A Fresh Look at Reverse Mortgages

The following program was prerecorded, so our phone lines are not open. You've seen the commercials for them on TV, reverse mortgages. But is there more to them than meets the eye? Hi, I'm Rob West. There's no doubt that a reverse mortgage could make your retirement years more comfortable.

Are there other reasons to take advantage of them? Harlan Acola joins us today to make the case. Then we'll have some great calls lined up.

But since we're not live today, please hold your calls until next time. This is Faith and Finance Live! Biblical wisdom for your financial decisions. Well our guest is Harlan Acola with Movement Mortgage, which is an underwriter of this program. Harlan is also the author of the book Home Equity and Reverse Mortgages, the Cinderella of the Baby Boomer Retirement. Well that's quite a title. Harlan, great to have you with us. Glad to be here.

Thanks for the opportunity. You know, Harlan, most people think of reverse mortgages as the bank paying you instead of you paying the bank. And I know that's certainly a part of it. But how might you describe the bigger picture around reverse mortgages?

Well, I think it's really way simpler than what people make it. We put money into savings accounts, IRAs, 401ks, so that we can take money out in the future. All that a reverse mortgage does is be the key that unlocks the ability to use some of the money that we put into an investment that 80% of us have by the time we reach 62, which is our home. And it's a safe, guaranteed way, guaranteed by the government, to be able to use some of the money that you've put into the house over the years. Yeah, which could be a real blessing for a lot of folks, especially those who are ill-prepared for retirement. But you'll make the case today. Perhaps it even goes beyond that.

We'll look at that. But let's start with the different types or forms of reverse mortgages. Well, the biggest thing that is super important to explain right away is that there were old reverse mortgages before Federal Housing Administration got involved during Reagan's term that were really not reverse mortgages. It was a loss of ownership. They were called shared equity loans. Those are relatively dangerous for most people, and you lose ownership of the house. What Movement Mortgage does, and what I've worked on for the last 20 years, is a reverse mortgage that is an FHA, home equity conversion mortgage, that allows you to use somewhere between 30% to 50% of the value of your house and is guaranteed that you will never be upside down and never be required to make a payment during your entire lifetime. So, there's a dramatic difference between the old and the new, so to speak, that came out in 1988.

Yeah, let's build on that a little bit, because this is a big idea. Regardless of how long you live, you will never owe anything in terms of having to pay it back unless you sell. Isn't that right?

That is correct. And you're always protected from the downside that if you die in a bad year or you simply need to sell in a bad year, like 2009 when home values were down, you are never required to pay the difference. So if you actually owe more than your home is worth, you're not responsible for it.

It's an insured loan, and the FHA mortgage insurance pays that. That is a very important safeguard. And quite frankly, I wouldn't be involved with the product if that was not there, because we cannot guarantee a future value of the house.

Yeah, and that's a really big idea. Harlan, are reverse mortgages ever misused? Well, I wrote a chapter in my book that seems to be turned to a lot called Drugs, Sex and Reverse Mortgages. And yes, they can be misused, just like drugs can be good or bad and sex can be good or evil. And reverse mortgages can be misused just like investments can be. I mean, think Bernie Madoff, FTX, where many people lost millions of dollars. If any financial product out there is not understood and properly used, it can be a detriment instead of an advantage.

Yeah. But you're making the case today that perhaps we've had a more narrow or a flawed view of this product in the past that you want to correct, right? Well, yes, we're so concerned about that because everybody thinks this is where you lose your house and you're mortgaging your future and you're hurting your children. You're putting yourself into a situation like a credit card that you might not be able to afford to pay in the future. This is the only mortgage loan in the country that is guaranteed to be safe that you never have to pay it back until you permanently move out of the house, which is usually death or of course moving.

And at that point you cannot be upside down, but whatever is left belongs to your children. So it's not like you've lost the value of the house. Harlan Akula with us today from Movement Mortgage. We're talking about reverse mortgages, what you need to know so you can make an informed decision about whether this might be right for you.

When we come back, we'll talk about how this relates to the kids if you want to leave the house to them. What about your retirement income and what about your giving opportunity that might come from a reverse mortgage? Harlan Akula here when we come back, much more on reverse mortgages.

Stick around. Well, it's great to have you with us today on Faith & Finance Live. I'm Rob West. With me today, Harlan Akula with Movement Mortgage, an underwriter of this program. We're talking about reverse mortgages. And you know, folks, here on this program, our hearts desire is that you would be a wise and faithful steward of God's resources.

That means you need to be educated. And that's what we're doing here today about reverse mortgages. But we also always want to leave room for you to work out your convictions with the Lord. And for instance, as it relates to this topic, if your conviction is to remain debt free, to get out of debt completely and stay there for the rest of your life, great.

You do that. You'll always hear encouragement from us to that end. But perhaps there's a place for a reverse mortgage that you hadn't considered in the past.

And Harlan's bringing some great educational information today to bring you up to speed on perhaps what you may have missed. Now, Harlan, one of those things that folks think a lot about in this area is, I won't get a reverse mortgage because I want to leave the house to the kids. So does a reverse mortgage always eliminate assets that could be left to children?

Well, it doesn't. In fact, in the research that's been done, it's usually proven that for those that do a reverse mortgage early in retirement in their 60s, you're eligible at 62, of course, that you actually can leave more to your children or your charities. The fact is, just because you're using some of the equity in your house does not mean that you're leaving less to your children because you can put more money into life insurance or into investments. Or one of my favorite things is you can give money away with a warm hand instead of a cold hand. You don't have to wait until you're dead to give something to your children to help them.

And I'm a big believer in giving away wealth with wisdom rather than giving wealth away without wisdom. When I give money to my children now, I can have a lot of conditions attached as to where it goes and what should be done with it. A huge misconception is that my kids want my house. When I'm 90 and the kids are 60, the kids probably are not going to want the house.

They're going to sell it. And the fact is, is that if they just want money, I can leave them life insurance. I can leave them a Roth IRA. I can do a lot of other things. And the same applies to what I want to leave to my church and charities.

Yeah, that's very helpful. Now, you have a chapter in the book called The Three Buckets. I'd love for you to explain that idea.

Yeah, the problem is that people are always thinking that I want to give my house to my kids. Well, bucket one is people's ability to make money. Bucket two, picture the one in the middle, which is the place where you put your nest egg, money for the future, savings accounts, IRAs, and so on. And then bucket three, which is your house. We actually pour more money into bucket three than any other place. Typically it's 29% of your income.

That's a lot of money. And so what we need to take a look back is, okay, now I'm in retirement or looking at retirement, where do I get money from? I can go to bucket one and keep working or go to social security. I can go to bucket two and withdraw money from my IRA, or I can take tax free money out of bucket three in a safe and careful way so that I will have more money in other buckets.

That's the issue is this is not about loss, but this is looking at the whole picture and how it works together with all three buckets. Yeah. And that brings us to this idea about the mortgage payment, because another argument against this is this idea that, well, I have plenty of money making the mortgage payment is easy. I don't need a reverse mortgage. So how would you respond to that? Well, I'm a perfect example of that.

I'm still working. I don't need a reverse mortgage, but I'm 63. So I did my reverse mortgage a year ago because I want to take my cash flow and put it into more giving, more investing, and more of helping our family while I'm alive and while I have the ability to generate that income.

It's not wrong for me to make a mortgage payment, but if I don't have to, and there are better uses for that money, I would rather lose equity in my right pocket instead of losing cash in my left pocket because cash is more valuable and I can do more with it. It's funny from a giving standpoint, I remember always getting these, the Salvation Army would always ask for money around Thanksgiving time. And this year it came up and I looked at the sheet and I just gave a little bit more. I'm not patting myself on the back, but it was just easier because my $2,500 house payment doesn't exist anymore. So it actually allows me to give more and to help more because that big obligation on the first of the month is not required for the rest of my life. That means I'll die, Rob, with less equity, but with more cash that I had to use while I was alive. Less in bucket three, more in bucket two.

Yeah, that's fascinating and a different perspective than we often hear. Let's get into some of the mechanics, Harlan. How old do you have to be? Is there an age limit? And how much equity do you have to have to be a candidate? You always have to have more than 50% equity and you need to be 62 or married to a spouse who's over 62. And then that allows you to either take money out in a line of credit that you might use once in a while or in a monthly check or a lump sum to pay off an existing mortgage. You don't have to use any of the money, but it's wise to have that set up to have it available because the only thing you don't know for sure is I've always told people the only thing certain about the future is that it's uncertain and it's nice to have that money available if and when you need it for good things as well as bad things.

Sure. For somebody who's saying, this sounds too good to be true, tell me who actually owes the money to the lender when somebody takes out a reverse mortgage. How would you help them understand that?

I'm glad you brought that up. From a legal perspective, this is called a non-recourse loan. When I did my reverse mortgage, as everybody, I signed a form that says release of personal liability. There are no other loans that you release from personal liability. It doesn't matter if you have a car loan, a credit card, you're personally liable for it.

This shifts the responsibility to two entities. The first entity is your house. Your house is responsible for paying back the money and the future value of the house.

The second entity is the Federal Housing Administration mortgage insurance program. If your house doesn't have enough money because you've lived too long or the value of the house went down, you are not responsible for it, your heirs are not responsible for it, nor is your estate or your trust. That is a very significant difference in why this is a completely different debt than something that you are personally responsible for.

Yeah, that's helpful. What about taxes, Harlan? How are they affected by a reverse mortgage?

Almost always positively. First of all, any money that comes out of a reverse mortgage is tax-free. It's not income. It's technically borrowed money, even though you don't have to pay it back until a year after you're dead. It's still borrowed money, and it's not taxable. It also helps out a tremendous amount. We just did a reverse mortgage for a Christian leader who was quite wealthy. He took money out of his home and put it into some donations to some of the Christian causes, so he got a big tax deduction and had zero tax income because he took it out of his reverse mortgage.

It can actually save you money from a tax deduction standpoint because of the interest and because of the giving, and it doesn't cost you money to get it out because it's tax-free as compared to an IRA or 401k or some other taxable source. Yeah, very good. We're almost out of time here. How can folks get in touch with you, Harlan, or learn more about this?

Best place to go is simply movement.com slash faith, and we'll be happy to field your questions, give you any other information of how this might be of help to you or your family. That's incredible. Harlan, thanks for being with us today. Thanks, Rob. Really appreciate the opportunity to get the news out.

Absolutely. That's Harlan Akula with Movement Mortgage, a national underwriter for this program. Harlan is the author of Home Equity and Reverse Mortgages, the Cinderella of the Baby Boomer retirement. Again, folks, this is a decision you need to make with much prayer between you and the Lord, but hopefully this has provided some further education today about an often misunderstood product. Well, folks, we're going to head to a break, but let me remind you, we're out of the studio today. Our team is not here, so don't call in, but much more to come just around the corner on Faith and Finance Live.

Stick around. 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 approach on this program each day. We want to be hopeful and encouraging, help you as a steward on your journey to be faithful in managing God's money, because that's what we all manage. A hundred percent is God's.

The Bible says in Psalms, the earth is the Lord and everything in it, so it all belongs to Him, and therefore we're stewards or managers of those resources, and the only way a steward can be effective in his or her role is to understand the heart of his or her master. So we go back to Scripture and pull out the big ideas and themes and help you apply those to your daily financial decisions and choices. Back to the phones we go.

Texas is where Esther is located. Esther, thank you for your patience. Go right ahead. Thank you for taking my call. Of course. I fall within your recommended limits for needing long-term care coverage, and I was wondering if you could speak to some of the pros and cons of the kind of newer hybrid long-term care life insurance policies versus just a straight long-term care policy.

Yes, I'd be delighted to. And so for the benefit of our audience, you can buy a standalone long-term care insurance policy that's specifically for that purpose, or you can add it as a rider, so it's an add-on benefit with an additional cost to a whole life policy. To your question here, Esther, as to the pros and cons, you know, there's a convenience factor just by, you know, merging these policies into one. It can be more cost effective only if you were already planning to have a whole life policy. If you weren't and you're specifically buying the whole life policy just to get the long-term care insurance, well then it's going to be more expensive than just buying the pure long-term care insurance. But if you were planning to have one or you already do have one and you were going to add it, that's where you could have some cost effective savings.

The downside is, you know, going back to the cost for a second, it can increase the premium significantly. Again, it tends to be more expensive than if you were to buy just a pure standalone LTC policy. There's also limited coverage, so you just need to be aware that the coverage offered by a long-term care insurance rider on a whole life insurance policy is often going to have some limitations. There may be caps on the daily or monthly benefit amount.

There may be a waiting period that's a little bit longer before it kicks in than a standalone policy. There might be restrictions on the types of even care that's covered, so you really need to review that carefully and just understand that a pure long-term care insurance policy is going to have a bit more in the way of customizations for you to get exactly the cost that you're looking for, you know, for that policy or not the cost but the features that you're looking for for that policy. And then with regard to the whole life policy itself, you know, by allocating a portion of the premium to that long-term care rider, you're of course going to have less cash value accumulation in your whole life insurance policy, so that's going to impact the growth potential of your policy's cash value over time. So I think at the end of the day you do need to probably get some advice from a financial advisor just to look at your overall financial picture and determine, you know, what the best direction is for you. You know, often what I will recommend is that you handle your life insurance through a term policy while you're accumulating outside of insurance products for your retirement assets and then just add this straight long-term care insurance policy where you're just paying for the, you know, the expense based on the tables of what it will take to offset that particular coverage and not continue to fund as a part of that this expensive whole life policy, you know, for the rest of your life, especially if you don't need it because you've already accumulated other assets that will really cover your other living expenses beyond long-term care for the rest of your life. Does that all make sense though?

It does. So the ones where you, say, take the large chunk of assets, the 80 to 100,000 for a single person, pay that up front and then the hybrid says, okay, you have so much available for long-term care and if you don't use that, then when you pass, life insurance would come back at, you know, this amount to your beneficiary. So that still, it's still better to go just simply with a long term care policy if you don't feel like you need that whole life.

I think that's right because there is a mortality expense built in there for the full death benefit and you're right, as you'll use that long-term care insurance or if you need it, it will chip away at that death benefit and erode what will ultimately be available for your beneficiaries but I would just question whether or not you need that full death benefit, you know, in the event you don't need the long-term care insurance and if you don't, then I'd rather you pay just for the straight cost of the long-term care insurance which is going to be less than, you know, paying the mortality expense plus the ability for the long-term care on the full death benefit that's available through the policy. All right, that answers my question. Thank you so very much. Okay, Esther, thank you for calling today. We appreciate it.

God bless you. Let's head to Texas. Paul, you'll be next on the program, sir. Go ahead.

Yeah, hey, I'll listen to you guys whenever I get a chance to and I love your program. Well, thank you. Got a question about debt, particularly credit card debt but, you know, I started, I am an accountant, okay? All right. But I started my life with the spiritual aspect of the borrower is the slave of the lender. Yes, sir. And I'm thinking, no, I'm not going to go there and then I end up getting into business, okay?

And what I find is or what my attitude now is if we got an asset and I can partner with the bank, they provide the cash, I provide the work, we generate revenue. Hey, let me do that. Let me interrupt you, Paul.

I hate to do this. I've got to take a break, but I want to hear what you have to say. So you stay right there.

We'll finish up on the other side. This is Faith and Finance Live. And even though we're not here today and can't take your live calls, there's much more ahead on the program. So please stay tuned. You're listening to Faith and Finance Live.

This program is prerecorded, so we're not available to answer your calls, but you can email us your questions at AskRobatFaithFi.com. Just before the break, we were talking to Paul in Texas. Paul was saying he's an accountant. He started out his financial life as an adult with a firm understanding of what Proverbs 22 says, and that is the rich rules over the poor and the borrower is slave of the lender. And that was rolling around in his mind. And then he went into business. And Paul, you were sharing that perhaps you had some other ideas once you were a business owner.

Pick up where you left off. Well, I mean, what I learned in business school, land, labor, capital and the entrepreneur is how the economy works or how modern economy works. Yes, sir. Okay. And so you have to have an entrepreneur, which is me, trying to make business affairs work that generate money. But you have to have capital. Yeah.

And I don't have enough money to buy a ton of stuff out of my pocket. And so the thing is, the way I saw it or the way I came to see it is that so if I take a mortgage on a piece of property and I'm making it pay a monthly rent, by the way, I'm also able to provide a home for somebody and witness to them and be part of their life, which is part of what I like to do. I love that. Yeah. But nevertheless, if the whole thing goes south, I mean, I thought if my county turned into a smoking hole in the ground, my assets are in trouble, aren't they? But anyway, in that case, the way I saw it is I don't have to be a slave.

If this thing goes south and it won't pay, I just let them take the property back and walk away. That's right. And so I'm just curious as to what kind of comments you might have about that approach.

Yeah. Well, I think you're exactly right. And so we need to heed the warnings in scripture that are plain. And that is starting with this idea that we just said in Proverbs 22, seven, a lender-borrower relationship changes the relationship, and it's a slave-master relationship.

And so although borrowing is not a sin in scripture, there are clear warnings throughout scripture around the use of debt. So how do we approach it then? Well, I think there's some rules for borrowing that really get at the heart of what you were just saying, starting with the idea that because borrowing always mortgages the future, there needs to be an economic return that's greater than the economic cost whenever we're borrowing. Exactly.

And that would exactly be the case with the situation you're describing. We're buying an appreciating asset, not a car or dinner last night, you know, that's depreciating. Depreciating.

That's right. We're buying an appreciating asset. So the economic return, at least based on everything we know at the purchase, is going to be greater than the economic cost. Number two, never presume upon the future. So there needs to be a guaranteed way to repay what's borrowed.

Well, in your case, there is. You'd sell the property or they'd take it from you and satisfy the loan. Number three, recognize God gave you a spouse to complete you, not to frustrate you, and therefore spouses must be in complete agreement before you borrow. And then number four, never deny God an opportunity to provide, and therefore there should be no other alternatives. But if we apply those four principles or ideas, economic return greater than the economic cost, guaranteed way to repay, spouses in agreement, and no other alternatives, then I think we've at least put ourselves in a position to use debt in a way that's appropriate. And I would add to that, let's seek to get out of debt over our lives so that ultimately, when it's appropriate, we're completely unencumbered. And at that point, we'll be most free to follow the leading and the Lord and whatever he calls us to.

Yeah, well, what I'm looking at here is I'm 67. Yes, sir. And I anticipate having everything paid completely off within about the next year. And then if we have to, I'm reserving the right to hire a management agency for total, what do they call it, mailbox money.

If it's fully paid for, I can pay 10% off the top to get the mailbox money. We don't have to do anything, but I love it. You know, it's a ministry for me to provide homes for people, even if they have pets.

Yes, sir. Well, I love your approach here, Paul, I think you're doing it exactly right. I think you are heeding the warnings that are in Scripture and yet still using debt responsibly to be able to build your assets, also using those as a platform for ministry, which is phenomenal.

And you're going to be debt free here in the next year or so, which is incredible. So I would affirm everything you're doing, and I think what you're describing is the right way to go about this. Well, I just wanted a second opinion and I'll listen anytime I get a chance to, okay? Thank you, sir. Hey, God bless you, Paul. We appreciate you being on the program, my friend.

Quickly to Colorado. Hi, Carla, thanks for calling. Go ahead.

Hi, thank you so much for your ministry. I really appreciate it, and I had a question because I have two credit cards. One I use for online shopping. It has a very low credit limit, and the other one I just normally use for everyday use. Both have never accumulated any debt, but I wondered what you thought of the idea.

Yeah, I think that's fine. I mean, I think the key to limit your cards is number one is to keep you out of financial trouble. It's, you know, one less card that has an available limit that, you know, you could just decide on a whim to use and perhaps use beyond what you budgeted, and so that's always a risk. Number two, it's one other account to keep up with because you really need to monitor them all regularly just to make sure nobody's compromised the account, charged it fraudulently. Number three, just make sure you understand with these low limit credit cards that if you're using it on a regular basis and you're paying it off by the due date, what's being reported to the credit bureau is the balance at the end of the cycle prior to you paying it to zero, and if it's got a low limit, there's a good likelihood that that's pushing your credit utilization for that card up above 30 percent, and that's going to pull your credit score down. So just understand the implications of that. Now, is that a big deal month to month?

No, not really, unless you're, you know, that happens to be the month where you're going out to buy a house or a car and you need to borrow some money and you want to make sure that that score is up in the top tier so you get the most favorable terms, but just be aware that that could be happening and it's more likely with one of these low limit credit cards that are often made available through the retail stores. Yes, I understand that and I mostly use it just as a matter of security because of the exposure online, and that's why I keep the credit limit low, but yeah, thank you so much for your advice. I really appreciate it. Well, you're welcome and I don't have any problem with the way you're doing it. It sounds like you're handling things pretty responsibly, so thanks for calling and checking with us, Carla. We appreciate it. George, we're going to be coming your way after the break. Also, we did hear from a caller, Jackie, who was asking how those cash back credit cards work.

She wasn't able to hold. Essentially, Jackie, one of the ways these credit card companies make money is through a merchant rebate. They get a portion of every transaction. They're just passing that along to you in hopes that you'll use their card, eventually run up a balance, and they can charge you interest and late fees, so they're not coming out of pocket.

They're just giving you a portion of that merchant rebate. Well, folks, we're going to take one more quick break and then back with our final segment today, but if you need assistance from a financial or legal professional, we'd love for you to visit faithfi.com and click Find a CKA. That stands for Certified Kingdom Advisor, our preferred designation for financial advice from a biblical worldview. We're back with much more just around the corner. Stick around. This is our final segment of a Faith and Finance Live program that we previously recorded. Thanks so much for being with us today, and we hope you'll stick around and enjoy the rest of the program. Hey, before we head back to the phones, if you're a part of the faith and finance community, perhaps you listen to this program with regularity and you've found some benefit, or you just want to help us support our work in reaching more and more people with the message of God's financial wisdom. Well, you can do that by making a gift to our ministry.

We are listener supported. This is a not-for-profit ministry, and we rely on listener support to do what we do, and if you'd like to support our work, it would go a long way to helping us to give any amount, and we mean that if it's $40 or $400 or $4,000, whatever you can do, we'd be grateful. Just head to our website, faithfi.com, that's faith, F-I, dot com, and then just click the Give button.

Again, faithfi.com, just click Give. Thanks in advance. All right, let's round out the program today with as many calls as we can get to. We'll head to Texas again, a lot of calls from Texas today. Hi George, go ahead sir. Hey, how's it going sir?

Great, thanks, go ahead. So I need your help. Me and my wife and I, we have three kids, we've incurred a lot of debt, having a lot of our stuff trying to build up flyer miles, etc., and we've overspent a lot, bought a house and stuff like that. So my issue is we're trying to get rid of our debt. I'm about to incur about 10 grand more due to COVID.

We lived in California at the time, and I was a hairstyling teacher at an academy, and we were laid off and hired, laid off multiple times, and so they have said I am now going to be over, I was overpaid, and I gotta owe them $10,000, unfortunately. So we were looking into doing maybe like debt consolidation, possibly, we didn't really want to, but bankruptcy or like a HELOC loan, but I don't think we have enough home equity, and I was just kind of wondering what you think would be the best. I don't really understand debt consolidation if I'm giving my debt to another company and they're negotiating and then it still looks bad on my credit or what.

Yeah, all right, let's dive into this. What I think you're describing there on the tail end is what's called debt settlement, but we can get into that in a moment. First of all, George, let me just say I'm really sorry to hear about the situation you're in.

I realize you're taking ownership for part of it. Part of this is just a result of you being in and out of work, and I know going back you'll probably wish you could make some different decisions, and yet here's where we are. So let's try to be wise and faithful as you move forward in just handling what God has entrusted to you, meeting your obligations to the best of your ability, and making some changes so that as you get out of debt and ultimately are debt-free, you're in a position where you're living on a balanced budget, managing with discipline what God has entrusted to you, and I know that'll take a lot of pressure off you and your wife, and hopefully just with a plan you all will feel like you're making some progress here, but I realize this can all be very overwhelming. Give me kind of just a rundown of the debt that you have right now. So right now we're looking at about $65,000 worth of debt.

Okay, how does that break down? What type of debt? It's mostly just credit cards. It's all credit cards. Okay, so $65,000 in credit card debt. Are you making the minimums right now?

Yes, so that's a good thing. We've created a budget. We've pulled all of our credit cards from any of Amazon. We're just sticking to our debit cards right now. My job that I have, I'm able to earn bonuses, so we're putting that towards debt. My wife said she handles all the finances, you know, but right now we've already paid about five grand off, but we got the hiccup from the EAD saying we're gonna owe like 10 grand, so I don't know.

I'm at a loss. So are you spending about $2,000 a month in minimum payments? Yeah, for sure.

Yeah, but you've got the cash flow to support that, right? Yes. Okay, all right. We thought if we could consolidate that into a, you know, a lower interest rate it would go away even faster.

Yeah, we'll talk about that. Is there an ability to negotiate the payment terms on this $10,000 that you owe? I don't know yet. It's something because this just happened. We just got the letter.

I thought we were going to win it because it wasn't really our fault, but at this point I still have a lot of digging to do and how that figures out, but I believe so. I believe you can come up with an agreement. And who do you owe this to?

The state of California, the EAD unemployment, I guess. Yeah, so, you know, they should be willing to work with you. I would definitely reach out to them and negotiate a payment plan hopefully that fits into this overall budget. I mean, they can't expect you to come out of pocket $10,000 all up front. I mean, they may end up charging you some interest and fees, but the bottom line is you need to get on a payment plan that everybody's agreed to that fits into your budget moving forward.

With regard to how to approach the $65,000, I don't like the idea, even if you had the equity, of securing this to your home. This is unsecured debt. If something happened and you were unable to pay, you know, and you were forced into bankruptcy, you could still try to meet this obligation.

You know, you won't find the word bankruptcy in the Bible. We do see that there needs to be an absolute commitment to repayment. So if you're forced into that legally, I think that's okay as long as you have that absolute commitment to repay.

But attaching that to your home, now all of a sudden you put your home at risk and I just don't want you to go there, especially in light of the situation. I'm glad to hear you've made the changes. You've got the budget going. You guys are living on cash only. You know, your wife's managing this.

It sounds like that's working well. We just need to get these interest rates down that are now probably on average, you know, more than 16 or even 20% and that's just killing you. My preferred approach on this is not to take out new debt and pay it off and consolidate it, because even if the interest rate comes down, a lot of times the repayment is extended. Also, it takes the pressure off and I realize you all may have learned your lesson and say, no, that's not us, but so often what I see is we pay it off with a new loan. It takes the pressure off and then the credit card debt comes back and we have the consolidation loan on top of it. I also don't like debt settlement where you stop paying and get it into collections and then try to negotiate something that's going to trash your credit.

It's just fraught with problems and could end up in lawsuits. So where do you go from here? Well, my preferred approach is debt management. It's a different thing entirely where you leave the credit cards right where they're at with the current creditor, but by using a debt management program through a non-profit credit counseling agency, each of these creditors has a credit counseling interest rate that's going to be lower than your current rate and they'll work with you to get one level monthly payment that you'll pay to them. They distribute it to all of your creditors and the combination of that level payment plus the reduction in those interest rates is going to have you paying this off 80% faster.

So that would be the way that I would go. They'll work with you. They'll get it fixed into your budget and help you understand exactly what this will look like. My friends at Christian credit counselors.org is the place we like to send folks. They've worked with hundreds and hundreds of our listeners. They're all godly folks who have trusted the Lord and this is part of their ministry, but they do a great work.

So that would be my next step for you, George, is to contact christiancreditcounselors.org and get set up on a plan and then if you have other questions along the way, you can certainly reach out to us. Awesome, you're the man. I appreciate it. I need you to have answers, so I really appreciate the help and a long-time listener, first-time caller, so thank you so much.

Awesome. Well, thank you and listen, all the best to you, George. You guys can do this.

Don't lose heart and I think once you have a plan, you'll feel a whole lot better. We appreciate you calling today. Let's see quickly to Mississippi. Hi, Diane. Go ahead. Hi, I'm 58. My husband's 62 and we have a, well he has a hundred thousand dollar term life insurance that ends when he's 70.

Okay. And that's all we got and I don't know what to do if I should continue a different kind of life insurance to cover when we're really, really old. Yeah, well, here's the thing. I mean, most often I like the fact that you've got this term policy and it goes all the way through age 70 and if you've built that into your budget, that's great. But typically what would happen is when you reach age 70, you would just let that policy lapse. You don't get anything for it, but you were offsetting the risk that existed during those working years to cover that loss of income if the Lord were to call him home. And so at that point you just drop that. You recoup that money into your budget every month and at that point you're relying on the assets that you've accumulated to both supplement your income in retirement and if, you know, something were to happen to one of you, it's not going to create a hardship because he's probably not working any longer and therefore you're living off of social security and what you've accumulated and hopefully between your assets and in savings you would have enough to cover burial expenses and things like that. Continuing that policy beyond age 70, Diane, is just going to be really cost prohibitive. Yeah, so I shouldn't have to worry about getting another one that's, you know, smaller?

I don't think so. I mean you need to be well planned, but the idea would be that you don't need that insurance anymore. Hopefully you've got the assets to cover your lifestyle and your expenses no matter whether you die first or he does and you've got enough to cover burial expenses and so then life insurance is not necessary at that point. It really is just during those working years where you're saving and building up for retirement. A loss of income during those years would be really create a hardship for the other spouse that survives you or him, but in this case once you reach age 70 that's no longer the case. So you'll you pay through age 70 but at that point when that's premium jumps up you just let it lapse.

You don't replace it and then you just recoup that money into your budget each month. I hope that helps you Diane. Hey, thanks for calling today.

God bless you. We appreciate it. You know we've covered a lot of ground today. You know before we wrap up, money management can often be confusing. A seemingly endless number of decisions that we have to make and yet if we think about it we can actually reduce our money management just to five uses of money. There's the money we live on, the money we give, the money we owe for debt and for taxes, and the money we grow, live, give, owe for debt and taxes, and grow. And God's word speaks to all of them. You know when we pull the principles from God's word out and apply them to our financial decisions we can have confidence because they're timeless.

They don't ever change. They transcend the tax code and actually allow us to move forward with peace of mind. That's what we're after here on this program every day. I'm so thankful for my team on behalf of Amy Rios and Tahira Haynes, our call screeners, and Jim Henry.

We couldn't do this without them, but we also couldn't do it without you. So thanks for stopping by today, telling us your stories, asking your questions, even sharing your testimonies. We always love to hear what God is doing in your financial life. Faith and Finance Live is a partnership between Moody Radio and FaithFi. Hope you enjoy the rest of your day and come back and join us next time on Faith and Finance Live.