Anthony Saffer VP / Financial Advisor CFP®, CKA®,

Alex Okugawa  / Financial Advisor CFP®, CKA®, CEPA® 

Alex Okugawa 0:00
Hello, and welcome to our segment cut through the noise where today we answer your questions that we’ve been hearing throughout the month. Today we’re talking about charitable giving child tax credits. Should I use cash? Or should I finance my purchases and potential student loan debt forgiveness? Okay, Anthony. So let’s kick it off. The first question we have here is I want to incorporate charitable giving into my budget, how do I start doing this? Yeah,

Anthony Saffer 0:25
First, starting with the goal, know what you’re aiming for. You know, I always counsel people put it put it as a priority. If you’re going to be giving, don’t wait till the end of the month, because you will run out of money, you know, started starting the beginning, give from the top. And then in the same thing goes with like savings is if you’re gonna prioritize it, put it in the budget first paid at the beginning of the month, and then go from there.

Alex Okugawa 0:45
Absolutely. Because if you prioritize it, you’ll make sure it gets done otherwise, like you said, you’ll wait to the end of the month, all the money trickles down. And oh, I only have this much left to give.

Anthony Saffer 0:54
Most people wait until they’re making more. And that doesn’t quite work. Yeah. Be faithful with the little you faithful faithful with much. All right. Next question for you. Any suggestions for what to do with the child tax credits that are coming in the mail?

Alex Okugawa 1:06
Yeah, that’s a good question. And so I think really, this applies to folks who don’t necessarily need the funds, right? There’s a lot of families who they are getting this payment. And it’s immediately being used for either food, rent, utilities, things like that. But there are a group of folks a group of families who don’t necessarily need that extra income coming in for their cash flow. And so what what do you do with it? Well, I think the worst thing you can do is start increasing your spending, right? You start spending more

Anthony Saffer 1:35
You get used to it.

Alex Okugawa 1:36
Exactly, what a smart thing to do can be is to, you know, literally invest that money for your child’s future. And it doesn’t have to be complex, you could set up an account for your child. But if you want to just keep it simple, open up an account in your name and start putting the money away, and earmark it for them for the future, rather than again, either spending it or just having it idly sit in cash,

Anthony Saffer 1:59
Because these are in advance of a tax credit guy. And so they are temporary in terms of them coming directly to two people. So therefore using it for something specific makes sense.

Alex Okugawa 2:10
Alright, next question. So interest rates are low. And this is a good question. Because a lot of people are wondering, should I pay for something with cash? Or should I finance it? And let’s just take an example like a car,

Anthony Saffer 2:22
Yeah, interest rates are low. So money is cheap out there. I think in some ways it’s becoming a bit of a trap for people is that more and more people are taking on debt? And I think that’s where you need to be careful. So yeah, it’s a good benefit, interest is low. But at the same time, we need to be smart about it. Because, you know, interest rates are gonna go up at some point, the economy cycle. And so there are a lot of things to be mindful of.

Alex Okugawa 2:45
Yes, it’s a good question. And we actually wrote down some questions that maybe you can ask yourself, when you’re trying to decide, right? Should I pay in cash? Or should I finance, you know, is that a low interest rate fixed or variable? Because that can have a big determining factor? Whether or not you want to finance our pay of cash? How much equity cushion do you have? Let’s say if you’re borrowing on a property, right, you don’t want to have that debt to value too high? Are the payments sustainable? If you have a reduction of income, right, that’s the thing about debt is debt presumes upon a certain future, we don’t exactly know what the future holds.

Anthony Saffer 3:15
Things can change quickly.

Alex Okugawa 3:16
Exactly. And then again, finally, is just do you have a plan to repay? Right? You don’t want to take on debt with the assumption, oh, I’ll just pay it off in the future. Have a game plan ahead of time?

Anthony Saffer 3:26
We don’t have all complete certainty, but certainly keeping those things in mind and being prepared for when things change make a lot of sense. All right. Last question, Alex, should I pay off student loans or wait to see if there is forgiveness?

Alex Okugawa 3:37
Yeah, it’s a really good question. You know, I know it’s a lot, a lot of people’s minds, especially those, you know, recent college grads, or even those in college wondering having to rack up a lot of student loan debt. What should I do here? You know, a couple of things to note is, debt payments have been paused until the end of January, right? That’s been extended. Again, it’s been extended a couple times now. But the Department of Education has essentially come out and said, this is going to be the last one. This is going to be the last extension we’re going to see exactly, we’ll see. Now, a couple things that are important to note about this is in the stimulus plan that was pushed through by the Biden administration, there are certain clauses within that stimulus package that state essentially, forgiveness of student loan debt is non taxable. Now, some people might be brushing it off, but that’s really important because before if you were to relieve student loan debt, the relief amount would become taxable to you. Right now. They’re saying this is going to be non taxable. Now, a lot of people are saying, This is essentially setting the table for a massive student loan debt forgiveness, okay. Whether or not that’s actually going to happen. I mean, we’ll see it could take a long time. I think it’s possible we could see some sort of massive partial student loan debt forgiveness, but even then, I don’t know if it’s necessarily something you should bank on, right.

Anthony Saffer 4:59
There’s a lot of people within both parties that are against this or some sort of full forgiveness.

Alex Okugawa 5:05
Yeah. And so what should people do between now and when the debt forgiveness ends? And I think what a smart thing to do is, you know, whatever your normal monthly payment was going to be, don’t necessarily spend it right. Maybe you actually do keep that set aside in cash. So when the payments do resume, you have that money there and it gives you flexibility should you choose to take that money and plop it down on the principal and pay it down lower, you can but it just gives you a lot more cushion and flexibility.

Anthony Saffer 5:30
Stay in control of your own financial situation. Don’t wait for some law to pass.

Alex Okugawa 5:34
So this is our segment cut through the noise. We hope you enjoyed it. If you have a question that you would like us to answer, you can send us an email at admin at one degree advisors.com in the subject line just put cut through the noise and then enter your question, and we’ll do our best to make sure we answer it next time our cut through the noise segment. Stay tuned.

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