tax benefits you'll receive just to have these properties free and clear. But I have no problem with you continuing with a low interest mortgage on these if you're realizing benefits financially through being able to deduct.

I'd check with your CPA, then pray about it and make a good decision. Thanks for your call. We'll be right back with much more on MoneyWise Live. Stay with us. Thanks for tuning in to MoneyWise Live. I'm Rob West, your host. Delighted to have you with us today.

Our team is taking some time off today. We're not here, so don't call in. But we've got some great questions lined up in advance, and we'll get to them in just a moment. But first, we've got a number of emails that have come in recently, and I'd like to tackle a couple of them today.

Beginning with this first one, it comes from Karen. Karen writes to us, we're refinancing our mortgage. What tips do you have to limit or reduce closing costs? Karen, I'm glad you're thinking about this because when we refinance, the cost of the refinance itself, the transaction, eats into the potential savings we're looking for, which is the whole point of the refinance through generally reduction in the interest rate and, at a minimum, matching the remaining term. We certainly don't want to increase that because that would further limit the benefit to you because even at a lower interest rate, if you have a longer term than what you currently have on your existing mortgage, that additional time, even at a lower rate, may cause you to not have the savings you were intending. But let's talk about those closing costs. Generally, as a rule of thumb, I'd like for you to think about spending in terms of the cost of the refinance, no more than two percent, at the very most, three percent of the value of the mortgage. So think in terms of a $200,000 mortgage, we're looking to spend no more than $4,000, $6,000 at the most.

Now, you're going to need to shop around. What's interesting is that most people only get one bid when they go to refinance. Well, you know, we might shop around for something that just costs $20 or $30, let alone the largest transaction we will ever have.

So let's get at least three. If you want one of them to come from your existing lender or bank, that's fine. I'd make sure at least two of them, though, are from online lenders.

I'd go to bankrate.com, see who has the best rates and loan programs right now through an online bank. It changes depending on how much money they have available to lend and then get bids from those folks. Oftentimes, the way that cost runs up is they charge you what are called discount points. It looks like a great rate, but you're actually buying it down on the front end. I would avoid doing that. That may make sense in some cases, but generally speaking, let's just try to get the most competitive rate possible with the lowest costs possible and that 2% number should be your target. All right, so get three bids, compare them closely, check out all the fees and expenses, and make sure you keep those expenses in line. All right, next is an email from Pam. She writes, my husband and I want to buy a house that we will rent out as an investment.

Is that ever a bad idea? Our goal is to earn income and have the house appreciate in the future. I would just say I like real estate as an asset class. I would start with your stock and bond retirement portfolio first. Make sure you're putting in 10% to a retirement account through stocks and bonds. If you have the ability then to add another asset class and then the way of real estate, I think that's a great opportunity. Make sure you go into it without taking on too much debt though. That's one of the biggest mistakes folks make is the debt service is high and therefore if it's not rented out for a period of time or they get into a financial challenge personally, it can really create some problems with a big mortgage. I would say as a goal, try to go in with at least 50% loan to value on the front end.

That's number one. Number two, make sure you go in with your eyes wide open as to the time commitment. Who's going to take care of the maintenance, routine maintenance when you get a call in the middle of the night or when somebody moves out and they've damaged the property? Who's going to be handling all that? Who's going to market it to make sure there's somebody in there?

Again, it can be a great thing but you just want to allocate the appropriate amount of time for that. In addition to looking at that and thinking about the debt service, I just want to make sure that you've really planned in your budget for contingencies if there's a period of time where it's not rented. Lastly, think about the market right now. We're at a very high point in terms of the housing market. It's a seller's market for sure. So that would be my only other caution, Pam. Are you paying a premium for this house that's going to eat into some of that potential cash flow and should you wait until the market perhaps dips down? I don't think we're in a bubble situation but I think we could see a cooling in the housing market that could work to your advantage if you wait and buy a bit down the road.

But if you consider those things and you still get thumbs up across the board then I like this idea. We appreciate you sending that email today. All right, let's get back to the phones. We'll take as many questions as we can over the next several minutes to Indiana. Rob, thank you for your patience. How can I help you, sir? Yeah, I have recently retired end of May and having finished up a life of building up our savings and obviously our charitable giving and tithing and so forth, now we're on the withdrawal side and just looking for some guidance and some thoughts on how do we handle our charitable giving and things in a period of time now where we're going to have less income and we're just really taking from our reserves and savings now.

Yes, yes. Well, Rob, I appreciate you thinking about this and you know as stewards of God's resources clearly we should be thinking about holding what we have loosely, however much or however little. I realize cash flow is down in this season of life and yet you want to still be found faithful in your giving and I believe God will honor that. You know, if we take the approach of starting with the tithe, the principle of the tithe that we see throughout scripture, giving a tenth based on our increase and beginning with God's plan A, the local church and then moving beyond that and giving sacrificially, if we focus in on the tithe I think you know it's interesting in this season of life because if you've been a tither and you've been giving based on your gross income and you've taken and put a portion of that aside and that's been growing, you know, obviously there's a good bit of this money that you're now living on as you take withdrawals from let's say a 401k that's been rolled over to an IRA. There's a good bit of that that you've already tived on so I think you've got a couple of approaches here. Number one is you just say, listen, as I take income out I recognize a portion of this is gain, a portion is my original investment, I'm just going to see it as my increase and I'm going to just tithe on what I receive as if it's just income because it's all provision from the Lord. The other approach is to say, no, I actually want to calculate the gain each year, the increase, the realized increase in the portfolio and then I want to give based on that amount.

However you approach that I think is certainly something that you need to take into account, pray through and get comfortable with. You know, in terms of other income sources, namely social security, again I think you could look at the same thing. Clearly a portion of that, although it'd be very difficult to calculate how much, is a return of what you've paid into the social security system but, you know, again it's all God's provision and so I would say just build your budget based on the increase, the income that you have, you know, whether or not you do it on the full amount or, you know, on a portion of it just recognizing the increase versus the original contribution and then give with great joy and open-handedly and then I think look at your balance sheet for additional giving opportunities down the road because you may find that, you know, you've accumulated more than you need and so you might say, you know what, Lord, we want to give a portion of this to you, you know, out of appreciated stock or, you know, just straight out of other assets.

I think the other opportunity for you, Rob, in this season is when you get to the place where you need to take out required minimum distributions is to look at the qualified charitable distribution where you'd give directly from one of these accounts like an IRA to a church or ministry and satisfy that RMD but where no tax is paid and therefore you get a bigger deduction and the charity or ministry gets a larger amount to put into God's service. So that would be something to consider and perhaps you could use that to offset money you would have been giving just out of regular cash flow. Does that help though or does that bring up any other questions in your mind?

Yeah, I think that's helpful. I'm also thinking obviously we don't know how long we're going to live. God does, but neither my wife or I know what our days will hold. We're currently healthy and expect to live a long and healthy life, but and so I'm looking towards that, you know, we've made arrangements for the end of our time when whenever that may come and we have two children and so our thoughts are to, you know, obviously provide some whatever's left at whatever point in time that is to them, but we'd also then I guess kind of we're looking at a three-way, you know, one for one child, one-third for another child, and then one-third for God's work. Yeah. So how do we, yeah, I guess I'm just asking the question how do we know how much we should plan to give at the end, you know? Yes.

Is it just whatever's whatever's left? Yeah, well it's a great question and I think it's one that you need to approach with obviously a lot of prayer in terms of thinking through where is each child at in their own spiritual walk. Would this money be a hindrance to them based on the lifestyle they have and the decisions they're making or would it be something to be a blessing because they're managing money well, making good decisions? Secondly, you know, what do you want to do as your last stewardship decision with regard to putting money into circulation in God's economy?

I think there's something real to that. And do you want to do some giving now and perhaps get the kids involved? Perhaps you put some money that you would give away at death in a donor advice fund and get them involved in giving it away now and, you know, use that as a way to model some incredible generosity. I want to send you a book that I'd like for you to read, Rob, that I think will help to unpack this. It's a book by our friend Ron Blue and it's called Splitting Heirs.

Not hairs, but Splitting Heirs. It's the best book on a biblical approach to inheritance and wealth transfer. It'll unpack all the principles, including the one that a lot of people struggle with, that if you love your kids equally you'll treat them uniquely, which just simply says we don't necessarily have to treat them all the same. And, you know, he unpacks that as well as a number of other principles.

So you stay on the line. We'll get that book right out to you. It's called Splitting Heirs from Ron Blue. And then once you read it, call us back and we'll talk about what you've learned. Well, that's going to do it for us today. I want to say thank you to my team today, Dan and Deb. I want to say thank you to Rich Rozell as well. And thank you for listening.

MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Come back and join us tomorrow as we apply God's word to your financial decisions. I'll be here. I hope you will be too. May the Lord bless you. Bye-bye.