This episode of the Faith and Finance podcast is brought to you in part by Christian Credit Counselors. If credit card debt is weighing on your heart and you're unsure where to begin, our trusted partner, Christian Credit Counselors, is here to help. Their debt management program can help you pay off your credit card debt up to 80% faster, while ensuring you honor your financial commitments in full. Take the first step toward financial freedom today. Visit ChristianCreditCounselors.org or call 800-557-1985.
Mm-hmm. Many student loan borrowers are falling behind again, and the impact is more than financial. Hi, I'm Rob West. A recent change in federal law has reshaped student loan repayment. And as collections ramp back up, millions are seeing their credit scores drop.
If you're feeling the weight of repayment, you're not alone. Neely Simon joins us today with practical steps to help you regain control. And then it's on to your calls at 800-525-7000. That's 800-525-7000. This is Faith in Finance, biblical wisdom for your financial journey.
Well, we're always glad to have Neely Simon back with us. She's a certified credit counselor with Christian Credit Counselors, one of our valued and longtime underwriters. She's also a trusted voice for those navigating debt. Neely, what a treat to have you back with us. Thank you so much for having me on the show, Rob.
Neely, there have been significant shifts in federal student loan repayment recently. I want you to break this down for us. What's changed? And why are so many borrowers feeling the effect so suddenly?
So, in early July, the big beautiful bill passed. And what's happening now is that there's just two repayment options.
So, you have the standard, which consists of a 10 to 25-year repayment, or the new repayment assistant plan called RAP, which runs 30 years with payments set at 1 to 10% of someone's income with a $10 monthly minimum.
So, what's happened is that this new bill has really eliminated borrower-friendly plans like SAVE or income-driven repayment plans. And so, a lot of borrowers are really struggling, especially those ones who are in a hardship or unemployed because they're no longer going to have access to the deferments that they once had. What's happening is that there are a lot of people that are starting to fall behind. And federal collections, which resumed on May 5th of this year, really ended the pandemic error relief.
So many borrowers were not prepared. I can imagine those are pretty sweeping changes, and these are affecting people's credit scores as well. What kind of effect are we seeing specifically on credit scores? And what are the ripple effects when it comes to credit card debt and overall financial health? Yeah, so just to share some statistics with you, AP News reports that credit scores took a major hit this year.
They stated that over 2.2 million borrowers dropped 100 plus points and over a million lost 150 plus points in Q1 of this year.
So what's happening is that higher interest rates or even loans are now being denied.
So not just for credit cards, but car loans, mortgages, and rental approvals.
So what's happening is that many people are feeling the fact that they don't have as much disposable income in their budget, if any, and they're really forced to choose: do I pay my student loans, rent, or credit cards?
So what we're seeing on our end is that a lot of people are relying on credit cards to pay for essentials and basics, which is only compounding the financial stress and deepening their overall debt. Yeah.
Well, I know at Christian Credit Counselors, you don't work directly with student loans, but you do support those feeling overwhelmed by rising credit card balances or mispayments on credit accounts.
So for those leaning now on credit cards to cover expenses as these student loan repayments resume, Neely, how can credit counseling offer relief and a clear path forward? Sure.
So nonprofit credit counseling agencies like Christian Credit Counselors work one-on-one with their clients to review the debt, income, and then walk through a budget. We provide a debt management plan which consolidates your unsecured debt into one monthly payment.
So CCC works with creditors to lower your interest rates, your monthly payments, and stops late fees once enrolled. It's really important to understand that credit counseling is not a loan, a settlement, or bankruptcy. You're honoring your debt in full. You're continuing to make monthly payments to each and every creditor on the plan. The payments are just made through the agency.
And then what's also important to understand is that your interest rates are fixed the entire time you're on the program, and they range between 1 and 12 percent APR. Yeah, that's really helpful.
So for someone who's struggling today, Neely, what is their next step? The most important thing is don't wait. Reach out, figure out what your options are, take a look at your budget, find how you can create more disposable income, and then reach out to a certified credit counselor to see what they can do to help. That is so good, Neely. We appreciate your time today.
Thanks for stopping by. Thank you so much for having me. Folks, this is my preferred way for you to get out of credit card debt once and for all. The team at Christian Credit Counselors is ready to serve you with biblical advice and practical solutions. Go to ChristianCreditCounselors.org.
That's ChristianCreditCounselors.org. What matters most to you when selecting a financial advisor?
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Just click Find a Professional. Are you feeling overwhelmed by credit card debt? As followers of Christ, we are called to be good stewards of what God has given us. That's why our trusted partner, Christian Credit Counselors, is here to help. Their debt management program can help you pay off your debt 80% faster while honoring your commitments in full.
Take the first step toward financial freedom today. Visit ChristianCreditCounselors.org or call 800-557-1985. Hey, thanks for taking some time to be with us today on Faith and Finance. This is all about helping you navigate your financial journey in light of biblical wisdom.
So, if you have a financial question today on any topic, savings, investing, getting out of debt, your credit score, giving generously, no matter what it is, we'd love to tackle it with you. Go ahead and call right now. We've got some lines open. We've still got half the program remaining, so we've got room for you: 800-525-7000. Let's go to Chicago.
Hi, Aaron. How can I help you? Hi there.
So, pretty much my story is kind of, I was following the David Ramsey thing. I've paid off all of my credit cards, paid off my car as of April. And so I feel like I'm doing really well. My question is about the emergency fund versus like a savings.
So recently I've just had a few things happen. I've had dental issues. And it completely depleted my emergency fund, and I had to go into my savings. Um I'm not doing terrible, but I was just wondering How big of an emergency fund versus a savings do I need? Like, is there like a ratio like one to four, or you know, like something to kind of go off of?
Yeah, no, this is great.
Well, first of all, I'm delighted to hear that you made getting out of debt a priority, starting with that high-interest credit card debt and then the car. That's great. Obviously, you're living within your means, you're setting goals, you're exercising some discipline here.
So, that's really encouraging, Aaron. You should be thrilled at the progress you've made. Both emergency savings and what I'll call regular savings are important, but they serve different purposes.
So, say, so think of them like two different tools in your financial toolbox.
So, tool number one, the emergency savings, think about that as for the unexpected.
So, this is your safety net, money that's set aside for unexpected expenses, something you couldn't see on the horizon, a job loss, medical bills, major car or Home repairs. The reason I say major is you should be saving in the regular savings category, and I'll get to that in a moment, for routine car maintenance and home repairs because we know we're going to have some of those. But if there's something that comes out of left field that's major, that's where the emergency bucket would come in. Because again, that's for the unexpected. That should be liquid and safe.
I recommend three to six months of living expenses in that bucket.
Okay, the second tool in the toolbox is regular savings. And whereas the emergency savings is for the unexpected, the regular savings is for the planned.
So this is for things you know are coming, like your vacation, holiday spending, a new car, home upgrades or appliances, regular car and home maintenance, you know, not the unexpected major expense, but something that's more routine. I would have that in a separate savings account. And I'd be using an online bank with FDIC insurance so you can earn some interest on it.
Now, if you don't have either of them, I would absolutely start with the emergency savings and get at least up to one to three months' expenses. And then you might want to split your surplus between your emergency savings and some of that planned spending that you've got where you'd save in particular buckets for known expenses that are coming not today, but down the road. Does that make sense, though? Absolutely, because that's sort of what I'm doing right now. I'm just falling into that kind of by accident.
So I have my two checking accounts at the moment. I have one that's Taking a certain amount out of my paycheck, and then the rest goes into the other one.
So the emergency fund. Makes sense, absolutely, because I definitely have one that's separate. I do my car insurance in six months. Plans, so I make sure to take out like $100 a month, make sure that's covered.
So I'm used to that. It's just I I guess my savings that I'm having an issue with. My plan is more to buy a property, um, just land, not a house or anything like that. And um, I know that you need about like ten percent down or something like that. And So you're recommending basically make sure that I have I have two or three?
Should I have three? Yeah, I mean, it really depends on you. You could have one account and kind of do it on paper. And that's why we built the FaithFy app because what's in your checking and savings could then be in the app without moving the money, kind of allocated to these different envelopes, if you will, digitally speaking, for specific purposes. One might be emergency savings, and then you might have multiple planned regular savings categories.
Like I said, you might have one for that piece of land you want to buy. You might have another one where you know you're going to need a new car in the next three years.
So you're saving for that. We know you're taking a vacation next summer, and so we're saving for that. And so you've got to decide based on how much surplus or margin you have on a monthly basis, how much is available for any long-term savings goals. And then you would need to decide how much of that surplus am I going to put into my emergency savings versus one of these other. Other planned savings buckets, whether that's by opening multiple accounts and actually putting the money in each account, or doing that, tracking that digitally, but operating out of one account, if that makes sense.
Gotcha.
So it's more of making sure that I really don't touch the other account because yeah, that that's the problem is that because the bank is connected, I can move the money so easily. Yeah.
From some of my savings to my checking, that I do kind of abuse that. That's why I tried to set up a second account so that if I wanted it, it would take. much much longer Yeah.
Well, I think that's right. And that's where it can be helpful. You know, many of these online banks allow you to set up as many accounts as you want, essentially, and they don't charge you any fees. They're fee-free. But just the fact that to move the money, you know, from the savings account back to your checking requires, you know, two to three days through the ACH system, that's not a bad thing because it's not so readily available.
But at the end of the day, this is all about discipline and it's all about delayed gratification, knowing that, you know what, I want to be able to take that vacation and pay cash.
So I'm going to put the time in to save in my savings account. I hope that helps. Let's go to Oklahoma. Hi, Sheila. How can I help?
I have Have a financial advisor, and through him I got a CD, and I got the interest on it. But rather than taking the interest, I just reinvest it.
So I don't get you know, I'm not getting any money, it's just reinvested. Do I pay tithe on the interest that I got? Yeah.
Yeah, let me just let me answer the question and then back up and give you some thoughts on the tithe, which I love the principle of the tithe. But I would just say your tithe, if you're giving a tithe, it's on the increase. And so, yes, you know, what you're getting in the way of interest is your increase.
Now, you're reinvesting it, and so you haven't realized that increase yet. At some point, when you redeem that CD, you will get the money you put in back plus the interest. And that's the time when you actually have the cash in your hands or in your account, not reinvested in the CD that you can't get to. That's the time to say, okay, every bit of interest I received while I own this CD is my increase. I'm going to apply the principle of the tithe.
I'm going to take a tenth and give it as unto the Lord.
So it's really not today. It's once you redeem that CD that you'd want to do that.
Now, as to the principle of the tithe, I love it. I think it's a great guideline. We see it clearly under the law of Moses. We're no longer under the law of Moses, but I think. Clearly, New Testament giving is still proportionate and systematic, starting with the local church.
So, I think giving a tithe, a tenth of your increase, is absolutely appropriate. But we should be looking to go beyond that for those of us who have seen the cross, giving freely and sacrificially, and giving certainly cheerfully as well.
So, Sheila, hopefully, that helps you. I'd wait until you redeem that CD and then give as unto the Lord.
Well, we're just getting started here, folks. Plenty more to go here on Faith and Finance: 800-525-7,000. We'll be right back. If you love what you hear on this program, there's even more waiting for you at FaithFi.com. Explore podcasts, videos, articles, Bible studies, and devotionals, all designed to help you see God as your ultimate treasure and money as a tool to advance his kingdom.
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SMI provides step-by-step guidance for do-it-yourself investors, from those just getting started to those getting ready for retirement. More information, including a short video webinar on profit and peace of mind no matter what's happening in the market, is available at soundmindinvesting.org. Hey, thanks for joining us today on Faith and Finance. Hey, Faith and Finance is listener supported, which just simply means we can't do what we do every day to bring you this program without your generous support. And as we are in these summer months, giving slows back down ever so slightly.
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We'll get to as many calls as we can here in this final segment.
Next to Akron, WCRF. Charles, go ahead. Hello, yes. I was listening to your program a while back and I heard something about that. Housal benefits for Social Security.
My wife is going to be turning 65 this year.
Now, I'm already collecting Social Security, but she She never got enough credits to actually benefit from that. You know, she can't do it on her own. Sure.
So. Is there some some way she can Collect on mine now, or does she have to wait till I'm dead? No, no. Right now, she would have the ability, if she doesn't have enough work credits to qualify for her Social Security on her own, she would be eligible for what's considered spousal benefits, which the most she can earn as spousal benefits is up to 50% of your full retirement age benefit, even if she's never worked. She can get that as early as age 62, and you must already be collecting your Social Security, which you are.
Now, if she takes it before her full retirement age, which is probably somewhere between 66 and 67, she wouldn't get the max, which is up to 50% of yours. She would be reduced.
So, for example, if she files before her full retirement age at, let's say, 65, her benefit would be reduced permanently by somewhere between. Between 4% and 7%.
So instead of getting 50% of yours, she would get somewhere between 43% to 46% of yours. If she waited until full retirement age, then she could get up to 50% of yours, again, as a spousal benefit, even though she doesn't have the work history in her own 40 quarters of work to qualify.
Now, when you pass away, then she'd be able to switch to survivors' benefits, which would mean she could get your benefit and she dropped the spousal benefit at that point. Right.
So basically At sixty-five, which she's turning in October, if she sign signs up for that, she can take that benefit and it won't affect anything when when I die that she would get my full That's correct. Yes. Huh.
So I guess the thing to do is is sign up for it. Right.
So That's exactly right. The only question would just be, do you want to wait until she's full retirement age to get the max amount, which would be, you know, 66 or 6 somewhere between 66 and 67? And then, you know, or does she want to go ahead and start taking it now and get a little bit less? And then, yes, that surviving spouse, her in this case, can receive up to 100% of your benefit once you pass away. And so, you know, if you've, she will get up to the full amount you were receiving, and then she would drop her spousal benefit at that time.
Sorry.
Okay, well that sounds really good. And I I said since we don't need the money, it's better to wait until she gets to like sixty seven or something like that, you said. Yeah, that's exactly right. I mean, if you want to maximize what she can get and you don't need the money right now, then yes, she could wait until full retirement age, which she could look up her full retirement age, but it's going to be somewhere between sixty six and sixty seven. Great.
Well, thank you. Thank you very much. All right. Anytime, Charles, thanks for your call, sir. Let's go to Tennessee.
Hi, Amy. Go ahead. Hi, thank you for taking my call. I listen to your podcast faithfully.
So that's great. Appreciate you. A quick question. I'm kind of trying to figure out right now, you know, my budget. And I am contributing to a 401k, but I was wondering whether I could if I should just stop contributing to a 401k.
And instead have just six months of emergency savings like Saved up first before I do that. Yeah, it's a great question, Amy.
So, how much do you have in your emergency run right now? How many months? Not even too much, but close to two months right now.
Okay, good. Yeah, that's great. And you're not putting anything in the 401k currently? I am. I'm putting in 15% right now.
Oh, wow. That's tremendous. And so, are you getting any matching? Yeah, I am. I'm getting like 5%.
So okay. But what I'm hearing is, though, that because you're doing the 15%, you're not having anything left over, so you're not able to add to the emergency fund anymore. Is that right? And no, it's very tight right now. But the good thing is that I am debt-free because I paid off my student loan last year.
So hallelujah. Thank the Lord. Praise the Lord for helping me through that.
Well, here's where I would go from here. I think it's great. I would absolutely take full advantage of the matching. But beyond the matching.
Now, if you can dial back other spending so that you can contribute a meaningful amount to your savings, so you're continuing to head towards six months' expenses, that would be great. I'd rather you pull it from other places than the 401k if you can find it. You know, maybe there's a subscription you could cancel, or maybe you don't eat out quite as much. I mean, whatever it is. But if truly the thing that's preventing you from really getting your emergency fund up to six months in a relatively short period of time is the 401k contributions, I would say dial that back so that you're still getting the full match, but you're not quite doing the 15%.
And then when you get up above three months' expenses or perhaps close to six months, then maybe you turn that back on. But, you know, I'd rather you have a fully funded emergency fund at this point in your life than I would you putting the full 15% in the 401k, as long as you're still getting the matching portion. Does that make sense? Yes, it does. That actually completely just helps me.
Thank you so much. You're welcome, Amy. Thanks for calling and for being such a faithful listener. We appreciate it. Listen, folks, so thankful to have you along with us today.
I'm glad we were able to tackle so many of your questions. Thanks for your kind remarks about the program as well. Big thanks to my team today. I certainly couldn't do this without them. Grateful for Adam Suttiff, Taylor Stanrich, and Sandy Dickinson, and everybody here at FaithFy that makes this possible.
Hope you'll come back and join us tomorrow. We'll do it all over again. God bless you. Bye-bye. Faith in Finance is provided by FaithFy and listeners like you.
