With monthly payments now averaging over $700, it begs the question, should you buy or lease your next car?
Hi, I'm Rob West. The days of record low interest rates and barely noticeable inflation are behind us, so the decision of leasing versus buying isn't so clear cut. Maybe it's time to go over the pros and cons again. I'll do that today and 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 decisions. Okay, so I mentioned that monthly new car payments are way up, as is inflation, but there is also another factor to throw into the mix, and it's that used car prices are way up too, especially late model vehicles with low mileage. All of this is making the idea of leasing a car a bit more palatable for some folks.
As inflation squeezes the monthly budget, the need to cut costs becomes more important. Before we get into the nuts and bolts of buying versus leasing, however, let's understand the difference. Obviously, buying a new car is just that. Before you can drive it away, you have to pay the dealership every last nickel of the cost up front, and these days that's a whopping figure. Of course, the best way to do this is with all cash up front, but that's getting harder to do. That means most people have to finance the purchase of a new car, ideally while still putting down as much as possible to minimize borrowing. Fortunately, there are a number of sites you can check out to get the lowest rates and best terms for an auto loan.
These include Bank Rate, Nerd Wallet, Driver, and Lending Tree. Now, what does it mean to lease a vehicle? Well, you might compare it to signing a lease for an apartment, except with an apartment, you don't have mileage restrictions. A lease gives you use of the vehicle for a set period of time.
Most leases run 36 months, unless you pay the entire lease amount up front, you'll make monthly payments. When the term is up, you have two options. You can hand back the keys or purchase the vehicle. There, you probably have some negotiating power because the dealership will probably want you to buy the car so they don't have to deal with it. But most people turn the car back in and that means they give up any equity the vehicle may have. Still, there are a few advantages that come with leasing a vehicle. The big one, of course, is that the monthly payment will usually be lower than if you purchase it. In some cases, leasing a new vehicle may have a lower monthly payment than if you buy a late model used one. With a lease, you're not paying down the principal on the car loan. Instead, your lease payments are really just covering the normal depreciation of the vehicle for the life of the lease. That's a real attraction for some people getting to drive a newer car for less monthly outlay than with buying a used car. Plus, some people don't like the idea of having to sell a car when they need a new one.
That's why most just trade them in, usually for less money than they could get if they sold them on their own. With a lease, when the term ends, you just drive back to the dealership and hand them the keys. A couple of other advantages to leasing, you may be able to deduct some of the expenses associated with it, especially if you use it for a business.
And if you typically drive the same number of miles each month, or you don't drive much at all, mileage restrictions shouldn't be a problem. Ah, but leasing definitely has a few downsides. We'll always tell you to keep making monthly payments to yourself once you pay off a car loan. That allows you to make an even bigger down payment when buying each new car, eventually getting to the point where you can pay all cash up front. Well, with leasing car after car, that never happens. Remember, your lease payments are really just covering the cost of depreciation for the dealer. When the lease is up, the dealership still owns the car. You've accrued zero equity. Also, with a car lease, you're usually limited to 10,000 miles a year.
Go over that, and you'll be hit with big penalties. That could be a real problem if the length of your commute changes, or you want to finally take that big cross country vacation. And while you won't be charged for normal wear and tear, the dealership will go over the car with a fine tooth comb when you turn it in and charge you for every tiny scratch or ding. So while leasing may seem a little more attractive these days, I wouldn't recommend it for most folks.
Still, the better option in my view is to buy a used car perhaps a few years older than you would have before prices went so sky high. All right, your calls are next. 800-525-7000. I'm Rob West, and we'll be right back with much more. Stick around.
Great to have you with us today on Money Wise Live, biblical wisdom for your financial decisions. We'd love to hear from you. We've got some lines open. 800-525-7000 is the number to call. That's 800-525-7000. Let's begin today in Louisiana. Kay, thank you for calling. Go right ahead.
Thank you for taking my call. So I have a question in regards to having—I've been saving since I was 15, so I have a good amount of money in my savings, and I have like three different savings accounts and one big checking account, and I have about 30,000 left to pay off my house, and I'm just wondering, once my house is paid off, I won't have any debt, and therefore I have no credit. I have low credit because I have no credit cards, and I'm 28 years old, and I'm just wondering what's my options.
What's my best option? Because I don't know if I should get a credit card. Yeah, well first of all, Kay, if anybody could use a credit card responsibly, it would probably be you, just based on your description of all the things you've accomplished by 28. You've got multiple savings accounts. It sounds like you're managing your money very wisely, living within your income, which is how you had the margin to accomplish these things, and you're going to have your home paid for in just a few years.
That's incredible. So yeah, you should maybe be hosting this program. In terms of the credit card itself, you know, I don't have a problem with credit cards as long as we can handle money wisely, which includes only using the card for budgeted items, and if we can't, deciding that we're going to cut it up, because if we use it beyond our means and we don't have the ability to pay it in full, then we shouldn't be using it. It's really just a convenience factor, perhaps something to use.
You know, the rewards are nice, but really it's mainly about convenience. So that is a way you're going to begin to establish credit. You may have enough credit to get an unsecured credit card because you have a home and a mortgage that you've been paying on time. If not, you could look to what's called a secured credit card, which is just essentially a credit card where you'd put a certain amount on deposit with the institution. They give you a credit limit up to that deposit. You would charge against it and pay it back each month, just like you would with an unsecured card. They just have no risk because if you don't make the payment, they can take the money from the bank that's on deposit. But if you pay it on time, they never touch that money.
Well, that's going to be reported to the bureau every month as an active account with you being as an on-time payer and that on-time payment every month with a revolving account, which is what a credit card is, plus your mortgage being paid on a timely basis should give you a better credit mix, a low credit utilization, which is the balance versus the limit and get you well on your way to boosting that credit score. But I would just continue doing what you're doing and possibly add this to the mix. But again, only use that for budgeted items.
Don't let the fact that you have a credit card change anything with regard to how you go about conducting your monthly expenses. Does that make sense? Right. Yes.
Okay. And then I have a four-year-old who inherited a few thousand due to the loss of his father. And I don't touch that money. So I want to know how can I invest it to make it more for him?
Yeah. So what would be the time horizon on this, Kay? When would you kind of target that you would want these funds available either for his caretaker like you to be used for his benefit or to be able to hand off to him when he's an adult, frankly, down the road? How are you thinking about the time horizon? So being like I can pretty much take care of him with my own income, him having his own separate, I wouldn't want to touch that until he absolutely needed it.
Maybe 21 years old, you know, like I don't even want him to really know about it until I know he can use it responsibly. Yeah. And what type of account is it in? How is the account titled? It's in my name. Yeah, yeah.
But for his benefit. Yeah. Well, I think a great thing would just be to get this invested with a long time horizon because that's really what it is. How much, if you don't mind me asking, is in the account? He's got about 60 grand now because I'm always putting in as well as the state is.
Yeah, very good. So one thing you could do would be to use one of the robo advisors like Betterment or the Schwab Intelligent Portfolios. Essentially, what you do is answer a series of questions about the time horizon, the goals and objectives, risk tolerance, and then it would automatically generate what's called an index portfolio. So it's a portfolio of exchange traded funds that mirror the broad market indexes.
So you just kind of capture the broad moves of the stock and bond market, largely stock, in domestic and international stocks, large cap and small cap, a small allocation of bonds. But the great thing is every time you add money, it's automatically rebalanced. So it's automatically invested and rebalanced and that's free. There's no transaction costs. And then the ongoing annual fee to do this is very low as well.
It's about 20 basis points or one fifth of one percent. So it's a great way when you're kind of just getting started something less than $100,000 for this money to be managed in an indexed approach where you're not trying to pick the winners and losers individual companies. You're just kind of capturing the broad moves of the market, which there's a lot of data that says that's a very effective, perhaps the most effective for many folks way to invest.
And it's very cost effective. So that would be one way to consider going. And again, it's Betterment or Schwab Intelligent Portfolios. I think either of those could work well for you. So Betterment? Yeah, Betterment or Schwab Intelligent Portfolios, which is their robo advisor solution.
It's an automated solution, but using a very powerful algorithm, very low cost and could be a great solution. All right. And as far as stocks go, what do you think about like Robinhood account? Well, for you or for this account with your son?
For me? Yeah, I would probably use the same approach for yourself. I try to get money into an IRA.
You can put in up to $6,000 a year into an individual retirement account or a Roth IRA. And I'd probably use the same approach with Robinhood. You're typically going to try to pick the individual stock. So, you know, I'm going to choose this stock and that stock. Well, the challenge is when you're just getting started, number one, you've got to do your own research.
Number two, you're typically very highly concentrated. So all of your investments are at the risk of one or two or three companies. Well, if they're out of favor or have a bad quarter that can really work against you in terms of performance. So a better approach is just to say, I'm going to participate as the overall market rises and falls and I'm going to count on the historical trends that over time it's going to be up. And I would say that based on all the evidence that this is going to be the very best way to build wealth.
So I would actually open an account for you, perhaps an IRA or a taxable account at the same institution for your son and then just use the same approach. So hopefully that helps you, Kay. We appreciate your call and thanks for checking in with us today.
Let's head to Hollywood. Frank, give me your question and then I'll answer it on the other side of the break. Oh, okay. Yeah. Well, it's two there really. One is about the car that I have, the Camry 2021 and I got, I got 15,000 miles on it and I paying $330 a month.
You know, I'll tell you that a little more. The other one is a co-op in Laguna Woods, which I just put five grand to fix the carpet and paint and fix it up. It's a co-op and I was going to sell it, but I fixed it and I could rent it and get maybe $2,200 a month.
My main mix in Texas is $847. Okay. All right, let's do this. You hang right there. When we come back, we'll talk about that lease and your co-op.
Should you rent it out? Where should you go from here? That plus your questions, 800-525-7000. We'll be right back. Great to have you with us today on MoneyWise. We're taking your calls and questions today at 800-525-7000.
We have some lines open. Hey, if you're struggling with credit cards, medical debt, or other unsecured loans and you don't know where to begin, our trusted partner and underwriter here at MoneyWise, Christian Credit Counselors, could really be a wonderful resource for you. They offer a debt management program that can get you out of debt 80% faster while honoring your debt in full.
If you'd like to learn more, including getting set up on a budget and reducing your interest rates, you can learn more at ChristianCreditCounselors.org. Back to the phones we go. Hollywood, Florida. Frank, just before the break, you were saying that you have two questions. The first part had to do with the lease. I understand you're paying $330 a month for a Toyota Camry. When the time comes due in, I guess, 23 months, are you wondering if you should buy it out?
Yeah, I can get it for, I think, around $16 residual value. And, you know, they're going up like crazy around $30,000 to lease it. And this time I put no money down because they gave me what I paid for it on my 219 because they had no cars.
But I think that's going to change in a couple of years. I'm not a big fan of leases, but I think in this case, especially with what's happening with car prices, this could make a lot of sense for you to go ahead and purchase it. You know, even though the car is depreciated, you may be able to get it for less than it's worth, especially given where prices are at right now. The dealer probably doesn't want to hassle with, you know, selling the car to someone else. You don't want the hassle of buying another car, especially at these levels. You probably like the car because you chose it and took care of it.
By the way, Camrys are great, reliable cars. If you didn't take care of it and there's been some damage or you've exceeded the mileage, buying it gets you out of paying those penalties. And so what I would probably do is head to kellybluebook.com, kbb.com, or edmunds.com just to find out what the value of the vehicle is. And if the dealer wants the Blue Book value, you might start the negotiation with, yeah, I'm here right now and I'd like to buy it. We both know that's worth a lot, so what's the best you can do? And see if you can get this for an attractive price if you can. I'd probably go ahead with it. In the future, I'd love for you to save, maybe continue making that lease payment to yourself and try to buy with cash in the future.
But I genuinely like that option as long as you can negotiate a good purchase price. Great. The other one is, I have a co-op, I'm dealing with that right now. I'm in Florida, it's in California. I fixed it up, it's empty. I lost one month's rent, the lady trashed it, I had to fix it, I've granted it. But now, I was going to sell it, but I said, you know what, if I get $250,000 that's paid, I'm 75 years old, I have a kidney out, I have to make sure I don't go through that money at this time. Because if I rent it, I can get top rents in California, it's like $2,200 a month. And I'm only paying $847 with maintenance and taxes, so it's about $1,200 a month I can pull in or more. And I don't think I want to do an annuity with that because it's risky.
So that'll keep me going for a while, but it's empty. And I owe $12,000 on credit cards, but I took a loan from Brightstar and they gave me a variable because I didn't take the money and put it right back in, they fooled me. I was on a 2.9 and then they said, they didn't explain it right, I had to get the money and then take it out and put it in, I would have been able to stay on a fixed.
Now, whatever I borrowed on it, now $6,000. Yeah, let me weigh in on that co-op, Frank. You know, I think as long as you're willing to be a landlord, it's a little more challenging given that you're on one side of the country and it's on another. So as long as you've got a plan for that to keep it rented and keep eyes on it, keep it maintained properly, it's a little easier, obviously, with a condo than a single family home. But if you can net that kind of return after fees and expenses and so forth, that would be great because you know, typically I would look at if you got a quarter of a million out of it, I would look at a 4% withdrawal rate a year, which would be $830 a month. And if you're pulling in $1,200 a month, plus your asset is continuing to appreciate, I think that makes a lot of sense again, as long as you can do it from the other end of the country and you're up for the, you know, just the staying on top of it. And as you just experienced, there can be some downsides to this, which is somebody who doesn't take care of it or moves out in the middle of the night, breaks the lease. Maybe you've got to evict somebody. I mean, you just have to know what you're getting into.
But if you account for all of that, then I think this could make a lot of sense for you. Continue to build value, supplement your income, and let's really focus on limiting your lifestyle and taking whatever extra you have every month and paying off that consolidation loan. Frank, thanks for your call today.
Northbrook, Illinois. Claire, how can I help you? Yes. I was just wondering, my husband and I are both in our late 70s, and we both have trusts, trust documents. We don't have any children, but these trust documents were written about 15 years ago. And my question is, when we open a new bank account, is it better, for example, when we open a CD, each one of us open a CD for half the amount that we're going to put in the bank in our trust name, or should we put it in a joint account? I'm just thinking of, if one of us should pass away, how easy it would be for the other person to have access to the funds.
Yeah. Well, if you opened a joint account, obviously that would be fairly simple, and you don't need to do anything else, and the surviving spouse automatically has the ownership. If there's particular provisions of the trust, though, that you want to be in effect here for this particular account, this CD, this bank account, then you would want to title it in the name of the trust, which is going to allow for the successor trustee to step in if both of you are incapacitated or even after death. But if it's fairly simple and you just want to make sure the other one has access to it, you can absolutely just open a joint account and have it in both of your names, and it would automatically transfer to full ownership if one of you passed away.
So I think either option would be good. It really just comes down to whether or not the provisions of the trust you want to also apply to this CD, and if not, then I think the easiest is just to open that joint account. Claire, we appreciate you checking in with us today. God bless you, and call us back any time if you have further questions. Folks, we have a few lines open today as we apply God's wisdom to your financial decisions and choices.
The number to call, 800-525-7000. I'm Rob West, and we're delighted you've joined us today. We're going to take a quick break, but we'll be back with much more just around the corner.
Don't go anywhere. We're thrilled to have you with us today on MoneyWise Live. I'm Rob West, your host, taking your calls and questions.
Looks like we have one line open, 800-525-7000. Hey, as we head toward the end of the month here rounding out the summer, let me remind you MoneyWise Media is listener supported. We only do what we do every day because of your generous support, and if you'd consider a gift to the ministry, we'd certainly be grateful. You can head to our website, MoneyWise.org, and click the Give button. That's MoneyWise.org, and click Give.
You'll find the tail end of our fun summer reading program. We're happy to give you with a gift of $25 or more, a three-book series called The Secret Slide Money Club. It's a fun way to teach children the fundamental principles of Give, Save, and Lend. So request that when you make your gift at MoneyWise.org. If you're a parent or grandparent, this would be a great series to put in the hands of your kids, and it would help us continue our work here at MoneyWise Media.
Thanks in advance. All right, back to the phones we go. To Florida, Alice, thank you for calling.
Go right ahead. Hi, thank you for taking my call. I was calling because I had a question regarding my husband's car, which is in the mechanic right now. Right now, the labor is $600 because he opened it up, and I think the repair might be $1,500 to $2,000. I don't know if I should consider it.
Well, it's a good question. It's generally a good time to get a new car, and this might sound extreme, but when the repair costs exceed the car's value or one year's worth of monthly payments. Now with an older car, you typically don't have those. What type of car is it and what year? So it's a 2010 Volkswagen CC, and of course, no payments.
Okay, yeah. So my team is telling me that prices range, it's pretty wide range here, $6,500 all the way to $11,000 depending on the mileage conditions and features. So if you're talking about a repair around $1,000, maybe a little more, it probably makes some sense given what's going on in the car market right now with used cars up 16% year over year and they're just sky high right now because of lack of inventory. So this is not a good time to be buying a car. So I would probably, if you've got an independent mechanic who you trust that says, listen, if we put this kind of money in it, you can get some good mileage out of it moving forward, it probably makes sense given that $1,500 versus a vehicle that's probably worth somewhere around seven or eight grand, maybe more, can make some sense. Obviously, if the mechanic feels like, and you confirm this maybe with a second one, that this is just the beginning of a whole series of repairs or there's something major on the horizon, that might change things. But just given what's going on in the housing market, if you can repair this and drive it for a lot longer, that would be good, at least if you can get a couple more years out of it. He doesn't drive it much, he only takes it to work and back. So that's a good thing. And you said that your team said right now the value is like $6,000 to $11,000 on that car? Yeah, so that's the range. And of course, that's going to come down to the condition and the mileage and the features.
And so you could go to KBB.com, that's Kelly Blue Book, KBB.com, or edmunds.com, E-D-M-U-N-D-S. And you could put in the year, the make, the model, the mileage, the condition, any features that you have on it. And it'll give you the trade value, the private sale value, so you'll at least know what you're working with and hopefully that'll help you make a decision, okay? All right. Well, thank you so much. It has helped already. Thank you. All right. God bless you. Karen in Glenview, Illinois, go right ahead.
How can I help? Thank you for taking my call. Okay, so I'm 64, single, never married, and I own my own condo, but I had to go on disability 10 years ago. So I've been living on Social Security, which is okay. A friend of mine told me that I should, I have a will that I made out when I had first gotten sick. She said that I should have a living trust as well. And I'm not sure if that's revocable or irrevocable, but she said it costs about $2,000 to have that put together.
And I, I'm just really, to me, that seems so expensive. And I wondered because I had done my own durable power of attorney for healthcare and just took it off the computer, the form, but I don't know anything about a living trust. And so I'm hoping.
Yeah. I mean, you may be able to get to one for more like 1500, but they could be 2000. Tell me the reasons that she was putting forward why you need a trust. You know, there are some advantages to a trust over a will, but not everyone needs one by any means.
What was she trying to accomplish for you? Well, she said, if I don't have a living trust that it would go through probate. I do have investment worth $450,000. And I guess that's the bulk of it. And I own my home for about $150,000. But she said, if you don't have a living trust, it goes through probate.
And that's true. With the exception of those investment accounts, you can name a beneficiary on those or beneficiaries and they can be individuals or you know, it could be a charity or ministry. And that account, which you said is the bulk of your assets would pass outside of probate directly to the beneficiary or beneficiaries. So the will would cover everything else. It would go through probate, a probate court, you know, would appoint an executor and the decision would be made based on your will on how to distribute the assets would be part of the public record.
But I don't have a problem with that. I mean, that's an efficient process. If you wanted it to control over those assets beyond your life or if you were incapacitated, if you needed to protect them for a minor child or a lifelong dependent, if you wanted all this private and out of the public record. I mean, those might be reasons to use a trust.
But in the case of your situation, the will covers everything except the investment portfolio. And that would be handled by having an up-to-date beneficiary. Well, do you think it would be okay to find something on the Internet that download living trust and fill it out myself? I would recommend against that.
Yeah, I understand you did that with the POA. I think trust get fairly complicated. And last thing you'd want to do is be depending upon a trust that was not valid for some reason for your estate planning. I think, again, I don't see necessarily a reason for it here.
I mean, you could put your home in it and things like that. But as long as you have a valid will, the probate process will work for everything for except the investment accounts and bank accounts which have named beneficiaries. So I'm just not sure what added benefit you get with the trust.
But if you're going to do it for any of the reasons I mentioned, I would use an estate attorney and spend the fifteen hundred dollars to do it. Because of the cost, I didn't want to, but I wasn't sure if it was necessary to do it. And I don't think it's necessary. And if you do do it, I wouldn't use an online tool. There's just too many things that can go wrong there.
That's just my opinion. If you're going to do it, let's do it right. Otherwise, I just rely on the will and the beneficiaries. That sound okay?
Yes. Who would you choose? An attorney?
Yes, I would. An estate attorney. So I'd head to our website MoneyWise.org and click find a CKA. And then when you contact a certified kingdom advisor, just ask for a referral to a godly estate planning attorney. They would all have one that they work with and could give you possibly even a couple of recommendations that you could check with. So that's MoneyWise.org and click find a CKA.
You're probably not going to find a certified kingdom advisor who's an estate attorney in your area, but they could all make a reference. Karen, we appreciate your call. Thanks for checking with us. This is MoneyWise. The lines are full. Great questions coming up.
Don't go anywhere. Hey, we're so glad you've joined us today on MoneyWise Live. I'm Rob West, your host. We've covered a lot of ground already today, but here in our final segment, we'll see if we can't get to as many questions as we can with full lines today.
Chattanooga, Tennessee. Michael, you're next on the program. Go right ahead. Hi there.
I think I have a unique issue. In 2014 at age 60, I started a master's degree in order to teach at college level in my career. 2017, I started making payments on the loan based on the repay as you earn, which was $100 a month. Well, the loan is approaching $100,000. I'm going to be 70 next year. So the college where I teach, because it is a state school, we have loan forgiveness if I make 120 payments without missing any.
So that will be 2027. And so what's the best thing to do? Do I need to like calculate how much $100,000 is and try to pay that off? You know, with my salary, my educator salary and social security in order to get that paid off or just wait out the loan forgiveness or, you know, as a Christian. Sure.
Yeah. You know, I mean, there perhaps would be some that would disagree with this. I don't have any problem with you taking advantage of the loan forgiveness for this specific program that your school applies to. I have issues with what was done yesterday with regard to the sweeping loan forgiveness that was done for anybody making as a married couple less than $250,000 a year, which kind of penalizes those that saved and paid it for it. Not to mention that it's inflationary.
It's going to cause the price of college to go up and just a whole host of issues including how it was done just legislatively or with the lack thereof. But with regard to this particular program in terms of public service loan forgiveness, it's an incentive program that really is driving toward a need that exists. And if you qualify for it, Michael, I would say take full advantage of it. So I would send your scheduled 120 or 10 years worth of on-time payments. And if they're going to forgive the rest, I'd be grateful for it. You obviously have a lot of debt here, but you are doing your part and I think that's what this program is for.
So I would say at least from my standpoint ethically and biblically, you'd be perfectly entitled to do so. All right. Great.
That's what I needed to know. Thank you, sir. Thank you, Michael. We appreciate your call.
To beautiful Brentwood, Tennessee, Lynn. Thanks for calling. Go right ahead. Hi. Thanks for taking my call. Thank you all too for your show.
It's absolutely wonderful and it's helped me prepare for retirement someday and stay out of debt. So thank you. Awesome.
Well, thanks for saying that. Thank you. I have a question about the real estate market in your opinion. I'm a single mom and have a son who will be graduating in two years.
And so I need to move when he graduates to be near family. So I have a house that I bought about two and a half years ago for around 650. And I could sell it for 900.
I think I have an offer. My question is, should I sell it and make that 250? It'll be a little less than that after fees and moving cost. And rent and kind of throw away money on rent. Knowing that I have to move in two years or would you think it'd be wiser to stay and just hope the market continues to improve, although I know it won't do it at the same rate and just move once in two years?
Yeah. Well, obviously, the ultimate answer from a financial standpoint would involve a prediction of the future, which clearly nobody knows for sure. What I would say is I think there in Brentwood, Tennessee, you're in a particularly hot real estate market. It's been hot nationwide.
It's been really hot where you live. And so I would see a cooling of the housing market. We've already seen that with home prices dipping ever so slightly last month. But I think in a strong real estate market like that, I would have confidence that you're at least going to maintain the value of the home that you have, if not see a modest increase.
If there was any decline, I think it would be slight. And what you would pay over the next couple of years, you know, let's say you paid $2,000 a month in rent, you know, that's $24,000 a year, $48,000 over two years. That's a lot of money. And not to mention the hassle of moving twice and the cost associated with that as well.
So although I don't know the future, I would say if it were me, I'd probably stay put and just plan to sell and take advantage of the growth that you've had over the last several years, which is phenomenal when you sell it and you're ready to make that move to your new state. Okay, great. Well, thank you so much.
I really appreciate y'all's input. It helps all of us, I'm sure. Happy to do it, Lynn. Thank you for calling in today. We appreciate it.
To Chicagoland, Andrew, thank you for calling. Go right ahead. Yes, I'm here to see what you guys would do. So I'm in sales and I have an absolute, the largest commission check I've ever seen, around $50,000. And God is blessing you, even with more, that more sales are coming in. And it's going to be a lot more money than I've ever had the honor to be able to manage.
I don't own anything on my cards. I do have a mortgage, which is at 2.5%, and it's very, very manageable. I'm planning on putting some of it into I-bonds or maxing out my I-bonds for me and my wife, and then also doing, obviously, tithing of 10% and then putting 10% of my 401k.
But I also wanted to see what you guys would do with the money or see what you guys, any advice you guys can give me with managing my money wisely. Yeah, great, Andrew. So commission check, that tells me you're self-employed, so you don't have access to a company-sponsored retirement plan. Is that right? I do. That's where my 401k is.
Oh, oh, oh, I missed that. It's a match. They match about 2.5% of what I put into it. Okay, and what percent of your income is going in? About 10% right now. Okay, plus their match.
Plus their match, correct. Yeah, okay. So I think the first thing I would do is max that out, so you're putting in the maximum every year. I'd do some planning with regard to what's your ultimate goal for long-term retirement savings accumulation, so you have a good sense of what is your ultimate target, where are you headed, and to the extent you're just now coming into this real surplus and you've not had that previously, perhaps you're a little behind on saving for retirement or maybe not, but you need to know that and define your finish line so that you know what you're ultimately trying to put aside, because the goal is not just a mindless accumulation of wealth. I think we need to pray through our ultimate savings goals in light of our values and our priorities and say, Lord, what is that finish line, both for my lifestyle, the monthly expenses and what lifestyle we're living, and our long-term accumulation.
And to the extent you're on track for that, well, that frees you up to once you're completely debt-free and you're not going to pay any more in taxes and you're not going to increase your lifestyle, well, the only bucket left after you've eliminated the O category and the live category and you've defined enough, so now we're not growing any longer, is just increasing your giving. But to the extent you're trying to continue to save for the future beyond that 401k and it's in light of a plan that's well thought out, I would say just put that money to work. You could just open a taxable account and invest there in more of an indexed approach, a broad market approach to investing at a low cost, just buying some broad market indexes. You could look to move into another asset class, so maybe over the next couple of years as we move from a buyer to a seller's market, maybe you pick up a piece of real estate and begin to convert that into an income stream over time as you convert to a landlord if you have interest in that area. I think those would be two options that I would look at in addition to perhaps getting more of this money into a donor-advised fund so that you can minimize your tax burden and then just have fun giving it away.
I think any one of those three could be great. I'm sorry, repeat that again. What was the minimized tax bracket or a minimized tax bracket? Yeah, so what I was saying is you mentioned tithing on it and that's phenomenal, but to the extent you're getting a whole bunch of income here now in a short period of time as you get these great commission checks, one option would be to look at if you didn't know where you wanted to give it all away right away, you could use what's called a donor-advised fund which is think of it like a charitable checking account. As you make a contribution into the donor-advised fund, you'd get a tax deduction and as long as you itemize which at these levels you probably would, then you could reduce your adjusted gross income with certain limits based on the contributions you make to the donor-advised fund and then essentially that just sits there in your charitable checking account until you grant it out to any ministries or charities.
And you could do that right away or you could do that over the next several years, that's up to you. But it's called a giving fund at ncfgiving.com, that's the National Christian Foundation. That would be another way to just reduce your tax liability and get a lot more money going into Kingdom causes. I love that advice, thank you for that, I really appreciate that. Awesome, yep, NCF is National Christian Foundation, you can set up a giving fund in just a few seconds actually, ncfgiving.com. And Andrew, we appreciate you checking in with us.
To DeKalb, Illinois, I think our final caller is Christian, I've got just a minute or so left. Hello, I just had a quick question. So I'm in debt a little bit. I have my credit card that is 7K, I'm 20 years old, I'm about to finish my degree as an associate and I also have a car payment and the car is worth right now $27,000 and I owe about $15,000. I was wondering if I should sell the car, get debt-free, pay off my credit card, whatever that money I have left, buy a cheaper car around $10,000 or what do you think about this? Yeah, the challenge right now, Christian, is car prices are just sky high. So now you should get that sky high price on the sale, which means that if you're maximizing it on the sale, then you could afford to pay a little bit more. If you can find a good, older, reliable car that would allow you to sell this $27,000 car and pay off the credit card debt, I would do that. I just do your homework to make sure you can get what you want and then you can find that new car that allows you to get in at a price point that frees up the money to pay off the credit card debt.
But before you do that, get on a budget and make sure you can live on it for at least a couple of months because I don't want you to pay it off the credit card debt and then only to have it come back down the road. Thanks for your call. MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. I want to say thank you to our team today, Gabby T, Amy Rios. Thank you to Ryan Hansen and Jim Henry. We'll see you tomorrow. Bye-bye.
Whisper: medium.en / 2023-03-05 22:35:58 / 2023-03-05 22:53:03 / 17