A fast food chain once used the slogan, Have it your way. Ever wonder why credit card companies don’t use it? If you glance over a few credit card agreements, you’ll quickly see that issuers write them to pretty much have things their way. But not always. Some things are negotiable. We’ll fill you in today on MoneyWise. We’ve talked before about how Americans are a bit too complacent. We don’t like to haggle over prices, which is a way of life in many countries around the world. We might walk away if we don’t like the price of something, but we usually don’t think to ask for a better deal. Now, when it comes to credit cards, it would be a good idea to get over that reluctance. The Federal Reserve says that Americans owe nearly $1 trillion in credit card debt. The average household balance is over $8000. Obviously, the best solution is to pay down credit card debt, but while you’re doing that, you can do a few things to make it easier. And we’re certainly not talking about negotiating to have your balance lowered. That’s called a settlement, and while folks sometimes find themselves in a financial predicament where they have to negotiate a settlement, we always want to avoid that and pay our debts in full. Proverbs 37: 21 reads, The wicked borrows but does not pay back So just what can you negotiate with credit card companies? And actually, there’s really not a lot of negotiating required. For the most part, we’re really talking about just asking for something and waiting for a yes or no. So it’s a pretty simple process. So let’s look at interest rates and fees. The plastic in your wallet is a great convenience at times, but it’s not cheap, even if you pay your balance in full every month. The typical credit card may come with as many as four different fees, and the biggest money maker for the issuers is the late fee, which could run as high as $35 every time you’re late making a payment. The vast majority of people simply pay it, not realizing there may be a better way to handle it. And that would be simply making a phone call to your credit card issuer and asking to have the fee waived. The number’s right on the back of the card. And we have some pretty good data on how effective this can be. CreditCards.comasked 1600 cardholders about their experience when calling their issuer and simply asking for a better deal. They focused on three areas: reversing a late fee, waiving or reducing an annual fee, and a really important request lowering the interest rate. The survey revealed something quite surprising. A full 85% of cardholders who made at least one request got what they wanted. It was also surprising to learn that not a lot of people know this because only three out of five cardholders in the survey reported making such a request. The survey broke down the success rates for each type of request: late fees, annual fees, and lower interest rates. In each case, the results were largely positive. Those asking to have a late fee waived were successful about 85% of the time. More than half were able to get their interest rate lowered, again, just by asking. But maybe more surprising, almost 3/4 of those asking to have their annual fee waived were successful. It’s true that only about 30 percent of credit cards have an annual fee, but for those that do, they’re pretty high, averaging well over $100. But again, the survey showed that not many people are aware that a simple phone call might get their annual fee eliminated. Only 18% of those polled had ever asked for it. Even more disturbing, they were much more likely to ask for a credit limit increase. Okay, the numbers clearly show that your chances of success are more than 50-50, sometimes a lot more. But why are credit card companies so willing to give in? Two words for you there: balance transfer. They know all too well that most of their cardholders can simply take their business elsewhere by transferring their balance to another issuer’s card. And they don’t want to lose you even if you pay off your balance every month, because they still make a lot of money in vendor fees when you use their card. So they have a vested interest in keeping you happy. One final thought: in these days of inflation and rising interest rates, it may be more difficult to get a lower rate, but it’s all the more important to try. On today’s program, Rob also answers listener questions: ● Would you have to pay a gift tax after receiving a large gift from a family member? ● At age 62 with adult children, do you still need life insurance? ● Would it make sense to refinance your first home and use equity to purchase a second property?
The beginning of wisdom is fear of the Lord. The beginning of wisdom about money is that God owns everything. We’ll talk about how you can teach that important concept to your children with financial teacher Ron Blue today. Psalm 24: 1 declares, "The earth is the Lord’s and all its fullness the world and those who dwell therein. Ron Blue is founding director of Kingdom Advisors and the author of many books on personal finance from a biblical perspective. In his book Raising Money-Smart Kids Blue emphasizes the importance of teaching children that very basic principle, that God created everything and owns everything. But that isn’t possible unless parents first understand it. Parents need to not only grasp that concept, but also model it for their kids. And the Bible couldn’t be more clear about it. Haggai 2: 8 records God's own words: "The silver is Mine, and the gold is Mine. " In the parable of the talents, Jesus said, The kingdom of heaven is like a man traveling to a far country, who called his own servants and delivered his goods to them. " Any reading of the Scriptures will lead you to the inescapable conclusion that all resources come from and belong to God. And of course that means that we own nothing. We only hold what God gives us for a time. How do you first teach that to adults, to parents? How many times have you seen a hearse pulling a U-Haul? Job said it this way in Job 1: 21, "Naked came I from my mother's womb. And naked shall I return. " We come into the world with nothing, and we will leave the world with nothing. Whatever we have to use in the interim belongs to God, whether a little or a lot. Someone asked John D. Rockefeller's accountant if he knew exactly how much Mr. Rockefeller had left when he died. The accountant replied, "Certainly, to the penny. He left everything. " So how do we teach that God owns everything to our kids? It starts with modeling that attitude. Model prayerful financial decision making. Model an attitude that says, "I’m responsible to handle God's resources because they don’t belong to me, and He has all the rights. " Show your children that you control financial resources instead of being controlled by them. In other words, illustrate your own freedom in the area of money and money management. TITHING AND GIVING Blue writes in Raising Money-Smart Kids that tithing and giving is probably the most significant way to model the truth that God owns it all. Anyone who truly believes that God owns it all will freely give, with the tithe being merely the beginning point of giving. One way to do this is to have family times when giving decisions are made. Periodically, sit down with your children and evaluate giving opportunities that may come your way. Make decisions about particular needs and how much to give to each one. Blue said he required his kids to tithe from their allowances and gift money, but their generosity grew from there, and they learned that God does own it all and that the tithe is a recognition of God's ownership, not a return to Him of "His share. " HOW TO TEACH THIS PRINCIPLE TO CHILDREN First, if you haven’t already, commit to the Lord to give up ownership of His resources: money, your home, time, or other resources God’s entrusted to you. Second, give regularly as God has prospered you. This will communicate more than words the truth that you believe God owns it all. Your children, in turn, will catch that truth. Third, as you’re confronted with the needs of the poor, the homeless, missionaries, the church play a part in meeting those needs. It may be why God entrusted some of His resources to you. And fourth, when your children are very young, require them to tithe so that tithing and giving become a habit. That way they’ll recognize that they’re returning to God a portion of what He’s entrusted to them. Those four things can free you and your children from financial bondage. For more information, check out Ron Blue’s book Raising Money-Smart Kids. On today’s program, Rob also answers listener questions: ● Is it wise to use 401k funds to pay off a car earlier? ● Can you do a pension rollover to an IRA? ● What can you do to get the best possible return on investments and saving for college? ● Should you name a beneficiary when purchasing I-bonds? RESOURCES MENTIONED: ● SavingForCollege. com
Forget to cancel a subscription or fail to get gas where it’s cheaper and you’re out a few bucks. But don’t pay attention to some big money wasters and your finances can really take a hit. We’ll talk about them today on MoneyWise. Okay, today we’re going to tell you some ways you can waste a lot of money. Of course, the idea is that if you know about them, you won’t do them. The Wall Street Journal did a survey of several personal finance experts, authors, and even a Nobel Prize winning economist to find out what they considered big money wasters. The first one they named is something they called compensatory purchases. That’s a fancy name for keeping up with the Joneses. And it’s anything you spend money on to make other people think you’re successful. But in reality, you’re doing it because you don’t feel successful. Compensatory purchases would include luxury goods and high end clothing with visible logos to indicate you have money and status. But the experts pointed out that these can include small-ticket items purchased over and over like designer coffee. Another big ticket money waster is buying too much house. One of the experts explained that peoples’ thinking about big houses hasn’t caught up with technology that enables us to live comfortably with less space. Take large, elaborate kitchens for example. Readily available prepared foods have made them obsolete. But what the experts didn’t say is that pre-packaged food items can also be a money waster. Another example of buying too much house is having a rarely used room, an extra bedroom that sits empty most of the time, or the workshop in the basement gathering dust. Or space for bookshelves when we have e-books that take up no space at all although maybe it’s not as much fun to curl up with a Kindle. For one expert, a big money waster was buying a new car, at least for many people and especially if you’re just trying to impress someone. You’ll have to work two to three months just to make the payments and insurance. A better option for many people is a dependable late-model vehicle with low mileage. If you simply must have that new car smell, you can now buy it in a can and make any car smell brand new for around 10 bucks. But we always point out that buying a new car is fine if you can afford it and plan to keep it for many years. It’s especially fine if you can buy it with cash. As we like to say, if no one bought new cars, we soon wouldn’t have any cars at all. Of course, with today’s high interest rates and sky high car prices, it’s more important than ever to buy a car for practical reasons, like affordable, dependable transportation. Okay, the next money waster is a touchy one for many parents. It’s spending money on adult children for things they should be paying for like keeping them on your car insurance or cell phone plan. If you no longer need a family plan and an individual one is cheaper, you’re just wasting money. The experts also mentioned over-scheduling younger children with too many expensive activities. Better to have the kids focus on one or maybe two things they really enjoy because the cost of extracurricular activities and transportation to them continues to rise. Some of you may be old enough to remember playing sandlot baseball or football with the neighbor kids when you were young. And while that sort of thing still happens, for the most part we live in an age of organized sporting activities a lot of them so choose carefully. And speaking of physical stuff, you want to avoid getting a gym membership unless you’re absolutely sure you’ll use it. Otherwise it’s just another money waster. Having an unused gym membership has been described as the failure to recognize future laziness. Another money waster? Unplanned trips to the grocery store. That’s when you go in thinking you just need to grab one item but you end up spending $100. Also mentioned were pre-packaged sugary snacks that could easily be replaced with something less expensive like an apple, better for your wallet, and your waistline will thank you. On today’s program, Rob also answers listener questions: ● If you buy a second house, can you recast your mortgage? ● How can you dig out of debt on a limited income with a special needs child? ● How do you determine what to do with a home passed on from a deceased parent? ● Is bankruptcy an acceptable option for a Christian? RESOURCES MENTIONED: ● Christian Credit Counselors ● Connect with a MoneyWise coach
1 Timothy 5: 8 says If anyone does not provide for his relatives, and especially for members of his household, he has denied the faith and is worse than an unbeliever. Christian parents take that verse quite seriously, wanting to give their kids everything they need, and even a life better than they had. Today we’ll talk about a tool that can help you do that. Here’s one more key verse for our conversation today: Proverbs 13: 22 reads, A good man leaves an inheritance to his children's children We’ve been getting a lot of calls lately about one of the ways that parents and grandparents can do that with a custodial account. It’s a great way to start building that inheritance for kids. CUSTODIAL ACCOUNTS What exactly is a custodial account? Much as the name suggests, it’s a savings or investment account set up in a minor child's name where you are the custodian. Technically, the child is the owner of the account, but you remain in control to act in the child’s best interest. Whether for saving or investing, a custodial account comes with few strings attached for how the contributions and earnings can be used for the child’s welfare. That’s quite different from other types of accounts set up in a child’s name, such as a 529 education savings account where withdrawals must be used for eligible expenses or you incur taxes and penalties. Federal law provides for two types of custodial accounts, but since the version set up under the Uniform Gift to Minors Act or UGMA allows for most kinds of investments. We’ll concentrate on that one. And it’s good to know that UGMA accounts are allowed in all 50 states. And while conventional custodial accounts are inexpensive and a breeze to set up they’re not perfect. So let’s get into the pros and cons. First, the pros: THE PROS OF CONVENTIONAL CUSTODIAL ACCOUNTS We mentioned that custodial accounts are easy and inexpensive to set up. This is especially true when compared to a trust that could cost around $1500 to establish and comes with certain legal requirements. Next, a custodial account provides a tax benefit to the person setting it up. Once assets go into the account, they become part of the child’s estate, they can never go back into your estate, and are no longer counted against you for tax purposes. You can fund a custodial account with up to $16, 000 in 2022 without having to fill out the IRS gift tax form 709. Contributions above that limit will count against your lifetime exemption of $12. 06 million, so that shouldn’t be a problem. There’s also a tax benefit for the minor, sort of, because his or her income is taxed at a lower rate. But it’s important to know the rules for the so-called kiddie tax, enacted to prevent parents from transferring large sums to their minor children to escape higher tax rates. Under the kiddie tax: - The first $1, 150 of investment income, meaning money earned by the investment is covered by the kiddie tax's standard deduction, so it isn't taxed. - The next $1, 150 is taxed at the child's marginal tax rate. - Anything above $2, 300 is taxed at the parents' marginal tax rate. And one final advantage to a custodial account is you can invest the funds in anything offered by the financial institution administering the account, although many institutions prohibit putting assets into high risk investments like futures or derivatives. THE CONS OF CONVENTIONAL CUSTODIAL ACCOUNTS Now here are the cons: First, you can’t change your mind. Once your funds go into the child’s custodial account, the child legally owns them, and only the child can withdraw funds from the account upon reaching the age of majority, which is 18 in most states, and at that age, the child can use the funds however they want. You have no control over the money. There are certain limited circumstances where you can withdraw funds, but you need to show they were used for the child’s benefit and not yours or you’ll open yourself up to legal problems. Buying a car or taking a family vacation with the money won’t qualify. And since the child legally owns the assets in the account, they’ll be counted against that child when it comes to federal financial aid for education. If there are substantial assets in the account, the child may not be eligible for grants and some student loans. Also, you can’t take a deduction for funds going into a custodial account, and when the child comes of age and withdraws funds, the child will have to pay capital gains taxes on the earnings. Well, those are the whys and wherefores of custodial accounts. I hope you find the information helpful. On today’s program, Rob also answers listener questions: ● Should you take money out of a Roth IRA to invest in I-bonds? ● How do you determine if you’re eligible for student loan forgiveness? ● How should you advise an adult child about renting a room to someone who is not a Christian and may be involved in a cult? ● Should you invest heavily in precious metals to guard against a collapse of the banking system? RESOURCES MENTIONED: ● Xx
God’s Word tells believers to Be fruitful and multiply and fill the earth. But it seems that economics is making that ever more difficult. We’ll talk about it with Chad Clark today. Our guest Chad Clark is normally behind the scenes, making things happen as the Executive Director of MoneyWise. But he’s also a keen observer of financial trends, so he joins us today to talk about the rising cost of raising a child. On today’s program, Clark shares some interesting statistics about what it costs to be a parent these days. According to the Brookings Institute, a married couple with two children will spend upwards of $310, 605 to raise both children thru age 17. Raising kids these days includes a range of expenses: housing, food, clothing, healthcare, child care, diapers, haircuts, and things like sports equipment or dance lessons. And raising kids isn’t getting any less expensive. In the short term, inflation is going to continue to play a substantial role. Prices for food at home were up 13. 1% in July compared with the year before, adding pressure to household budgets. Even though inflation eased a bit in July, down to 8. 5%, food prices continued to climb in July, up 10. 9% on an annual basis. Clark shares four financial keys to raising kids: 1. Have a spending plan 2. Track your expenditures 3. Communicate with your spouse 4. Communicate with your children On today’s program, Rob also answers listener questions: ● How should you go about preparing to sell your home? ● What is the best way to evaluate a financial advisor? RESOURCES MENTIONED: ● Find a Certified Kingdom Advisor
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