New Year, New Hope for Paying Down Debt with Neile Simon

This faith and finance podcast is underwritten in part by Christian Credit Counselors. If you're struggling with credit card debt but don't know where to start, our trusted partner Christian Credit Counselors offers a debt management program that can get you out of credit card debt 80% faster while honoring your debt in full. Contact them to get out of debt today at ChristianCreditCounselors.org. At this time of year, many people hate going to the mailbox or checking their email. That's because the Christmas bills are starting to roll in.

Hi, I'm Rob West. Yes, the holidays are behind us but for many people, burgeoning credit card balances are just ahead. If you think you'll have trouble making those payments, Neely Simon is here with a plan to help you get out of debt. And then it's on to your calls at 800-525-7000. That's 800-525-7000.

That's 800-525-7000. This is faith and finance, biblical wisdom for your financial decisions. Well, we're always blessed to have Neely Simon on the program, especially this time of year when credit card statements come out. Neely is a certified credit counselor with Christian Credit Counselors and underwriter of this program. And Neely, it's wonderful to have you back.

Thank you so much for having me on the show. It's good to be here. Neely, give us your take on where we are with credit card debt right now and why this may be an even bigger problem this year than in the past. Well, it's unfortunate, but when people feel confident about the economy, some tend to rely on credit cards more.

And then for others, it's not a choice. Rising costs due to inflation are forcing them to use their credit cards just to get by. Let me share some statistics with you. Credit card debt has surpassed $1.16 trillion.

Wow. Yeah, this marks a staggering 50% increase over the past three and a half years. By 2024, the average credit card debt for those carrying unpaid balances has climbed to $7,200. The situation is serious because as it continues to grow, the financial worries intensify, which create fear and anxiety and a sense of helplessness, which we know does not come from God.

Yeah, that's exactly right. And we're in uncharted waters as far as credit card debt is concerned. But to solve a problem, sometimes you have to realize that you need help. So, Neely, how does someone know if they need to reach out for credit counseling?

Yeah, it's a good question. So, if someone has an unpaid balance of more than $4,000 in credit card debt, or they're struggling to keep up with minimum payments, or maybe you even feel stuck because you're making payments with very little progress. If any of this sounds familiar, and your debt is causing you stress or sleepless nights, I would encourage you to reach out to Christian credit counselors and explore your options. Help is available and you don't have to face this alone.

That's right. And there's folks that really want to encourage you, pray with you, but help you get to a solution. Now, I've said many times that I don't like debt settlement. I don't like debt consolidation. But what I do like is debt management. And that's the approach that Christian credit counselors take. So, tell us how that works.

Sure. So, we have pre-negotiated interest rates, terms, and conditions already in place with the creditors, which are going to enable us to lower your payments and your interest rates. We then snowball the accounts, which enables us to get you out of debt about 80% faster while honoring your debt in full. Now, you have to keep in mind that the accounts you choose to enroll into the program will be closed, but you're not required to enroll all of your accounts.

And then our interest rates are going to range in between 1 and 12% APR, and they vary per creditor. Part of our free consultation also includes helping you create a budget if you don't have one. We'll help you understand how much disposable income you have and identify areas where you might be able to cut back.

That's great, Neely. I want to finish today with the biblical foundation for debt management, because I know Christian credit counselors is really focused on encouraging God's people and giving a biblical approach. Share that with us. So, the Bible teaches us that managing debt wisely is a way for us to honor God and experience personal freedom, living a life of generosity and service to others. A debt management plan can help you achieve financial well-being while staying true to your values by ensuring you honor your debts fully.

Romans 13, 7 and 8 encourages Christians to fulfill their financial responsibilities. Give to everyone what you owe them. Let no debt remain outstanding. Accept the continuing debt to love one another. Yeah, that's well said, Neely, and a great place for us to finish today.

Now, if someone wants to learn more, how can they get more information? Sure, you can visit our website at christiancreditcounselors.org or call 800-557-1985. Remember, our consultation is free, there's no commitment, and our goal is simply to educate you on your options. Folks, this is my preferred way for you to get out of debt, not debt settlement, not debt consolidation, but debt management, and christiancreditcounselors.org is the place to go. Neely, thanks for stopping by. Thank you so much. That's Neely Simon, Certified Credit Counselor with Christian Credit Counselors, an underwriter of this program.

We'll be right back. Do you feel like your hands are tied with debt, preventing you from serving God? If you have credit card debt, Christian Credit Counselors can help. Through our debt management program, we can get you out of credit card debt about 80% faster while honoring your debt in full.

For more information on how Christian Credit Counselors can help, visit christiancreditcounselors.org, that's christiancreditcounselors.org, or call 800-557-1985, 800-557-1985. Taking your calls and questions on anything financial, helping you see God as your ultimate treasure, that's our vision here at Faithfi, and that's our goal each day on the Faith and Finance broadcast. Thanks for being along with us. We do have some lines open. We're taking your questions for the remainder of the show today, 800-525-7000. Let's dive in today. We'll begin in Hanover Park, Illinois. Glenn, you'll be our first caller, sir. Go ahead.

How you doing, Rob? Thanks for taking my call. My job is, right now I'm in the 401k, but they also have a Roth, so I just wanted to gain wisdom, so I invest in both of them, should I just be in one?

Yeah. So, interestingly, I think there's a case for you to do both, and the rule of thumb is this, and this came from a study that I read not too long ago, where some researchers looked at thousands of situations based on the current tax bracket and a future tax bracket as they studied this over a number of years. They looked at how folks handled this and looked for the optimal distribution between traditional and Roth, and what they came up with was that you add the number 20 to your age, and you put that amount in traditional IRAs or 401ks, and then you put the balance in Roth. And what that just simply means is that the latter part of your career you're putting more in traditional because you're at the peak of your earning potential and you're getting a bigger tax deduction.

You also don't get as much benefit from the Roth without those years of compounded free growth. And just given the uncertainty of are we better in a better tax environment now in terms of rates or will we be in the future and we just don't know what the future holds, I mean, we know at least more than we did a month ago in the sense that at least now we know that the Trump Tax Cuts and Jobs Act is not likely to expire, or if it does, it will at least be replaced with something that will keep a low tax rate environment. But what about a decade from now or two?

We just have no idea. So this rule of thumb kind of allows for that. So in your case, what is your age, Glenn? 60 right now. All right, great. Yeah, so nice round numbers.

So in their research, this rule of thumb they came up with would say you'd put 80% in the traditional and 20% in the Roth, get the bulk of that with a current tax deduction and get some of it growing in a tax free after tax manner. Okay. All right. All right. Thank you very much. You're welcome, Glenn. Thanks for your call today. Let's go to Illinois. Diane, how can we help?

Hi, how are you? So my question is, I have an 18, soon to be 18 year old granddaughter that has about $16,000 in Edward Jones right now, and it's in a custodial account. So when she becomes 18, she has to make a decision. She doesn't know she has it right now, but the decision has to be made.

And I was just wondering, would it be better to take it out and put it in a high yield? Because I would kind of just like to have her just sit there and let it compound? Or can I put it into a Roth IRA? Or does she have to be working to do that?

She does. Yeah, it couldn't go into a Roth IRA unless she has earned income. And you can only put it in up to the amount of earned income she has. And it would cap out of the annual contribution limit for the year, which for 2024 is $7,000 under the age of 50. So you could take $7,000 of the 16 and put it into a Roth, so long as she has earned income.

If not, then there would not be able to be an option to put the money into a Roth. What is the money in currently? I know it's in a custodial account, but is it in cash or investments?

What do you have it in? I think it's an investment in Edward Jones, but I just know that when she's 18, it's out of my control. Right. And that's one of the challenges with a custodial account is that, you know, at the age of majority in your state, it becomes the child's, the minor's, now adult's funds. And so they get to do with it what they want, which is why we typically advise folks, all right, if you want to earmark money for the kids, keep it in your name.

And then you can choose the time or date you hand it over. In this case, it's automatically going to be hers. She doesn't even know about it today. You know, Lord willing, she has the financial and spiritual maturity to see, okay, I don't need to blow this.

This is a blessing. And, you know, whether she sticks a part of it into a Roth and, you know, puts it aside, which would be amazing, you know, 50 years down the road, or she takes a portion of it and uses it maybe to, you know, for college or, you know, to buy a car or something like that. So I think the time horizon is a big piece of this. And, you know, that may mean that you go ahead and sit down with her whenever you think the time is right. Maybe it's a year out and let her know that it's there and why it's there, why, you know, you or whoever put that money there, why that was done, what your hope is for how she would use this money. But at the end of the day, she will be the steward come two years from now and have to make the decisions. So I think at this point, you know, I like the idea of leaving it invested unless you have reason to believe she's going to need it in 18, you know, because she, you know, she's going to need a car or she's going to need to use it to offset college expenses, things like that. And if that's the case, you probably want to start backing out of those those investments, because with the market sky high like it is, we may find ourselves in our, you know, two years from now where the market's down quite a bit.

And so that 16,000 is all of a sudden 14,000. And if you know you're going to be using it or she is in the near future, then you'd probably, you know, want to move to a more conservative posture. If you have reason to believe she's just going to forget she has it and sock it away for the future, then you might want to leave it right where it is. Does that make sense? Yeah.

So before it comes to and she's going to be 18 in May. So before May, I still have control. So I could take it out then you're saying and do something else with it just in case of the market. Yeah, I mean, yes. Are you the owner of the account currently? Yes. Yeah.

Yeah. So until her age of majority until 18, you're the decision maker on this account. And so you could you can't take it out and use it for your benefit, but you can make changes to the investments. And so, yes, if you felt like there's a reason to get more conservative because you think she may need the money or there may be a good use for it in the short term once she's 18, then I probably would start stepping out of the market. But if you feel like and maybe you go ahead and have the conversation with her that a portion of it, she may want to just let can, you know, let it continue to grow, then you might want to leave it right where it is.

And I think that needs to be the driver at this point. If I took it out of the market, where would I I mean, what choices do I have to put it into? Yeah, I mean, it really just depends on and what you to be safe with it and to get a little bit of interest, a high yield savings would make a lot of sense. But again, it's going to come down to the time horizon. But I would say if it's money that's going to be used in the next three years, yeah, I just put it in high yield savings. Yeah, I'm hoping she just forgets about it. Yeah, well, I mean, yeah. And I think this is an opportunity over the next couple of years for you to lean into that and see if you can just kind of walk her through, you know, some really good, wise understandings of money management.

Let's do this. I'm going to send you a resource that I think will be helpful and kind of speaks the language of young adults. It was written for college students to help them understand not only God's heart as it relates to money, but just the practical mechanics of the dangers of debt and how you set up a budget. And they actually in the workbook, get some real life examples to start making decisions about money management, but all from a biblical lens.

It's called Open Hands Finance, and I'll send you a copy of the workbook, maybe take some time over the next 24 months to lean into this opportunity for her to grow in her understanding of how to be a wise steward of God's money. So she's ready when that time comes. But in the meantime, yeah, if you think you need to get more conservative, now's the time to do it. Thanks for your call, Diane. Stay on the line. Well, folks, we still got a lot more to go. Only half the broadcast underway so far, which means plenty of room for more questions. You have a question today.

Looks like I've got one line open, 800-525-7000. Stick around. A lot more to come just around the corner as we apply God's word to your financial decisions.

Check off the affordable box on your list and get back to what you really love, running your business or caring for your kids and have peace of mind while doing it. Visit chministries.org to enroll today. I'm so thrilled you've joined us today on Faith and Finance, our goal to help you see God as your ultimate treasure, not the things of this world, and use money as a tool to accomplish God's purposes.

Thanks for being along with us. We're taking your calls and questions at 800-525-7000. Again, that's 800-525-7000. I've got room for you. You can call right now. Let's go to North Idaho. Connie, thanks for being with us. Go ahead.

Hi. My husband and I own a small business, and we're 71. Don't have any retirement saved up. Long story, we've had an adult son live with us that has been extremely challenging, and a lot of resources have gone toward that. The business itself has about a $23,000 visa at a very high interest rate. Our home has more than doubled in value, so I had taken out a second mortgage and have recently paid that off. We had to pay for my son's car that was in an accident.

I mean, there's just too many things to mention, but got that paid off. Now, it's at zero, so the debt on that home equity line of credit, if I transferred the debt from the visa over to the lower interest rate, would be solely set aside as a business debt. I'm just wondering, because we've made a little bit of profit this year on the business, and I haven't paid in business taxes, would that debt of the visa that's high, the interest rate, be more beneficial to us than transferring it over to the home equity, and am I even able to do that in terms of mixing business with personal? Yeah. You mean from a tax standpoint or otherwise? For taxes and just for – I mean, is that a smart thing to do? I'm not quite sure.

Yeah. I would rather you not. I mean, the principle here is we don't mix business and personal finances with regard to the books, with regard to spending, and with regard to certainly with debt and debt service. The idea here is that I get it, that it makes sense on paper. One debt interest rate is much lower than the other, and yet right now, you essentially have unsecured debt, and as soon as you put it on that home equity line, now you've secured it to your home. And I guess the first question I would add is, I realize you said you made a little bit this year, and that's great, but is this actually a viable business, and what is the likelihood that in the future, you're going to be able to actually pay off this debt and get to a place where you're not incurring any more debt, and that this is actually generating some income for you, because if it's not, I'm sure you could find better things to do with your time. So how do you evaluate the business right now and just the possibility that it could continue to be a drain on you financially and not a benefit? I agree with that, and we've had quite a few people tell us that we should just stop the business, and so we're looking into some options right now, and I do appreciate that with the secured versus unsecured for the home. So then I think the next question is, what else can you do? And I think the idea there is, because it's a small business, your business is you, and you are your business, even though you want to keep the books separate so you can take full advantage of every deduction and be able to defend that before the IRS, and that's really why we don't mix the two, and it becomes problematic if we do, because all of a sudden you're saying, well, this is a business expense, and they're saying, well, it looks to me on paper like it's personal, and I don't see the line in the sand, and that's why it's really important to keep all the separate credit cards, accounts, books, all those kinds of things. But I think the question is, apart from you just taking every deduction possible, what could be done to cut lifestyle, look for other ways to get some additional income, is it time to kind of think about unwinding the business? Sounds like you've already gone down that road.

I mean, I think we need to take kind of an honest assessment of the situation, but yeah, I think I would not want, to your original question, to put this against your primary residence, because if something did happen, yes, there's negative fallout to you having a judgment against you if you're unable to pay that credit card, but at least you're not going to lose your home, and that would be my primary objective. So Connie, I hope that helps. I know these situations can be challenging, but we appreciate you being on the program today. Let's go to Schomburg, Illinois. Lucille, go right ahead.

Oh, hi, Rob. Thank you so much for taking my call. Sure.

So my question is, with brokerage investments, if you're making a withdrawal from it, what is the best way to calculate the cost of the investment? Yes. Because they get different options, yes. Sure.

And are you talking about like last in, first out, and those kinds of things? Yes. Yeah. Yeah. Do you have a CPA? I do. Okay. Have you had this conversation with your CPA? No. Okay.

I think that's really your next step. It really has to do with the methodology that you would use with regard to your taxes. So in some cases, you might use a last in, first out method, which just means the shares most recently purchased are the ones that are sold. And then assuming shares are bought while prices are rising, selling the newest shares first will generally result in the highest cost basis and a lower capital gain from the sale. But there can also be a first in, first out rule as well. And so it gets pretty technical and you have to be consistent in terms of how you do that.

So I think this probably warrants a call to your CPA just to say, hey, I'm getting ready to sell some stocks and I want to make sure I understand how you recommend or how you're going to be treating this from a standpoint of calculating a cost basis. He or she can share the methodology that they're recommending. Okay. Okay? Okay. Thank you very much. Thank you for calling.

Absolutely. Thanks for being on the program. We appreciate it. Well, folks, we are about out of time today, but I'm so thankful to have you along with us today. And you know what?

We're always grateful for your questions and you stopping by. At the end of the day, here's our heart, is that you would be able to manage God's money wisely. You know, I think it was Rick Warren, the author of The Purpose Driven Life and the pastor that said there's two questions on the final exam when you get to heaven. What did you do with Jesus? That's the most important.

And then second, what did you do with what you were given? And that's the part that we deal with here. Once you've surrendered your life and placed your trust in Christ for your salvation, now it's about stewardship of time and talent and treasure.

Yes, money and relationships and truth. And we want to help you be that wise and faithful steward of the resources, the money, that God has entrusted to you, recognizing it all belongs to him. And so now the way we're found faithful is to understand his heart, the heart of the master. The only way we can do that is to look to Scripture. And so each day, our hope and prayers, we can be an encouragement to you in that, give you some practical ideas to think about, remind you of a biblical worldview of money management, looking at everything through the lens of Scripture. Far too few Christians, even Christians today, operate truly out of a biblical worldview in every domain of life. We want to help you get that right in this money area.

It doesn't mean we have all the answers, but we know the source does, and that source is God's word. So hopefully you found something helpful today. Let me say thanks to my team today, Amy, Tahira, Jim, Anthony, and everybody here at Faithful. We'll look forward to seeing you tomorrow. Bye-bye. Faith and Finance is provided by Faithful and listeners like you.