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That's faith f i dot com slash give. Now let's dive into the podcast. Has your lifestyle changed in the last two years? Have you run up higher balances on your credit cards?
You wouldn't be alone. Hi, I'm Rob West. Inflation reared its ugly head two years ago, causing many to dip into savings or slide into debt, both of which are unsustainable. So what's the answer? Well, maybe it's time for a budget overhaul. I'll talk about that today, and then it's on to your calls at 800-525-7000.
That's 800-525-7000. This is faith and finance, biblical wisdom for your financial journey. Well, there's something you need to understand about the inflation numbers you hear in the news, such as inflation fell to 3.2% last month on an annualized basis. Some folks think that means prices went down, but it really only means that the rate of price increases has gone down. So if prices increased 3.2% for the period, you must also understand that they will stay that way month after month, even if the rate of inflation continues to fall. You rarely, if ever, see prices ratchet backwards. In a nutshell, it means that if inflation were suddenly 0%, the harsh effects of the last two years would still be with us.
It's important to understand that. Coupled with that disturbing trend is that wages have not kept pace with inflation. According to Bankrate, 60% of workers say their paychecks have fallen behind inflation over the past 12 months. That's up from 55% who said they were losing ground to inflation last year.
So if prices continue to rise and your paycheck doesn't keep pace, what do you do? Well, it seems some people have been tapping into their savings to make up the difference. Some 40% of Americans have depleted savings they built up during the pandemic. Others decided to use their credit cards. The Federal Reserve reports that credit card debt rose sharply in 2023, despite soaring interest rates.
Credit card balances increased nearly $50 billion in 2023 alone to reach an all-time high of just over $1 trillion. Savings will run out. Credit cards will be maxed out. So if you can't increase your income, you have to scale back your lifestyle. That means trimming your budget, or maybe giving it a complete overhaul. Some things that would have the biggest impact on your budget take a lot of time to implement, like downsizing to a smaller house or getting rid of a car payment.
So for now, we'll just look at a few things that you can do right away. First, freeze your impulse spending. And you do that by freezing your credit cards. I don't mean freeze your credit with the three credit bureaus, which by the way is another good idea. I'm talking about actually freezing your credit card or cards in a big chunk of ice in the freezer. That way you won't carry them around and be tempted to use them. Ah, but what about online impulse spending, you ask?
A fair question. Your online accounts probably save your credit card information. So you'll have to log in and delete them from your accounts. That way, you'll have to thaw the cards out of the ice before you can use them online. Maybe the urge to spend will be gone by the time the ice melts.
Now, all of that may sound silly, but it works. And we know that because studies show you save from 10 to 30 percent by using cash only. So take out a budgeted amount of cash to get you through the week for various spending categories. Leave your debit card at home.
When the money's gone, well, you have to stop spending. Next, double up on meal prep. When you're preparing a meal, double or even triple the recipe and put the extra meals in the freezer. And now you're asking, well, that's nice, but how does that save money?
Well, I'll tell you. The next time you've had a rough day, you're on the way home and you feel too tired to make a meal, you want to hit the drive through to get fast food for the family. For a family of four, that could be $50 or more. But wait, you don't have to stop because those frozen dinners are waiting for you in the freezer, maybe next to your frozen credit cards. Just pop a meal in the micro and save some serious cash. Okay, here's one more way to fight inflation and get your budget back in the black. Have your spouse or a friend cut your hair. You can start watching YouTube videos showing how to do it.
There are plenty of them. Buy the necessary equipment such as barber scissors and combs, maybe even an electric razor. It's worth the expense and it'll pay for itself soon enough. Many shops are now charging close to $20 for a haircut.
You may want to add a tip, but if you cut your own hair, you can save almost $250 a year. So there you have it, some ways to cut back on spending today to counteract inflation. All right, your calls are next.
We'll be right back. What if your everyday purchases could support biblical causes? With the all-new Cash Rewards Visa Card from Christian Community Credit Union, a portion of every purchase goes to ministries that spread the gospel, combat human trafficking, and protect vulnerable children. Plus, earn unlimited 1.5% cash back. Visit joinchristiancommunity.com. Membership eligibility required. Each account is insured up to $250,000.
This institution is not federally insured. If you enjoy this radio program, you're going to love all of the many different resources waiting for you at faithfi.com and the Faithfi app. You'll find powerful wisdom, free podcasts, articles, videos, and more from leading voices such as Randy Alcorn, Howard Dayton, Ron Blue, and our own Rob West. Grow in wisdom and knowledge by connecting with a community of thousands of Christians striving to be good and faithful stewards at faithfi.com or by downloading the Faithfi app.
Welcome back to Faith in Finance. I'm Rob West, your host. All the lines are full, so let's get to as many questions as we can.
Ocala, Florida. Hi, Rick. Go ahead, sir. Good afternoon.
Hi there. I am 58, almost 59. My wife's 57. We met 13 years ago broke. We have worked through some plans. We've paid off everything. We owe about 75 on the house. We have no other debt. She has 150 a year in income. I'm making about 60.
When's enough enough? That's a great question. So talk to me about, you know, as you all have taken a step back and you've just talked about your values and your priorities, I mean, what's most important to you guys and where are you headed and how does that then translate into financial goals as you look out into the future? Well, we took the time to pull all of our funding out of secular investments. Okay. We wanted to go ethical-based.
I was pastoring a small church in north central Arkansas before we moved here to Florida. And so we pulled everything out and we went into Guidestone and a couple of other investments. Nice. And we're at a, I hate to say a stuck point, but you know, she wants me to retire at 62. I'm kind of feeling that maybe we're, there's not enough set aside.
I think we have about 200,000 in our retirement accounts. Yeah. And you know, I feel like, I don't, you know, I feel like maybe we need to talk about longer and you know, we want to be able to give and provide for the kingdom.
Yeah. I love that. Well, you know, as you think about your financial situation and into whatever God's calling is next for you in that season of life, you're talking about retiring from perhaps paid work to redirect your energy to whatever God has in store, which may be more volunteers work. Maybe it's continuing to teach.
Obviously the Lord has gifted you there. You know, maybe it is something that does involve a different kind of work, maybe even for pay down the road. As you well know, we were created to be workers in the image of God and his calling doesn't expire until he calls us home. So, but I also recognize we want to be wise and faithful stewards and that includes saving appropriately. And so we have to take a step back and define our goals. And one of those goals is to be able to provide for ourselves and our loved ones, you and your wife in that season of life where either you can't work or God redirects you away from paid work. And so we start by saying, okay, what would our lifestyle look like that we believe God has called us to?
And that's a prayerful decision in and of itself. How much is enough for our spending even before we get to how much is enough for our accumulation? But once we've defined that, then we can put a spending plan together that says, okay, in retirement, this is how much we believe we'll need to cover all of our expenses.
We know that it gets simpler in that season of life because I don't know whether you all have kids, but if you do, hopefully they're off the payroll. You know, if you said you don't have any other debt, maybe one of the goals is as you enter retirement to have the house completely paid off. So that just takes this largest expense off the table. You know, there are other expenses that generally go away.
Usually life insurance is no longer needed, things like that. So we get to this retirement budget, if you will, and then we compare that to known income sources. So if your only income source between the two of you or sources is Social Security, well, we've got to match that to the budget and say, what's the gap going to be?
And then we have to, you know, answer the question, how are we going to solve for that? And usually we would say, well, you know, just a general rule of thumb. And that's all it is, is you need to have 10 to 12 times your income, because if you have that and then you pull 4% a year off of that plus Social Security, you should be able to get back to that 80% of your pre-retirement income.
If you don't have that, well, that's fine. But we just need to know that if we're pulling more than 4%, we get up to, you know, 5, 6, 7, 8% a year of your retirement assets. Well, they're going to be declining over time. And so either A, we're going to run out of those eventually, or B, we're going to have to continue to work part-time to generate income. Have you all kind of talked through those pieces? And do you know what your income needs will be in retirement?
Yes, we've looked at it. And, you know, we've talked that, you know, at this point, we're living on about $2,000 a month. Yeah, and you're bringing in $200,000 a year.
Yes. Yeah, so you're in a great opportunity here to do some planning, Rick. And I think this just really highlights the value of having an advisor who shares your values. Because if you had somebody who perhaps doesn't, they might just say, well, let's just accumulate as much as we can. And although there's probably still some accumulation that needs to go on that you and your wife need to consider prayerfully, once you define enough, the good news is you can get debt-free.
And based on your modest lifestyle and your really significant income at more than $210,000 a year, you should be able to save quite a bit. But you need to know what your ultimate goal is and why. And then you may be able to accelerate some of your giving now because you know that you're on track to over accumulate. Or you may say, no, we're not quite there yet. So we're going to continue doing what we're doing. But we're really going to focus on socking money away and getting it invested and growing because we're not at that ultimate goal yet.
And we do want the ability in, let's say, the next five years to redirect away from paid work, or maybe it's seven years, you know, and be able to follow God's calling on our lives. So I'm going to suggest, Rick, you connect with a certified kingdom advisor there in Florida. Just go to our website at faithfi.com.
That's faithfi.com. Click Find a CKA and you could find two or three to interview. You're not necessarily at this point looking for investment management, although you'll probably need that too.
Really, it's retirement planning, comprehensive retirement planning in light of your values and priorities as a believer, but also considering the financial implications. I think that will give you the peace of mind you need. Thanks for your call. To Chicago, Tyler, go ahead. Hi there, how's it going?
Thank you so much. Doing great, absolutely. Would you aggressively pay down student loans or would you count on waiting for student loan forgiveness as 10 years out working at a nonprofit? Yeah, you know, so, I mean, this is ultimately a conviction issue, I think, Tyler, that you have to wrestle and pray through. You know, some people will, people will come down in different places on this and I don't think it's, this is a command type issue. I think it's a conscience matter between you and the Lord.
So I can't tell you the answer. I mean, some folks will say, I don't want to touch student loan forgiveness, even if they offer it, I'm going to do everything in my power not to take it because I just don't think that's right. I don't think the government should be making those decisions and putting that on the back of other tax, other taxpayers. Others will say, listen, if the government's offering it, I'm going to take full advantage.
And I don't think there's a right or wrong solution there. I think that's ultimately something each person needs to provide. Now, I will say, just through the PSLF, the public service loan forgiveness program, I mean, this is a program that the government put in place, not some of this latest stuff that we're seeing by the executive branch. This was a well thought out plan to encourage folks to go into nonprofit work, you know, teaching in, you know, certain, you know, districts that are more challenging, that are hard to get teachers to go to. And so I would say if you're able to qualify through those 120 on time payments over 10 years, then take full advantage of that, in my opinion, but again, this is a conviction you need to have.
If you meet the qualifications of that program, you get the 10 years in, they're willing to pay it, then I just say pay those scheduled monthly payments. And when it's time for the government to forgive it, because you met the program's requirements, then you go for it. But at the end of the day, I think this is between you and the Lord, and I pray it through. Does that all make sense? Yes, sir. Yeah. Thanks so much.
Okay. Thanks for your call today. We appreciate it.
I'm Rob West. You're listening to Faith and Finance, and we'll have more of your calls and questions on the other side of this break. The number to call is 800-525-7000.
We'll be right back. We're grateful for support from Eventide Investments on the Faith and Finance program. Eventide's approach to values-based investing is grounded in the belief that humankind was created in the image of God with intrinsic dignity, value, and worth. Eventide calls this investing that makes the world rejoice. More information is available at eventideinvestments.com.
That's eventideinvestments.com. Welcome back to Faith and Finance. I'm Rob West. All right, let's round out the program today with your questions.
Back to the phones to South Dakota. John, go ahead, sir. Rob, thanks for taking my call. I appreciate it. Quick question here, Rob, not a quick answer.
My son proposed a question to me. He wanted to cash in his Roth IRA and pay the subsequent penalty on that to pay off a business mortgage. And I recognize that that's a retirement tool that he'll need down the road. He's 36 right now, but he owns a medical office in a small mall, and he owns both the strip mall as well as the practice. And my thinking is that if he did pay that off, since he's got another 30 years plus to work, he would be able to recapture that money for an IRA down the road and from the rent and everything else that he would get from that practice and the strip mall.
Yeah. Yeah, I guess the only thing I would counter that with is just the value of having that money in that Roth IRA, with him having 30 years between now and retirement for that money to continue to grow tax-free. And the fact that he couldn't just drop that back into it because you've got these annual contribution limits today, that's $6,500. So he'd be pulling that out, paying a penalty, paying the taxes on the gains, and miss out on that tax-free growth for a long, long time, which just makes that a really powerful vehicle for him. Not to mention the fact that if there is good debt, this is it. When we're borrowing for where the economic cost is lower than the economic gain, meaning this is an appreciating asset. It's not like he's paying off a consolidation loan from credit card debt or something. So this business and the strip mall should continue to appreciate over time. Is he having any trouble with debt service just based on the cash flow? No, I think it's just there's some challenges with some medical expenses.
And then I think a desire to be debt-free. Yeah, yeah. And I can certainly appreciate that.
I would just say, let's just try to pile back any profits that he has back into paying off and accelerating the debt payoff before I would look at pulling out of that Roth IRA with the penalties and the loss of the potential for the compounding growth over the next 30 years. I would use that as a source of last resort, if it were me. Good. That's very helpful. I appreciate it. All right, John. God bless you. Thanks for being on the program. We're going to round out the broadcast today in Indy. Alan, go ahead, sir.
Hi, Rob. I appreciate your ministry. Thank you.
Okay. My wife will be, my wife will be 62 next month. I'm 57. We've been planning on waiting to take her social security until at least 65 or maybe longer. But I was reading last week that if Congress doesn't do anything about social security by 2033, everyone who is drawing will have to take a 33% reduction. Yeah. So my question is, is there truth to that, number one? And number two, should we go ahead and take our social security and put it in some kind of account and let it earn money? Because thank God we don't need the money. Yeah, yeah.
Well, I can certainly understand that. And I can't predict the future, how long you're going to live or what Congress is going to do. Only the Lord knows those. But what I will tell you is, yeah, if in fact, no, no changes are made, the fund will run out somewhere between 2033 and 2035.
It tends to be a moving target. The latest numbers I've seen is that they'd be able to pay 75% of benefits. So not a 33% reduction, but 25%. In either case, that's not good. And for that reason, I don't see it happening. Nobody's going to want to be on the watch of Congress that allows those checks to be cut that significantly. So what's going to happen? Well, they're going to do what they have to do between now and then to shore it up, which means continuing to push full retirement age out or perhaps FICA tax increases or both, you know, would be on the table.
And I think those are the probably fairly likely. You know, here's the reality, though, it takes about 12 years for you to, for the higher monthly benefits to recoup the money you gave up by waiting. So if you expect to live to age 79, and again, only the Lord knows our next breath, but but that's essentially the point at which, you know, it would have made sense for you to wait because you would have been fully paid back for everything you gave up. And you'd now have this higher check for the rest of your life. So I think if it were up to me, and you didn't need the money, I'd probably come down on the side of let's wait and let that check continue to build. Because if you're in good health and the Lord tarries, I'd rather you have that higher check for the rest of your life.
And to Congress, we certainly don't know where they're headed. But I can tell you that this is too much of an issue for them not to address it between now and 2033. Okay, makes sense to me. Thank you very much. Absolutely, sir. Thank you for calling today. We appreciate it. All right, let's finish in Chicago, Maryland.
I've got just a minute left. Go ahead. Yes, that's interesting and knowing information on these high yield savings accounts that are mainly online accounts. Are they really what they proclaim to be? Yeah, they are in the sense that these are banks with bank charters. And basically the way they're able to pay these high yields of Maryland is because they don't have to pay the brick and mortar building costs.
And they don't have big, you know, staffs across the country staffing these brick and mortar locations. So they're able to pass that along in the form of no fees and higher yields. So absolutely, as long as there's FDIC insurance, and I'd probably look for one that's higher rated, just in terms of the strength of the institution. But yeah, I don't have any problem with them. In fact, the interest rates are fairly compelling. Was there a second part to your question?
Yeah, well, no, it's a different question altogether. Would it influence your credit score by canceling out credit cards you're not using and or reducing your credit limits? Yes, it absolutely both of those could reduce your credit score.
And here's why. If you're carrying a balance on other cards, by eliminating that one card that you cancelled or lowering the limit, it's going to make the balances that you're carrying on the other cards a higher percentage of the overall credit that's available to you. That's called credit utilization. So that could raise your score. Also removing that card from your credit history, especially if you've had those cards a long time could lower your score. The question is, will lower it enough? If you have really good credit, you know, well over 720, you know, you're not as long as you're not dropping yourself below 720, you're not going to get down in, you know, have any effect on yourself.
And if you're not looking to take on new credit, buying a house or a car probably doesn't even matter. So I just think it through from that perspective. Thanks for your call today. Well, we're almost out of time. If you liked today's program, why not share it with a friend and while you're at it, share the Faithfi app with them as well. Help us get the word out. Thanks for listening and sharing. And I hope you'll come back and join us again next time for another edition of Faith and Finance. Faith and Finance is provided by Faithfi and listeners like us.
