New Year, Less Debt

Today's version of MoneyWise Live is prerecorded, so our phone lines are not open. It's New Year's Eve, and you know what that means. You only have a few hours left to decide on your 2022 resolutions.

Hi, I'm Rob West. Anybody can make New Year's resolutions. It's keeping them. That's the hard part, but I've got one for you that you'll never regret keeping. I'll share that with you.

Then we'll have some great calls lined up, but since we're not live today, please hold your calls until next time. This is MoneyWise Live, biblical wisdom for your financial decisions. So about now, a lot of folks are trying to decide how many pounds they want to lose in the next year. That's a worthy endeavor, but why not add something else to your list of resolutions?

In addition to reducing your waistline, how about reducing your debt? We'll get into that in a bit, but did you know that making New Year's resolutions is actually a strong Christian tradition? Many cultures make them, but Christian New Year's resolutions are grounded in a centuries-old tradition called Watch Night.

These were services held at the end of the year by some Christian denominations, and they inspired believers to reflect on the past year and resolve to do better in the one ahead. And there's something of a psychological boost to making them at the start of the year. Studies show you're more likely to keep your resolutions if you make them at New Year's.

It's like drawing a mental line in the sand, out with the old, in with the new, and making a fresh start. About 30% of Americans make resolutions each year, but by March, only about 30% of them are still following them strictly. And in the long run, only 10% of folks making resolutions keep them permanently. Researchers have tried to improve those odds, and they've come up with the acrostic SMART to use when deciding on what resolutions you'll tackle.

The S-M-A-R and T stand for Specific, Measurable, Attainable, Realistic, and Timely. So keep those in mind as you work out the specifics of resolving to reduce your debt in the new year. And I'd like to start with a word of encouragement. For many people, the thought of getting out of debt is overwhelming, so they don't try, or they give up too easily.

But you don't have to do it all at once. The important thing is to set a realistic goal and get started. And to be clear, we're only talking about consumer debt, like credit cards and maybe auto loans, not your mortgage. Now, if you can't see yourself getting out of consumer debt in the next 12 months, think about making some amount of progress instead. The first thing you need to do is write down all of your debts and their amounts. So pull out all of your credit card statements, auto loans, and outstanding bills. Then total it up.

That's never a fun thing to do, but it's essential. When you've totaled up your debt, make a plan to pay off some part of it. Start by figuring out where you can trim spending from your budget to create margin.

That's the money left over after all necessary spending. Of course, if you're not on a budget, you'll need to draw one up. If you need help with that, sign up with one of our volunteer coaches at MoneyWiseLive.org. You can also download the MoneyWise app wherever you get your apps. It's based on the tried and true envelope system, and it makes setting up a budget a snap. So after you've done that, now you know how much money you have to attack your debt each month. While still paying the minimum due on each debt, take that surplus money and put it toward the smallest debt each month.

This is called the snowball method. When the smallest debt's paid off, take the surplus and you'll have a bit more of it now and apply it to the next smallest debt. When that's paid off, repeat the process. As you keep going, you'll begin to pay off debt faster and faster, like a snowball getting bigger and gathering speed as it goes downhill. As each debt is paid off, you have more and more money to apply to the remaining debt. Now, to be successful, you also have to resolve to not take on any new debt. Otherwise, it will wipe out your progress. So don't use your credit cards.

If you have to, cut them in half. And one last thing, remember the SMART acronym? Specific, Measurable, Attainable, Realistic, and Timely? Well, choose an amount that you can reasonably expect to pay off in the next 12 months. That may not be all of your consumer debt.

Maybe it's only $1,000 or two or three. You don't want it too easy, but at the same time, it has to be a goal you can reach. And that's it. Do those things and you're far more likely to be in the 10% who keep their New Year's resolutions long term. I'm Rob West and you're listening to Money Wise Live, biblical wisdom for your financial decisions. Oh, and let me be the first to wish you a happy New Year. It's great to have you with us on Money Wise 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. Thanks for tuning in to Money Wise Live. I'm Rob West, your host. Hey, our team is off today. We're taking some time away from the studio, so don't call in, but we've got some great questions we lined up in advance. Let's head right back to the phones.

Bushnell, Florida. Hi Augusta. How can I help you?

Hi. So I'm in a little bit of a different situation than I normally hear on your show. I live at home.

I'm staying with my folks. I have kind of helped with raising my sister's kids and that's kind of the thing that keeps me from having greater income and that's the part that is an issue for me. I have some debt that is the Lord's putting on my heart that I need to work on trying to clear up and it's becoming a more and more apparent thing. The more and more I think about it and constantly listening to your show now, it's like everything's aligning. I need to do something. So I've called in. I need some direction. All right.

Tell me what it is you're really wrestling with right now. Okay, so I have a little bit under just under 30,000 in debt. The biggest bulk of that is student loans and I only make about $400 a month.

Sometimes it might be a little bit more but there's no guarantee on that. I've done out my budget and my budget isn't past my income and that being here at home has helped that a great deal. I'm not having to pay rent and such but that only leaves me with probably about $200 to be doing anything with. Okay, so you've got about $400 a month coming in in income. You said you have about 30,000 in debt. How much of that is student loans?

27, about 28. Okay, and are those deferred or are you currently paying on those? I'm not paying on them at the moment. I haven't been able to.

Most of it, unfortunately, I have to be honest, is by choice but that's why I'm trying to, the Lord is telling me, you're doing wrong. You need to straighten this out and I'm trying to be very disciplined through him and it's a learning process still but I mean I want to do what I'm commanded to do. Sure, sure. These are federal loans, is that right?

Yes, sir. Okay, and if you were to contact them, I mean the income-based repayment options that are available through the federal loan program would allow you to pay something that would be very small but at least you would be paying and you would, I think, feel better that you're, even if you're really not making much progress, at least you're honoring your commitment and if you get to a place where you get out and you can earn some more money, then obviously you'd have the ability to pay more in overtime but right now, obviously, with very limited income, I realize your expenses are low but we're talking only $200 a month you have even to work with. There's not a whole lot there. So I think the next step for you is perhaps to reach out to them and say, listen, here's what I've got and I want to get started but I don't have a whole lot. And they'll ask you to document the income that you do have and then hopefully work out a repayment plan that allows you to begin sending an on-time monthly payment based on what you have available and at least that will get you going in the right direction and then if the Lord provides more income, you're able to move kind of out from under this and work full-time, then that's a whole different scenario. The good news is you will have learned to live modestly so you can carry those principles over and as you have increases in pay and more margin available, then that will give you ample opportunity to make some meaningful progress toward these debts in the future. But I think right now, we just don't have the resources so if you're wanting to get started, I think you could certainly begin making payments out of what you have available even if it's not going to make a whole lot of progress each month.

Sure. Well, I'm relying on the Lord to bring in the extra. He's the one who brought in the 400 to begin with so it's all in Him. That's right.

That's right. Well, we certainly don't want you to be in default so if we can get you back on an on-time payment status based on the resources you have, I think that's the key. So I would go ahead and contact your student loan service provider and let them help you through this process of determining an income-driven repayment plan and I think if you have the ability to do that and they'll be willing to work with you, that will give you the peace of mind that you're looking for. We appreciate your call today, Augusta, very, very much. To Rochester, Bob, how can I help you, sir?

Hi, Rob. Thank you for taking my call. I'm 58 years old and I have a mortgage that I owe $65,000 on and my father-in-law is going to give me $20,000 on my mortgage so to take it down to $45,000. I currently pay 5% interest on that loan.

My question is, should I refinance at lower rate or should I just pay extra on the mortgage and pay it off quicker that way? Yeah. Well, you certainly could. I mean, I think the question is, you know, you're planning to stay in this home even beyond you paying this off, is that right? Yes, it will be the final home for my life. Okay.

Yeah. I mean, you're going to have trouble getting a mortgage below $50,000, maybe even $60,000. So you may need to, if you're going to refinance, you'd probably want to do it at the $65,000 and then just prepay it kind of right away with this extra $20,000. But if you have a good credit score and you could get that down, you know, at around 3% on a 10-year mortgage, the key would be you'd want to determine what the monthly payment is you'd want to send to at the very minimum match the remaining term of seven years. And then the combination of the lower interest rate and the accelerated payoff based on a seven-year payback, I think, you know, will be the key. And then it's just a function of how much interest are you going to save over those seven years with the lower interest rate versus the cost of the refi which, you know, at $65,000, you know, could run you two to 4%, so somewhere between $1,500 and $3,000, I would guess, that you would be paying. And then it's just a math equation based on the amortization schedule to determine, am I going to save at least that much in interest over these next seven years? And if you are, it might be worth kind of the hassle of going through. If you're not, clearly, then it'd be better just to stay with your current mortgage. So I'd probably look into it. I mean, if you can save a few thousand dollars over the life of these next seven years, then it's worth it, you know, for several hours of your time to get this refinance to go through the closing process.

But if you are going to look at it, I'd probably look at doing it on the current balance at no more than 10 years with a plan to prepay it, keep your same monthly payment, and then do the math to determine that you can, in fact, recoup the closing costs and then save on top of that through the lower interest rate. Does all that make sense? Yeah, that makes sense. What we plan on doing or what our plan is just to keep the mortgage because they said it would have seven years left and it's paying an extra hundred dollars a month on it to get it paid off in less time.

Yeah. Well, and the key is, I mean, I like that plan. The key is just can you accelerate that even further or save more by reducing the interest rate as a part of this process before you pay it down?

And that would be worth looking into. But at the very least, if you just did nothing more than your current plan, I think you're on the right track to being debt-free. We appreciate your call, Bob. All the best to you in the days ahead.

This is MoneyWise Live biblical wisdom for your financial decisions. We're going to pause for a brief break and then we'll be back with much more. Stay with us. Welcome back to MoneyWise Live. Delighted to have you along with us today. Our team is away from the studio. We're not in today, so don't call in, but we lined up some questions and an email that we'll take here in just a moment that I know you'll be encouraged by. Back to the phones. Mary is in Indiana.

Mary, how can we help? Yes, I am single, no children, and I like to leave money for contributions, church and maybe family members. However, I don't want my I have a home. I don't want that to go into probate. How would I go about doing that through a I think it's a living trust. Yes, you absolutely could use a living trust. Now, a will will accomplish that as well. I mean, the probate court will be involved, but when there is a will, the probate court is just facilitating the transfer of your assets based on your wishes that have been expressed through a valid will, last will and testament.

So that would be the simplest way. But if you're trying to avoid the probate process altogether, then you would have to use either what's called a transfer on death, which is a legal instrument that basically just says how the title is to be transferred outside of probate as a result of your death. And that would be a legal instrument you could put in place or a living trust, which would allow you to retitle the home in the name of the trust. And then based on certain triggering events, you being incapacitated, your death, the home then would be liquidated or however you decided you wanted it handled.

And the trustee, the person named to carry out the trust documents and the intent would then distribute the assets according to the trust documents. So you could take either approach. I think the question is just whether you're when you say you want to avoid probate, are you saying you want to avoid the probate court making the decisions or are you saying you want to avoid probate altogether, even if there's a will that governs their decisions? Well, I would really like to avoid any taxes being incurred on the on the on the on the property or value of the property.

I know with children, you had two different ways. One, the child would end up paying a percentage of the taxes, depending on how many siblings were involved, I guess, or, you know, and that's what my concern is. I don't want funds going to taxes. Well, the the there shouldn't be an issue with taxes based on the current tax laws, because, you know, keep in mind, if there's any taxes due, it's going to be paid by your estate. But right now, that doesn't kick in until eleven point seven million. So the heirs don't pay the taxes. There's not an inheritance tax that exists. So the fact that this would be transferred as a part of your will, whoever's receiving this asset, if it's a family member, they would get a stepped up basis, meaning the value of the property at the date of death would become the new basis for the property, which means that if it was immediately sold, there would be no tax due, assuming that it's sold for the same amount as the basis that is reset at the date of death. So if they do that quickly, those numbers are essentially going to be equal.

There's no capital gains because the basis is equal to the selling price. So I don't think you have to worry about that. The key is just how do you want this carried out and how do you do that as efficiently and effectively as possible? It could be done through a simple will, or if you want to avoid the probate court altogether, you could use a T.O.D. or you could use a living trust. So I'm going to encourage you, Mary, to visit with a godly estate planning attorney there in Indiana, someone that you can talk through all of this with and make sure that you've put other things in place as well, like a health care surrogate, somebody who can act on your behalf for health related decisions if you're unable to make those decisions, a living will related to end of life decisions, even a durable power of attorney, somebody to act on your behalf in terms of your financial affairs if you're incapacitated. These would be the things you'd want to do at the same time. You're dealing with wealth transfer and asset transfer through wills and potentially living trust.

So perhaps you call your church, ask for a referral to an estate attorney, or you could contact a certified kingdom advisor there in Indiana and ask for a referral as well. And I think that will get you pointed in the right direction. We appreciate your call today.

Thanks for listening to the program. Let's quickly take an email. And this first email just says, as a Christian, should I be buying gold and silver to prepare for the upcoming hyperinflation? And that comes from Keith.

And Keith, I appreciate that email. You know, number one, I mean, yes, inflation is on the rise. Could we have a debt crisis or hyperinflation down the road? Well, nothing's out of the realm of possibility, but I will say the people that I trust that are looking at all the data and have God's heart, meaning they understand biblical wisdom.

They've read Revelation and know the end of the story. The people that I trust are not seeing signs of hyperinflation on the horizon. Could that change? Sure.

But that's not on the radar at this point. Should you be buying gold and silver? I don't think there's anything wrong with having a proper allocation to gold and silver. But this, you know, that would be five to 10 percent that I would be looking at. So five to 10 percent would be a normal allocation.

I wouldn't overweight in that for any reason. So I hope that helps, Keith. We appreciate you sending that email to questions at MoneyWise.org. Well, folks, before we head to this break, let me remind you that this is a great opportunity for you to consider supporting the work of MoneyWise Media. It's the last day of the year, which means this is the deadline to get your gift in in a way that's going to contribute to our planning for next year. And so if you would consider prayerfully a gift to MoneyWise Media, we are entirely listener supported and that would go a long way toward helping us accomplish our ministry objectives in twenty twenty two.

It's quick and easy to do. You can head to our website, MoneyWiseLive.org and click the donate button. If you put a check in the mail today, that will be credited toward twenty twenty one. That would help us. You'll find the address there or you can call and talk to someone as well.

The phone number is there that you'll find on the website. Again, your support will go a long way toward helping us accomplish what we're doing next year. And thanks in advance. This is MoneyWise Live. We'll be right back. Thanks for tuning in to MoneyWise Live. I'm Rob West, your host. This is biblical wisdom for your financial decisions.

Our team is away from the studio today taking some time off, so don't call in. We've got some great questions that we've lined up in advance. Before we get to those, let me remind you, MoneyWise is entirely listener supported. So if you count yourself among the MoneyWise community, we'd invite you to prayerfully consider supporting this ministry so we can make plans for all of the ministry activities we're doing next year. If you'll make a tax deductible gift before twelve thirty one, we'd certainly be grateful. You can do that quickly and easily online.

MoneyWiseLive.org. Just click the donate button and thanks in advance. Let's head back to the phones. Florida is where Terry is located. And Terry, how can I help you?

Hi, thank you so much for taking my question. I guess I have kind of a multi-level situation. I am separated from my husband.

Not divorced, we've just separated. And I bought a house two years ago. And I have about 80,000 in a 401k. And I'm wondering if just because of the stock market political volatility, I'm a little concerned about keep protecting that money.

So I'm wondering if taking maybe half of it out, putting it in a something something more stable like a Roth IRA or taking half of that money and putting it towards the principal on the house. Yeah. Terry, have you separated from the employer that that 401k is associated with or are you still working for them?

No, I'm I'm still working. OK. Yeah. So you're probably not going to be able to take that money out unless your employer offers that provision, whether you roll it to an IRA and a non-taxable event or you just take a withdrawal. You typically are not able to do that until you separate from the company. Have you inquired about that? No, I wasn't even aware that that because I thought once I was 59 and a half, I could do what I wanted with it.

Yeah. I mean, you could take a withdrawal on it, but you're typically not going to be able to just roll it out to an IRA unless they allow for that provision. But I think at this point, you know, the question is, first of all, with the money that's in there, what is the right investment strategy that aligns well with your goals and objectives? And then secondly would be, is there any portion of it that you want to take out for another purpose? I'd love for you to not take the money out just because that's going to create a taxable event, even though you're not going to have the 10 percent penalty because you're over 59 and a half.

You still are going to add whatever you take out to your taxable income. And then in addition to that, that money is no longer there to be growing so that you can access it down the road and, you know, convert that into an income stream to supplement other retirement sources. You know, you mentioned just the political environment and the economy. And, you know, I would agree we have our challenges. There's going to be some headwinds. But, you know, we still have a very strong economy, a strong consumer. We're 12 years into a bull market. We're probably going to see it roll over at some point here.

It always does from a cycle standpoint. And so, yeah, we could hit a recession. Are we going to have a full blown debt crisis?

Probably not. I mean, I think, you know, we're going to make the hard decisions, in my opinion, when we need to make them. But clearly we need to, you know, make some changes down the road that will have most significant effect for our kids and grandkids. But the bottom line is, you know, we still have the strongest economy in the world. And in terms of where else you're going to put this money to make it grow such that you can offset, you know, what's eroding through inflation in terms of your purchasing power, I think the stock and bond market is still the very best place to be, to be able to grow this money as opposed to, you know, pulling it out and just having it parked on the sideline or something like that. Because in my mind, there's not a risk of a financial collapse or anything like that.

It would just be more of a, you know, a recession that we could hit, you know, let's say 18 months or a couple of years down the road. So I think for that, from that standpoint and recognizing that if you're in good health and the Lord tarries, you know, even once you retire, you still have a decades long need for this money. And, you know, investing it, you know, in a properly diversified portfolio is the very best way for it to outpace inflation, to get some growth so that you can take an income off of it and not impact the principal. So from my standpoint, you know, all things being equal, I'd leave it there.

Look at adjusting the investment allocation to match your risk tolerance, age and objectives inside the 401k, because you have multiple investment options inside the 401k. You can be as conservative as you want. And then, you know, with any debt elimination you want to do, just try to limit lifestyle and fund that out of current cashflow. But what thoughts do you have? That it actually all sounds very sound and probably the best way to go. I think my major concern is having taken on a mortgage at this late date and you know, my number of working years being somewhat limited and wanting to protect the home I'm in. Yes. And I think the key is right now, as long as you can afford to pay that mortgage, did you take a 20 or a 30 year mortgage?

What is it? 30, optimistic there. And so I think the key would just be, I mean, recognize, you know, that's not going to get paid off on the current, you know, trajectory. But at the point when you retire, if it's, you know, more than you can afford through Social Security and whatever income you'd have off of your retirement accounts, then you could downsize, you know, you could sell it and hopefully take a profit at that point. And you could rent, you could buy something smaller, you know, get a townhome or something like that. That's more manageable.

So I think, I mean, you clearly have options. The key is let's keep your lifestyle at a minimum. Let's keep investing in saving for the future. Let's, as you're able, try to pay down the mortgage, but just recognize that at some point, you know, the budget is going to have to balance in retirement when your expenses hopefully are lower and, you know, will make the necessary adjustments at that point for your housing because that's, you know, obviously your largest expense. So I think that's the track I would go on as opposed to pulling a big lump sum out of the 401k right now, which is then not going to be available down the road and you're going to have to pay the tax on it as well. I think you could also benefit from a financial advisor who would do a financial plan for you to project some of these things out so that you know that you've got, you know, a plan that you're working toward.

And I think that would give you some peace of mind. You could find a financial planner on our website, MoneyWiseLive.org. And thank you for your call today. Gabriel is in Niles, Illinois, WMBI.

Gabriel, just a few seconds left. How can I help you? Hello.

I would like to thank you for taking my call. And I would like just to ask you what is the best time to pay the credit cards and how much should I let the credit cards to bill credit? Yeah. How much balance should you keep on the credit cards?

Is that what you're asking? Yes, exactly. Yeah, I would try to pay them off every month. I wouldn't worry about your credit score.

I mean, here's the bottom line. As long as you're paying them off every month, don't worry about when you pay them. You know, as long as you're keeping those balances, even with what you charge every month before it's paid off under 30 percent of the limit, that's not going to affect your credit score. And as long as you're using it for budgeted items and then paying it off at the end of every month, that's ideal. I wouldn't pay a penny of interest for the sake of trying to build credit.

And you don't need to because that's not the way the algorithms work. So I just pay it based on the statement day, pay it off in full and only use it for budgeted items. Hang on the line. We'll talk off the air. And this is MoneyWise Live. We'll be right back. Thanks for joining us on MoneyWise Live. I'm Rob West.

This is biblical wisdom for your financial decisions. Our team is off today. We're enjoying some time away from the studio, so don't call in. But we've got some great questions lined up in advance. We're going to go to those in just a moment. Do you know, as a steward of God's money, you have an incredible opportunity to be found faithful in using his resources as a tool to accomplish his purposes?

Well, together each day on this program, we want to try to extract God's wisdom from the Bible and apply those principles to the decisions we're making today. Let's do that together. We'll head back to the phones.

Glenview, Illinois. Hi, Karen. Thank you for calling and for your patience. How can I help you?

Thank you for taking my call. I'm 64 single. I had a brain tumor when I was 50.

It was unexpected. And I worked for an additional five years. But then I was no longer able to do I was a grant writer at work. So I was able to get on disability at age 55. And I presently own my own condo, I have no debt.

I've worked only for nonprofits. So my only savings is what I've managed to save. So I have a checking account with 30,000 in it, I have an investment of 620,000, and an IRA of 257,000. And then a part time job for a church that I do, I get 400 take home pay every month. And my question is, I've lived in this condo for 23 years, it was always my intention to find a larger place. And so I did find a larger place recently. And it's instead of what my condo costs at 100,000, which is now valued at 170.

The one I'm interested in is 300,000. And I'm calling to find out if you could give me some advice for my income situation. If it's wise to purchase something at my age, that is more expensive than where I'm living, being that I'm no longer working full time.

Yes, no, it makes complete sense. Well, thank you for that really hopeful description of where you're at. It sounds like on disability for the last 10 years, almost, you've done incredibly well working for nonprofits, you've obviously limited your lifestyle. I mean, it's amazing what you have in your checking, which you've put away in your investments. The fact that you're completely debt free, including your condo.

That's just remarkable, Karen, what you've been able to do and applying biblical principles here. Moving forward, let me ask you, what is your monthly expenses each month? What is the total of what you spend? 1700. Okay, so you're only spending $1700 a month, and you're bringing in $400 a month.

So, you know, you really need 1300. And are you pulling that from your investments each month? No, I'm not touching my investments. I'm living off Social Security and the part time job that I have. I see. Okay, so Social Security- It's not a strain where I'm at now. Yeah, okay.

I just always wanted something a little larger and a little nicer. I'm wondering if I've lost that opportunity. I don't think so. I mean, you've done incredibly well. I mean, even if you were to take 130,000 out of your investments, you're roughly 900,000 that you've saved up, you're down to 750,000. But you don't even need that money right now. I mean, you may down the road, but you certainly don't need it now. And, you know, even at that lower amount of 750,000, which is a lot of money, you know, at three and a half percent, which is what I would say you could very easily take per year with the right conservative investment strategy.

And, you know, never deplete the principle. You should be able to make that up through the investments. You know, that would give you another 26,000 a year just in income if you wanted it or needed it. But you don't have to take that right now because you've got your bills covered because you're living so modestly. And, you know, if you were to take the additional money to buy the little bit larger place, you know, you may have perhaps a few increases in expenses. You know, the property taxes may be a little bit higher. The utilities may be a little bit higher.

I suspect you could absorb that pretty easily. And remember, you're buying an asset that's going to continue to appreciate. So, you know, from everything I'm hearing, Karen, I'd say first, great job. You really are managing God's money wisely. And number two, I don't see any problem whatsoever with you taking some of these investments, putting them into real estate. Remember, you're just transferring the asset from, you know, investments, stock investments or bond investments over to real estate. I don't see any problem with you doing that, given your financial position.

Oh, thank you. I just been so unsure if I'm doing something that I should no longer be thinking about because of my situation. I'm in good health, but still in all, I can't earn what I used to earn. Not at all. You are, you would essentially be moving from the one asset class to another. You'd be able to enjoy that, which is part of the reason God had trust to us. We see in 1 Timothy to enjoy what he's given us. Sounds like you're living very modestly and simply with contentment. And so I think you're doing everything right. And I would actually encourage you to go ahead with this plan because it sounds like it's something you're excited about and there is no reason to do anything else.

So listen, you do that with confidence, you enjoy it. We'll ask the Lord to give you some wisdom as you make that selection for your new place. And we appreciate your call today. God bless you, Karen.

To Columbus, Ohio. Hi, Cheryl. How can I help you?

Hi, thank you for taking my call. My question is in reference to life insurance. I have a life insurance policy, it's whole life. And I'm 63 years old. And I've been considering for a while I'm turning it over and getting term, like a 20-year term, which would put me at maybe, I think, 83 years old. My question to you is, I need some advice on that.

Do you think that's a good thing to do? Well, first, Cheryl, the question is, how much life insurance do you need, if any, and for how long? If something were to happen to you, would that place a hardship on somebody else, a loved one or a dependent, because you were no longer able to earn an income?

No, my husband passed, so I'm by myself, but I do have a daughter and four grandchildren. So that wouldn't, my expenses wouldn't be a burden on anyone. It would be a matter of, go ahead. Well, I was just gonna say, so then what is the purpose of the insurance? Is it to be able to provide an inheritance? Well, to give, you know, make sure my daughter and my grandkids have something after I pass.

Okay, all right. Well, I guess the only question I would ask is, you know, as you think about stewardship of what you have, you know, this policy that you would have if you're gonna try to keep it for the rest of your life, so that no matter what age the Lord calls you home, whether that's next month or 30 years from now, it's gonna get more expensive as you age. And the question is just, is that the best use of those funds to buy that insurance policy or would it be better, you know, just to cancel these policies altogether and take that money and just start systematically investing it, so that if you needed it at any point, you could access those funds for yourself. But if you don't, then you could give that to them as opposed to trying to pay for a policy that's gonna become increasingly expensive over time. Does that make sense?

Yes, it does. So you don't think I need any life insurance? You really don't. You know, unless you have a lifelong dependent, somebody that's counting on you and your income to be replaced if you die or who's gonna incur additional expense after your death, then really there's no purpose for it unless you're just using it to generate funds to leave as an inheritance. But again, if you're gonna keep a policy that's gonna last until, let's say, you know, you're 100 years old, if that's the long the Lord has in mind for you, it's gonna get pretty costly. And at some point, you're probably gonna drop it because it's cost prohibitive. And then what do you have to show for it? So I just think you need to really think about why do I have this insurance, life insurance in the first place? And should I be using this money another way to, you know, either forgiving or for, you know, covering your own bills or for saving for the future, which is then an asset that would be available to give to the kids and grandkids when you pass away. So I just think you need to think through that. We don't. A lot of people get into this mode of, well, I just need to have life insurance for my whole life. No, it really is to serve a purpose.

And when that purpose comes to an end, it's an expense we can get rid of. So you think about that, pray through it. And if you have other questions along the way, give us a call quickly to Pleasant Plains, Arkansas. Jerry, just a couple of minutes left. How can I help you, sir?

Okay. I'm a pastor of a church. I'm 81 years old. And I have a house. I've got a lot of equity in it. I wonder if it'd be better to pay my house off and, you know, not have that bill, because I probably will retire not from preaching, but from high school work, you know, sometime in the future.

But I don't know what's best for me to do right now. Yeah. What is the home worth, do you think, Jerry? $175,000 to $200,000. All right. And what do you owe? I owe $38,000. All right. And where would you pull those funds from if you were going to pay it off? I have a 403B that I could take out. But if I did, it would drop it pretty low, you know. Okay.

And you can cover the mortgage payment every month out of your income? Well, I can as long as I'm still pastoring. But after I put pastoring, I'm not sure. Yeah. Okay. Well, I think this needs to be done in the context of a plan to make sure we look at the implications of both and how long you want to plan to continue to work.

A lot of this is going to be a function of what income sources you have in retirement, quote unquote, even though you're going to continue to preach. You stay on the line. We'll talk a bit more off the air. That's going to do it for us today. MoneyWise Live is a partnership between Moody Radio and MoneyWise Media as we finish 2021. Happy New Year. And by the way, if you'd like to visit our website and make a year end gift in these few hours that remain this year, you can do so at MoneyWiseLive.org. Just click the donate button. It would go a long way toward helping us plan for next year. Let me say thank you to my team today, Amy, Deb, Jim and Eric. Happy New Year and we'll see you next year.