Financial Ed for Kids

Proverbs 20-11 reads, Even a child makes himself known by his acts, by whether his conduct is pure and upright.

Hi, I'm Rob West. Of course, we all want our children to be pure and upright in their walk with Christ. And that certainly includes how they manage money. I'll talk about some ways you can help them do that today. Then 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. Okay, I've said it before, but it bears repeating. After sharing the gospel with your children, one of the most valuable gifts you can give them is teaching them God's financial principles. It will positively impact so many areas of their lives. Children need to learn that you work hard for the money that supports the family, that you're not an ATM machine with unlimited funds.

They need to work as well to receive material rewards and the satisfaction that comes with doing a job well. They need to learn how to budget and spend carefully because there's never enough money to do or buy everything we want. They need to learn how to save, not just for rewards, but to cover unexpected things, just like you do with your emergency fund. And most importantly, they need to learn how to give, to be generous to God's kingdom, because He is their ultimate provider, as He is yours as well. A recent article by The Humble Dollar, a secular website, caught my eye because it lists five strategies for teaching wise money management to children. It was also interesting because all of these ideas can be found on the MoneyWise website in various places.

So let's start with the first strategy. Share the big picture with your kids. Now, that doesn't mean showing them how much you make and giving them a copy of your 1040, but you can share many of your expenses with them so they get an idea of how expensive things are and what it takes to provide. Show them your mortgage and car payments and your weekly grocery costs.

You might also show them your retirement account statement. That can give them a sense of how important it is to save for the future and how much time and effort it takes to build up a nest egg. Managing credit wisely is another extremely valuable lesson for older children. When they head off to college, they'll be inundated with credit card offers. Far too often, they fall victim to this and run up consumer debt. On top of any loans taken out for education. A better strategy is to teach them about credit before they reach college age.

That way, you can monitor them. You could make them authorized users on your credit card, but a better way might be to open a secured credit card account for your teen. Several issuers offer them. If you're unfamiliar with a secured credit card, it works like this. You deposit a certain amount with the issuer, say $300 or $500.

You can then use the card up to that limit, but no more. Of course, you don't want your teen to do that. They need to learn to pay off the balance each month out of their earnings, which brings us to allowances. The article I mentioned actually recommends setting up a three-jar system for holding allowance and gift money that kids receive. One jar for saving, one for spending, and one for giving.

Well, we couldn't agree more, but we'll take it a step further. Have your children put some of their money in the collection plate each Sunday. The earlier you teach them to be generous to their church systematically, the better. Another valuable lesson for kids is that they'll have to pay taxes, and maybe sooner than later. If your teen has a job, the employer may withhold taxes. That means the child will have to file a return, even though they may not have to pay taxes. You would probably use the 1040EZ form, but filing it with your child would be an eye-opening experience, especially if taxes are owed. But impress on your child the importance of being scrupulously honest about money owed to the government. Romans 13, 6 through 7 reads, For because of this you also pay taxes, for the authorities are ministers of God attending to this very thing.

Pay to all what is owed to them, taxes to whom taxes are owed, revenue to whom revenue is owed, respect to whom respect is owed, honor to whom honor is owed. The last money lesson for your kids involves saving for and buying major purchases. This is a great way to teach budgeting.

Younger kids may want a special toy. Teens may want a cell phone or even a car. Help them set up a saving plan where they are at least providing some portion of the money needed for the purchase.

The percentage isn't important. Figure out what's best for your situation. The main thing is have the child participate in the purchase with their own money. Well, we hope you found these ideas helpful.

Remember, the earlier you start teaching kids how to handle money wisely, the better. Your calls are next. Here's the number, 800-525-7000. I'm Rob West and this is MoneyWise Live. We'll be right back. Delighted to have you along with us today on MoneyWise Live.

I'm Rob West, your host. We've got some phone lines open today. We'll be taking your calls and questions in just a moment. Here's the number to call, 800-525-7000.

That's 800-525-7000. Whatever is on your mind today, we'd love to hear from you, of course, financially speaking. We began today by talking about money and kids. And let me just underscore our opening topic in terms of the importance of preparing our future adults to handle money wisely. And that's not only just making sure they're financially literate, understanding the importance of having a spending plan and how to put that together, understanding how compound interest works, and why it's important to avoid debt, understand the compounding force of long-term dollar-cost averaging, and why we should start early when it comes to investing, the value of hard work and limited resources. All of those things are key, but I think what's even more important than that is really understanding God's heart as it relates to our money and training our kids to recognize God owns it all, and we're managers of God's resources. And therefore, money becomes a tool in that money can be a competitor to the Lord for first position in our lives. And talking about what that looks like with greed and the comparison trap, and especially as it's fueled by social media with younger generations. You know, when we compare ourselves to the best version of somebody else's life on social media, well, it can lead to a lack of contentment.

It can lead to comparison and envy that results in overspending beyond our means to maintain the appearance of a lifestyle that we can afford when in fact we can't. All of these things are really important to talk about very early on. And as you think about that, perhaps you can apply the principles that our former host, Howard Dayton, talked about when he said we should be MVP parents.

M standing for modeling. Model these ideas in your daily life, the fact that you're operating on a spending plan. Talk about that. For our kids, we actually turned the eating out budget over to them one month and had fun watching them wrestle around the kitchen table, not physically, but as they negotiated how they were going to spend that for the family and trading off a lunch out after church for a Friday night dinner out. And it was fun for them to understand that their resources weren't unlimited and so if they were going to live within our budget, they were going to have to think strategically about that.

Well, that's one way we can model it. V stands for verbal communication. We should be talking about these things regularly, including the idea of generosity and how important that is.

And then P stands for practical application. Let's find practical ways to allow them to experience this, and when they're ready, that could look like opening a checking account and managing a debit card. And early on, it's give, save, spend with clear jars. But throughout the whole of their childhood, we need to be training them and getting them prepared to be adults and manage money wisely. And the fruit of that is they'll be able to experience God's best, be connected to his work through generosity, and hopefully have marital harmony as it relates to this area of money.

It's so important. All right, let's take some of your calls today. What's on your mind? Is it investing or saving? Getting out of debt?

Perhaps it's your credit score, whatever it is. Give us a call. We've got some lines open. And Hans, waiting to take your call today. Here's the number, 800-525-7000. That's 800-525-7000.

Let's head to Ohio to begin with. Jay, thank you for calling. How can I help you?

Hello. Thank you for accepting my question here. I have seen commercials on TV that say that if you have life insurance or insurance policies that you no longer want, need, or can't afford, or whatever like that, that they will buy them from you. How does that work? Yeah, you know, typically there's a couple of forms of this. One of the more common would be what's called a viatical settlement. Now this is a very specific type of settlement or where you're selling your policy, and it's where somebody relinquishes the right to receive the death benefit as a beneficiary, and they sell their policy at a discount from its face value. But a viatical settlement really is for those who are terminal, where they're terminally or chronically ill, and they would be within an expected two years of the end of their life, just based on, again, that terminal illness. And so typically what happens is they need the cash to provide for their medical expenses or end-of-life expenses, and so they want to go ahead and get the advance on that money, and they're willing to take a discount. The purchaser of that viatical settlement is obviously counting on the internal rate of return based on the day they buy it at a discount and the date of death at which time they'd receive the full death benefit. If it goes longer than that two-year period where there's not a health crisis involved, you still can sell an insurance policy to get cash. That's typically referred to as a life settlement, and there are other options to look at that would be better than that, even though this is legitimate. If you want to access some of the cash value, you could look at that option while still keeping the policy in force for beneficiaries. It might also be possible to use the cash value as security for a loan for a financial institution. But typically for most people, selling an insurance policy is not something I would be looking at.

For the average person, unless there's extenuating circumstances, I would be looking specifically at the cash value, and at the very least I would just be canceling the policy if it's not needed so you can recapture that premium back into your budget on a monthly basis. Does that make sense, Jay? Pardon me. All right. Well, thank you so much. I was curious, didn't know exactly how it worked, but you have cleared some things up for me, and I appreciate it.

All right. You are very welcome. Thanks for listening and for calling today.

800-525-7000 is the number to call to Tennessee. Hi, Alex. How can I help you? Hi. Nice to meet you. I'm very grateful for your radio ministry here and the service you do.

Thank you. I had a question about 401Ks and Roth IRAs. I currently have a 401K through my employer, and I know on a Roth IRA you actually pay the taxes up front as you go, so as you get this distribution later in life, you don't have to do that. But I would think that a 401K would grow faster. Is that not the truth, or does it actually come out to be more or less equal? Well, where are you seeing the faster growth?

What is it you're keying in on? Well, just whenever I went to this new company, I rolled over my old 401K into it. They had a presentation on that, and they were saying, regardless of which route you went, it pretty much came out to the same after you retired your distributions. It's just that the Roth was here paying the taxes up front as the account grew. But I would have thought that 401K would grow faster because it had those funds sooner to invest more that it would grow quicker.

Yeah, you're thinking right there. So the growth really has to do with the investments inside the account. So if all things were equal and the Roth had the same investments as the 401K, they would grow at the same rate. But you are correct in the sense that when you put in Roth money, because you're paying the tax up front, if you put in the same amount, you would obviously have more in the Roth.

And so it would, in effect, allow you to grow that just a little bit quicker. But at the end of the day, it's really about the tax treatment. So with the 401K money where it's going in and you're getting the tax deduction, that money then would grow and you would then pay it as it comes out as ordinary income versus the Roth where you're paying that tax up front, you're getting that money into the Roth, and then it's growing tax-free, at which point you never pay any tax on the gains.

So the opportunity is really to consider whether you are going to do better with the benefit today on the tax deduction versus the benefit later after you pay the tax now of being able to take it out tax-free. That's in part going to come down to what tax rate are you at in the future. Part of that is unknown because we don't know where tax rates are going to be. I would submit we're probably not going to see anything lower than we have today, so the logical expectation is rates are going to be higher. But you also have to factor in that you're potentially earning less in retirement, so you're in potentially a lower bracket even though the brackets themselves may move up.

So that's the unknown. It's also a factor of just how long do you have for this money to grow and is it worthwhile to go ahead and pay large chunks of tax if you were to convert it to a Roth versus leaving it in a tax-deferred environment if it's already there because you've been funding a 401k for a long time and then either converting it over time or not converting it at all and just as you get into retirement going ahead and pulling out of the 401k as your income needs dictate. Does that all make sense?

Yeah, it does. I'm on the younger side of things, so I may keep it as a 401k for a while longer and wait until later in life to roll it over or I may just keep it a 401k. I'm 28 and I currently have a little over $12,000 in it. Okay. As a young guy though, I would actually say converting it to a Roth now if you have that option is a good idea just because we're not talking about a large sum of money, so it would be not an amount that would likely push you up into a higher bracket for that portion of the income that's taxable, but you'd have time on your side for this money to grow tax-free and that's where the real power of the Roth comes in because as this money is growing over the next, let's say, 30 or 40 years, you have all that gain that is tax-free as opposed to having to pay the tax on it later.

So I think in your situation, a conversion is probably something to look at just because you've got time on your side and that's really powerful when it comes to looking at the Roth IRA option. So hopefully that's helpful to you, Alex. We appreciate you calling in. May the Lord bless you.

And folks, we're going to head toward a break here. We've got lots of great questions lined up. Jeanette wants to talk about credit card debt and a possible home equity loan to pay it down. Phil has a 15-year-old daughter that was involved in a car accident, wants to know about how to use the settlement money and what to do with that. Karen has $40,000 in a mortgage and wants to pay it off in the next three years, and she wants to get some counsel on that.

That and perhaps your question, 800-525-7000. This is MoneyWise Live. Thanks for tuning in to MoneyWise Live.

I'm Rob West, your host. So glad to have you along with us today. We've got questions stacked up here.

All the lines are full. So sit back and enjoy. We've got some great ones, including this one. We're going to head south to Florida where Jeanette is located. Jeanette, how can I help you today? Hi. Thank you for taking my call.

Yes, ma'am. I have a debt, me and my husband, of course. I have a $25,000 debt, and we're trying to figure out if it would be a great idea to take an equity line of credit to pay that debt. And you said it's credit card debt, Jeanette? Credit card and also a loan. Okay. And what's the amount, roughly? About $25,000.

Okay. And what was the source of that debt? Was it just lifestyle expenses, or was there a specific event that resulted in that debt?

Where did it come from? Well, it's different things, because also when the COVID-19 hit, we actually did a lot of things. So when the COVID-19 hit, we actually did a lot of credit card things because of the income and so on. So we took out a loan to pay some of that credit card debt. So now we have the loan, plus we still got some credit card debt. I see. You know, I'm not a fan of using home equity in any form, whether it's a home equity line of credit or a home equity loan, to pay down consumer debt.

And here's why. I understand on paper it might make some sense, because you're taking high interest debt and you're replacing it with a lower interest rate. The problem is that in just about every case that I've seen, number one, you end up paying it back over a longer period of time, because in getting that lower interest rate, it takes the pressure off, and typically the payback period might be 15 years or more. And so even though you're at a lower interest rate, you're going to end up paying as much or more because of the time period. The payback period is much longer. Number two, you're taking what is unsecured debt, that is debt if you were to default on, they could get a judgment against you, but that's not collateralized by a particular asset. If something were to happen that is unforeseen in your financial life and you were unable to pay, versus you putting this into a home equity loan or line of credit, which is now collateralized by your home, so in the event you're unable to pay, now your home is at risk and has the ability to be foreclosed upon. I think the other issue, and perhaps this is as big, is that when we have credit card debt, it's usually because, and let me say as a caveat, it may be because unforeseen circumstances, COVID, the pandemic caused a lot of hardship for folks financially related to their jobs, depending upon what sector of the economy they were in, eliminated positions, hours cut back.

I mean, it was really difficult, and that may be the extent of it. But for most folks, credit card debt is symptomatic of living beyond their means, a consumptive lifestyle beyond the provision that they have. So they're not living on a budget.

They consistently spend more than they have available. Credit card is an easy place to kind of take all that excess. It builds up over time, and before you know it, you've got more than you ever imagined. And then you come in, you pay it off with the home equity line of credit. That takes the pressure off, makes you feel better, but you haven't treated the underlying problem, which is living beyond your means. And so a year from now, you call me back and say, Rob, I've got this home equity line of credit, and guess what? The $20,000 to $25,000 is back, and I wouldn't want to see that.

So I'd rather you do one of two things. One is the snowball method, where you pare back your expenses as best you can and take every bit of margin, starting with the smallest balance, attack that first while paying the minimums on all of them, and then go right down the line. But better yet, with $20,000 to $25,000, a debt management program is probably your best option. I'd contact our friends at ChristianCreditCounselors.org. They can get those interest rates reduced. You'll pay one fixed monthly payment, and you'll pay it off on average 80% faster through debt management.

I think that's by far your best approach, and they'll work with you on setting up that spending plan. It's ChristianCreditCounselors.org, and Jeanette, I think that's the solution for you. Stay with us. We'll be right back. Thanks for joining us today on MoneyWise Live. I'm Rob West, your host. This is biblical wisdom for your financial decisions. All the lines are full of some great questions coming up.

We'll go back to the phones in just a minute. Hey, did you get our MoneyWise Weekly Wisdom email today? If you have a free MoneyWise account, check your inbox.

It's right there waiting for you. If not, head to MoneyWiseLive.org and create your free account so you can receive our weekly wisdom email today. A note from me on the experts and predictions in the stock market. We talk about some of our recommended reads in there.

You'll see a great article from the National Christian Foundation on five common obstacles to generosity. An article from Art Rayner on the value of financial goals, our trending podcasts, including our episode from yesterday called The Boy Who Cried Wolf. A great episode of MoneyWise Live with Jerry Boyer talking about some folks calling for a collapse in the banking system. We addressed that head on yesterday. It was a great addition.

If you didn't hear it, I'd check it out. You'll also find our scripture of the week. It's all there in our MoneyWise Weekly Wisdom email.

You can sign up at MoneyWiseLive.org. All right, let's head back to the phones today. We're going to head next to Youngstown, Ohio. Hi, Phil. Thanks for your patience. How can I help you, sir? Hi, thanks for taking my call, Rob.

Sure. Yeah, my my daughter, she has a settlement coming from an accident that she was in last year, and it's roughly about twelve thousand dollars. And she also has a 529 plan that is set up. It's currently set up now with roughly fifteen thousand dollars in there. OK. And I guess I was looking for your expert advice and how to manage this money, you know, to get, I guess, the best return for her investment.

She's 15 years old and she's just a freshman in high school. OK. Very good. Well, Phil, first of all, is she doing OK? Is she have any ongoing problems related to the accident? No, luckily, by the grace of God, she is she's doing well.

Yeah. She was actually hit head on by a car that was going on the off ramp and avoiding a police officer. So it was not a good situation. But no, it wasn't for the seat belt.

I think that it would have been a different story. But yes, the Lord was definitely looking over her. Oh, wow, Phil.

Yeah. By the grace of God, that's incredible. Well, the reason I ask is I want to make sure, number one, she's doing OK. But number two, if there was any medical issues that you anticipated for the future, obviously holding on to that settlement to take care of that would be key and you wouldn't want to invest it.

But if she's just fine, we're grateful to the Lord for that. Then it's a matter of how is the best and most wise way to use this money. You mentioned a 529 and I guess that would be my question is, did you have in mind earmarking this for something other than college? Because unless she's going to get significant scholarships or you all have the ability to step in and to pay, she's likely going to need far more than the 15,000 she's got already in the 529. And that would be a great place over the next four years while she's in high school for that money to continue to grow. So she'd be up to 27,000 which would give her a great start, at least depending on where she goes, hopefully cover the first year. And any growth that you have on that money would be tax-free as long as it's used for qualified educational expenses. Of course, one of the benefits of a settlement is, if it's related to personal injury, it's not going to be taxed. So you should be able to put the entire settlement into the 529. So that would be my recommendation, Phil, unless you had some other specific purpose for that money that was not related to educational expenses.

Yeah, not at the moment. I mean, other than she's getting excited about driving right now and that's coming up here quickly. But I was going to maybe take a small portion and maybe to put it down on a car. But other than that, I was going to invest all of it.

Yeah, yeah. Well, that sounds like a good plan. Anything that you see a shorter-term time horizon on, go ahead and just stick that in savings. And when you're ready to make that car purchase, you've got that there for the down payment. And the rest, go ahead and put it into the 529. Let's keep it growing, albeit it'll be somewhat conservative because you're getting close to college here with her being a freshman in high school.

But any growth that happens over the next several years, you'd be able to use tax-free. So I think that sounds like a good plan to me, Phil. I would stay on that track, tell your daughter we are so thankful to the Lord that she's okay, and we appreciate your call today. God bless you, sir.

Up to Chicago, Illinois. Karen, thanks for your patience. How can I help you?

Hi, great to talk to you today. You as well. I have come to being intentional about funding my retirement a little late.

Okay. But I am debt-free with the exception of my mortgage, and I could pay off my mortgage within three to four years. And I'm wondering if it would be to my advantage to do that, to work at paying off the mortgage and having no debt in that sense, or if it would be to my advantage to really put as much money in retirement accounts that I have. Yeah, that's a great question, Karen. A couple of questions for you. Number one, based on what you know today, and I realize this may change, how far off do you think retirement is?

I'd say five to seven years. Okay. And what percentage of your income, apart from you accelerating your retirement contributions with what you are considering putting toward the mortgage, if you didn't do that, what percentage of your income is going into retirement right now? Right now, about 15 percent.

Okay. And how much have you saved up to this point? I realize you said you're a bit behind, but what do you have currently? Probably around $200,000. Okay, around $200,000. And have you worked on a retirement budget, just to get a sense of what you think your expenses will look like, recognizing most folks live on somewhere around 70 to 80 percent of their pre-retirement income in retirement, because, well, you're going to take that 15 percent right off the top where you're no longer saving for retirement. And then if your house is paid off in the next three years, but certainly by the time you get to retirement, that would be great. So obviously your expenses will come down.

Maybe you're dropping a life insurance policy or any dependents are off the payroll. Have you looked at what you think your best estimate of what that might look like? I have. Okay. And do you think that with Social Security, you have a good sense of what the gap is that you'll need to solve for with income from your investments?

I do. What do you think that number is per month? Oh, probably maybe around $2,000. Around $2,000.

Okay. Yeah, you know, I think the key for you is to get as much going into retirement as you can. I mean, you know, if you were able to build that up to $300,000 over the next five years or so, and we were to look at you pulling off to about 4 percent a year, that would be $12,000 a year or about $1,000 a month. So that would still leave you about $1,000 a month gap in terms of you taking an income from this portfolio that we would expect you could make up with an investment strategy that's income focused and keep that principle intact so it lasts throughout the rest of your life.

So that tells me that we need to try to accelerate this a bit faster. So I would, if it were me, I mean, unless you have a real conviction to be debt-free as soon as possible, and if you do, I'd say go for it and don't look back. But if you're comfortable with either, I'd probably say let's prioritize putting as much as you can in retirement, and let's make the payoff of the mortgage not necessarily three years, but by the time you retire, so that five to seven years.

And that way, when you hit that point in your life, that major expense is gone, but you've been able to put as much as possible away, get it working for you on a tax-deferred basis in the retirement account so you can get that income up to where you need it. Hang on, we'll talk a bit off the air. This is MoneyWise Live. Thanks for tuning in to MoneyWise Live.

I'm Rob West. This is biblical wisdom for your financial decisions. Hey, as you get started with a new year and a new financial plan, perhaps a spending plan is in order. If you haven't been tracking your spending, I'll tell you, it's really, in my opinion, the only way to live within your means. And the MoneyWise app is a great way to do it. It's the only money management system that I've ever seen where there's three approaches built in, and you get to pick the one that best fits your personality. Do you just want to track by category so you know directionally where you're headed at any point during the month?

That's there. All the way to the most hands-on approach, which is our digital envelope system, where every envelope is funded at whatever automatic interval you set. Transactions are downloaded and categorized automatically. You and your spouse at any point can open the app and see what's left in each envelope.

And there's one right in the middle that's kind of a hybrid between the two. It's all in the MoneyWise app. You can download it today in your app store. Just search for MoneyWise Biblical Finance. And if you want all of the features and the automatic downloads, you'll want to become a pro subscriber.

You can learn more about that at MoneyWise.org slash P-R-O. All right, we've got a line of phone calls here in about ten minutes, so we'll get through as many as we can today. Next up is Dennis in Tennessee. Dennis, go right ahead. Hi, how are you doing today? Thanks for being on your show. Thanks, absolutely. Good. Just my question is, so I have – my house has gained about $100,000 in equity in the last two years.

I just kind of had it priced out a few days ago. And I'm about $25,000 in debt with a truck payment, and I have $24,000 of back taxes from the IRS. That's something that wasn't rectified the correct way from an accountant years ago, and nothing I can do about. And then I have about $10,000 in credit card debt. And I'm thinking, should I just sell my house this spring and pay off all that debt? But it's hard to buy something new because the market is so high, so maybe sell my house and rent, pay off all the debt, and start being able to fund my retirement more and more cash flow or just pay off my debt over time slower and hold on to the house and maybe it goes up. Yeah, yeah.

Well, that's a great question, Dennis. And I understand you probably would feel a lot better knowing all this was cleaned up and paid off, get kind of a fresh start and move from there. The only hesitancy I have with that is rentals, rent is sky high right now because of what's happened in the housing market, the lack of inventory, the price points of where so many of our homes are. And I don't know where in Tennessee you are, but if you're anywhere near Nashville or Franklin, it's even more so. These prices are through the roof and rental prices have followed suit because of it. So I would just want to make sure that before you did this, you had a plan and you knew based on where you want to try to live and how much space you need and what you're looking to rent, you understood what you're going to have to pay to get that because it may end up being counterproductive in terms of the amount that you're going to have to pay. And so that would mean then you stay in the home and as long as you've got enough income where you're able to make all the payments on the car and the IRS debt and the credit cards and stay current, then I would be looking at something like ChristianCreditCounselors.org to get on a debt management program, get the interest rates down on the credit cards, see if you could start ticking those off one at a time.

Of course, you want to stay current on whatever you've negotiated with the IRS in terms of hopefully an offer in compromise or you're on monthly payment plans. And then you want to keep that car payment obviously paid up. And then the key will be to get a budget that balances where all those debts can be paid.

You're making progress on them, especially with the debt management program and the credit cards. And you're living within your means, so you've got margin to make sure you've got an emergency fund so we don't ever have this debt come back, giving, you're funding your retirement. And I realize there's competing priorities with limited resources, so you may be in a spot where you just don't feel like you can do all of that and you're going to have to sell the home. But if you don't have to sell it and you can make it work, I think that perhaps could be the better approach just given what's going on in the housing market and what you might have to pay in terms of a monthly rent to get something comparable once you sell it.

So give me your thoughts on that. Yeah, well, I'm just thinking the market, is it going to, you know, because it's so high right now, you know, while it's high and high that, wow, I could really cash out and possibly buy another property and, you know, pay off all my debt. And now being an even, I know it's hard to buy, but I can buy one that's not as like a fixer up. I can paint it and, you know, as I did my home, you know that, but I see you're saying too where I could stay in it, let the equity keep building up and pay down my mortgage, all my debt first with the snowball effect. But, you know, maybe even kind of learn my lesson of how I got in the spot in the first place and, you know, be able to build it up.

So, yeah, I think that's the challenge. And I think you need to do some homework, Dennis, just to see, because you're right with the market being where it is, you could get top dollar coming out of your home. But if you're looking to then buy something else, you're going to pay top dollar on that next purchase. Now, you could downsize.

I don't know, you know what, how much space you have and if you can find something less expensive that's appreciated on a percentage basis as much. But because it's a smaller piece of property, smaller parcel, you know, smaller home, fewer bedrooms, you know, whatever it is, you can then downsize and you've got some cash to take, you know, out the highest interest credit cards or pay off the IRS debt. I just want to make sure you do this with a plan. And so if it's renting, then you know where you're going to go and you know what it's going to cost you and you've got a budget that balances. If it's not renting and it's buying something, you know what you want to go buy and make sure that you can get it for the price you want and that you have actually enough leftover after you buy that new property that's also sky high that you can actually accomplish some of these goals you have on the debt reduction. So just make sure if you do this, you know where you're going and you have a plan to get everything paid off. Otherwise, let's dial in if there's enough income to staying where you're at, getting these things paid off, living on a budget, and let's just see if you can make some progress over time. I don't think we're in a bubble situation with the housing market.

It certainly could cool off, but I don't see any kind of precipitous drop on the horizon, you know, by any means just because of the continued lack of inventory. So we'll ask the Lord to give you some wisdom on that, Dennis, as you think through it. I realize it's a tough decision, but I'm confident you'll make the right one once you do your homework. Thanks for your call today. To Wheeling, Illinois, in Chicago. Faye, how can I help you? I'm not in Illinois.

I'm in Tennessee, but I have Faye, though. Oh, well that's fine. My apologies. You go right ahead. Oh, that's okay. Thank you for taking my call.

Yes, ma'am. I'm an 81-year-old widow. My youngest son had a stroke about two and a half years ago. I was living in Texas with my oldest son.

I had to come to Tennessee to be his caretaker. I sold some land, and he was renting in Franklin, which was very expensive, so I sold some land in Texas and bought a house here in Nashville. Okay. I have a small loan on my house. The mortgage on my land, I hold the mortgage on my land in Texas. Okay.

The payments are both about $900 a month, so my mortgage payment that I sold on the land in Texas pays my house payment in Tennessee. Okay. I have the money to pay off my loan in Tennessee. Okay. I'm wondering if I should use my cash to pay off my loan on my home, or if I should save it in reserve. Yes, ma'am.

I completely understand your question, and God bless you for moving to Tennessee to care for your son. That's great. Would that deplete all of the reserves that you have, Faye, if you were to pay off the small loan on your home? Not all of it, no. How many months' worth of expenses would you have left? Oh, probably, let's see, about four years.

About four years, okay. And obviously the money that you're getting from the mortgage that you hold from Texas is awash with the mortgage, so that would be additional income. You wouldn't need that. That'd be surplus income, because I assume you're living off of Social Security, is that right? That's right.

Okay. So this would be an extra $900 a month, so you'd have four years left of reserves, plus an extra $900 a month for the mortgage that you hold in Texas, and you wouldn't really need any of that, because that would be surplus. So I think that's a great position to be in. You're living modestly, you'd be completely unencumbered, Faye, with that mortgage paid off, debt-free, you'd add $900 a month to your income, which you could continue to build back up your savings, and it just puts you in a really strong position. So unless you had a real conviction otherwise, I'd say you go ahead and pay off that house, and I think you'll have a lot of peace of mind knowing that you're completely out of debt.

What do you think? Well, I just didn't know. This is another factor. My son died in October, so my oldest son is wanting me to move back to Texas. My house that I bought here in Nashville has appreciated about $100,000 in the two years that I've been here. Now, another thing that I'm thinking is I'm about two years and a few months into the five years I'm required to sell my house and not have to pay taxes on it, on that gain. Well, it's two out of the last five years, so you only have to be there two years to get that tax exemption. Oh, is it? I thought you had to live here five years.

Well, it's two out of the last five years, so you would not have any capital gains on that first $250,000 of gain, and you said you had $100,000 in gain, so you'd be able to pull 100% of that out without paying any capital gains tax as long as you've reached the two-year mark. Oh, well, that really makes a lot of things different. I thought I had to live in the house five years. No, ma'am. No, ma'am.

Well, listen, you hold the line. We'll talk a bit more off the air because I want to make sure we get all your questions answered. I'm so sorry to hear about your son, but I'm delighted that the Lord's given you some clarity here, and we'll talk a bit more here in just a second. God bless you. That's going to do it for us today, folks.

MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. I want to say thank you to Jim, Amy, Deb, and Hans, my incredible team. Thank you for being here as well. Hope you'll come back and join us tomorrow. I'll be here. We'll see you then. Bye-bye.