Biggest Financial Mistakes

Today's version of MoneyWise Live is prerecorded, so our phone lines are not open. Some people learn from the mistakes of others. The trick is learning to not be one of the others.

Hi, I'm Rob West. Proverbs 1-5 puts that another way. Let the wise hear and increase in learning and the one who understands obtain guidance. Today I'll tell you some of the biggest financial mistakes so you can learn from them.

And we have some great calls lined up, but we won't be taking your live calls today because we're prerecorded. This is MoneyWise Live, biblical wisdom for your financial decisions. So a recent survey asked folks about their biggest financial faux pas, pardon my French. Interestingly, first on the list was buying and not buying a house.

Obviously, it's a huge financial decision and it can go wrong either way. Some in the group reported they bought too much house and were having difficulty making mortgage payments. Others said the home they bought required more work than they'd bargained for. Still more said a big mistake was not putting down 20% to avoid paying private mortgage insurance. But some reported that it was a mistake not buying a house a few years ago when home values were lower because now they can't afford to buy one. Well, to those folks we say keep saving diligently.

Home values are showing signs of moderating and eventually you'll catch up to the market. The next mistake people cited was student loans, but specifically using money from those loans for what they now consider frivolous spending, like eating out at a fancy restaurant, buying upscale clothes and even buying a car. Others said it was a mistake to borrow for a degree that didn't provide marketable skills that employers want. So now they're unable to find a job with a salary high enough to repay their loans.

The moral here is that you always want to borrow as little as possible, use the funds only for education and choose a major that will provide a reasonable income. Now, talking about loans in general, a lot of folks said it was a mistake to be on either side of one. Specifically, some said that co-signing a loan for someone else was a big mistake.

And the Bible certainly agrees. Proverbs 22 warns, Be not one of those who gives pledges, who put up security for debts. If you have nothing with which to pay, why should your bed be taken from under you? And some even said it was a mistake to borrow from a family member or friend, presumably because it damaged the relationship. The next mistake involved keeping up with the Joneses and spending way too much on a wedding to impress people that didn't have to pay for it.

One bride even said she wished she'd gone potluck and wore a simple dress, instead of shelling out thousands on an extravagant meal and fancy wedding gown. Impulse buying also made the list of mistakes people cited. They regretted buying a lot of stuff that made them feel good for a moment, but then ended up in the garage or basement gathering dust.

If they'd only read Luke 12.15 where Jesus said, Take care and be on your guard against all covetousness, for one's life does not consist in the abundance of his possessions. The impulse buyers said that instead they should have put that money in a retirement account, which was actually next on the list. Many respondents said it was a mistake not contributing more to their retirement accounts, so their holdings could grow more over the years from the benefit of compound earnings. And specifically, they said it was a mistake to not take advantage of employer matching funds in their 401k. We always advise you to contribute at least enough to max out any employer contributions, because it's free money.

You don't want to turn that down. Now, what list of financial mistakes would be complete without mentioning credit cards? And of course, a lot of respondents said it was a mistake to go into debt the first time for things they couldn't afford to buy with cash.

But some even admitted that they didn't learn from that mistake. When they got a windfall of some type and paid off their credit card debt, they kept overspending and found themselves in debt all over again. And that's why we tell you the only way to avoid going into debt is by living on a budget and having an emergency fund for unplanned expenses. Otherwise, you'll just reach for a credit card to solve a problem or satisfy a wish. By the way, the very best way to get on a budget is to use the MoneyWise app.

You'll find it in your app store. Just search for MoneyWise Biblical Finance. There's actually three approaches to setting up your spending plan, and you can find the one that works best for you and your personality. Set up your budget, track your expenses, and make sure you use the money for all the things that you intended and nothing else. So there are what folks are calling their biggest financial mistakes.

We hope you learn not to make them. This is MoneyWise Live biblical wisdom for your financial decisions. Stay with us. We'll be right back. You're listening to MoneyWise Live, and you can find us online at MoneyWiseLive.org. However, today we're not live, so if you hear that phone number, please don't call.

But do stay with us. There's lots of great information ahead. All right, we're going to head to the phones, and we'll begin in Lancaster. CC, thank you for calling. Go right ahead. Hi there, Rob. Hi.

Thanks for calling. I was wondering when a father would give to his children gifted monies. First of all, will they be taxed? And second of all, would it be such a great benefit to the father when it comes to taxes?

Yes. There actually is no tax implication, CC, one way or the other. It won't affect his daughter's tax liabilities, and it won't affect him positively or negatively. There's not a deduction for a gift. There's certainly no tax incurred on the part of the giver, and the recipient does not pay taxes as well. The only thing that comes into play is what's called an annual gift exclusion, and that only has to do with whether or not you have to report the gift to the IRS. So you can give up to $16,000 a year to anyone, $16,000 per person, without having to fill out the federal gift tax form, which is called Form 709. If you give more than $16,000 in a calendar year, then you have to fill out that form, which reports that amount over and above $16,000 to the IRS.

But here's the key, CC. Even then, that amount would only account against your lifetime gift exclusion, and that lifetime gift exclusion happens to be over $12,000,000. So unless he's planning to give over $12,000,000, there's not going to be any gift tax due based on the current tax code. So under 16, make the gift. Don't even report it to the IRS. Over 16, report it on 709, but still not taxable whatsoever.

Does that make sense? Okay, so if he gives $16,000 each to the daughters, that would be $32,000 for the year. That's fine. Yeah, $16,000 per person. And if it's a married couple, they could give $32,000 per person because each person can give $16,000 to another individual. But again, I just want to make sure I'm clear. Even if he wants to give more than $16,000, that's still not going to be taxable to either party.

It just has to be reported to the IRS, and it's just going to chip away at that $12,000,000 lifetime gift tax exclusion. Okay? Sounds good.

Okay. Hey, thank you for listening and for calling today. God bless you. Brenda's in Arkansas. Brenda, you go right ahead.

Thank you, sir, for taking my call and God bless you for what you do. I have a question about taking a loan out on my TSP. I work for the post office. It would be a 3% interest on a loan for TSP to pay off my credit card, which is I owe $2,200 on it, which is at 24% and pay down my car, which is 13%, I think, interest. So what should I do there? Should I do that?

Sure. A couple of thoughts. I'm not a fan of borrowing from a TSP or a 401k. First of all, that's money that's not available for its intended purpose, which is to be able to put away for the long term, to compound that and grow it over time so that you can then have it available in retirement. If you were to separate and leave, in this case, federal employment, the outstanding TSP loan would have to be paid back within 90 days.

I think for that reason, I'd love to see you do two things. One is with regard to the credit cards, let's look at a credit counseling program. I would recommend you at least start by contacting our friends at christiancreditcounselors.org and just see what they can do in terms of interest rate reductions to get you on a scheduled monthly payment that fits into your budget, which on average allows you to pay those back 80% faster. And then I'd look at refinancing that car note, not extending the term but seeing if you can get that interest rate down. But I'm not a fan of using the TSP. If you are putting in through salary deferral, you can always decrease that temporarily and get more going toward debt reduction.

But I wouldn't borrow from the existing TSP money, Brenda. Okay, thank you. All right, thanks for your call today. We appreciate it.

Let's go back to an email. This one simply says, sorry, I'm pulling it up here. Do I still need emergency savings if I have enough credit available for emergencies? And this comes from James. And James, I would just simply say the purpose of emergency savings is to keep you out of debt. The purpose of credit cards is to get you into debt.

So let's not mix the two. Credit cards are really not an acceptable tool for emergency savings. The credit card is only to be used in a disciplined fashion which means budgeted items paid off in full at the end of the month.

So what do you do then? Well, what I would do is try to free up some margin that is cut back your spending so that you can have a bit left over that you could use to systematically fund your emergency savings. Let's set an initial goal of $1500.

That'd be a great first step. And then if you have any credit card debt, let's then focus on getting that paid off. Once it is, the ultimate goal in that emergency fund is three to six months liquid reserves. Liquid meaning not invested, readily available. I'd use a high yield savings account linked to your checking.

So it's only perhaps two to three days at the most away from being in your checking account through an electronic transfer and you can even get a little bit of interest on it. James, we appreciate you checking in with us. Back to the phones to Florida we go. Hey Anne, thanks for calling. I understand you have a comment. Yes, I do just want to share. I've listened to you guys and I remember how we got out of debt by listening to Larry Brocat years ago before his death. And it was such a blessing to have that ministry because it's encouraged my husband and I to pay off our homes. And we have had three homes.

This is the third one. Praise God, we were able to move in and debt free. And the same thing with our automobiles. He believed in paying cash.

He didn't want to give anybody any interest. So I give that credit to Larry when he was alive. He was such a blessing to us and I'm sure to many, many other listeners.

Wow. Well, I appreciate so much and you taking the time to share that testimony. Let me tell you, there's not a week that goes by that somebody doesn't to this day talk about the impact that Larry Brocat had on their lives. His kind heart, his wisdom, his approach, his biblical focus.

It was started and ended with God's word, all of his counsel. And I had the privilege of knowing him and to be able to walk in his shoes on this program. And Howard Dayton as well, who was on the program yesterday, is just, well, it's humbling and it's an enormous blessing and a stewardship responsibility. And you're right.

Larry was very quick to say, you know what? Borrowing is not a sin, but there are clear warnings in scripture and therefore we should try to live as quickly as we can without debt because being unencumbered brings with it great joy and flexibility and peace of mind. And you certainly are a testimony to that today.

And what did you all do? What was the key to being able to get out of debt and stay that way? Was it really about frugal living or something else? Very frugal living. My husband, he was not a big spender. He was in the Navy for 21 years.

And then from that point, civil service. And he was very wise and he taught me to be wise, not to be too quick to spend, think about before we make a decision. And we were always blessed to talk it over with each other before we would decide how is it going to go about it.

Yeah, I love that. Well, what an encouragement today. And we're so appreciative of you taking the time to share that with us. I love that you said we live simply and frugally and we talked.

You know, communication is so key in this area of money, especially when it comes to marriage. God bless you, Anne. Thanks for your story today. This is Money Wise Live. We'll be right back. We're so thankful you've chosen to join us today on Money Wise Live, biblical wisdom for your financial decisions. This is the program where we recognize that our financial journey is in many ways tied to our spiritual journey, often money and the things that money can buy as a competitor to lordship.

So we want to hold what we have loosely, recognizing God's authority and ownership, our role as steward, to be found faithful, applying his principles that we find in his word to the decisions and choices we make every day. Let's do that together. By the way, we're away from the studio today, so don't call in. But we've got some great questions that we lined up in advance. Let's head right back to the phones to Waco, Texas. Hey, Barry, thanks for calling.

Go right ahead. Okay. My question is, my wife retired from the school system as a teacher's aide, draws a small pension. She has her quarters from previous employment for Social Security. She's working part time now. When I pass away, will she be able to draw my full Social Security?

Yeah. So was she eligible for Social Security on her own work record because she worked beyond the teacher's retirement system in addition to her work there? Of course, you know, working part time, she's not going to draw very much. So when I pass, considering the fact she worked for a school system and did not pay Social Security, I'm just curious if she will be able to draw my entire Social Security.

Yes. You know, typically you won't be able to claim a spousal benefit if you haven't earned your own Social Security benefit. That's what it's going to ultimately come down to. You know, when you are a teacher, a lot of times you're not paying in to Social Security because you're qualifying for the pension. Texas happens to be one of those states where Social Security is not available and you have to rely exclusively on the teacher's retirement system unless apart from your work as a teacher, you had based on your own work record the ability to qualify for some benefits. And if you qualify for benefits, then you would be eligible for spousal benefits.

So I think what she or you need to do would be to contact Social Security just to get some clarity on based on her work as a teacher and her own current work record, whether or not she'd be entitled to the spousal benefits in addition to her teacher's pension. Does that make sense? It certainly does. And I'll do that. Get a hold of them like get the hold of President of the United States. Just can't do it. I understand.

You know, here's the key. You know, you just want to try to set up that virtual meeting if you can, you know, through SSA dot gov or go down there and see them. What you may find is because you've paid into Social Security, she may qualify for a spousal benefit based on your earning record. The key is that you have to be receiving your own Social Security benefit before she can apply for the spousal benefit. And then the other is that if she receives that teacher's pension, that's where this government pension offset would reduce the spousal or survival benefit she might receive by two thirds of the amount of her pension. And so if the two thirds of her pension is greater than the amount of her Social Security benefit, it could be reduced all the way down to zero. So that's why it gets a bit complicated, Barry.

And I think even though it's going to be challenging to perhaps get that set up, I think having that actual record for both you and her in front of them will give you ultimately the information you're looking for so you can be certain. OK, sounds real good. Thank you very much. All right, Barry. God bless you, my friend. Thanks for calling today. Let's see Jackson, Mississippi. Hey, Ruben, go right ahead.

Hi there. Quick question. Me and my wife have been entertaining thought of refinancing our home, but I'm just kind of in between. We're both kind of in between because we're thinking the value of our home might go up, you know, and the area that we live in actually is in Madison, Mississippi. And basically the value of the homes there are a lot higher. But anyway, I'm just kind of finding out the pros and cons of should we pay off our home and pocket the money or refinance and just find another home to live in somewhere in Mississippi? The idea is, you know, it's kind of entertaining the thought of having like some land and some acreage, but just kind of in the middle, you know?

Yeah. Let me make sure I understand the primary decision point here. So the home that you have now, what is the value of it at this point? Two forty. OK. And what do you owe on it? Right now, we paid it down. We paid approximately about sixty thousand.

We just moved in. OK, so you put sixty thousand down on the property. Oh, no, no, we put we put twenty twenty thousand down and. Yeah. And so do you do you think you still owe to ten or more? Give or take. Yeah. OK, very good. And what is your interest rate on that current mortgage? That I do not know. OK, but you got it a couple of years ago, so it's probably pretty low, maybe three, three and a half percent. Possible. OK. All right.

Let's assume that's the case. And what's your ultimate goal as you and your wife, Ruben, sit down and talk about where you feel like the Lord is leading you? What is it you're trying to solve for primarily? Are you trying to reduce your overall expenses? Are you just trying to move and get some more land? What is the ultimate objective with regard to your housing? Well, at this point, I think both me and my wife kind of agree that we would like to have more space in our home right now. It's a three bedroom, two bath. But my wife is kind of looking more towards, you know, like a five bedroom, three bath. And we don't live on acres. We have a cul-de-sac that we live in. So we have to pay HOA fees and etc., etc.

But I personally would like to live privately, you know, without all the regulations. OK. All right. And have you looked at the properties that might fit that?

And have you looked at what you might have to spend to find something that meets those criteria? Yes. And my wife's thinking about pulling from her 401K to pay for the house as well. So there's a few ideas rolling around. Let's do this. I've got to take a quick break when we come back. We'll continue to unpack this and see if we can find a path forward. This is MoneyWise Live biblical wisdom for your financial decisions. Stay with us. We'll be right back. You know, I just love bells and whistles.

No, not that kind. You know, features and benefits, options and accessories. Well, the new Moody Radio app's got them. When you download it from the App Store or Google Play, you'll access your favorite programming and you can connect with Moody Radio directly through e-mails, photos, audio and video.

Get the updated Moody Radio app with right away. We are grateful for support from Soundmind investing in the MoneyWise program. If you have money in a retirement account or just a general investing account, you know the stock market can sometimes seem like a roller coaster. But it is possible to enjoy both profit and peace of mind in investing no matter what's happening in the market. You can see a short video webinar on that topic at soundmindinvesting.org. Since 1990, Soundmind Investing has sought to offer financial wisdom for living well.

Soundmindinvesting.org. Children need to believe that their future is bright. Learning to overcome defeat and negative encounters is essential. Help your children and grandchildren by reading Kathy Cook's book, Resilient Kids, raising them to embrace life with confidence, practical advice and biblical strategies to help raise thriving children who will recover from disappointment.

Pick up your copy of Resilient Kids at moodybooks.org. Holiday anxieties can rob you of thankfulness. Disappointments and discontent lead to dissatisfaction, and gratitude seems impossible. Well, in his new book, A Grumbler's Guide to Giving Thanks, Dustin Crowe looks at Paul's exhortation to be thankful in everything. He reminds you what life can look like when you make space for gratitude. Take on the life-changing challenge to see God's hand in all things. Pick up your copy of A Grumbler's Guide to Giving Thanks at moodypublishers.com. Do you ever feel stressed or anxious about money?

If so, that's normal, but you don't have to accept that. You can find peace of mind and financial security. Learn how with the 31-day devotional Money Seeking God's Wisdom. You'll find daily questions to reflect on and practical exercises paired with scripture for spiritual and financial growth.

Right now, you can request your copy of the Money Seeking God's Wisdom 31-day devotional with a gift of any amount at moneywise.org. I'm Miriam Neff, and I'm Valerie Neff-Hogan with Wise Women Managing Money. We have been talking about the great financial challenges our families are facing, inflation and more. We've recommended going quickly to our discretionary budget and making immediate reductions. We can't do without heat and cool air, but we can modify our comfort zone to reduce utility bills. We can halt all clothing, shopping and eating out.

Entertainment can become simple – walks and parks and board games. Meanwhile, we visit our big picture budget. If we did not have that 3-6 month emergency savings in place, we are now motivated. It is said that we learn more in hard times than easy ones, so now is premium learning time. We often say, count the cost. It's biblical.

Pray and wait on God's direction. This feature and more at wisewomenmanagingmoney.com. Thanks for joining us today on MoneyWise Live, biblical wisdom for your financial decisions. Hey, our team is away from the studios today, so don't call in, but we lined up some great questions.

We'll get right back to the phones here in just a moment. Hey, would you like to find a financial advisor, an investment advisor, tax and accounting professional that shares your values and has met high standards when it comes to character and integrity, but also experience? You can do so when you search for a Certified Kingdom Officer. You can find one in your area on our website, moneywise.org.

Just click find a CKA. All right, let's head back to the phones. Before the break, we were talking to Ruben in Jackson, Mississippi. Ruben and his wife own a home worth about $240,000. They owe perhaps maybe around $210,000. I suspect a low interest rate given that they purchased it a couple of years ago, but they're considering moving to try to get some more space, maybe a little more acreage, maybe being out of an HOA, having more of a private parcel of land and a home. And just wondering if that makes some sense financially.

Ruben, what do you think? Have you all looked at properties that meet the criteria you're solving for? And if so, what do you think you'd have to spend? You had to spend $240,000 to get the house you have today. What would you have to spend to accomplish your goals on this new property? They would be up towards maybe $300,000, in between $300,000 and $400,000. Between $300,000 and $400,000.

Okay. And if you only have, let's say, after the expenses to sell it, because it probably cost you 6% or more to sell this property. So let's say you only pulled out roughly the $20,000, maybe $25,000 you put into this current property. That doesn't get you a 20% down payment on a $300,000 home, which would be $60,000 down, or a $400,000 home, which would be $80,000 down. And that's what I'd love for you to have going into this new property. Do you have any other savings to pull from?

Not really. And that's kind of where it's kind of stopped. So our conversation about talking about moving or not, but my view of it is say, and this is my opinion, and she has a different opinion, but my opinion is, stay in the house, let's just pay our house off. And once we pay our house off, let's just pocket the money, and then look for another home. You know, how much margin or surplus do you have on a monthly basis that you can apply to extra principal reduction on the current home?

I think right now, pretty much what we're doing investing in 401k and stock in a couple places, and it's paying off pretty good, but that's kind of where we're at. After that, you really don't have anything left over at the end of the month, correct? Right.

All right. So what would you use to pay off the house when you're saying let's just pay off the house and pocket the money you're talking about over the next 30 years? Are you talking about paying it off quicker? Yeah, yeah. I'm thinking just stay and we'll just pay it off and then, you know, wait it out.

Yeah. And what she's probably looking at is, yeah, but if we do that, that means, you know, we're going to have to be satisfied that this is our home for the next 30 years. You know, unless as you get raises and bonuses and things like that, you cap your lifestyle, say we're, you know, we're done spending more on our lifestyle, any increases is going to go to debt reduction and let's try to take, assuming it was a 30 year mortgage, let's try to pay it off in 15 or something like that.

You know, that would be an option. The other option is at some point as your income rises, you go ahead and sell it. Maybe this house continues to appreciate and then you use that plus maybe some savings you're able to build up to buy the next property that's a little bit bigger, gives you a little more space. But I think the bottom line is right now, just based on what I'm seeing, I think you'd be stretching to get into a new property between 300 and 400,000. You'd be going in after the expenses of the sale of this property plus all the moving expenses.

You'd be going in with less than 10 percent equity in all likelihood. And it sounds like with the long term savings that you're prioritizing, which is a good thing, you're putting money away for retirement and investing, but without any margin, anything extra left over doesn't sound like you'd be able to absorb a higher mortgage payment either without cutting back on some of your other goals. So I think for the time being, you probably need to sit tight unless things change that allows you to create more income so you have more margin that you could put toward a bigger mortgage and certainly the ability to save for a bigger down payment going into a 300 to 400,000 dollar home.

So I think I would agree with you, although this may not be home for the next 30 years necessarily, at least now until we can absorb that bigger mortgage and we've got more for a down payment, I'd probably stay put. Does that make sense? Absolutely. I totally agree with you. Thank you. You're welcome. Thanks for calling today. God bless you, my friend. To Tennessee. Hey, Pat, thanks for calling.

Go right ahead. I have a situation where I was living in Florida and I sold my home for a lot more than I paid for it and moved up to Tennessee to retire, but I did not start getting my Social Security on my birth date. I didn't get it until I actually retired from my company in December, and so I got a lump sum, like $11,000, and I just put it in savings. I wanted to make sure that I, even though I was buying the house outright in Tennessee, that I would have enough to pay all the bills and not get behind. Also, in the past, I did have a real big problem with some debt and I went to Christian Credit Counselors and I pay $865 or something like that a month to bring it down, but I still have an $8,000 leftover bill. So what I'm wanting to know is whether I should use that money and pay down that debt, like in one big lump sum through Christian Credit Counseling, or whether I should let it go. I mean, yes, it's a lower interest rate, but it's not nothing.

No, that's exactly right. So you have $8,000 left. What do you have from this lump sum from SSA? And that's what we're talking about, right?

What to do with that money? Right. Yeah. What do you have left from that?

$11,000. Okay. And do you have, Pat, what I would call an emergency fund separate from that $11,000, an emergency reserve? Yes. And I do.

Yes, I do. How much is in that? Well, it's not a big one. It's like $3,000. $3,000. And what do you, last question, what would you say the total of your monthly expenses are? Oh.

Roughly. $2,500. $2,500.

Okay. So I'd love for you to get that up to three months expenses. So that'd be $7,500. So I'd take, if it were me, from that $11,000, I'd take the $4,500 and add it to the $3,000.

So now if you ever have an unexpected major expense, you've got at least $7,500. If you wanted, you know, I could see even going up to six months if you wanted, which would mean you have to put the whole $11,000 in it. But given that you have this credit card debt, I would probably cap it at $7,500 and then I'd take the balance and I would absolutely prepay, which you can do through debt management with Christian credit counselors. You can prepay that balance whenever you want. And I would just go ahead and drop that remaining amount on those credit cards because no matter what you do with it, even if you use the I-bonds right now at 9.6%, you're still going to come out money ahead by paying off those credit cards just because even though those rates are lower, they're still higher than you're going to get anywhere else. And paying it off is a guaranteed return equal to that lower interest rate through debt management.

So I'd shore up your emergency fund to three months worth of expenses and then put the balance against the credit cards. Does that make sense? Absolutely. I just wanted to push to see whether that was what I had felt was the right thing and that I was going to do it. Good. Well, I'm glad you called.

I'm glad that was helpful to you. We appreciate you checking with us. God bless you very much, Pat.

Well, folks, we've got some great questions lined up. Philip, James, Diane, we're coming your way. Margaret, you as well. Thanks for being along with us today on MoneyWise. Still more to come in our final segment.

Don't go away. We'll be right back. It's great to have you with us on MoneyWise Live today, but unfortunately, today we're not live. We're prerecorded and therefore won't be taking your calls. However, we've lined up some calls in advance that we think you'll find helpful. So stay tuned and enjoy the rest of the program. Let's head right back to the phones.

Let's see. James is in Hot Springs, Arkansas. James, thanks for your patience.

How can I help? Yes, sir. My wife has worked for a company for like 22 years and it was bought and part of it sold off. And they told her they sent her a message Monday and told her she had till Friday to do something different with her 401k and to stay with the company, the prior company. But she has a small loan and if she leaves it there, she's not, we're going to have to pay taxes on what's left of it and or she can roll it over to something else.

Well, the company that it's changing to is actually using the same company they're using now. And she just wondered whether to go ahead and put it, leave it in that company or the previous company. Yeah. So did you say, James, she has a loan against that 401k?

A small one. Yeah. Yeah. Do you all have the ability to pay that back? Yeah.

OK. So, you know, what I would look to do, did she move to a new employer at this point? Well, the. Yes, basically, is what the company sold off part of the company because it's a telecommunications company and they sold off part of the company. They basically bought the company and then they split it up, sold off part of it. And like the original company said that she could leave her money in theirs. But the new company is using principal as their 401k people.

Well, that's where it's at now. She should have to change it over to the new company, I suppose. Yeah.

And is she contributing to a new 401k with her new company? Oh, yeah. Yeah. OK.

So, you know, I think given that she's still working and she just happens because of this transaction that occurred to be with a new company, I'd probably just roll that 401k into the plan that with the new company that she will ultimately be contributing to moving forward. That just simplifies things. James, everything's in one place. Yeah.

Yeah. You know, otherwise she's going to have she rolled it out to an IRA or left it there. Now she's got multiple accounts. She's got multiple investment strategies going. She needs to make sure they're complementary and not competing, not to mention just the extra hassle of keeping up with another financial account. So I think wherever she's ultimately going to be contributing in this new plan with this essentially new employer, that's where she ought to roll this existing account. And that way, everything's in one place.

Now, I see all in one spot. Yeah, exactly. I was hoping you'd say that. I told her that's kind of what I thought she probably needed to do.

And simple is good. We didn't see if I could. That's exactly what I thought. All right. Thanks for your call, James. Yeah. God bless you, my friend.

To Corpus Christi, Texas. Hey, Diane, thanks for calling. Go right ahead. Hi. Hi there. Hi. You can hear me? Yes, ma'am. OK. Hi.

Yeah. I was calling out about our retirement. We have a small pension plan. My husband is in his 70s and draws full Social Security. I'm in my 60s and I draw early Social Security. And we want to know how we should and everything we own, our home and cars are paid for.

We don't know anyone anything, but we need to know how to prepare better for an income coming in now that we're retiring. Yeah. So have you worked on your retirement budget, what your expenses will be in retirement?

It pretty much just comes up to what our Social Security's and our pension is. There's no margin. Yeah. OK.

So you're looking for a little cushion here. Are either of you currently retired or is there's any of this forthcoming? He just retired.

He just retired. OK. Yeah. I mean, I think the key is to recognize that some of these expenses will drop. The medical category tends to go up over time, but some expenses will drop depending upon the situation. I mean, you may be able to drop life insurance premiums. You know, obviously, the savings that you were doing for retirement goes away.

You know, there may be less gas expense if he was commuting to work or work clothes, that kind of thing. I mean, so you just need to first of all, I think, take a look at what will the actual budget be and are there any opportunities for reductions in your budget, which could create a little bit of margin in your current situation. If you get to the end of that exercise, Diane, and there's really just not anything there, you're still living kind of right up to the edge with regard to the pension income and the Social Security income.

And you don't have any other assets to draw upon. Well, then we have to look at other opportunities, which would namely be, do we downsize the house and kind of pull some, you know, reduce expenses there by being in something smaller where less utilities, less maintenance, let's upkeep. We might even pull some equity out if you own your home free and clear that could be converted to an income stream. Or if you guys want to stay put, you know, do you look at something like a reverse mortgage?

I mean, that's not my first choice. I don't like funding lifestyle with debt. And yet if that's your biggest asset and your house rich and cash poor tapping to that equity into that equity could add an income stream, you know, that basically provides that cushion that you're looking for. So I think those would be the kind of the priority order for me. First, looking at are there some cost savings we can experience? Let's go back to the budget, do some hard work and see what we can do to reduce overall spending so that we can feel comfortable with what we have. If not, should we downsize? And then thirdly, you know, would a reverse mortgage make sense?

But give me your thoughts on those. Well, I just didn't know I don't really know. It's just like it came earlier than we were prepared for, you know, and I want to have that cushion. So we don't mind downsizing. I think our house is probably worth about 350,000. And, you know, it eventually in our life shrinks, unfortunately.

Yeah. Well, you know, I think that before you do anything, especially with something as big as selling the house because of the expense involved in it, you'd want to make sure that it really does help to solve the issue by moving. So you'd want to do the due diligence to say, what can we actually get out of our property? What would it cost us to sell it? What would it cost us to move?

And where would we go? What place would kind of meet our needs, but also accomplish this other objective, which is we want to make sure we're reducing our overall expenses. And if you can't reduce your overall expenses with this move, well, then you're just incurring a lot of other expense unnecessarily. So you'd really want to check that option out thoroughly before you made that decision. The other option, of course, is if he hasn't already started taking Social Security, could he continue to work longer and let that check build up? Or thirdly, does he go ahead and take it? But does he get a part time job and something he would enjoy just to bring in a little extra income so you all could build up a little more cushion here? So I think you've got a number of options to consider.

It's just a matter of sitting down together, talking through it, praying through it and deciding which one makes the most sense. Okay. Okay. Quick question on the end of this is I have about probably $80,000 in savings. It's drawing no money at all. It's just sitting there for a cushion. And I'm wondering if I should take part of that half of it, a third of it and invest it to make money.

Yeah, I don't think that's a bad idea. Do you have an emergency savings account separate from that $80,000 or is that included? I have one but it's only $10,000. Okay. All right. And what are the total of your monthly expenses every month? Roughly?

I really don't have that in front of me right now. Would you guess $3,000, $4,000? Probably about $5,000. About $5,000.

All right. So I'd love for you guys to have six months expenses in the bank not invested. So that would be $30,000. So then the question is if you have $50,000 left over and by the way I'd put that $30,000 in emergencies reserves in a high yield savings account like Marcus or Capital One 360 or Ally Bank. At least you're going to get 2% a year on that with no fees and you can link it to your checking account and it's FDIC insured. Then with the $50,000 you could invest that and try to earn about 4% a year on that. That'd be $2,000 but every $2,000 a year helps because you could pull an extra $150 a month out of that and I'd look at turning that over to somebody to get that invested for you conservatively with a goal toward making 4% a year. You could check with our friends at soundmindinvesting.org or you could connect with a certified kingdom advisor there in your area.

That would make some sense. The other option is using the I bonds although that's a little bit more near term because although they're paying 9.6% right now, that's probably only a runway of the next couple of years and then the rate of return won't be as attractive. So I would probably look at that point to be a little bit more longer term in your investment strategy with this $50,000 and again if you could invest it in such a way Diane that would throw off another $150-$160 a month, that may be the cushion you're looking for. So a couple of things that I mentioned just to recap let's put $30,000 in a high yield savings. I'd look at Ally Bank, Marcus or Capital One 360. Let's take that $50,000 and think about getting that invested.

You could check with our friends at soundmindinvesting.org or you could do that yourself with one of the robo-advisors like the Schwab Intelligent Portfolios or you could connect with a certified kingdom advisor on our website at moneywise.org. Lot of moving pieces. I know it can seem overwhelming but you guys will get there and just stay at it. Trust the Lord for your provision. Be grateful for the income and the assets that you have and as you allocate those wisely, I'm confident the Lord will give you everything you need and we appreciate your call today very much. Well folks that's going to do it for us today.

We are about out of time. Before we head to the end of the program let me remind you that MoneyWise Live is listener supported which means we can only do what we do each day because of your generous support. If you'd like to be a financial partner one time, perhaps you want to be a MoneyWise patron giving monthly, whatever it is, just head to our website at moneywise.org. You can click the donate button. There you will find an online form to give, a toll-free number to call our team or the physical mailing address if you'd like to send a check. Again, moneywise.org, just click donate and thanks in advance. MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Let me say thank you to my team today, Amy Rios Engineering, excuse me, producing, Dan Anderson Engineering, Jim Henry providing research and Melody on our phones today. Thanks for joining us. We'll look for you next time for another edition of MoneyWise Live. Bye-bye.