Must-Have Financial Skills for Young Adults

Statistics show that young adults in the U.S. are sadly lacking in basic money skills. What happens when their turn comes to run things?

It's a sobering question. Hi, I'm Rob West. Evidently, parents in schools aren't doing their job when it comes to raising kids with financial savvy. Today, we'll do some remedial work on essential money management skills. Then we'll take your calls at 800-525-7000.

That's 800-525-7000. This is Faith and Finance Live, biblical wisdom for your financial journey. Year after year, the annual survey taken for the TIAA Institute shows low financial literacy for the 18 to 25 age group. A majority of these young adults consistently fail to demonstrate a working familiarity with financial concepts like budgeting, saving, insurance, and investing.

Think about what this means. Tens of thousands of young adults are going off to college or joining the workforce today without knowing how to manage their money or how to avoid overspending or even how to build a solid financial future for themselves. When I was a kid, learning to balance a checkbook and pay bills on time were part of financial training for kids and teenagers.

But today, things look a lot different. Now we have online banking and instant digital transactions. It's so easy to use credit and transfer money that many young people just live day to day without a plan until they need a bailout from mom or dad. The fact that young adults rarely handle cash also means they no longer have a physical connection to their money. When you don't actually see and feel your money coming and going, you might not realize when it's gone. This disconnect can lead to unintentional overspending and a lifetime of debt, not to mention a lack of motivation to save for the future. So if you're a parent of teenagers or a Gen Z just starting out, here are a few must-have financial skills and how to get them.

The first skill is actually an attitude. The Bible says God is the owner of everything, as in Psalm 24 one, the earth is the Lord's and everything in it, the world and all who live in it. Understand that nothing really belongs to you, even you. You are a manager of God's resources, which should change your perspective on money and material things. The number two financial skill you'll need is planning. A dream without a plan is just a wish, as they say, and wishes won't buy you a house. The fundamental planning tool we recommend is a budget, otherwise known as a spending plan. A budget keeps track of your income, giving and spending, and gives you a picture of your progress towards meeting your financial goals.

Download the free FaithFi app to get one started. The next fundamental financial skill everyone needs is work. Maybe your dad always told you that money doesn't grow on trees.

Annoying as that was, it's the truth. Employment is where your money comes from, not the oak tree in the yard. So, start at the bottom. If you have to, work hard and develop your resume. Earning can really build your financial confidence. If you do have a job, make sure you keep it in perspective. Remember, your identity comes from Jesus, not from what you do for a living. In Colossians 3, 23 and 24, we see the key to successful work. Whatever you do, work at it with all your heart, as working for the Lord, not for men, since you know that you will receive an inheritance from the Lord as a reward.

It is the Lord Christ you are serving. The next skill is to open and manage a bank account. Then, make sure you develop habits of giving and saving from every paycheck. Watching your balance increase will encourage you to stick to your plan. Keeping track of your bank balance will also help you understand your limits. You can't spend what isn't there.

The next skill will also help you understand your limits. Learn about credit. Don't fall into the trap of believing that a credit card equals permission to spend all you want. Instead, keep track of your balances.

Pay your balances in full every month and watch your credit score. Another basic financial skill you'll need is to understand about investing, including types of investments, risk and return. Check out the great information at soundmindinvesting.org. Finally, admit you don't know it all and learn where to go for solid financial advice.

As it says in Proverbs 15, 22, without counsel plans fail, but with many advisors they succeed. Visit faithfi.com and click on the Community tab to chat online about your money questions or ask someone you trust who knows about finances to help you. Now, more than ever, young adults need financial skills to succeed in the real world and we hope today's information has been helpful. All right, your calls are next 800-525-7000, 800-525-7000. This is Faith and Finance Live.

We'll be right back. Well, it's so great to have you with us today on Faith and Finance Live. We started the program today by talking about must-have financial skills for young adults and yes, according to this new study from the TIAA Institute, financial literacy is low for the age group 18 to 25 and we need financial literacy. But you know what we also need? They need to understand a biblical worldview of money management. So alongside those skills of budgeting and the dangers of debt and how you can grow your money through compound interest over time, they also need to understand that God owns it all and that we're stewards and that money is a tool and yes, giving, generosity, is what breaks the grip that money can have over our lives. We need to be on a parallel track as we prepare these future adults for leaving the nest and being faithful stewards of God's resources.

It's a tall order, but it's worth it and we can encourage each other in that great endeavor. All right, let's turn our attention to whatever you're thinking about today financially. The number to call with a few lines open is 800-525-7000. The calls are coming in quickly, so get on board. We'd love to hear from you.

800-525-7000. Let's start in Tyler, Texas. Hey John, go right ahead.

Hey, how are you doing today, Rob? Really appreciate your show. Thank you. And I appreciate what basically I consider to be your ministry to help the faithful to be good stewards of what God's given us, because it lies. You said it's His, not ours. Well, I consider it to be my ministry as well, so I'm glad we're on the same page.

Hey, how can I help you, sir? Well, I wanted to call mainly not with a question, but to bring up the topic so that people can understand their mortgage company, their lender, which is their mortgage company, their escrow account, their principal plus interest, which could be fixed or variable, because many people misunderstand why they have fluctuations in their monthly bills for their loan because of possibly an increase in their escrow account, and they don't totally understand what an escrow is, how it performs, and that they do have some fiscal responsibility as the homeowner to make sure that they have enough money in their escrow because of an increase of property taxes or homeowner's insurance, which is not anything to do with their mortgage company. It has to do with their state or their insurance company. So I'll let you maybe dumb it down for folks, and I'll hush for a minute. Well, Jon, first of all, I'm delighted that you brought this up. We actually had a caller asking about this just the other day, and you're exactly right. You know, with interest rates rising, of course, if you have a variable rate, that's going to cause your mortgage payment to fluctuate. Unfortunately, it's going up as that rate is rising, but few people have variable rates these days. Normally, we have fixed mortgage rates, so why then are you getting notified that your mortgage payment is all of a sudden increasing? Well, to Jon's point, that has to do with the escrow portion of the account. The mortgage escrow account is what the lender uses to pay your property taxes and your homeowner's insurance. They require, and this is right there in the covenants usually, in some cases they'll let you handle that yourself and escrow your own, you know, payments or amounts for homeowners and taxes.

Sorry, I'm not losing my mind here today. But they do typically escrow that for you, and so they require an extra amount each month beyond the principal and interest to pay for your property taxes and homeowner's insurance. And the money is then held in that escrow account until those bills come due, usually once or twice a year. And they do that to ensure that those expenses are being paid because they want to keep their investment in your property safe. Now, because home values have risen so sharply, counties and municipalities have really been hiking up property taxes as of late. And depending on what part of the country you're in, you may see your homeowner's insurance going up, namely those of you listening in Florida today.

You know what I'm talking about. And when those bills increase, well, that means the lender needs to collect more for your escrow account. Often they'll do it. They'll ask you to make one larger payment to bring it higher, to leave your payment the same, or you can choose to spread it out in the form of just raising the payment itself. But yeah, you need to understand what that is and the reason that it's happening. But in the end, it's not anything that the mortgage company is benefiting from. It's just the fact that your taxes and your homeowner's insurance are on the rise. Did I say that well, John?

Yes, I believe you did. And I think a good way to kind of dumb down what the escrow portion of your home loan is, is that your escrow is basically kind of like an exofacto savings account. Your money that they collect, and it's a fixed amount that they have calculated through an escrow analysis. Now that analysis they do yearly. They do it usually at the beginning of the year, and they do it after all taxes have been paid, all insurance has been paid. They analyze your account and they will say, okay, well, due to what we're seeing, your taxes are going to go up, your insurance has gone up, and we're going to need to increase what your portion to your savings basically account is. And they take from that and they pay your taxes and your insurance. And then if for some reason they haven't done the analysis and your taxes go up and your insurance goes up, they don't just sit there and go, well, I sure wish we had the money to pay it. No, what they do is they go ahead and pay it for you. So now you have a shortfall in your escrow account, which you may have to make up. And I don't think people understand that portion of it.

Yeah, that's right. So they don't get, and it's not that they're penalizing you. It's that, hey, look, we took the money and paid it for you in advance.

It's like a savings account with overdraft protection, basically. So they pay it out, but we got to collect it back because we gave it ahead of time. And we gave it for you. Hey, John, well done. Well done, my friend.

You articulated that very well. And hopefully that clears up for some folks maybe that had some confusion around that escrow account, what that looks like. Let me finish with one final thought, and then we'll move on to some other callers. The escrow department is not beyond making a mistake. So it's not a bad idea to monitor that escrow account. They'll send you once a year. You can ask for it more frequently. Once a year, they'll send you a reconciliation.

It's not a bad idea to check up on that and just make sure that everything looks good. John, thanks for your call today, my friend. We appreciate it. To Harrisburg, PA. Hi, William. Go ahead. Hi, Rob. Thanks for taking the call. I'm 61 years old, another five years to work. And late last year, everyone was talking about a recession this year. And so I moved my 401K money, 75% of it from stock based to a secure fund. And now that the market's up 3,000 points since then, and it feels good to have no risk, but at the same time, because I'm a little behind on my 401K and retirement funds, I sort of hurt that I lost this 3,000 points.

So my question is this, stay where I'm at with my age being what it is, or move it around a little bit. Yeah, very good. Let's do this. I've got to take a quick break, but that was helpful background.

I want to give you my thoughts on that. So William, if you can stay right there, we'll pick your question up right on the other side of the break. Still two lines open today, 800-525-7000 is a number to call. Vanessa, Lisa, Monica, we're coming your way.

Plus perhaps your question today. This is Faith and Finance Live on Moody Radio. And again, taking your calls and questions, 800-525-7000. Stay with us. Much more to come just around the corner. It's great to have you with us today on Faith and Finance Live. I'm Rob West. We're taking your calls and questions.

All the lines are full, so we'll get to as many of these questions as we can today. Just before the break, we were talking to William in Harrisburg, Pennsylvania, and William is five years out from retirement because of the uncertainty of the market, the volatility, a looming recession. He took his retirement assets and moved them out of the market to more of the stable, fixed type of guaranteed investment and as a result has missed this rally that most of us didn't expect. I mean, this market has just gone straight up and there's really not a whole lot of reason for it other than we are seeing inflation come down and the economy has been resilient despite the massive and quick rise in interest rates. And now we're starting to hear more economists than ever during this current cycle say that we may miss a recession. We may actually see that soft landing that the Fed was trying to engineer. That still remains to be seen. There's still a great likelihood we could have that recession later this year and we could see more hikes or they could stay in place longer. Nevertheless, William's wondering what to do, just kind of given his current situation and William, what I would go back to is just saying, okay, despite the fact that maybe if we could redo this, you would have changed how you approach this.

You would have just ridden it out. I think the question now is given where you find yourself today, what is the very best option for you in terms of the right allocation moving forward? Because here's the reality. Even though retirement's only five years away, if the Lord tarries and you're in good health, you have a decades long need for this money. This money needs to last you quite a while, you know, 20 plus years. And so we want to have a growth component to it. We also want to have some stability. We don't want it to be volatile.

Whether we have a recession now or not, we're going to have one at some point in the market is cyclical. So let me ask you this. Did you say your age was 61 today?

Is that right? Yeah. All right. And when you get to retirement at 66, are you planning to begin drawing an income from this right away? Or will this just be free to continue to grow because your bills will be covered from other sources?

Probably begin to draw. Okay. All right. And what do you have today in that retirement account? 157. 157,000? Yes.

Okay. And do you have an idea? Have you run your budget to look at what your retirement budget might look like?

And by the way, typically folks live on about 75% on average of their pre-retirement income. But have you taken a look at that? No, I haven't really spent much time on that.

I just assumed that I don't have enough and need to draw as long or work as long as I can. Yeah. Yeah.

Okay. Well, I mean, I would put it back to work and you know, the data says, you know, putting it all in at one time is the best way to go. Oftentimes we might think, well, maybe I should stage it back into the market over six months. And the only reason, at least based on the data, you would want to do that is if you just can't stomach it, putting it all in at one time.

And that's going to allow you to actually get that working for you and you'll feel better about it. But if you just want to rely purely on the data, the data would say, when you decide you're going back into the market, you put it all back in and you would want to put it in with an allocation that makes sense based on your current balance. You'd want to try to not pull more than 500 a month, 6,000 a year out of that account in order to preserve it for the rest of your life.

But obviously you've got five years for it to grow. And I think, you know, as somebody who's roughly 60 years old, typically we would say at this point, you'd probably want to go 50, 50, 50 in fixed income, bond type investments, 50 in stocks. And you want to be properly diversified in each of those two asset classes once you deploy it. But that's going to give you some more stability. The bond portion, which has been out of favor and you miss that, which is good, will do well moving forward because as rates fall, the bond prices will increase and you'll benefit from the current high yields we've got. And then we would hope stocks would continue to do well, even though you're going to have to be committed to it and not try to time the market in the future like you did this go around. And I'm not faulting you for that.

That's hard to do. And I've been guilty of the same thing in the past. So I would say probably 50, 50, if you wanted to be a little more conservative, you could be 60, 40, 60 bonds, 40 stocks. Are you in a 401k? Is that what this is with kind of a menu of investment options? Yes, 401k and I have more often there as well. Okay.

Yeah. So you'd want to just choose from that menu of investments. You could get the counsel of an advisor if you wanted somebody to look over the investment options you have in your 401k.

But basically you'd want to be broadly diversified with a mix of roughly 50, 50 or 60, 40 bonds to stocks using the investment options in the 401k. And again, the data would suggest you move it all in at once. Right. All right. Well, thank you very much. I appreciate the information. All right, sir. Thank you for your call today. We appreciate it.

To Forest Park, Illinois. Hey, Vanessa, thanks for calling. Go ahead. Hello. Hi. You're on the program.

Yes, ma'am. I was calling because I have credit freeze on my trade credit on my credit. And I recently put a credit credit fraud as well. But I'm not really sure what's the difference between the two. And do I need both of those?

Yes, it's not a bad idea to have both. Basically, a fraud alert is a notice that's placed on your credit report that alerts credit card companies and others who may extend you credit that you've been a victim of fraud, including identity theft. So think of it as a red flag to potential lenders and creditors that would be there so that when your credit is accessed, they would know that that's happened to you in the past.

And maybe they'd give it a bit more scrutiny. That's different, though, that red flag or that notice that's on your credit file. That's different from a credit freeze where there's actually a PIN number placed on your credit files. And you've got to do it separately with each of the three bureaus, TransUnion, Experian and Equifax, where that PIN number would have to be provided to the lender for them to access the credit file. And if a fraudster was trying to open an account in your name fraudulently, they wouldn't have your PIN number and therefore the lender wouldn't be able to pull the credit file and they'd be stopped in their tracks. So one's a notice and one's an actual PIN number that locks your credit file unless somebody has it. Does that make sense?

That makes sense. So if I went out to buy some furniture, would that person have to have my PIN number to check my credit? Yeah, you would probably unfreeze it before you went to buy the furniture is typically the way that works.

It'll take you just a few seconds and then you could refreeze it when you're done. I hope that helps you. Thanks for your call. We'll be right back on Faith and Finance Live.

Stick around. I'm so glad you're with us today on Faith and Finance Live. We're tackling your financial questions, but here's our promise to you to be hopeful and encouraging and always look at your questions through the lens of biblical wisdom, pulling the principles and passages we see in God's word related to money and applying them to the practical decisions you're making today. There's a lot in God's word, 2,600 verses on money and possessions.

Why is that? Is it because God needs our money? No, it's all his. He wants our hearts and money has a way of being a competitor to Lordship. You know, he has the rightful place of first position in our lives. The question is, are we allowing money and the things that money that can buy to compete with God for first position? Well, we want to handle money in such a way that it demonstrates that God is our true treasure and not the things of this world as we maintain an eternal perspective, as we give generously, hold God's money loosely, save and live appropriately. Well, we do that together as we encourage one another and certainly as we look to the Council of Scripture. So let's head back to the phones and tackle more of your financial questions today.

We'll go to Chicago next. Hi, Lisa, go ahead. Hi, good afternoon, Rob.

Thank you for taking my call. I hope that this is a simple answer for you. I understand the annual gift tax exclusion. So I want to help my son buy his first home. He's going to put down a sizable amount, but I want to match that and even go beyond. If I give him, let's say, 87,000 to put down, then the 17,000 is that freebie that you get, but that other 70,000, does that force me to file a form with the IRS? Is it going to be taxed? I just don't understand how the over and above and how the lifetime exclusion works.

Yeah, it is simple, but it's a great question because it can be confusing. So you can basically give your son any amount of money you wish as a gift. If you give more than 17,000 in one tax year or if you're married and you and your husband together give more than 34,000 because you could each give 17,000, then you would have to fill out that federal gift tax form. It's form 709. But you still wouldn't have to pay any taxes if you give more than that unless you exceed your lifetime gift tax exclusion, which is sitting right now at almost $13 million.

So you got a little ways to go before you get anywhere close to that. Now the underwriters who will look over your son's mortgage application will require you to write what is commonly called a gift letter. And basically that's a written statement confirming that the funds given to a borrower for a down payment are a gift, not a loan that has to be repaid because they want to know that this isn't something that he's going to have to try to pay back in addition to their mortgage payment.

And so it would explain who's gifting the money, where the funds are coming from, and the relationship between the donor and the recipient. But they're going to want to know that it is in fact a gift. And as long as it is, that won't be a problem.

But to your original question, no problem going over 17. You'll just have to report it to the IRS and it's still not taxable. And then when I report it to the IRS form 709, do I have to file form 709 every year because now their eyes are on it and they're starting to tally this up?

No, only when you go over that 17,000 in any one year would you need to report it so they can keep the tally. Okay, perfect. That was a simple answer.

That's kind of what I found in my research. But thank you for confirming. I really appreciate it. I'm delighted to Lisa, thanks for calling today. We appreciate it.

And I'm sure your son will be delighted about the gift that you're thinking about making. We're going to stay right here in Chicago. Hey, Monica, go ahead. Hi, thank you for taking my call. My question is, what is your take on running to own due to credit not being so great? Yeah, so you know, they can be good or bad.

I know that's not helpful. So let me explain. You know, in effect, you're paying more than the typical monthly rent for a house. And then that extra is put in escrow theoretically to be a future down payment for purchasing the house.

Now, there's two kinds of these agreements. There's basically what's called a lease option, which you pay an option fee to the homeowner so that you can buy the home at the end of your lease term and it will spell out what portion of your lease option or rent payment will go toward the purchase price. And then there's the lease purchase. And this is very similar to a lease option. You're still putting a certain percentage of your rent payments toward a down payment to buy the home. The difference is you've got an agreement in place between you and the seller to purchase it ahead of time and you would establish the purchase price.

You'd agree on that before you sign the lease agreement and you'd specify a date for a home appraisal and decide on a price after the appraisal is completed typically. But you have an obligation to buy the home at the end of the lease. Now, here's the challenge is you're doing this because you have poor credit and you're still going to need to qualify for this mortgage at some point. So you're going to have to make sure you have the credit score they're looking for. You've got the debt to income ratio that they're looking for in order to be able to qualify for it.

So, you know, what are the downsides? Well, you've got to pay that premium rent rate instead of a market rate because it includes the rent credit toward your ultimate purchase. You may have some non-refundable fees like an option fee. If you ultimately don't qualify for that mortgage or nullify the contract by missing a rent payment, you also could lose the money you spent on the option and potentially the rent credit as well. And the home could lose value over the lease period.

I mean, typically that doesn't happen, but it certainly is possible. So why would you do it? Well, you know, the benefit is it allows you to kind of lock in a home that you know you want to own so nobody else can purchase it. And it can provide you with a path to home ownership if you can't qualify for a mortgage today, but you have reason to believe you could down the road.

It could also help you try out the neighborhood before you make a purchase and it can ultimately cut down on the cost and hassle of moving multiple times by you getting into this property and then just staying there as it rolls into the purchase. But that's a lot of information I threw at you there. So give me your thoughts. Yeah.

I mean, it is a little bit scary going into that with all those different options. Yeah. Do you know whether it would be a lease option or a lease purchase?

It would be Chicago. No, but is it an option or a purchase agreement? Meaning, are you paying for the ability to buy it if you want to? Or are you doing a lease purchase agreement where you're committed to buying it? I haven't even done any of the options yet. I was looking into what the options are, but I think I'm just going to work on the credit and then go from there.

I like that option, Monica. I think, you know, despite the fact that rents are high and I know it's frustrating, you'd probably like to get in your home. I think that, you know, typically that's the best way to go unless, again, you have reason to believe your credit is going to, you know, improve in a timely basis.

You know, you find the home that's the perfect home and you just feel like you want to try to lock it down now and you've got somebody who's willing to work with you on it. But typically it's better just to focus on getting your credit improved, which means on time payer pay down debt. So you lower your credit utilization, have a good credit mix and then save, save, save.

So you can have that good twenty percent down payment when you're ready to make that purchase. I think that's going to be a better option for you, even though I realize it's going to take a little longer. I hope that's helpful for you. We appreciate your call today very much. Folks, we're going to take a quick break.

Let's see, Vez in Florida, Nancy in Missouri, Lori in Cleveland. We're coming your way just around the corner. We appreciate your patience and we'd love to chat with you all today. We're going to take a quick break, though, when we come back much more in your questions. Plus, I'll give you an update. Some new data out today that I've been looking at related to car loans and what's going on in the auto industry, just given these high interest rates and higher rejection or default rates.

We'll talk about that just around the corner. Great to have you with us today on Faith and Finance Live. Hey, interesting data out from the Federal Reserve. The rejection rate for auto loans in June rose to fourteen point two percent, up from nine point one percent in February, the last time the survey was taken.

This is the highest level since this data was first started in terms of collection back in 2013. And it's the first time that the rejection rate is actually exceeded the application rate. Lenders are pulling back leery of borrowers who have struggled with high inflation and a surge in interest rates the last couple of years. And they've piled on debt to make ends meet. And as consumer credit balances grow, there's a higher chance of default, especially in the market for auto financing. Listen to this.

The number of Americans paying at least a thousand dollars a month on new auto loans reached a record high of just over 17 percent for the three months ending in June, according to Edmonds. So just be on your guard. Be careful. I realize car prices are still high. But when we put that together with the high housing prices and what's going on with food, not to mention other categories that have been affected by inflation, we can get out of out of line in our budget pretty quickly.

So just be careful there and don't get overcommitted to something that's going to put a lot of pressure on you financially. All right. Let's head back to the phones to Florida. Hi, Vez. Thanks for calling. Go ahead.

Hi, Rob. Thanks for taking my call. And I just want to say thank you so much for the great job that you're doing every day. Well, thank you. I appreciate it. You're welcome.

I have two questions. My husband is 62 years old and he has a truck that he owed thirty thousand dollars and he has a 401k of ninety five thousand dollars and he is planning on taking thirty thousand to pay off his truck. Is that a good idea or will it hurt him in the future with his taxes?

Yeah, I mean, there are tax implications and then there's also just the idea that the reason the money is in the 401k is so it can keep growing even beyond his retirement so that he's got something that you all have, something that you can use to supplement your income. And the more we pull it out of that, the less that's going to be there, which means we don't have that money available. What is the interest rate on that truck loan?

Six point five percent. OK. And are you all able to make more than the monthly payment or are you just making the scheduled payment? Just making the scheduled payment. OK. Well, I mean, the implications from a tax standpoint are he's over fifty nine and a half, so he's not going to have a penalty. But all of that is going to be added to your taxable income for the year. So you guys, whatever you make an income that's taxable, you're going to have to add thirty thousand to it, you know, which means that it's certainly going to be subject to the tax rate that you're at. It may push a portion of it up into a higher bracket, but just plan on paying whatever your marginal tax rate is on that withdrawal, which means, you know, you're not going to have the full 30.

You'd have to pull more to account for the taxes. What's the alternative? Well, how far is he away from retirement? He's planning on doing it in two years. Two years. OK. And what income sources will you all have in retirement?

Well, he's not. He's going to start working, but I'm going to continue to work. OK. And is your income enough to cover your bills?

Yes. OK. And how long do you plan to work? Maybe until I'm 67.

How far is that? About three years out. OK. And so once you retire, let's say his ninety five thousand dollar 401K is now 60 because he pulled out the money for the car plus the taxes. What other retirement assets will you have at that point? Well, I have my retirement 401K also.

And that's another question I wanted to ask you about. How much do you have in that? About 200.

About 200. OK. And it's you guys, you will be full retirement age, but he will not. So he'll take Social Security prior to full retirement age. Yes.

OK. So, you know, if you had two hundred and sixty thousand in that account, let's say it grows a little bit because you've still got a few years. Let's say it's two hundred and seventy five thousand between your 401K and his at 60 after you pay off the car, that would throw off at four percent withdrawal rate, which is what I would suggest to ensure that, you know, you don't deplete the balance and it continues to maintain at least a consistent principal balance.

That would throw off eleven thousand a year or about nine hundred a month. So the question would be, can you all without the car payment because it would be paid off, can you all get by on Social Security, his reduced Social Security, your full benefit plus nine hundred a month? Would that be enough to cover your bills? And if so, well, then, you know, at least you've got a plan. If not, you know, then you need to think about, OK, does does one or both of us need to continue to work?

Do we need to try to build up more of our savings? I would probably leave it there and try to pay it off out of current cash flow just so you can preserve as much of that, you know, retirement asset as possible so that you have it available down the road because money is going to be tight. But if he just absolutely wants to do it, one option is you pay it off half this year and half next year. That would spread it out over two tax years. That would be the other option. You could pay down half of it this year, half next. I'd probably not do it, but if you did, I could understand. But I would really do some retirement planning just to get a good feel for what is your budget going to look like in retirement? What income sources are you going to have based on your actual Social Security benefit and an estimated balance of these 401ks and then make your decision from there? I know you had a second question.

What was that? Yes, so I'm 64 years old and I have my phone in two different places. Is it best for me to combine them together since I'm not working at one of the company anymore? Yeah, I think that's a good idea. I would either combine the old one with your existing one with your current employer just so it's all in one place or roll it out to an IRA.

If your employer will allow you to just roll it in where you are now, I would do that just for simplicity. Okay. All right. Thank you. Thank you for your call, Vez. God bless you. We appreciate it.

To Missouri. Hey, Nancy, thanks for your patience. Go ahead. Thank you for taking my call.

My question is this. I am interested in changing the title on my property, my real estate. And presently I have it listed in my name with and should I pass on?

Should I die? It would go to my daughter. I am told that without a will, it would have to go through probate.

Is that correct? Well, with a will, it will still go through a probate. So I would not put your daughter's name on the deed before you die.

And here's why. If she inherits the property when you die, she'll get what's called a stepped up basis for the property. So that means if she sells it, she won't have any capital gains to pay because her cost basis for tax purposes will be the market value of the property as of the date of your death, which means if she turns around and sells it, she's got no gain and therefore no taxes. If you put her name on it, the portion that she receives now through a gift from you will retain your original cost basis and then she'll have to pay taxes on it.

So what would I do? Well, this is always something you want to get legal advice on. I'm not an attorney, but here's something to consider. In Missouri, you can file what's known as a beneficiary deed or a transfer on death deed. And basically with that, you would ensure that the transfer of the property to your daughter will bypass probate, but she will still get the stepped up basis, which will benefit for her for tax purposes. So you'd want to have a real estate attorney help you draft that transfer on death deed and then you'd file that with the recorder of deeds in your county. You'll hold title while you're alive and you can sell the property or revoke that at any time, but at your death, it would pass outside of probate directly to your daughter. It's called either a beneficiary deed or a transfer on death deed. It's kind of an interchangeable term.

And I would just contact a real estate attorney in your area who could help you put that in place and then they would tell you what to do to get that filed so that it's handled properly. Thank you for your call, Nancy. We appreciate it.

Quickly to Illinois. Hi, Carla. Go ahead. Hi.

I have a question. I'm 68. I retired six years ago and I had a rollover IRA and a fixed annuity. I bought a house two years ago and, uh, because of some work that needed doing some, some, you know, required to get their house up speed and everything, I pretty much taken my, my savings, my, uh, IRA down to 6,000 and the other one down to 20,000. And of course I got hit with taxes each year for that.

And I'm just wondering if there's any suggestions as far as building, I have good credit. I paid my car off when I retired, but I just kind of need to build things back up again. Yeah. Are you still working Carla? No, I retired six years ago. Okay.

Yeah. I mean, you know, unfortunately I understand, you know, how you can get into the situation and you didn't expect to have these other costs for the home. The challenge is, yeah, I mean, you could, you could invest that $26,000 and, you know, try to grow that a little bit, but at the end of the day, you know, you're only going to want to pull a thousand dollars a year or so out of that. And if that's not enough, plus, you know, with social security to cover your bills, I think going back to work, uh, so that you can continue to save for the future is probably your best option at this point, even part time. So you could cover your bills and maybe continue to put some savings away, build that back up. So you have enough, but ultimately this comes down to what is your, your lifestyle expenses and how much do you need to cover your budget? And I think that's really the key.

So I'd start with your budget, figure out how much, you know, gap you have from social security and then decide whether you need to go back to work or whether you can get by with what you've got. I hope that helps you. We appreciate your call today. Uh, thanks for being on the program. God bless you, Carla. That's going to do it for us. Faith and finance live is a partnership between Moody radio and faith five. I want to say thanks to our team today.

Lynn Tahira, Amy, and Jim couldn't do it without them. Have a great rest of your day. We'll see you tomorrow. Bye bye.