Preparing for the Worst

It's great to hope for the best, but it's even better to prepare for the worst.

Hi, I'm Rob West. Are you prepared for a worst-case scenario with the assets you've worked hard to build up, or could you lose them with a single mishap? Today I'll tell you an inexpensive way to protect yourself. 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. You know, Proverbs 27, 12 talks about this. It reads, the prudent sees danger and hides himself, but the simple go on and suffer for it. We always tell you that having insurance in general is prudent. But today I want to talk about the prudence of having a particular type of insurance that many homeowners fail to take advantage of. It's coverage that protects your assets from catastrophic lawsuits, and it's most commonly referred to as an umbrella policy. As the name implies, an umbrella policy gives you extra liability coverage for you and your family beyond what you have with your homeowners and auto insurance policies. Is everyone needed?

Maybe not, but more people than you might expect. If you've been working hard to build up assets in your retirement fund and the equity in your home, it's entirely possible that you need an umbrella policy, especially when you consider that a civil judgment against you could even include future earnings. Now, you might think you're adequately covered by homeowners and auto insurance, and that your home is protected from lawsuits by state law. That's usually the case, but not always.

For example, New Jersey and Pennsylvania have no homestead protection. You might also think that your employer-sponsored retirement plan, like a 401k, has immunity from lawsuits and creditors. And that's true under the Employee Retirement Income Security Act, or ERISA. But non-ERISA plans, like traditional or Roth IRAs, don't have the same level of protection. So that's another reason to consider an umbrella policy.

How exactly does an umbrella policy work? Well, I'll give you an example. You're driving down the road and your smartphone chimes with a text message. You know you're not supposed to text while driving, but you're curious about what the text says. With a momentary lapse of judgment, you look down to see and you don't notice that traffic is stopped at a red light ahead. As a result, you rear in the car in front of you. That causes a chain reaction with two or three cars running into those ahead of them. The next thing you know, several drivers are complaining of whiplash. But you're not worried because you have $500,000 coverage with your auto insurance policy. The problem is, between costly repair bills and medical costs, your liability quickly goes beyond that $500,000. And worse, now one of the drivers ahead of you decides to sue you for emotional trauma caused by the accident. You're on the hook for everything that exceeds the limit in your auto insurance policy, which could be sizable.

Given how common lawsuits are in this country, it would not be prudent to think this can't happen to you. But with an umbrella policy, coverage kicks in and pays off everything above your auto insurance limit, not just for repairs and medical costs, but also any judgments, plus attorney and court fees, usually up to a million dollars. For example, in the area of bodily injury, most umbrella policies would protect you in the case of the auto accident I described, but also if your dog harms someone, or a guest falls in your home, or a neighborhood kid is injured while playing in your yard. And of course, an umbrella policy would cover the cost of damage caused to other people's property in the event of an accident where you're at fault. This type of coverage could also be a lifesaver if you own rental property. It would protect you from liability claims if someone is injured on your property, or even if your tenant's dog bites someone and you're held responsible for it. And yes, that could happen in today's litigious society. Another thing that an umbrella policy might cover could be quite unexpected, a judgment for slander or libel, which are injurious spoken or written statements.

A note of caution here, be careful what you say about someone on social media. Now, you probably think that any policy that protects you from all these potential disasters would have to be expensive, but actually umbrella policies are quite reasonable. For up to a million dollars in coverage, you're probably going to pay 150 to $300 a year. You might even find it cheaper if you have an independent insurance agent shop around for you. So those are some pretty good reasons for planning ahead and getting an umbrella policy.

Remember, it wasn't raining when Noah built the ark. All right, your calls are next. The number, 800-525-7000. I'm Rob West, and this is MoneyWise Live. We'll be right back. Great to have you with us today on MoneyWise Live. I'm Rob West, your host, taking your calls and questions today on anything financial, 800-525-7000.

We'd love to know what's on your mind today. You know, the reason that we have this program every afternoon is not so we can just apply biblical principles in order to enrich ourselves financially. It has to go beyond that. Yes, we want to provide for our families, and that means we might have the opportunity to work harder and earn more. Well, work was a part of God's plan before the fall.

There's nothing wrong with that. But what is the end? What is it that we're ultimately aiming for? And here's the reality is that we're able to handle money in a way that would actually draw us into more intimate relationship with the Father. Working out these money decisions and wrestling with them is actually an opportunity to lean into what God has for us in this area to learn and grow and stretch and trust Him implicitly. And when we do that, we can actually go on a journey to deepen our faith through the money door, which is just fascinating. And I think that's why Jesus talked quite a bit about this topic in terms of its ability to derail us from having God in first position in our lives and to be used perhaps as a tool to accomplish His purposes if we put it in the right context.

Well, as we work out our financial decisions every day as we live on it and as we give and as we grow and as we owe it to others, we actually can look at it through the lens of Scripture and I believe invite God into our financial lives in a way that draws us unto Him. Well, that's our objective here as we wrestle through the decisions and choices we make every day. So what's on your mind? Let's talk about it today. 800-525-7000 is the number to call. All right, we're going to begin today in Lakeland, Florida. Hey, Eric, thanks for calling. Go right ahead. Thank you, Rob.

Real quick. We're looking at long-term insurance that's been offered through the company after I retire from after 13 years and from working for them for that amount of time. I'm going to be getting around 50 some thousand dollars and we'd looked into this long-term health care that they're offering through the company and it's a locked in price if we would accept it and it's a life insurance slash health term long health care and for me for a $50,000 policy it was approximately 320 a month and my wife and I figured that what I would receive from the company I'm retiring from would pay for that. We could set it up to where we could pay for that per month to where I'm about 80 years old.

I'm 67 right now and we just didn't know if this was a wise thing to get into and you came to mind after we were thinking about it. Well, I appreciate the call. Absolutely. Yeah, so help me understand the policy itself. You said that 50,000 is that a death benefit? No, 50,000 is what I'm going to receive from the company. Yes, it is.

It's a long-term say if I have to go to rehab, if I have a stroke or a heart attack, ALF, anything like that. Right, but it sounds like it's a combination of life insurance and long-term care insurance. Is that right?

That's the word I needed, combination. That's what I needed to tell you. Yes.

Okay. Alright, and so the death benefit is 50,000. Typically, the long-term care benefit itself is in the form of a certain dollar amount per day once you qualify for long-term care and that has to do with whether or not you can perform a certain number of activities of daily living. But once you qualify, they would typically pay a daily benefit.

There might be some sort of period where you can't earn it but after you get past that period, if you still are in need and you still qualify, then they would pay a daily benefit. Do you know what that is specifically related to the long-term care portion of the policy? No, I do not. Okay.

No, I do not. Yeah, so I think at a high level, I like the idea of where you're headed here, Eric, because if there's something that's going to erode your assets in this season of life, it's most likely going to be the need for long-term care. Once you reach age 65, about 70% of Americans will need some form of long-term care for a period of typically 18 months to 3 years and it is very expensive depending on whether you need in-home care or full nursing care or some form in the middle.

That obviously would provide, if not the whole offset, at least a portion of it. I think another question would be if we were to take this out of the equation and you were to use this $50,000 specifically the proceeds or an income that you could generate off of it to fund the life insurance policy with the long-term care, do you have other assets to meet your expenses for you and your wife, Social Security, but do you also have anything else? My wife is going to be drawing. Right now, we're both still working. She's a nurse practitioner, a nurse of 50 years. She's going back to part-time. I'm going to continue on working, but we're moving back to Kansas from Florida, but I'm in the process of looking for employment before I retire from this company.

And then once I'm there, then I'll have employment access there then. Yeah. And do you have other retirement assets? Yes, but it's very small, very small. I think it's only in the $30,000 and I haven't looked at it with everything that's going on, I'm afraid to.

So I think it's around $30,000. It's nothing fantastic for me, no. But I do have a farm in Kansas that when it comes down to it, I can sell that too, which is rather large. Okay. And that's worth a good bit? Yes. Yeah. I have 240 acres back there. So right now, yeah.

Yeah. You would typically want to look at long-term care insurance if you have assets. And I realize this is going to be a pretty wide range, but assets between $250,000 and $2 million. Under that, you could rely on government assistance under the $250,000. More than $2 million in assets, you would typically think that you might be able to just self-insure against this risk.

But right there in that middle, which is clearly where you find yourself and you put in the retirement assets plus the farm, you're probably there. So I think the key is just getting down to the details of this policy, Eric, and that's what I would want to know more about. What is the benefit that you're going to be getting?

Is there any kind of inflation protection on there? Is there any waiting periods beyond you'd have to get past before that benefit starts to kick in? If you can answer those questions, and it seems like a quality policy in exchange for the cost, which is not insignificant.

We're talking about $3,600 to nearly $4,000 a year. We want to just make sure that it's going to give you the benefit that you need to get out of it to at least offset a major portion of what could come in the way of long-term care. And then I like the fact that there is this life insurance policy built in as well that essentially gives your wife, if you were to pre-decease her, something back for all that you paid into it that she could use to supplement her income. I think the other key would be if you can get it in a lump sum to roll it into a retirement account that you could have invested so that you could, let's say you're able to withdraw 4% a year. Well, that's $2,000 a year that could offset the total cost that might allow you to extend it beyond age 80 because you're not just pulling out a principal every month.

A portion of what you're pulling out is actually interest and dividends and appreciation. So I would connect, I think this is important enough to connect with a certified kingdom advisor there in Florida to look at the policy and consider whether this policy or another one you may get on the open market may be a better option. I'd find a financial planner who specializes in long-term care and you can find a CKA on our website, ericatmoneywise.org.

Just click find a CKA. I'd go that route before you make the final decision and we appreciate your call. We'll be right back on MoneyWise Live. Great to have you with us today on MoneyWise Live, biblical wisdom for your financial decisions. Let's head right back to the phones to Ohio we go. Hey, Mary Beth, thank you for calling.

Go right ahead. Hi, I received an inheritance check from my parents' revocable living trust and I'm curious whether I will owe taxes on that. No, that is not a taxable distribution and there's not a tax on inheritance. What are you planning on doing with the money, Mary Beth? You already have it earmarked for a specific purpose? I'd like to make charitable donation. I'd like to give some to my children and the rest I'd like to, well, I don't know if invest is the right word, I'd like to do something with it but stay out of the stock market because it's just too volatile for my taste right now. Okay, sure.

Do you have any suggestions of where to put it? Yeah, potentially. So if you don't mind me asking roughly how much are we talking about? A hundred thousand. Okay, and just let's put this into buckets if you will and talk about what we're going to have in each bucket. So you said you'd like to give some to your kids, about how much would that be? I haven't decided. I don't know. Will they have to pay taxes on it if I give them money?

They will not, no. So you can give $16,000 per year per person without filing any kind of notice to the IRS. Now, you can give more than that, it's just that you would have to report that to the IRS and at that point, it would go against your lifetime exclusion for gifting of north of $11 million. So apart from just letting the IRS know, you're probably not ever going to get anywhere close to $11 million in gifts and it would only involve a gift tax beyond that number.

So you really can give them as much as you want. But I think that's important to decide in terms of are you going to give it to them now or down the road and that would determine kind of where you put it. Then the second portion, I think you said you wanted to do some charitable giving and you could just write those checks right out of the account wherever you deposit it or if you wanted to do that over time but you wanted to get the deduction, the tax deduction all in one year. I really like what's called a donor advised fund which is essentially where you would determine how much you want to give away to ministry or charity. You would make the contribution to your donor advised fund and then think about it at that point like a charitable checking account. You'd get a tax contribution receipt for making the donation to the donor advised fund for this year 2022 and you could get all the deduction in one year which would help because most people don't itemize their taxes. 80% of people take the standard deduction especially given how high it is now because of the Trump increases but if you bunch it all in one year then you'd get full credit for it this year which perhaps could increase the likelihood that you could itemize on your taxes and get that deduction. Then you could decide over time how you want to distribute it. You wouldn't have to do it all this year if you didn't want to. You could but you wouldn't have to and at any point you just want to make a contribution to your church or a ministry or charity.

You just open up your donor advised fund account online and make the gift and it would be sent out and I'd use the National Christian Foundation for that, ncfgiving.com and they call it a giving fund. So that could be a great place to put at least that portion you want to give away charitably and then the third bucket you said you'd like to invest it but you want to stay out of the market and I certainly get that. I think again we always have to define what is our time horizon and how much risk do we want to take. Do you have at least 10 years for the money that you would want to put to work for you?

God willing, $5.64. Yeah and so obviously we don't know when the Lord will call us home but in terms of the use of the money you wouldn't anticipate using it in the next 10 years. So from that standpoint my initial recommendation apart from what you had said a moment ago would be a properly diversified stock and bond portfolio especially given how much we've seen the stock market decline because you would be buying in at some pretty attractive levels if you're looking long term.

But at the end of the day Mary Beth you are the steward and if you're uncomfortable with that I certainly understand. So if you want something more safe or secure you could look at CDs, you could look at just a high yield savings account which at least now they're paying a couple of percent interest where they weren't in the past. One other thing to look at might be for $10,000 of this what are called I bonds or inflation bonds. Have you heard me talking about these recently? Yes. You have? Yeah.

Okay. So that would be a good option because they're paying 9.62% right now and it's backed by the full faith and credit of the United States government. So there's almost zero risk and a phenomenal rate of return. You got to leave the money there for a year but you could get a great rate of return. So I think that's your next step is to say okay maybe you make the deposit into a high yield savings account with FDIC insurance so you know it's safe and you're earning at least a couple of percent interest.

I'd look at Capital One 360 or Marcus or Ally Bank for that. And then at that point let's take this bucket approach to say okay let me pray through and think about how much I want to give to the kids and then go ahead and write those checks if you want to do it now. And then the second thing is how much do I want to give to charity and do I want to do it all at once or do I want to do it over time and if it's over time maybe you open that donor advised fund at ncfgiving.com. And then the third piece is okay I've got some left to invest and if I really don't want to take any risk maybe I bonds or CDs or just leave it in savings.

Does that all make sense? Sure. What do you think of the brokerage CDs? You certainly could do that. I think just buying the direct CDs is probably better because you can just ladder them yourself. So you could split it between one year, two years, three years and then every year you've got one tranche of it coming due and you can roll it over into a higher yield at that point and then you're not having to pay for the premium or the discount depending upon where interest rates are. You're kind of locking in those interest rates but every 12 months a third of it is coming due to roll over and take advantage of higher rates.

So I like what's called the CD ladder better than the brokered CDs. Okay. Great.

Thank you for your help. I appreciate it. You're welcome Mary Beth. All the best to you and if you need some assistance from an advisor you could connect with one of our certified kingdom advisors on our website MoneyWise.org.

Just click find a CKA. Thanks for your call. We're going to take a quick break folks. Patty, Morgan, Dawn we're coming your way in just a moment.

We've got a few lines open. 800-525-7000. This is MoneyWise Live biblical wisdom for your financial decisions. Stick around. Great to have you with us today on MoneyWise Live. I'm Rob West, your host. Taking your calls and questions here on anything financial. Let's head right back to the phones to beautiful Franklin, Tennessee. Hey Patty. Thanks for calling. Go right ahead.

Hi. My husband and I are in our early 50s, mid 50s I should say. We've always been dead free and we see our mutual funds not doing well. We have mutual funds. We have Roth IRAs.

We're considering buying precious metals. I don't know the first thing about it. It just seems a little confusing whether you should have, how much tangible, how much, you know, how do you trust a company?

How do you know that your certificate is real to what they're, you know, holding in a vault? You know, I don't know the first thing about it. It's hard. I looked around and it's just kind of confusing.

You don't know who to trust with the facts or who you're investing with. It's just all kind of a blur. Yeah. Yeah. Yeah. And so what portion of your portfolio are you looking to move to the precious metals?

I'm not sure because I would like to put a lot. I mean, we have to debate that. We need to know more to determine that. It's just, you know, it's not, I'm not sure. I mean, yeah. Okay.

Well, I certainly understand that. And, you know, this comes up more frequently, obviously, when the market is performing poorly like we've had right now. And especially when folks think, well, there's some, you know, problems out there that are systemic that may cause it not to recover like it always does. I'm not of that opinion, although I think there's some, we have some longer term macro challenges in this country with regard to the aging demographics in the workforce. And we're not replacing those workers.

And we've got, you know, our debt is through the roof in this country. I think all of those things are going to come to roost much further down the road. I think we will see this economy recover, probably be a mild recession if we do have one and the market will recover ahead of it. So trying to time the market and get out and move to something else, I think is going to cause you to miss the recovery. And so my perspective is I'd love to see you kind of wait for this to rebound before you make any decisions.

But obviously, you're the steward. And if you all just don't have peace of mind being invested in stocks and want to move to the precious metals, I would just say the long term performance is actually not as good and more volatile, actually, even though, yes, it's a store of value and it's a fear trade. And if you feel like things are really going to get bad, there could be a case for it. But it would just not be my choice. I would rather you see you keep an allocation of no more than 5% allocation to the precious metals.

You know, it's certainly no more than 10. But a lot of folks feel like that is the way to go. And at that point, then you do need to do quite a bit of research before you make the decision.

The first decision is how you want to hold them. Do you want to buy the physical metal like, you know, bullion bars and coins? Or do you want to go through a financial product, which you don't actually take possession of it, you're not actually buying the metal, you'd go through what's called an exchange traded fund. You know, when you buy the ETFs, it's very convenient. But you don't actually own it, you have no claim on the gold within the fund. So you can't take delivery of it. Whereas with the physical gold, like the bars and coins, you actually own it. It's an asset that can be stored outside the financial system, which a lot of people are looking for.

And you know, you can get exposure to it in that way. Now, you don't always have to take possession because if you want to take to get the physical gold or silver, then you would buy through a dealer typically you'd use these days an online dealer, although you'd want to make sure you do quite a bit of research to make sure you're going through somebody reputable. And you can actually get a dealer that offers a buy in store program so you actually avoid taking physical delivery even though you actually have the precious metal that you own.

And you can do, you know, most often people these days do coins, the American Eagle or the maple Canadian maple leaf coins, both silver and gold are a way to go. But you know, the downside is you if you are going to take possession, you've got the storage and security issues, you also have the markups on the buyer and sell through the dealer, you know, which does make it a little more challenging. So I think you do need to do quite a bit of research. And I would just want to make sure that you do understand that just in terms of historical performance, it doesn't do as well as a properly diversified stock and bond portfolio, even given periods like we're in right now where we see pretty sharp declines, when you put that in the context of just the long term overall performance of a stock and bond portfolio, it just performs better, unless you feel like this time is different. And I don't say that lightly. And, you know, I think that's certainly something you have to answer. So I guess the key is do your research, take your time. And I wouldn't go into this lightly.

But that first decision is really whether you want to have the physical precious metal or whether you want to do it through a tracking exchange traded fund where you're just getting the movement of the asset, the underlying precious metal, in terms of the price performance, it would be reflected in your brokerage account through that holding that you had. Does all that make sense, Patty? I want to know if I can listen to this later on your website or something I can share with my husband because it's a little confusing.

Is this accessible? Oh, absolutely. Yeah. And this will be up. You can find it at Moody Radio, moodyradio.com and you'll get a replay of this probably tomorrow.

Or excuse me, moodyradio.org is the website and you could just find the MoneyWise radio show. But I think that's the key. And the other option perhaps is to connect with an advisor, somebody who shares your faith and your values, who can help you talk through your options. Somebody who's a trusted resource that could help you think through all of this because these are important decisions.

You all have spent quite a bit of time building up these assets. I know you want to be found faithful in managing them. And so that's where you need to ultimately pray through this and make the decision. But you want to seek some wise counsel as well. So if a Certified Kingdom Advisor, which we have a number of them there in the Nashville area, would be helpful.

You could go to moneywise.org and click Find a CKA and that could be another sounding board. But yeah, the replay of this will be on the program. And if you and your husband have further questions, don't hesitate to reach back out. We appreciate you calling, Patty. God bless you. To Clearwater, Florida.

Hey, Morgan, go right ahead. Hi, I've been on disability for 23 years, and I'm turning 62 next year in August. And I know that they're going to switch my disability over to early retirement. But I don't want to do that because it's going to minimize the amount that I can collect.

Is there a way to prevent them from doing that? Well, the automatic conversion to retirement benefits from disability benefits comes not at 62. But when you reach full retirement age, which would be 66 or 67. So you're not getting reduced benefits because you're not taking it early. So unless there's something I'm missing here, I would not expect you to have anything converted to Social Security at 62. You can always set up an appointment with the Social Security Administration, SSA.gov to clarify that. But that has been the case as far as I'm concerned. I wouldn't expect you to have any conversion to retirement benefits next year. Oh, okay. Well, I haven't been able to get in touch with anybody there at Social Security. That's why I call.

And they're like, Well, maybe he'll know. I wouldn't worry about that. So you're not actually locking in anything lower because you're still going to be on disability until you reach full retirement age.

And at that point, you'd be entitled to your full retirement benefit as your Social Security benefits, and it will convert automatically at that point. So I think that's really the date you're looking for. So you've got a bit more time here before that happens. Hope that's helpful to you, Morgan. Thanks for your call today. Folks, we're going to take our final break of the broadcast today and back with more questions.

We've got some great ones. Don't go anywhere. This is MoneyWise Live, biblical wisdom for your financial decisions. Stay with us. Thrilled to have you with us today on MoneyWise Live. I'm Rob West. Let's head right back to the phones. Calling from Venice, Florida is Dawn. Dawn, you're next on the program.

Go ahead. Hi, I have an investment property in the LLC, and I wanted to get the umbrella policy for that property and my primary residence and for my two cars. The investment for the words, should it be the name insured in the LLC for that or in my own personal name? Yeah, you're going to want to talk to your insurance agent about that.

There's not a one-size-fits-all answer for that. It could be that you would need a separate policy for the rental inside the LLC that would cover you beyond landlord insurance. But an agent would be able to tell you that if you want them all together, it may have to come outside of the LLC, which you probably are not going to want to do. Keep in mind with an LLC, a lot of times folks will use that for a rental property to protect their personal assets. The challenge is, and I'm not an attorney, so you'd always want to get legal advice on this, but the challenge is using an LLC for protection is that the assets of the LLC are still at risk in the case of a judgment, so you could be forced to sell the rental property. But specifically related to the umbrella insurance, I'd talk to your agent. It could be, Dawn, and likely I would expect that you'd need two umbrella policies, one for all of your personal risks, your personal residence, but also a potential for a car or slip and fall or car accident, and then a separate one in the name of the LLC specifically for that rental property.

The good news is they're not terribly expensive, and it'll be a good thing for you to have it in place. If you can do it with one policy, that'd be great, and your agent can tell you that, but I suspect what you're going to find is you need two. Okay. Can you recommend a good insurance company for an LLC? Yeah. We don't make those recommendations specifically to an insurance company over the air, so I would just talk to... Do you have a local agent that you work with for your property and casualty? Yeah.

Okay. I'd start there as one option, and then you could get some other competing bids online ... There's a lot of great tools. You could also look for an independent agent.

Maybe ask around at your church or contact a certified kingdom advisor in your area and ask for a referral. Somebody who represents a lot of different companies who can look at your situation, assets, and the type of policy you're looking for and shop it around across the industry, looking at both price and the strength of the company. There's a lot of great online tools, so I would go one of those three.

They're an online quote service, an independent agent who can represent you and quote it across the industry, or number three, go to your local agent and where you already have maybe your home and auto insurance and see about adding an umbrella policy there. I think between those, you'll come up with the right one. We appreciate your call today.

To Apollo Beach, Florida. John, you're next on the program. Go ahead.

Hey, thanks. Question is, I am 60. My wife is 52. I plan on retiring at 67.

I'll try and let her do 62. Depends on where our accounts are then. I am self-employed, so I contribute to her IRA and my own as my retirement. This past year has been kind of lean, so I haven't, but I've got $35,000 in taxable stocks. During the good years, I put it in there when I'm maxed out the IRAs. I was wondering what your opinion would be to take money out of those taxable stocks, take the capital loss and put it in the Roth IRA where any gains would be non-taxable.

Yeah, you certainly could do that. If that was your plan to use for retirement savings, then you're funding Roths $7,000 a year if you're over 50 times two for you and your wife $14,000. Yeah, so you could lock in those losses and have that capital loss that you could take advantage of on your tax return and then immediately turn around, make the contribution and perhaps buy the exact same investments right away. Don't try to time the market and then inside the Roth, in theory, you could benefit from the recovery and that growth would obviously be tax-free. So you're benefiting from the sale and then you're turning around and buying it as a long-term holding in your Roth IRA.

So that certainly could work especially if you don't have the ability to contribute with after-tax dollars. Okay. Thanks, sir. All right.

Okay. Thanks, John. We appreciate your call.

Let's see, to Illinois. Hey, Joe, thanks for calling. Go right ahead. You're on MoneyWise Live. Praise the Lord, Rob.

I'm happy to be on with you. I just wanted to ask, I currently have 11 months' worth of emergency savings. I may be buying a new vehicle. I'd like to buy a new vehicle soon and that may knock it, knock my, first I want to know, would it be a good idea to take it from my emergency savings? If I did, it would knock down my emergency savings to maybe five months' worth. What are your thoughts on this? I've heard you talk about this all the time.

I just want to get your thoughts. I like that because you still have five months left and now you don't have a car payment which you could take what you would have been putting toward a car payment and actually rebuild that emergency savings and save the interest in the process. The only potential flaw in your plan is just where car prices are right now. Obviously, if you need this car because you need reliable transportation, that's one thing. If you have some flexibility and therefore the ability to wait a while, I would say six months or a year from now, we think car prices will be in better shape just because of the pandemic, supply chain, shortage of computer chips.

There's been a host of issues that have led to an incredible inflation for both new and used cars and we believe that will moderate as the inventories return which will have a trickle-down effect to used car prices as well. So it's not a great time to be in the market for a car. You're just going to spend a lot of money and I think you could do better if you could wait a year. But if you can't, then I think this is a good plan. But I would stay really focused, Joe, on taking any surplus you have and trying to replenish that savings account. Absolutely.

And when I say I'm going to buy one, I didn't mean immediately. I'm pretty sure I can get a few more mileage out of my baby now. So I don't have to rush right now, praise God. So I just wanted to hear what you had to say on it and I thank you so much. You're welcome, Joe. God bless you.

Thank you for your kind words and encouragement. To Charleston, South Carolina, Gary, you're next on the program. Go ahead. Hi, Rob. Hey. Good to have you. I'm Gary Manigault. Yes, sir.

I appreciate what you all do each day, Monday through Friday. I'm calling to find out, is there a Kingdom Credit Counselor Advisor that could assist myself and my wife? People we've used in the past before, the methods that they use wasn't promising and we paid them. We're just trying to prove our credit scores to do some home improvements.

Yeah, I don't recommend that. There's really nothing anybody can do that you can't do yourself. And paying someone to try to get your credit score up is really not legitimate. The only thing you can do is just to look at the credit scoring factors and just try to improve yourself in terms of the things that will cause your score to rise.

What are those? Well, number one, this is the biggest one, your credit utilization down. So you want your balances below 30% of the limit, especially on revolving accounts. You want to be an on-time payer every month.

You want a good credit mix, so the different types of credit represented. You want to keep the inquiries at a minimum. You want to have older accounts versus shorter accounts. So if you're looking to close something, close something that was open more recently. Those are the kinds of things that take time.

But as you're an on-time payer every month and you don't have any negative credit history and you're keeping your balances low and you've got a good credit mix and a long-term history, that's going to improve your score. Somebody who tells you they can improve your score by you paying them a fee to do something for you, I think is completely suspect. And I just don't have any confidence that would yield any kind of results whatsoever. What I was talking about, the counseling part of it, not paying them to do the part of it. Okay. Okay, very good. So you're looking to pay somebody to help you think about a strategy to pay down the debt, is that right?

Exactly. Okay. And just give me a quick rundown of what you have in terms of debt. Mortgage on one house, HELOC on one, a couple of car payments, college loan.

That's basically it other than the day-to-day expenses. Okay. Yeah. I mean, so what is the rate on the mortgage?

2.75. Great. And the HELOC, how much do you owe on that?

Just about 85K. Okay. And that interest rate's been going up, right? Yeah. All right.

Yeah. And then the car payments and the college loans. I mean, you could certainly reach out to one of our coaches at MoneyWise.org.

A certified kingdom advisor would not be a good person to help you with this. I mean, it's not a real complicated situation in the sense that you've got a great mortgage, so you just want to pay that off as quick as you can. But I wouldn't be in any rush. I think the biggest thing right now is getting that HELOC knocked down given the variable rate on that. I suspect part of the college loans will be forgiven. And the car payment, you just want to try to add a little bit to that every month if you can. But I'd prioritize the HELOC over that in terms of any moves you might want to make.

I mean, I wouldn't refinance the whole mortgage just given where rates are right now. I'd probably stick with what you've got for right now and just try to accelerate the payoff. That is going to come down to you keeping your expenses as low as possible so that you have margin to pay toward the debt reduction over and above the monthly payment on the HELOC as the priority. And then once you get that knocked out, the car will probably be already paid off and then you're in much better shape. But if you want somebody to review the situation, you could reach out to one of our MoneyWise coaches at MoneyWise.org and they can help you work through your spending plan and help you think about if there's any changes to make on the debt specifically.

But I think that would be your best option. Appreciate you calling today, Gary. Thanks for listening to the program, sir. God bless you. That's going to do it for us today.

MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. I want to say thank you to my team today, Jim, Amy and Dan. Thank you for being here as well. Hope you have a great evening. Come back and join us tomorrow. We'll see you then. Bye-bye.