The Crisis Budget

Psychologist will tell you that people often hold that goes something like this hasn't happened. What won't put another way, it can't happen to me. But reality is just because of that hasn't occurred yet is great today hose from West speech during Christ's question don't call this program is budget that's nice right here from our Dayton is the founder of compass, finances, God and original host of this very program. I don't know if Howard was a Boy Scout, but he certainly adopted their motto of be prepared.

No doubt about that.

Steve Howard, welcome back to moneywise live on its great consider is developed what we call the Mayday budget to help folks who have already experienced a financial calamity.

But today, you want to talk about a different approach to financial preparation. I look for you to dive in and tell us about Rob and Bob away Mayday budget jewelry just glided available folks mentioned it's what we call the crisis budget and really it's more about planning for financial crisis than reacting to one and stuff but just tell your story. Great and blessed to sit on a life insurance Company Board of Directors for almost 20 years. It closely associated with the bank holding company. So when COBIT 19 pandemic hit board and executive team decide to start meeting once a week to work through the challenges that we were facing in about once a month.

We invite someone from the outside to share what they're doing to address the pandemic.

We asked them their view of the financial future and last month we invited CEO of a large $30 billion bank deeply committed follower of Christ very bright guy started sharing by telling us something that blew me away. She told us that they had developed a pandemic disease plan 12 years ago, every year they would break it out. Review the plan updated improvement.

So when COBIT 19 hit. They simply work the plan. They'd already been prepared.

There were some issues such as social distancing sequestering that they hadn't factored into the plan, but they'd already decided on the majority of the major steps that they needed to take in the bank have missed a beat. Given example in terms of serving their customers personally contact more than 100,000 customers to learn how they could better serve them and during this time.

It's incredible to think that he had had the foresight to develop the plan so far in advance in our lives. You know, it really underscores the importance of planning and knowing the rest of the story. I know that as that bank manager related the story. It started to sound a bit familiar to you didn't share. Struck me about 10 years ago. Compass developed what we called the crisis budget both for individuals or for married couples and the crisis budget is to be developed gifts of what before a crisis occurs, a job all serious illness, pandemic you name it and here's the objective of the crisis budget is to help you make decisions now about how you're going to reduce your total spending will you be in better position to survive the crisis since the real document thinking behind no question about it.

And obviously this notion behind this type of preparation comes right out of God's word only come back we'll talk about some of the details of how you can prepare your own crisis budget and the biblical foundation for at all that right around the corner that's right you listening to moneywise live last more blessed to have holy name joining us today author and founder of the company is also more the financial wealth you leave behind could be the best thing that ever happened to your loved ones or the worst in splitting hairs, giving your money and things to your children without ruining their lives. Ron blue explains why it's important to make these decisions now, instead of forcing your heirs to do it later. Splitting hairs will foster a real appreciation for the precious resources that God has entrusted to you, and it's available. Click the start button moneywise live.org our friends and sound mind investing have been helping Christians reach their financial goals since 1990 with step-by-step guidance for investors. Just getting started making choices in a 401(k) or getting ready for retirement all grounded in consular SMI slogan is financial wisdom for living well. More information is available online. Sound mind investing the SMI website also includes articles, and money and investing sound mind investing.org you have a junkyard, a junkyard is scrap engines and transmissions and tires like you might think it's really potential. Waiting for the right opportunity. It's a headlight or carburetor that could replace the broken one. You know it's the same with people, problems, stresses and situations break us down, add extra mileage and wear us out. God is there. However, to sell, give us God's repair manual says we need to believe Jesus died on the cross he rushed take away the penalty of our sin. Give us new life with Jesus is positive because the broken has been replaced by the God is freedom and peace of mind. Christian credit counselors can help where a nationwide nonprofit counseling organization has helped over 3000 individuals in the last 27 years out of credit card debt percent faster while honoring that data and phone to learn how Christian credit counselors can help you visit Christian credit counselors.org Christian credit counselors.org or call 800-557-1985 with us today is something called rice right now. Through this date. Howard, I appreciate the story were sharing about this bank president who actually thought 12 years ago, about his pandemic disease. Plan what foresight and I know you have worked up something similar you and the team.

It compass finances God's way.

Years ago, and the idea of planning in advance has some real benefits and advantages talk about those just more than the budget done you can do it before the crisis and you're not stressed out.

The pressure of making quick decisions without really talking it through. Thinking it through on how to cut back and when you're doing it in advance of a crisis. You can take your time. If you're married, you and your spouse can be praying about the decisions that you want to make you want to hear from the Lord and your spouse. You can discuss it, maybe even do a little negotiating a very relaxed way say well give up my weekly golf game with my buddy and I shall say, well, okay, I'll give up my bowling with my friends. I mean it's right a lot less stressful and a lot less pressure because you're not faced with the actual crisis here making those decisions so that when a crisis hits you can immediately go ahead and institute that your plan you've agreed on it.

If you're not married, you might have a friend who also works on one as well to help hold you accountable. I do think just like that bank CEO that it's wise to pull it out of the door down your calendar every year just to review what's changed in your financial life for your personal life that you might want some things around and and guess what, when a crisis you can immediately work to play well that's what's so key is to have it at the ready and something that is being updated as you said so when the unexpected comes and we know that it will, we can implement a plan that's been well thought through and as you said, without the emotions at the heart of this Howard is the ability to really dial back spending what is it about developing a crisis budget well in advance of an event like you're describing what is it about that that can actually reveal weaknesses in your financial picture and I in terms of the benefits of doing this for the crisis hit.

And that is that many folks you've gone through and developed their crisis budget that the only way to really reduce enough and we encourage folks to think about the crisis budget. Just as a bogey if you will, of 15 or 20% reduction of their spending. They understood that to achieve that they really had to get really serious about their current financial decisions so focused on paying off their credit card or audio data or some other kind of debt, and it's also motivated them to be more faithful and more consistent in their saving and even in their giving. Recognizing that the Lord who ultimately is going to have to protect and provide that were in the middle of a crisis but I love the fact that it's help to motivate people to be more faithful today in working their clan to become a faithful really with the resources the Lord entrusted to you. As you know we always tell people that the optimum the very best goal to shoot for.

In preparation is to have 3 to 6 months of spending already prepared in advance in a savings account even though it may take a while to get there. That would be best to have 3 to 6 months of living expenses just in case I was were talking about something greater. Crisis budget does that mean that we just have a different plan or does that also mean that we have to actually save up more money because I can imagine some people saying I can't save more money. I think it really motivates people to be more in terms of their financial decisions to take a harder look at what their spending just to plan ahead you know if a credit card debt in their car loans and they got those paid for dinner in position to be more generous and also be more faithful on the saving side.

That's which really encouraged us to say the family situation. Is this really has to do with strategy and agreement between the spouses and you know we realize this may never happen, but if it does, here's what we decided well in advance. It may hurt a little bit, but we decided it together and it's on paper. We know where were headed right just like that bank CEO. I may not sure that they've had some cutbacks with some of their staff are furloughs, but the bank is more than survive in good shape and the same is true for a family there. There are difficult choices to make in terms of our spending, but think of having us to building and that translates over to the husband and wife drawn closer together as they talk about things that are really important to them and what are they got cut back on whether they going to continue doing because you're learning more about your spouse, Howard, you talked about the giving side of this, and here's what I love. You know during the crisis especially like the one we just experienced and knows what is coming in the days ahead.

That's the opportunity where the church needs to step up to be the hands and the feet of Jesus. So by having this plan and being able to continue to give or even do more.

That's the time you want to be able to do that and unfortunately because people don't plan often they're going the other direction right exactly right. It should really challenge Rob as you will note for many churches for many ministries. When I got people are in a position where they don't sign on one of the story, the prophet is an action where he prophesied that there's a worldwide family coming. The which happened in the during the reign of Claudius since it tells us, and the first thing that the people did that heard that there was a worldwide famine coming was to take out their checkbooks and give as they were able to help the brethren in Judea and really is just a great picture of matter fits the worldwide famine coming up.

This is basically a worldwide famine affecting so many people around the cloak that God's people should be generous and if we work the plan.

I will be in a position to do well in God's word is clear. As you know Howard that our future well on earth is uncertain. Ecclesiastes 11 to force you do not know what misfortune may occur upon the earth. And that's precisely wise stewards. We need to be well planned.

Howard Dayton always good to have you my friend, so thankful for you all greatly review Robin you as well. Thanks very much our God bless you and will have a link in today show notes where you can download this free moneywise. My 015.

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Find it all in master your money by Ron blue available when you click the store button moneywise. This is more that of the answers is Rob West. With this, however, taking your calls but we've lined up some calls in advance that I think you'll find very practical. At least we tried to make them that way so stick around. Let's go directly to our phones, hey and how can we help on Mark okay you got life insurance beneficiary policy, but your three children down and one up and passed away before before we did.

That word needed to be in the beneficiary or that grandchildren found that child would not split between the other children and what you are exactly right. You are a great student and because you're describing. It's a perfectly his name was Mike Miller. He's out to Greenville.

He's a certified kingdom advisor blogger. He also has his own radio program joins us here periodically but what you're talking about is is very important and this is the term, per stirpes and it's a legal term, that's intended to make sure that children inherit in the place of the deceased parent, but over the years there have been many lawsuits surrounding the term with varying results. But it's the that's the term that he was talking about and you want to always get legal counsel here, but it's an important reminder to check your beneficiaries. Make sure they're up-to-date because our circumstances and situations change as we age and you always want to use a competent estate planning attorney to make sure your well prepared with everything from your will to your beneficiary designations including things like living wills in healthcare surrogates and if you need them. The powers of attorney.

A durable power of attorney, but I think it's really important of the term means by branch in Latin.

Interestingly and if you want to get the full download on it again, go to moneywise live.org and just search for don't disinherit your grandchildren.

Mike does a great job explaining it all yes ma'am, per stirpes P ER per stir peas STIR PES and again make sure you always update this information in the context of getting sound professional counsel in this case it would be from an attorney, but that's the idea behind it and you want to just make sure you're applying it appropriately to your situation and does that help to couple other people and I can't remember the word had these what are you talking about I have to find out more about the information you're very welcome. Thank you very much and we appreciate thanks. Stir peas. Also one of the moons that revolves around Jupiter Jupiter being Elijah Idaho Sarah to grow potatoes where you are. Sarah was at just a portion of Idaho will have sure Idaho was much more than just potatoes so I don't get myself in trouble here, but today I think an extended time.

I will now find that he yes sir I appreciate the question.

You know I'm not a fan of playing what I call the balance transfer game. There are plenty of credit cards, assuming you have decent credit or pretty good credit. Other player credit cards that would be happy to allow you to open a card and give you 0% for probably up to 18 months.

You would have to pay a fee on that, usually about 3% of the balance. And that's the way they make sure that there to get paid something even if you pay it off in full or transferred out for the 18 months is up, but it does a couple of things. Number one I don't like paying that fee number two it's going to take the pressure off, which in most cases causes the individual not to focus on paying it off because they know in the back of her mind, while not paying any interest so they just keep spending, and often times the problem that got them into debt in the first place. Hasn't been solved number. This debt is symptomatic of usually not in every case, it may been a real hardship, but usually it's just consumptive spending beyond your income and so what I would prefer that your friend do here. Sarah would be one or two things. Number one, I'd have them contact our friends that Christian credit counselors.org Christian credit counselors.org they would explore a debt management program which are basically involved the card or cards being closed he could keep one card out of it. If he has one with no balancer. He wants to open one because he wants to continue to have access to a credit card and then the ones that are close to be moved into the debt management program that's not in and of itself a part of the credit scoring formula so wouldn't automatically hurt his credit, although it would be it would reduce the overall credit that's available to him, which may pushes utilization up that's going to give them a lower interest rate, helping to pay that off 80% faster. The second option is to snowball. It takes most balance the largest and just keep style low and throw every available dollar beyond the minimum payment at the smallest balance in the move right down the line and several you have to let you go on that we have hit a brick. Hope that helps you and your friend. Thanks so much for listening to moneywise line from last today's broadcast is so we won't be taking any calls but we have some calls lined up some great information.

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We also announce one of the officers involved will testify against real Senate Republicans on Capitol Hill today took the wraps off of their own proposals for police perform the public and center Tim Scott of South Carolina leading the charge for the Republicans. He says the bill called the justice back since right message to African-Americans. The justice act is considered most ambitious GOP policing proposal in here's it's a direct response to the massive public demonstrations of the death of George Floyd.

Another black Americans treated the close that was out 170 points. This is SRA news today is my last times more. Check us out online moneywise wisely.org you'll find links to free resources at that website budget templates things like that. Also archives the past programs and links to finding a certified kingdom advisor in your area in multiple disciplines and how to connect with a budget coach at no charge. Moneywise, live.org, St. Petersburg, Florida hello Greg, what's on your mind's or in regard to strategy in regard finding out we have a keen donor fund for their pension approaches to security and we are with the question is really taking would try to get a strategy start.

Click out of my account that I have and start moving it towards the kingdom.

So we have some opportunity for that now looking at around the dollar investment donor account and the question came up. We also have a line of credit that is you know I think the point of the primer that around 3.9.5 so if I take it out of the IRA. I would pay on and then you know that I could either do it through the end we could pay off the line of credit. I think in that amount in a in a single year but somewhat looking at moving some of the money from the IRA in more into the kingdom very well first of all I love the fact you called your donor advised fund our kingdom account. I think that's great for the benefit of our listeners. A donor advised fund think like a charitable checking account where essentially you put assets into it could be cash, stocks, business interest, real estate, it's then perhaps converted to cash and then you get the deduction in the year of the contribution.

One time, for whatever amount you put in over the year and then you're able to distribute that as you would like to qualified charities not not for profits be at your church or any other ministry and you can do that quick and easy online Greg because you have a an IRA.

You've got a couple of options you can do a qualified charitable distribution directly from the IRA. Once you are over 70 1/2, but for the meantime, you would have to take a distribution from these retirement accounts and then recognize that his income and then make the gift. So I'm assuming you have access that's built up in these IRAs and so you're just looking for the best way to go about this. Are you trying to determine the timing of paying off the line of credit versus the additional giving you want to do or what is the main question this point with which it you have or would it be better for us to pay the interest you know what we are paid on product that we would have with the interest on that and I don't like pain, interest, and I don't so we are trying to debate your line of credit are duly start going from the IRA and what is the amount of the line of credit at this point that we just purchased the car where we get 15,000 and that was what will have that paid off within less than a year. It's what I have on the line of credit currently looking to give over the next 12 months out of the yet about okay well you know I think it's really a conviction for you all to think through breakthrough. I kinda like the idea of you getting money working in the kingdom sooner rather than later and so you will manage your money wisely and so you saying I want to pay a little bit interest so I can accelerate this gift. I think that's a great idea, but if you said you know what we just would rather be debt free.

Even though it's a relatively small amount of debt were paying a little bit interest. We like to just go ahead and knock that out that's given then free up even more money to perhaps we could do some additional giving both now and in the future. That would certainly be a viable approach so I don't think it's right or wrong decision here. It's really just a matter Greg of you and your wife praying through it, asking the Lord what would you have me to Dupree James 15 asked for wisdom, and in then make the best decision you can, but given the way you guys have handled your finances to this point I don't think you can make a wrong decision here. Greg, thank you very much we appreciate that call today and I think we have time for one more.

It would be Bob in Chicago. Bob, thanks for your call today.

How can we help you. I am a missionary semi retired live on my Social Security which is an automated 80 in my 80s now so I'm not going out to anything terribly big money financially, but anyhow have a good credit record and but open the pastoral six modern pestering 3 to 4 months I've gotten in some difficulty in that I've been going over my credit, my brother, my younger brother of fatal disease. Last much longer and I've had to travel on be helpful in that regard financially.

So what happened is I always pay off my credit card account that everything in advance. During the year, but I but I got to the point where I maxed out my accounts now on taking care of these short-term issues and I'm going over my interest rate on the card is taken me over the limit and I'm looking to figure out how to back that up so that I don't go over my credit limit because that is as I understand it detrimental to me maintaining a good credit rating. Well it is in the sense that you not only are with the over limit fees that you can be paying the extent to which your total debt is greater than 30% of the available credit, you have to you across all of your accounts. It's going to begin to reduce your credit score, but that's not my primary concern. I think the key for me would be what can you do to begin getting these balances down so we can get you out of debt completely. So you're not paying all this interest that's the bigger concern to me than in your credit rating. What is your plan at this point to begin to get this these debt balances moving in the right direction. And no, I'm not really the greatest of myself. Okay, so I'm not going to run out.

I'm a missionary I am an independent missionary at this point my career okay so I'm not not going out and doing a lot of fancy things okay I'm down to basics, sure, but here's what I would do a break here. I would encourage you Bob to visit with her friends@christiancreditcounselors.org what they're going to do is there gonna perhaps look at whether it would make sense for you to put these into a credit counseling program any of the accounts you do that with the need to be closed okay, but what can happen as those over limit fees to stop immediately. Interest rates can be reduced your bill to pay that off with one payment a month and paying off 80% faster start there and then let's see if we cannot get you moving in the right direction. If you have further questions after you talk to them give us a call. Christian credit counselors.org and then call us back after that, Bob. We wish you and your brother the very best.

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It does pay dividends very good okay so you're wondering what to take. Yeah I my left company. I was able to put 20% of site and then with the matching 6% it wound up being like 1/4 of my salary going to 401(k), but it also ordered another radio shows where well if you have outstanding debt, you probably should pay that off first before taking some of these other options. Well I think it's always important to make decisions like this Wayne in light of your overall goals and objectives. We don't want to. It's just safer saving sake, we really want have a plan. We want to prayerfully consider one of the goals that we have moving forward, both in the area of giving as well as lifestyle and ultimately what are we saving for want to build or provide for ourselves and her family during a season where he might redirect her time and energy to serving the Lord in other ways we may come a day where you can't work or you just want to slow down and certainly need to have the resources at that point to support yourself at the same time I think we can over accumulate, which is why it's really important we set what I call a financial finish line really answering the question how much is enough.

Tell me about the process you work through either on your own or with a financial advisor to define some of these goals and objectives. And if you have them.

How do you feel like you're doing with what you've accumulated so far, $30 medical but I have very low overhead because we moved in with older parent be taking care of sharing expenses in two years will be able to everything cumulated in retirement accounts.

To this point. 600,000 and how long do you plan to continue to work especially given the care that you be providing for your parents. Hopefully she's actually still working okay so you anticipate continuing to work, perhaps even for as many as 20 warriors okay very good and have you done some projections to still understand what perhaps your retirement savings goal is so you can evaluate with your current savings of around 600,000 what you might have when you get to that point. If you continue accumulating and what your target is sure well and I think the key is to really bring some definition around what is that goal, not just how many zeros would make me feel good or give me peace of mind and that certainly part of it. But what is that income I'm trying to generate to support the lifestyle I've been calling called to and what guaranteed income sources.

Might I have sinned.

It may be only Social Security but you could factor that in and say is the current trajectory.

I'm all I'm going to give me the resources that I could then draw an income off of to support my lifestyle at that point or will I have over accumulate. If I stay on this path, and so perhaps visiting with a retirement planner who could not try to sell you something. But where you could buy a few hours of their time to to do a plan like I'm describing would give you some real goals and objectives that you're shooting for in rather than just saying them to save as much as I can. You know like exactly what you're trying to put aside each year and then you can evaluate your progress along the way in terms of these new options that you have. We certainly think it makes a lot of sense to take advantage of any matching dollars, both on the 401(k) plan as well as the stock options because that's just free money and so I think that's a great opportunity but contributing.

Beyond that, especially with credit card and medical debt. I'd rather see you focus on paying that off quicker, even if that means perhaps redirecting some money you had intended to put away in some of these company-sponsored plans or opportunities to eradicate that debt in full and then at that point evaluating again how much do we want to then begin putting in addition to any matching dollars into those those retirement accounts so that would be my first priority at this point. Number one, doing some retirement planning. So you have some finish lines in mind, and you know how you're progressing toward them in the number two let's focus on paying off that debt sooner rather than later that I think your third option is then say okay with this additional money. The excess that I have because have low expenses and with now not having to service the debt. How much do I want to redirect into long-term savings versus perhaps other things including perhaps additional giving dissent all make sense.

All right Wayne, thank you for calling today. We appreciate you listening thanks Wayne. Let's go well in school west of the Ashley West quite a bit, Delta Junction, Alaska. Michael, what's going on up there.

How can we help you to send thank you so much for taking my call.

I appreciate it had a question. I own my property is totally debt free and I was curious about taking out some loans both unsecured and secured loans secured loans with my property of the collateral and the amount I would be looking for loan to be anywhere from 17 to 25,000 anywhere from 7 to 10 year timeframe so because times. Consider this option because the tax credits will expire at the end of 2019 ticket and at 30% tax credit for the tax credit Michael yes I'm sorry yes okay so my question is, you know, what would you recommend know it was you suggested a secured, unsecured, since the property is to free mailing free and clear versus unsecured and yes there is quite a considerable difference in the interest rate unsecured versus unsecured. My first question to you Michael would be what do diligence. Have you done to really approve out the benefit you're going to realize in general you look at it over a 20 year period, which is almost people evaluated in terms of the benefit you'll receive by moving to solar. I realize that we got currently 30% tax credits. It's available through this year.

I think that's drops to 26% next year.

In 2020 and then continues to drop after that. So ill have you looked at what the savings might be after that tax credit when you factor in your current electric bills you factor in the cost of the installation and the panels you evaluate your sunlight exposure and the opportunities you have there and in Alaska. What you know about the benefit you might experience so I have a number of those options you mentioned. However, though popular that there is no power there. The nearest power pole is about 20 miles and is quite costly to run power up to the property dusky consideration. Right now we can initiate a generator to keep four hours a day just to get our refrigerator you keep the temperature down for greater that's pretty much in the highlights we have sunlight but we are considering expanding enough in terms of our electric electric uses that time considering the solar powered option yes and I know here in Alaska in the wintertime we you to take in consideration we might good day get flowers sunlight in wintertime dust. I have a generator for backup and the battery capacity eight and in this solar system design. I have included the wintertime increased battery capacity so that four hour window will have a huge impact they will have some, but not if you can pack that's why it is such a costly loan amount said, 17, $25,000 because the batteries quite of high costly portion of the system makes a lot of sense. Well obviously you're in a different situation needing to bring power to the property as opposed to just trying to switch from electricity over to solar for savings purposes so makes a lot of sense and you've obviously done your homework. Tell me about the difference in the interest rates that you're seeing from the secured to the unsecured options. Lender goes, I might add that I didn't debt free for about 1517 years until recently I had an unfortunate accident had purchased a new pickle so I now have some debt which I plan on getting out of very quickly and because of that, and I found out because when I had a waiting vehicle that because I didn't debt free dated the interest rate can be higher because there is no record no.

In terms of surrender to speculate well my don't know what to do. I don't know how you could merely pay even though I have a full-time job. They had no credit history always comes back in session credit history rights well in the amount you're looking to borrow is obviously below the threshold of what you might be able to get in the way of a mortgage with the most competitive rates of the small amount plus the lack of credit history. I can certainly understand that's working against you. I think given everything I'm hearing Michael, I'd be more comfortable with you taking the secured loan. You've obviously purposed yourself to live within your means you've been committed to being debt free and you have been for a long time, and given your lack of credit history. Having the collateral of the home is going to keep the cost down in terms of the interest that you will be paying to take the salad and input the solar end so that would be the direction that I've had the I would head as long as you've done your homework and make sure that you build into your monthly spending plan how you can service the loan. In that way, will spend as little as possible and hopefully pay off as quickly as possible. This loan to put the solar ends that make sense in my initial thought was to commit double payments. That way I get out of there as quickly as I love it I love it. That's a great idea. Hey, thanks for calling. Thanks for listening Lord bless you sir, thanks Mike. We appreciate that and Rob West. We are out of time. Thanks so much, I will come back and do it again. Very good.

Thanks you for listening to moneywise live with Rob West, I'm Steve Moore. My thanks to our technical staff and crew with Roslyn Henry Amy's been with us today. Judy and cast of characters in Chicago with their listing moneywise live coproduction of moneywise and Rob West, I'm Steve Moore hoping this again