Financial Potholes that Can Wreck your Budget

The following program was prerecorded, so our phone lines are not open. You made a great start with your spending plan journey, but you're having trouble staying on track. We're here to help. I'm Rob West. Well, you can't afford to wreck your budget, so today we'll help you steer clear of a few common financial potholes.

Then we have some great questions lined up for you, but don't call in today because we're prerecorded. This is Faith and Finance Live, biblical wisdom for your financial journey. Well, a really big pothole can do some serious damage to your vehicle. The same is true for your finances. Even if you have a budget, there may be times when unexpected expenses or even financial temptations can put your spending plans in jeopardy. So let's look at three financial potholes that can wreck your budget. You'll save money and a big headache if you can steer clear of impulse spending, money leaks and scams. Let's start with scams.

There are new ones every week, so be alert. Technology makes it easy for crooks to cheat people, so keep your phone and computers updated with antivirus software as the first line of defense. Identity theft is one of the biggest threats out there, so protect your social security number and passwords as if they were cash.

Find out more about identity theft and how to deal with it at ftc.gov slash idtheft or by calling 877-ID-THEFT. Money transfer scams are rampant these days too, so don't send money from your bank account just because someone asks for it, even if they claim to be a friend or family member. You should be the one to initiate any transfer and verify the recipient. Of course, you should never click on links and suspicious looking texts or emails. Never share personal information, access codes, passwords or PIN numbers by phone or email. Watch out for communications claiming that your account is compromised. If you aren't sure, look up the company's legitimate phone number on the internet and verify the claim. Don't call the number listed on a suspicious email or text.

If you feel unsure about a contact, especially if you're getting threatened or pressured to act quickly, just stop. Don't give any money or information until you have double checked the source. Okay, the next kind of financial pothole to avoid is the money leak.

Money leaks are little charges that sneak into your life and get forgotten, or small expenses that add up without you realizing. For example, free trials. Don't sign up for a service just because you get three months free. When the trial period is up, they'll charge you and chances are you'll forget to cancel. Auto-renewing subscriptions. Along the same lines, people tend to forget about music, magazine and streaming service subscriptions which will continue to renew until the end of time.

So save money and cancel as many as you can. Another common money leak is the daily indulgence. Whatever is your snack of choice, that daily stop at the coffee shop or donut place can take a bite out of your budget. Finally, watch out for the grocery store gimmes.

The best solution is to shop alone, but if you have to take the kids to the store, limit them to one small treat each and then stick to your list. It's important to know where your money is going, even the small expenses. Ultimately, it's a matter of stewardship, taking care of what God has entrusted to you.

As Jesus says in Luke 16 10, he who is faithful in a very little thing is faithful also in much. Our third budget-busting financial pothole to avoid is impulse spending. For most people, impulse spending is only an occasional temptation, but it has spiritual as well as financial implications.

Here's what I mean. Impulse purchases are hasty decisions, and the Bible warns against those. Proverbs 21 5 reminds us the plans of the diligent lead surely to advantage, but everyone who is hasty comes surely to poverty. Also, impulse purchases are immediate gratification, which means putting the pleasure of the moment ahead of everything else. 1 John 2 15 says, Do not love the world nor the things of the world. Lastly, impulse purchases steal money from better causes. 1 Timothy 6 8 encourages us to be rich in good works, be generous and ready to share. You see, folks, financial potholes of impulse spending, money leaks, and even scams can really wreck your budget.

But now that you know they're out there, well, you can plan ahead to avoid them. For more help starting or sticking to a spending plan, visit us at faithfi.com to download the Faithfi app. That's faithfi.com.

Just click app. Just a quick reminder, we're not here today, so don't call in, but we're going to head to a break and much more coming just after this. Stay with us. We're Faith and Finance Live, and we talk about our telephone number often because we usually are live.

But today the program is prerecorded, so if you hear a mention of the phone number, please don't call us. But you can find us online at faithfi.com. Here's our goal on this program each day, to encourage you, to provide you hopeful biblical advice on how you can manage God's money. That's right, it all belongs to him, and that's really the starting point for money management. That's a game changer because when you recognize that you are a steward and not an owner, then you understand that you need to reflect the heart of the owner or the master in your money management decisions, which means we go back to God's Word and understand the biblical themes and passages and principles. By the way, more than half the parables deal with the topic of money. There's a lot there.

So how do we pull out those themes and apply those to the practical decisions and choices we're making literally every day with our finances? Well, let's begin in Alabama today. Chad, a first-time caller. Go ahead, sir.

Yes, sir. I was calling to find out if you've paid taxes on the money that you're putting in a 401k, not a 401k but an IRA, you're putting it in already paying the taxes. Can you take that portion out if you should need it? Yeah, so you're talking specifically, Chad, about a Roth IRA, correct? Well, it's not, no, it's an IRA.

And I put the money and I'm just putting into it. What it was is I had worked at another job, so I created an IRA when I left there, all right, and I've been contributing to it out of my new job, just $150 or $200 a month. Can I take out the money that I put into there or is there a penalty? Well, keep in mind, with a traditional IRA and 401k, you have not paid the tax on that. You got a deduction, or you will get a deduction when you file your taxes for any contributions.

And so for that reason, you're not able to take out a withdrawal of any amount because it's all pre-tax. So as you make that contribution, you're going to go ahead and get the deduction on the amount going in. A Roth IRA is different. As long as you meet the five-year holding period, you can always take your original contributions out because those are after-tax dollars. But the traditional IRA and the traditional 401k are all pre-tax. Okay, so you don't have a choice in whether to take the deduction or not?

You do not. Now, you can do a non-deductible IRA if for some reason you don't qualify to be able to put in. So let's say you have, for a variety of reasons, you're not able to take that deduction. But generally speaking, once that money goes in, you are going to need to leave it there, or you're going to pay the penalty below 59 and a half.

You're certainly going to pay the taxes on it as it comes out. All right. Well, I appreciate that, sir. Okay, very good. Thanks. Thanks so much for your call today.

We appreciate it. By the way, if you did want to consider a non-deductible contribution, you have to report those contributions on your tax return. Just check with your CPA about that. But there is a provision there. Most majority of people making an IRA contribution are doing that on a deductible basis.

But if you're unable to contribute to a traditional IRA because of your total income, you may be able to contribute to then a non-deductible IRA, and you can get more information on that. Hey, before we head back to the phones today, in the news today, a top credit industry analyst says, a credit score of just 760 is all you need to get the very best interest rates. This is coming from CNBC. They're saying that having a credit score of 850 might make you feel good about yourself, but it won't get you any better rates than if you were in the mid 700s. CNBC is reporting that FICO score between 740 and 760 is going to get you the most favorable terms when you're opening a new credit card or getting a mortgage or a car loan. A lot of folks get concerned about that. They might be sitting at 790 and all of a sudden, you know, or 800 and they pull their credit score because, you know, more and more creditors are offering it now free and Credit Karma offers it free and they might see that it's dropped 20 points and they're getting concerned.

But as long as you're in the mid 700s, you're already qualifying for the very best rates and terms. So no reason to fret over that temporary drop of that helps you. All right. Back to the phones to New Mexico. Hey, Mario, how can I help you?

I would like to know something. I have a little over two hundred thousand dollars invested in an investment firm and met with him yesterday. And it's been been in there just about a year and it hasn't made anything.

Does that sound about right with the way the economy is or something? Yeah. You know, the it hasn't been a great year. So you started when? Last summer, basically? Yeah.

Yeah. We had a we had a talk with him yesterday and we kind of went through the figures. But but when we put it in, there's been about a year and it hasn't really. In fact, it's dropped a little bit according to the chart that I was looking at. And I said, you mean it's been in there this long? And we really hadn't made anything. Yeah.

And she said it was just the way the economy was. And I guess I don't know. Sure. What is the investment strategy? How would you describe it, Mario, just in terms of the mix between stocks and bonds? I don't know that a whole lot about that. Sorry.

All right. What is your age? Sixty eight. OK, so, you know, at 70, you probably have, let's say, you know, maybe 30, 40 percent in stocks and the rest probably in bonds. It's been a tough year for bonds. And that may be why there's been a drag on the returns. I mean, the S&P 500, which that's the five hundred largest from a market cap standpoint, companies in the United States, you know, the one year return the last 12 months is positive, about four percent. But those are all, you know, mega cap companies, large cap companies. And you may have a mix of mid and small cap stocks.

Those have not done as well. So it's not hard to imagine that you would be flat, especially if you have a concentration in bonds, perhaps as much as 50 percent or more of the portfolio. And that wouldn't be surprising as somebody near 70 years old, because keep in mind, as interest rates rise, the prices of bonds fall.

They work in an inverse relationship. Well, what's happened with interest rates? Well, as you know, we've had 11 consecutive rate hikes and the Fed's probably not done yet. So as the Federal Reserve has been fighting 40 year high inflation, they've been trying to slow the economy. And we could argue whether that's a good strategy, but that's what they've been doing. So they're trying to slow the economy to deal with inflation.

One of their primary tools to slow the economy is to raise interest rates, which is why, you know, mortgage rates are now up near seven percent and credit cards are 20 percent plus on average. Well, so as the Fed has raised rates, the bond prices have fallen. So you've probably lost some value on the bond portion of your portfolio that with just a lackluster 12 months in stocks, you know, has you here probably flat. So I don't think it's a bad thing to be asking the question, hey, how am I invested and what is my strategy and what should I expect going forward? But I don't think it's necessarily something you need to be concerned about at this point.

I just keep an eye on it and keep good communication going with your adviser. Hey, thanks for your call today, Mario. God bless you, sir. And this is a great time for me to remind you before we head to our break about the FaithFi app. Our team built the FaithFi app for you so you could stay on budget using the tried and true envelope system that Larry Burkett made popular. But we put it in a beautiful, simple smartphone interface so you or you and your spouse can stay on budget and know exactly where you stand in every budget category or envelope at any point in the month that securely connects to your institutions, downloads your transactions automatically. Check it out today.

You'll find it in your app store. Just search for FaithFi, faith and finance, or you can head to our website to learn more. That's faithfi.com.

That's faithfi.com and just click app. All right, we're going to take a quick break. As a reminder, we're not here today, but more of the questions we lined up in advance just around the corner. Stick around. You're listening to Faith in Finance Live. This program is prerecorded, so we're not available to answer your calls, but you can email us your questions at AskRob at faithfi.com.

Then Arkansas, James, how can I help you, sir? Well, I wanted to ask about Social Security. In March of 2000, I got laid off from the pandemic, and I was laid off for over a year and a half. I've been back to work for over two years. Now, I know that I'm stuck with the rate that I had to start drawing at 62. I was told that since I've been working for the last couple of years that it would increase my benefits a small amount. I plan on working until I'm 72, which is another seven years. I'm 65 now. I just wondered the amount that you can earn per year as it goes up at 66 and eight months. I just wondered, will that go up for me as well?

Yeah, very good. So there's a couple of factors going on here, James. Number one, I certainly understand why you had to begin taking that because you were out of work and it was a needed source of income. When you did that, you locked in a reduced benefit. So you have about a 30% reduction. Now, there are basically two ways you can increase that benefit.

First way is through a cost of living adjustment, which everybody will get. The second is as you continue to work, they will check your earnings each year and see if those additional earnings would cause you to increase your monthly benefit because you're replacing one of your what's called high 35, which is your 35 years of highest earnings. And if you are, then that would increase your benefit. Now, you do have this temporary reduction in the benefits if you earn over a certain threshold. So you have to recognize that, but that will be paid back to you after full retirement age. But as you continue to work, certainly beyond full retirement age, you have the ability to earn an unlimited amount that won't affect your benefits.

And again, if you're replacing any of those high 35, you actually could see an increase in that benefit over and above a COLA adjustment, that cost of living adjustment. So a lot of moving pieces there. Does that all make sense? Yes, yes, I believe I understand.

So So after I turn full retirement age, I'm losing you there just for a moment. But let's see if we can get you to a clearer signal and try that again. Try to restate that last statement you made. Okay.

Yeah, unfortunately, it looks like we do have some bad reception. Let's put you on hold. We'll see if our team can get that line cleared up with you. But yeah, bottom line here, James is that the Social Security Administration does review wages each year.

And if your latest year of earnings is one of your highest years and replaces a year that was lower among the highest of your 35 years of earnings, then they recalculate your benefit and pay you an increase that you are due. Let's try one more time. Does that all make sense? Yes, yes, I appreciate that very much.

Thank you for your assistance. Absolutely, James. God bless you, sir. And we appreciate you being on the program today to Texas. Hey, Paul, thanks for calling, sir.

Go ahead. I'm in the rent property business. And my wife and I took it but it's a kind of it's an on the side thing always has been my wife and I took a job managing a farm out in the country around here for six years. And they sold that farm and we had to move back into town in the middle of this real estate mess.

And so what do I do? Well, we looked at a house that we like it was in my stomping grounds. And we offered them 20,000 above the asking price. And that in eight hours, there were six offers and somebody beat us. Yeah.

Okay, we're going oops, how far do we have to stretch? Yeah, look, I own 12 houses. How about if we just use one of those?

Yeah. So we did a major remodel on one of our rent houses. And we moved into there. But now that I'm living in it, that affects the accounting issues associated with deductibility of repairs and whatnot. I don't even know exactly what they are, because I've never done this before.

But my main question to you, if you know anything about this is, I was thinking if I take if I if we decided to stay there, and I transfer all this rent priorities in a corporation, if I transferred into my name, so I can take the homestead exemption in Texas, I could save a sack full of tax money there. But I don't know how complicated that would be. Do you have any idea about that? Or what?

What am I not thinking about here? Yeah. Are you talking about the capital gains tax that would be due on the sale with the profit? Are you talking about the homestead exemption that would I'm just talking about changing the title from Garden Worthy Incorporated to my name.

Yeah. S corporation, I want to change it into my name, I'd have to work something out. Does the company have to actually sell it to me? And then we go that way?

Is that the way that would work? So who owns the property today? You're you have a business that owns it? My corporate my wife and I are 50% each in owning the corporation. The corporation owns a block of rent property.

And we had to move into one of them because we couldn't find a house to buy. Yeah, I mean, so in order to get that, you know, homestead exemption, which allows you to write down your property value, so you don't get taxed as much. You you would need to own that personally. You know, obviously, they're in Texas property taxes, like most states are a major revenue source for the state of Texas. If you can get that exemption, that'd be a good thing. But in terms of how you'd go about that, to get that title back into your name personally, I would, I would talk to a real estate attorney about that Paul just to make sure you do that properly. But I think it likely could be just in terms of the savings on property taxes after getting that right down. Well worth the time spent, but I'd get some legal counsel on that.

So contact a local real estate attorney, tell them how it's currently titled, tell them what you're trying to accomplish. They can tell you exactly how you'd make that transfer over to you personally. And let us know if you have any other questions. We'll be right back. This is Faith and Finance Live with Rob West. Hey, if you hear a phone number mentioned today, please ignore that number and don't call us because today's broadcast was previously recorded. But we think the upcoming information will help you and make you a wise steward of what God's given you.

So please stay tuned. To a first time caller in Indiana. Hi, Ken. Thanks for calling, sir. Go ahead. Yes. Thank you for taking my call, Rob. Sure.

Absolutely. My question is this. My wife and I are retired and both drawing Social Security right now. We have a small business that we run here. We have a Christmas tree farm and our Social Security income covers all of our day-to-day bills. We owe about $60,000 on our house and we have that in CDs to pay off if we needed to.

Rob, here's my question. We have about $430,000 in an IRA and we'd like to build a barn that would be for the business and also for possibly an event center for like a wedding venue. And our thoughts are we could invest this money into that and our children can come alongside, help us run the business, which they already help on the Christmas tree farm. We're just kind of looking at that money and thinking, well, you know, do you give a lump sum to your children down the road once you went on to be with the Lord or do you reinvest it in the farm and give them a business they can continue to run? So I would just like to have your opinion on that.

Yeah, very good. So if you were to do this, and I love this idea, how cool that you have this Christmas tree farm. And I think just given how more and more weddings are happening outside these days, having an event center with that beautiful backdrop would just be fabulous.

I love the direction that you're headed here. How would you fund that? Would you need to pull the money out of the IRA to do that? Yes, I would.

And I'm estimating it would take probably about $300,000 start to finish to get the barn up and running. Okay. Yeah. Are you familiar with what's called a self directed IRA? I've heard the term.

Yeah. That might be worth looking at, you know, just to see whether that would be something, you know, you can consider doing, because that allows you to invest in a business a startup or a private company, even real estate. But you know, I think the big idea here is, you know, your bills are covered right now, you obviously are quite liquid with this IRA money, because it could be converted to cash in an instant if you needed it for something like long term care, or you had a major expense beyond, you know, what your normal bills are, which, as you said, is covered by Social Security.

Obviously, as soon as you tie this money, you know, let's say you were to take it out as a distribution, and you work with your CPA on that. And you do that in a way that doesn't push you up and, you know, pay more taxes in a higher bracket in any one year. So you're thoughtful about that. But let's say you did that, you know, obviously, that would be very illiquid.

And so now you're at a point where even once that mortgage is paid off, which further reduces your expenses, gives you a little bit more margin that you can sock away in a savings account every month, your bigger nest egg that was there and able to be liquid is now very illiquid. So how would you feel about that? And are there any other assets you could tap if you needed to?

Yeah, that's the main assets that we do have. And that's my quandary. I'm like, well, you know, is it a leap of faith? Or am I, am I doing something I may regret down the road? So yeah, I don't know, we're just prayerfully considering all this. And I thought, well, there's wisdom in many counselors.

Let me see what Rob thinks. Yeah, I mean, I like that. And obviously, wouldn't need to use all of the money. And you know, I think you all could have a lot of fun doing that it would obviously be income generating.

So that puts you into a situation where, you know, although you're making a major investment, if it's successful, now all of a sudden, it's throwing off cash that you could use to build up a reserve, maybe what you do can to offset that risk. What did you say your age was? I am 67.

Okay, very good. So you know, you're right there. I mean, you're a little beyond the ideal window, but maybe you get a long term care insurance policy. And you know, that's what gives you some added peace of mind that if you and or your wife needed long term care, you know, which 70% of Americans 65 years and older will for some period of time, usually, you know, two to three years at the most, you know, you've got a policy that would kick in and provide that daily benefit because a nursing home could run you nine $10,000 a month. So you know, it gets pricey, that's probably your biggest risk in this season of life. So if you said, Okay, we're going to recognize that risk, maybe we're going to add a long term care insurance policy, maybe we're going to get a big umbrella policy, just to offset any kind of liability risk, because now you're running an event center and somebody slips and falls on your property.

And so you've got that covered. You've got the hundred thousand still left in the IRA after it's done, and your mortgage is now paid off. So you got more margin and you've got now income being thrown off by the event center that you're building up. I mean, that sounds like that could work. And especially from a quality of life standpoint, you guys would enjoy that you'd have something to leave to the kids, maybe they continue it on or, you know, they could sell it and obviously you'll would have to work through that. I mean, I'm not seeing any major red flags here just because you guys have lived modestly, you've saved diligently, you're about to be debt free. And I think as long as we address some of these potential risks for this next season of life you're entering into, it sounds like something you guys would really enjoy.

Oh, I know we would enjoy it. I like said, I just appreciate another set of eyes on it and appreciate your wisdom on that. So we will prayerfully take what you've told us as well and talk with our children and see what the next step will be.

Yeah, I think that's right. And I think part of being a steward is just making sure you've thought through and, you know, ultimately we depend on the Lord. So I'm not trying to redirect you away from that. But also as good stewards, we want to just be thoughtful about, you know, how we're offsetting potential risks to the extent we can do that. And I think with the umbrella policy and the long term care, you know, you would have done that, which maybe gives you a little more freedom to take some of this cash and put it to work in a more illiquid way. Let me also clarify one thing, you know, what occurred to me is with, you wouldn't have the self directed IRA option, because if you're involved in the business, it's a prohibited transaction. So you would have to take the money out.

And that's where I think you just really need to work with your CPA on the withdrawal schedule, just to make sure you minimize those taxes. I hope that's been helpful to you Ken has it. Oh, it has and I sure appreciate you. All right. Thank you, my friend.

Hey, if you end up doing this, let us know I need some pictures of that event center and those Christmas trees. It sounds like it's gorgeous up there. God bless you, my friend. Thanks for being on the program today. We appreciate it. Quickly to Danny also a first time caller and he's in Christmas tree land in North Carolina. Danny, how can I help you? Thank you for taking my call.

I have had this in my mind for a while. And I even talked to my agent about it, my stock agent. And I have some stocks, I have about $19,000 in stocks, not a not a great amount of money. But I owe about 23,000 on my house.

And I'm thinking about pulling that money out and some of my 401k to pay my home off. I'm 60 years old. I'm retired. I'm a pastor.

And I just wanted to get some ideal. Would that be a good idea or just keep paying for it? Yeah, I sure do Danny and delighted to hear that you're in vocational ministry as a pastor. You are fully retired though. So you're living solely off of your social security at this point.

Is that right? Well, I'm living off of what my church they they take care of me and I'm drawing my pension also. So we're pretty comfortable.

I have about $10,000 in savings too. Okay, great. Yeah. And you've got a little margin.

I love that. All right, let's do this. Unfortunately, I'm up against a heartbreak. But I'd love to weigh in on this, Danny.

It's a great question. So if you can be patient and stay right there, we'll I'll give you my thoughts on the other side of the break. We'll be right back on faith and finance. Thanks for joining us today on faith and finance live here in our final segment of the broadcast today.

Let me remind you, our team is not here. So don't call in but we lined up some great questions in advance. We'll get to those in just a moment. Before we do, let me remind you if you haven't downloaded the faith Fi app, we'd love for you to check it out. It's got three sections in it. The first is the money management system based on Larry Burkett's digital envelope system and helps you manage God's money in a way where you know exactly what's left in each envelope at any point during the month. There's also our learn tab where you can access the best content and biblical finance to grow in your understanding of God's way of handling money and our community where you can post questions, get comments and ideas from other stewards on the journey. So download it today on our website, faithfi.com.

Just click app. Just before the break, we were talking to Danny. He's a retired pastor in North Carolina. He's got about 23,000 left on the house. He's got 19,000 in stocks plus a 401k. Danny, just to clarify that 19,000 is all in right from the stocks and the 401k. Is that right?

No, sir. I have the stocks alone are about 19 and then I have some 401k money and then I have some savings too. Okay. Just give me a rundown of what you have. How much is in? You've got 19 in stocks. What's in the 401k? 8,000 and then I have about 9,000 in savings.

Okay and then about 9,000. Is that the extent of your savings? Does that include what I would call your emergency fund? That includes my emergency fund, yeah. Do you have the ability, I mean obviously you're paying that mortgage right now and as you said between your pension and the church taking care of you and your social security if you have it and you didn't opt out, you've got a little enough to cover your bills plus some cushion and that includes the mortgage payment, right?

Oh yes, sir. I don't owe for it. That's the only payment I have. It's my house payment.

Yeah, good. You know if it were me, I mean two things here. Number one is if you all just had a real conviction from the Lord, you pray about it and you just have a real conviction from the Lord that you should be debt-free as soon as possible, then I'd say you go for it and don't look back. If you're comfortable just continuing to pay on this mortgage on the scheduled basis and you've got fully the ability to do it, which you do, and you're just not sensing the Lord is asking you to be completely out of debt immediately, then I'd probably just continue to pay on it as you have been. If you have some extra, maybe add a little bit to it for further mortgage reduction as you go so you're not just sending the minimum payment but you're out of your regular cash flow each month, you're paying down that principal balance. But I would probably let that 401k and the stocks just continue to grow, especially since the market's been struggling the last year or so.

Let that rebound. Keep that nest egg growing on a tax-deferred basis. So if you need it down the road, long-term care or some other major expense, you've got it. And then just let this mortgage be paid off over time. That would probably be the way I would go, if that makes sense. That would be the safe route.

It would, yeah. And keep access to those funds. If you were real tight on your monthly spending and getting rid of that mortgage would help you pay the bills and balance the budget, that'd be a different thing.

But that's not what I'm hearing here. So I'd just continue to pay it down as you can, and don't be afraid to send a little extra along the way. What we really had in our mind to do, if we paid our house off, we was going to buy a little bit better vehicle, a car, because what we have right now is getting a lot of mileage on it.

And that was something we were thinking, if we paid it off, then we would go and buy another car or something, and we'd have that money to do that with. You see what I'm saying? Yeah. How had these investments been doing?

I mean, do you feel like that... Well, the one is, it's up and down. Right now, it's the one that's doing, you know, okay, I retired from a company that I worked for for 25 years. That's where I'm drawing my financing from. So I'm already sad as far as that.

When I turn 62, I'll draw my Social Security. But this is something that we had in our mind that we were thinking about, and I wanted to get somebody else's idea about it too. Yeah, you know, I can understand where you're coming from. Because if you don't have the ability to take on that car payment on top of the mortgage and everything else you've got, even though you guys are living modestly, I can understand where you'd say, well, it'd be nice just to get rid of that mortgage, then we can redirect that money. Again, I'd probably just let this money grow on a tax-deferred basis as long as you can, and either try to fund that new used car out of cash flow, and maybe send a little bit less for principal reduction on the mortgage. That'd probably be my first choice. But again, if you guys said, you know what, we'd love the idea of being debt-free, and it'd give us the money to take on this car loan, you know, then I wouldn't argue with that at all. I think that's a personal preference.

My first choice is probably leave the money where it is, and let's try to fund the car purchase out of cash flow, and that mortgage will be paid off sooner than later. I have one more question. If I was to pull my stock out, what is the taxes on that now?

Do you know, I've heard many things, and I want to get somebody that knows what's going on. Yeah, so that's a taxable account, right? It's not an IRA or some other sort of retirement account? No, I've got it with Edward Jones.

Okay. Yeah, so that's a taxable account. So basically the taxes would be based on the sale of the securities inside the account. As you sell them, you would either have a short-term capital gain if you held those investments for less than a year and they had a profit, and then it would just be added to your taxable income for the year or a long-term capital gain, which, you know, would either be at zero or 15%, and again, that would be based on the profit that you had in those investments. So if you held them for more than a year, you'd end up paying capital gains on those, and it wouldn't be more than 15% of the gains, not the total proceeds. I've heard 22%, and that's the reason I was asking you.

Yeah, federal long-term capital gains, unless you're making more than $400,000 a year, you're going to be at 15%. All right. Well, I appreciate your time. Yes, sir. Thank you for your call. We appreciate you being on the program today. Let's head to Louisiana.

Hi, Alfred, another first-time caller. Go ahead. Yeah, I was calling in reference to a trust. I have a couple of rental properties that's paid for with no mortgage on it, and trying to literally see whether or not to put them in an LLC, which I have established, but it's not in the LLC at the time. It's just in my name of whitening. But I was thinking about whether or not it would be beneficial to put in a trust or put it in an LLC.

Yeah, very good. You know, with regard to an LLC for rental property, you know, there are plenty of benefits to doing that. It's a flow-through taxation.

It does provide some limited liability protection, but there, you know, is a process of what's called piercing the corporate veil if you're doing it from a liability standpoint. The benefit of the trust, you know, is just really the cost. I mean, it can run you a couple of thousand dollars, but that would allow you then to effectively transfer these properties to avoid probate, which means your heirs would have access to the assets specified in the trust without having to wait weeks or in some cases even months to allow them to clear probate.

So it makes the transfer of the assets private, you know, whereas it would be part of the public record if you go through the probate process. Do you have an estate planning attorney that you've worked with for your will and those types of things? No, but that's something I haven't established yet.

You know, I've been putting on, putting on, and I was going to get it, but I haven't got that done. I need to get what a CPA or either attorney wanted to to establish that as well. But I didn't know exactly. I was going to talk to one to try to find out, but I just been talking. I've been listening to your program off and on for a while by finance and I thought I'd have to question to get some more information dealing with trust. I don't have much knowledge, nor do I help it. Okay.

Yeah. I mean, really what these are separate conversations though, because LLC ownership interests can be held in a revocable trust. So you could put it into the LLC because of the tax flow through and the limited liability and then put that into the trust, which is really an estate planning vehicle that allows you to efficiently and effectively transfer that to your heirs. So I think at the end of the day, you want to talk to your CPA about the LLC and then you want to visit with an estate attorney to talk about your wealth transfer and estate planning wishes and then come to some terms on, yes, the LLC makes sense to put the properties in. And then as a separate conversation, do we then want to take the LLC or those properties just held in your name in either case and then put that into a revocable trust.

And that would just be, you know, to facilitate your estate planning wishes at your death and transfer it efficiently and effectively to either heirs or charity. So it sounds like you need the LLC. I mean, it sounds like you need to put it in the LLC first of all. That's right. If you decide to go with the LLC, you'd want to do that first and then an LLC interest could go into a revocable trust.

So I think you need to talk to some pros here, get some professional legal counsel and talk to your CPA as you make these decisions. Alfred, we appreciate your call today, my friend. God bless you. Hey, before we go today, let's tackle an email. These come into us at AskRob at FaithFi.com.

This one comes from Chicagoland. Our listener writes, my husband and I have a will, but we're wondering if we need a trust. We're in our 70s and debt free. We have pensions and assets of around a million dollars.

What do you think? Well, do you need a trust? No, you don't. The reason you would establish a trust beyond having just a basic will is really more about either the complexity of your estate and or your desire to avoid probate. With a trust, anything named in the trust, real estate, other assets and property will bypass probate and therefore pass directly to the beneficiary of the trust.

And that will not be a part of the public record. You will avoid some of the time that it takes for the probate process to play out. And it allows you to control your assets and property prior to death if you're incapacitated and beyond your death in the event that you have, let's say, heirs where you don't want them to receive the money right away and you'd want them to reach a certain age or other criteria before they received it. A trust can be very helpful there.

I'd recommend you connect with a godly estate planning attorney to determine if you actually need one. Thanks for writing. Faith in Finance Live is a partnership between Moody Radio and FaithFi. Thank you to Dan, Amy, Gabby T, and Tahira. We'll see you next time for another edition of Faith in Finance Live. God bless you.