The Debt Effect of Inflation

Inflation robs the spending power of your hard-earned dollars and we're now seeing the consequences. Hi, I'm Rob West.

Inflation is bad enough for folks living on a budget with some money to spare, but it's devastating for those relying on credit cards. I'll talk about that and the best solution to the problem today with Neely Simon. Then it's on to your calls at 800-525-7000. That's 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial decisions. Well, our guest today is Neely Simon.

She's a certified credit counselor with Christian Credit Counselors, an underwriter of this program. Neely, welcome back. Great to have you.

Thank you so much for having me on the show, Rob. We always enjoy it and, Neely, you always bring good news about how to get out of debt, but I'm afraid we're going to start with some bad news today, so tell us just what's going on. Yeah, so today consumers are putting more purchases on credit cards and paying more to do it. We're seeing many clients who used to pay off their credit card debt every month are now carrying a balance month over month, and with rising prices and inflation, it's really caused many Americans to feel suddenly cash strapped and more dependent on the credit cards to make ends meet. The Federal Reserve of New York just issued a report about credit card debt in the second quarter of this year, and it's surging as people struggle with inflation. Americans took on $46 billion in new credit card debt from April through June of this year. That's almost a 6% increase from the previous quarter, and there was also a 13% jump in new credit card accounts.

That's the biggest in 20 years. So we have to ask ourselves, what's happening here? Inflation is higher than it's been in 40 years, which is now running around about 9%, and people are just not prepared. We really need to adjust our budgets and be intentional with our spending, because there is no doubt that carrying a balance month over month is becoming more expensive.

And let me break that down for people to help you understand why. The reason is that most credit cards have a variable rate, so there is a direct connection to the Fed's benchmark. So as federal fund rates go up, so does the prime rate, and credit card rates follow suit. I know even on my own credit card statements and looking at it just in this past month, they've gone up anywhere from 1.2 to 1.5% APR, and I'm someone who doesn't carry a balance month over month, so I can only imagine what's happening with other people and consumers out there.

Well, Neely, as we know, if folks were already living paycheck to paycheck, the effects of inflation are real. I've seen studies that say perhaps as much as $500 a month more for the average American family, which means some are spending even more than that, and that's obviously hitting them hard. I'm curious, you mentioned a 13% increase in new credit card accounts in the second quarter.

Just how many is that? Well, the number is staggering. Some 233 million new accounts were opened, and we haven't seen a number that high since 2008. I suppose there's one bright spot, and that's that experts are saying that the delinquency rate for credit card debt is relatively low, but I think time will tell. Total credit card debt has jumped up 100 billion in the second quarter to reach a whopping 890 billion, and it's not over. Lending Tree just did a survey where 43% of the respondents said that they were likely to add to their debt in the next six months.

Wow, so that means it's probably just a matter of time before we see a $1 trillion number in terms of what's actually owed in total credit card debt. Neely, obviously this is placing a huge hardship on folks. We're going to talk just after the break about the solution, but I suspect as you take those phone calls, you're hearing from a lot of folks who are really discouraged and in a desperate situation, huh?

Absolutely. People are struggling not only because of the inflation, but it's putting stress and strain from COVID to a lot of people are not receiving bonuses or during the COVID time were impacted by having a reduction in hours. And now they're trying to play catch up, and they just can't seem to break the cycle with inflation and rates going up as well.

Yeah, and many don't have an emergency fund to fall back on, so they're going to the credit cards as the default solution. Well, Neely Simon's with us today. When we come back after this break, we'll have the solution, some good news to help you get out of debt.

She's a certified credit counselor with Christian Credit Counselors, an underwriter of this program. Much more to come with Neely Simon on MoneyWise Live. Stay with us. We'll be right back. Great to have you with us today on MoneyWise Live. I'm Rob West, your host.

Joining me today, Neely Simon. She's a certified credit counselor with Christian Credit Counselors, an underwriter of this program. You can learn more at ChristianCreditCounselors.org. Just before the break, Neely was sharing some startling statistics out from the Federal Reserve of New York about credit card debt. Massive increases in the amount of debt with now total credit card debt at $890 billion with a B. Also a massive increase in the number of new credit card accounts. A 13% increase, which was the biggest increase in over 20 years, which is 233 million new accounts. All of this really coming from post-pandemic finances, but on top of that, high inflation, the latest reading nearly 9%, which is really putting pressure on the average American family, and that is leading to more debt.

Neely, that's, of course, dire news for the average family, but we have some good news. There's a way out of credit card debt that doesn't involve bankruptcy, which, by the way, destroys your credit rating, and is not debt consolidation, which takes out new debt. That's where Christian Credit Counselors comes in. So tell us how you help folks get out of credit card debt.

Sure. So the service that Christian Credit Counselors offers is called a debt management program. And the way that we're able to benefit people is that we have pre-negotiated interest rates, terms, and conditions already in place with the credit card companies that enable us to get people out of debt 80% faster while honoring their debt in full. And the way that we do this is that we're able to lower interest rates anywhere between 1 and 12% APR, and then we also snowball the debt.

Yeah. And that's obviously something we talk a lot about here. Snowballing your debt is a powerful force because as those balances come down, there's one level monthly payment. That on top of the reduced interest rates is really the secret sauce. Nealey, we mentioned that bankruptcy, of course, destroys your credit rating, among other things. Talk about the impact of debt management on your credit rating because I know that's a concern for a lot of folks.

Yeah. So with debt management, the impact on the credit score isn't from the actual program. It's actually from closing the accounts. So the amount of impact is going to be really relative to two categories, and that's payment history and credit utilization. If you're closing down accounts that have high usage, then the impact is usually pretty minor because you've already taken the hit based off the high usage, and you're really not shutting down much available credit. The goal is really to get help with the high APR, high balance accounts, and then try and keep your longest standing account, if it makes financial sense, open, as well as maybe one other general credit card. That way, you're really coming up with a long-term solution to getting out of debt. You're keeping revolving credit lines open, which is 30% of your credit line, and then you're going to work on paying down the accounts that you have open to hopefully get eventually down below 30% of the credit limit because that's the sweet spot for your credit score.

Yeah, that's really helpful information, Neely. Here's the reality from my perspective. We're not thinking about your credit rating. We want you to get out of debt. But the good news is, as Neely said, the debt management program itself is not a part of the credit scoring algorithm.

And the reality is you're closing accounts all the time in all likelihood, and so it's a very minor effect for most folks in terms of the impact of closing an account. Now, Neely, a lot of folks get into credit card debt because they haven't been living on a budget. How do you at Christian Credit Counselors help folks with that so they can manage their money better and make that one monthly payment on their debt? Yeah, so part of our consultation process, which is free, is that we walk people through a comparison estimate, which is going to outline their total amount of debt, how much we're able to save them, not only on the monthly payment, but also in interest, what their payment looks like, and then also what our fee is. And then the next step is that we walk people through a budget. We really want to figure out how much disposable income they have at the end of the month and then maybe make some suggestions in terms of how they can be more intentional with their spending.

Yeah, that's really helpful. Yes, and so after going over the comparison estimate and the budget, then we send all that information to you along with the next steps and then allow you to think about or share the program with a spouse, so there's no commitment. The call is confidential. We really just want to educate you on what your options are with credit counseling.

Yeah, very good. What about privacy, Neely? A lot of folks might be wary of sharing their personal financial information.

Absolutely. So it's important to understand in that free consultation process, we don't need any personal information. The information that we would ask from you is name a creditor, balance, interest rate, minimum monthly payment, and with that, we're able to generate the estimate. I also think it's important to understand that as a certified credit counselor, everyone who works for Christian credit counselors has a DOJ background check, so we've been helping people for 32 years. You're working with people who have hearts to serve, and we have an A-plus Better Business rating, and then we also are aligned with some of the largest Christian ministries in the world. So we have a strong reputation, but more importantly, it's really a privilege to help people who are struggling with their finances and to be able to come alongside and offer solutions. Well, I know that's the way you and your team feel, and it's why we at MoneyWise recommend Christian credit counselors. The real beauty is that this truly is a ministry, isn't it, Neely? It really is. In the conversations that we have with people, you really learn their hearts and their pains when you're talking about their finances and their struggles. So to be able to be in a position where you can provide solutions and resources and really help people to see the light at the end of the tunnel and to be able to get out of this bondage, there's such a tremendous release and peace and freedom that you get from this process. I know there is.

Neely, we've got just about a minute and a half left. Can you end with a story, perhaps, of somebody you've helped get out of credit card debt? Yeah, so going back to the topic of inflation and COVID, I just was helping a gentleman, Mark, this past week, and he had called up. He had about $25,000 worth of credit card debt. He has a family of four. His wife is only working part time, homeschools the kids. And during COVID, his hours were reduced and then he wasn't receiving his bonuses. So he really relied on the credit card debt to get him through that period of about a year and a half. Now that things are back on track, he's really struggling to break that cycle. You know, he's making payments a little bit more than the minimums, but he really just can't have breakthroughs. So it was really great to be able to offer him a solution to getting out of debt and to learn about his experiences and his family.

Oh, I can only imagine. And what an encouragement to know that there's a plan that's actually going to get him out of debt as opposed to just treading water with the normal minimum payment to your credit card. All right, Neely, how can folks get more information on a debt management plan from Christian credit counselors?

Sure. So you can visit our website at christiancreditcounselors.org. You can call us at 800-557-1985, or you can go to the MoneyWise website and find us there as well. Yeah, well, I know you all have helped hundreds and hundreds, probably thousands by now, of our MoneyWise listeners, and we're so grateful for how you do it. Neely, thanks for stopping by today.

Thank you so much for having me. That's Neely Simon, Christian credit counselors and underwriter of MoneyWise. The website, again, is christiancreditcounselors.org. Your calls are next, 800-525-7000. I'm Rob West, and we'll be right back after this break.

Stick around. Great to have you with us today on MoneyWise Live, biblical wisdom for your financial decisions. We've got some phone lines open. We'd love to hear from you today on anything financial.

800-525-7000 is the number to call. We've got some lines open. Let's head to the phones. Cleveland, Ohio. Kathy, thank you for your patience. Go right ahead.

Oh, thank you. I've been laid off. I was laid off at COVID, and I haven't found a job yet. It's been almost two years, and I've been living off my credit cards. I'm paying my minimum pay. I'm not putting a dent in anything, and I don't know what to do. I have a very limited income.

I live off pension and government assistance. Yes. Yes.

Yeah. What do you have in credit card debt right now? About $10,000.

About $10,000. All right. And are you able to make the minimum payments, Kathy? Yes.

Okay. Yeah, so the key is, and this really goes to what we were talking about in our first two segments with Neely Simon, the key is we need you to continue those payments, but we need more going to principle than it is right now. The challenge is with these interest rates rising from the Federal Reserve as an attempt to fight inflation and slow the economy, the variable interest rates on those credit cards, which were already sky higher, continuing to head higher, which is really causing you some challenges about getting these going in the right direction. A debt management program, Kathy, when you have more than around $4,000 in credit card debt is really going to be the most effective solution. Essentially, any of the cards that go into credit counseling would be canceled, so they would be closed, but the benefit is you would enjoy the lower interest rate that these credit card companies offer to those in a credit counseling program. And the combination of a level monthly payment, probably around 3% of the outstanding balance, probably something very similar to what you're already paying today, the combination of that plus the lower interest rates that the credit cards would offer would allow you to pay this off 80% faster. Basically, you'd have more money going to principle every month. You'd send one payment through the debt management credit counseling agency. We recommend Christian credit counselors, and they would distribute it to the credit card companies.

But I think that would get you at least knowing that your balances are headed in the right direction and allow you to pay those off much quicker. How does that sound? Oh, great. Thank you.

You're welcome. So you would just head, if you're comfortable using the computer, just go to Christiancreditcounselors.org. That's Christiancreditcounselors.org. This is a not-for-profit ministry staffed by believers that have had extensive background checks, but they'll work with you to get a budget in place, take a look at all the new lower interest rates that each of your credit cards would offer, and get you enrolled in the program.

And I think that will be a real encouragement to you. There is also a toll-free number on the website, Kathy, if you'd prefer to contact them over the phone. So Christiancreditcounselors.org is the place to go, and let us know how it turns out. We'll look forward to hearing back from you. 800-525-7000 with lines open.

Let's stay right there in Cleveland. David, you're next on the program. Go ahead, sir. Hi, Rob. Thank you.

I'd like to know your opinion on the wisdom of taking Social Security at early age as opposed to full retirement age. I've listened to your program a lot, never really heard you address that, your opinion. Yeah. Well, tell me how long you're going to live, David.

No, I'm just kidding. That really is the key question, and that's what makes it tough. Here's the reality. You know, if you start taking Social Security early, so at age 62, your monthly benefit will be permanently reduced by about 32%. However, you might receive, let's say, for the average benefit check, $60,000 or so in benefits by the time you reach full retirement age. If you wait until then to receive benefits, you're essentially behind by that amount you would have collected, and it's estimated that it'll take 11 years and 7 months to recoup that that you've given up by not taking it early. So you'd have to live to, again, on average, 78 or so years old to break even. Now, after that, though, you'd be ahead by, let's say, $500 a month for the rest of your life, again, using the average benefit check and that 32% that you would be able to, you know, realize by not taking it early. So it really does come down to, you know, if the Lord comes back, it doesn't really matter, but if he doesn't and you're in good health and, you know, you want to wait until full retirement age and you live these roughly 12 years beyond full retirement age, which the average American these days does, then, you know, for the rest of your life, you'd enjoy that higher benefit check. Does that make sense?

It does. The downside for me of, and you can weigh in on this, the downside for me of not drawing early, and I'm just a few months out from retiring, Pat, just a little over 62 years old, the downside of waiting is the drawdown, the higher drawdown on my retirement accounts while I'm waiting for that full retirement to kick in. So then I lose that, the more I draw down, obviously, the more earning power my investments lose quickly.

Yeah, that's right. However, I think you're not going to get a guaranteed 8% in the market, number one, and number two, typically when you get to that point, your allocation of your investments gets somewhat more conservative. So you're probably not, you know, even if the market's performing really well and you would have gotten 8% plus in the market, you're probably not realizing the full benefit of that because you've got a larger allocation toward fixed income. So given the option of taking a little bit more from the 401k between 62 and full retirement age only to get that guaranteed increase of 8% a year on the Social Security, generally it comes out better to go ahead and take the benefit increase because it's guaranteed and it's not in the market. You're obviously at risk and because of a more conservative, typical allocation, you probably, you know, aren't even in a good market going to come anywhere close to 8% a year.

Does that make sense? It does, but just to kind of push back a little bit, then the 8% that I'm earning is not an 8% on my entire portfolio. This is an 8% on that amount that I'm receiving from Social Security. Right, but on the 8% increase on the Social Security, it's on the whole thing.

The only thing you're giving up in the 401k is just the amount that you're taking out. Let's do this. I'd love to continue this conversation. I got to hit a quick break.

You hold the line and we'll pick up on the other side of the break. This is MoneyWise Live. We'll be right back. Have you with us today on MoneyWise Live? I'm Rob West, your host.

This is where we apply biblical wisdom to your financial decisions and choices. We're glad you're here today. We've got two lines open, 800-525-7000.

Belinda's in Chicago. You're next on the program. Go ahead. Hi.

I have a question and some concerns. I filed bankruptcy a couple of years ago. I reached the discharge date where I can actually purchase my home. I have money saved for down payment. My credit score is 760 now, and I have $30,000 in credit card debt that I'm not using.

So I want to know what can I do to not put myself at risk again to not be able to purchase when the time comes, when the market changes or whatever. Is that exactly what you would be looking for? The credit?

Is that what you're thinking about? I was in that position to have to have filed bankruptcy because of divorcing a lot of other things. I don't want to put myself in that position again. I'm thinking maybe I need to, but I do know if I close the credit cards that could hurt me because they're closed accounts.

I make enough money on my job to take care of my expenses every month, so that's why I don't have to use the card. But with this inflation that everybody keeps talking about, I don't want to do anything to jeopardize me staying in that position to be able to purchase my home when this market levels out. Yes. Okay.

Very good. Well, I think the key is you just want to try not to borrow for anything and try to pay down the debt as much as you can. If you were to buy a home, you want to save 20% for the down payment, which would avoid the private mortgage insurance and ensure that you have enough equity in the home. But really take a close look at your budget and make sure that it fits well within your income. And a good rule of thumb for that principal interest taxes and insurance payment would be 25% of your take-home pay. And as long as you really keep that mortgage payment within that 25%, then you should be in a good position to make sure you can cover everything else out of the remaining income, which is where that guideline is not a hard and fast rule, but just that a guideline can help you make sure you don't get overextended, putting you back into his position like you were in before. Does that make sense?

Right. It does because I don't have any debt now. All I have is my monthly rent payment. That's all of my car insurance.

That's all I have. Well, and my cell phone bill. Other than that, I don't have any other bills. So, you know, I'm able to pay those and have, you know, a surplus left over. So it's just like I guess, like you said, just keeping out my budget and make sure I don't go out and do anything extreme or crazy and just kind of like let it stay like it is basically. I think that's right.

Yeah. I mean, it sounds like you certainly have gotten your financial house in order as long as you really have a good plan. You have an emergency fund to fall back on, which of three to six months expenses. You know, you don't presume upon the future with your borrowing and you try to operate as much as you can on a cash basis.

And then, you know, as you build up that surplus, starting with the emergency fund and then longer term savings for things like cars and other things as you need them. You know, I think that's really the key, Belinda, to moving forward and making sure you don't ever put yourself in a really difficult spot again. So listen, all the best to you. I'd love for you to stay on the line. I want to send you a copy of Howard Dayton's book, Your Money Counts, that I think will be an encouragement for you as you think about God's way of handling money. We appreciate your call today. To Pittsburgh, Glenn, thank you for calling. Go right ahead.

Good afternoon. One of my nurse co-workers has a 17 year old living at home that's going to start college. I think their combined household income is going to preclude them from like the major Pell grants and whatnot, financial aid. So I thought perhaps a better approach would be go for some of the smaller scholarships that go overlooked and that perhaps if they could get a few of them, they may get some reasonable amount of help. Does that sound like a sound plan? And if so, do you have a comprehensive list of a website has a comprehensive list of the scholarships? Yeah, I'd be happy to help with that. And I think you're right. I think if they don't qualify for need based aid, then, you know, there are a host of scholarships out there.

We're kind of in the throes of this right now. My oldest is a senior and he does really well at school and he's looking to get a full ride to college. But he's going to in part do that through scholarships. Well, the other night he was provided a list by his the counseling office at the high school of maybe 30 different scholarship portals. And he went in there and just in one evening applied for about forty thousand dollars in scholarships, just sitting there at his desk, applying away for everything he could find. And his goal is to get that up to one hundred thousand on top of the merit based grants and scholarships that he's going to receive. So, you know, I think it's really a matter of the willingness to put the effort in and the time that you put in to using multiple scholarship search engines, starting well ahead of the school year, not ignoring the small awards because many small scholarships add up fast watching the deadlines. For instance, in his case, the first few that he was applying for had a deadline of September 1st.

And so he was trying to get them in. Well, you know, a lot of folks, this isn't even on their radar yet because they're just getting back to school. But I think it's it's really important to stay on top of that and not miss the deadlines, because especially these earlier ones is going to be key to getting in the running, especially for the ones that the masses haven't applied for because it hasn't hit their radar yet. I think, you know, to the extent the scholarship requires an essay and many of them do, you know, get that done early so you have time to have a teacher or somebody else review that and give feedback before it's submitted.

Of course, not to write it, but just to give feedback and critique. And so I think, you know, that's really the key in terms of some search engines or websites that you can search for scholarships. Fastweb.com is one. Scholarships.com. There's one called niche.com that has some really specific scholarship opportunities. And you obviously want to search and sort by the ones that apply in this situation.

But anyway, I think those are kind of generally the ideas behind how you might think about taking advantage of this. And, you know, one more example from my family. My wife grew up in a single family home. Her mom made it very clear if she was going to go to college, there just wasn't money there. She was going to need to do it on her own. She was a great student and ended up with over one hundred and fifty thousand dollars in scholarships.

Put herself through college the entire way with zero debt. So it is possible, Glenn. And I think just encouraging these friends of yours to get on this early and be diligent about it is really the key to having some success. Thank you.

Will the show be archived so I can have her listen to your advice? Absolutely. Yep.

It'll be right there at MoneyWise.org. You'll be able to get to it probably tomorrow. Thank you, sir. Good day. All right, Glenn. Thanks for calling.

God bless you, my friend. You know, folks, as we think about the cost of college, you know, it really is incumbent upon us as parents to, number one, plan ahead to the extent we can and save early and often. Number two, I think it's really important to be communicating with your kids about the feasibility of them being able to go to college in terms of your financial readiness so that they know going into it. They can go check the cost of attendance, which each college furnishes, and match that against what mom and dad have communicated is available so they know what they can pay for. And to the extent there's not money available, what they're going to need to do and earn in the form of scholarships and awards and grants, perhaps the work they'll need to do in the summer or on campus or as a last resort, any borrowing they'll need to do. So really critical that you have those conversations early.

But I think to this conversation around scholarships, tons of opportunity out there. You just need to stay on top of it. We're going to take a quick break when we come back much more on MoneyWise Live.

Stick around. Great to have you with us today on MoneyWise Live, biblical wisdom for your financial decisions. Before we head back to the phones, it's Monday. It's a great opportunity to check in with our friend Bob Doll, who joins us on the program each Monday afternoon. Bob is with Crossmark Global Investments. He's chief investment officer.

And Bob, interesting times in the market. The headlines last week, which precipitated the big Friday selloff that continues today, were all about the Federal Reserve chairman. Tell us what he said that spooked markets. He said we're going to fight inflation. And then after we heard that, he said we're going to fight inflation.

I think you repeated about five times. He's reiterating, Rob, that the Fed's job is to bring inflation down, even if it weighs on economic growth and causes economic pain. And that's new.

He has not said that before. And that's what spooked the market Friday and today. Yeah, obviously we have to fight inflation, and that's one of the Fed's primary jobs. But the key is the second part of what you just said there, and even if it causes some collateral damage in the economy. So how do we interpret that?

What is a possible outcome given his aggressive posture? So to get inflation out of the system, the Fed has to slow things down. And that means slow economic growth. It means fewer job openings. It probably is going to mean some people will lose their jobs. These are the difficult and painful parts of fighting inflation. Yeah, no doubt about it. Bob, have we already started to see any of that, either on the corporate earnings side or just with some of the economic data?

We have, Rob. Just the early signs of economic weakness. There are a number of companies who are talking about the second half not being as robust, not as much visibility.

Wall Street analysts are bringing down earnings estimates for a lot of companies in the second half of the year. Money supply growth, money is what powers the economy. That has slowed significantly. So there are a bunch of early signs, not severe, but enough for us to have our guard up, Rob. Yeah, no doubt about it. Bob, as we look out across the rest of the world, I assume we're seeing similar things globally.

We are. In fact, the U.S., relative to other developed parts of the world, are doing pretty well. Europe perhaps is in a recession already. In fact, the central bank basically predicted a recession and central banks almost never do that. And we're seeing whether it's the eurozone or Japan, China because of the lockdown related to COVID, we have a lot of economic weakness around the globe, which is only feeding the fears of these earnings concerns that we mentioned earlier.

Yeah, no doubt about it. Bob, for somebody who's a long-term investor, 10 years plus, they feel like they have the right mix of investments for their age and risk tolerance, what would you say to them? I'd say stay the course, Rob. I mean, you know, we're down, well, at our worst, we're down more than 20%. We're still down more than 15 from the high not that long ago. And while we could fall further, I think the lion's share of the decline is in the rearview mirror. So if your time horizon really is 10 years, a lot of people it's longer than that, just stay the course. Try not to focus on it every day.

Try not to bite your fingernails. Try to realize that economic growth leads over time in a bumpy way to up equity markets. And we'll get that again in just maybe some time. Yeah, no doubt about it. All right, last question, Bob. I hate to end on a down note, but I saw some comments in your dolls deliberations this week related to global food shortages as a result of rising natural gas prices.

Will you update folks on that and how severe or serious is that? You know, this could get nasty, Rob, as you know, we've got the issue of natural gas prices not just moving higher. I mean, careening higher, much higher triple digit percentage increases in some places. And that causes shutdowns in fertilizer production, which can create a global food shortage. And so we need to keep our eye on that very carefully. Couple that with the concerns about energy in Europe. And we can have a nasty situation on our hands.

Let's hope God intervenes some way, shape or form to make it not so onerous for so many people. Yeah, very good. We'll certainly continue to watch that and look for your additional thoughts on that in the days ahead. Bob, always great to have you with us, my friend. Thanks for stopping by. Have a great week. All right. Bob Doll, chief investment officer at Crossmark Global Investments.

You can sign up for his dolls deliberations, his weekly investment commentary at crossmarkglobal.com. Back to the phones we go here for our final moments on the program to Fort Myers. Let's see, Tisha, thank you for calling. Go right ahead.

Hi, thanks for taking my call. So my question is, with the Christian Credit Care Counseling, I've actually contacted them, but as like all things except for Christ, I haven't followed through yet. But when you say that you close your accounts, does that affect your credit score? I didn't work for 18 years, so now I'm working paycheck to paycheck. When I started working, I got overwhelmed with all these offers, and I took them because I didn't work for 18 years, so I never had anything, you know. And I have about $8,000 worth of credit cards.

Okay, very good. Yes, could it lower your score? It most often does, but it's only temporary. The biggest factor is what's called credit utilization because if you take an account out of the mix, it makes the available credit lower, and then any balances you have are a higher percentage of that available limit. But, you know, I think the key here, Tisha, is the goal is getting out of debt. So any minor declines in your credit score, especially ones that are temporary, you know, what far outweighs that is your ability to get out of debt once and for all and, you know, not get back in in the future. And I think the key is, you know, for you, unless you're, you know, going to buy a car in the next six months or you're buying a house in the next six months, I would hope you're not out looking for more credit. And so these temporary declines that, again, won't be significant, but on your credit score really don't affect you at all. And it helps you pursue this ultimate goal, which is I want to be rid of this credit card debt forever.

So I think the benefit far outweighs any temporary decline you might experience. Okay. All right.

That was my question. Very good, Tisha. Thank you for calling. God bless you to Oklahoma. Amy, you're next on the program. Go ahead.

Yes, sir. I borrowed money from my DSP. So my question is, does it affect my investment? Well, it does in the sense that, you know, it's the opportunity cost. You know, when you take a loan from your DSP, the interest rate you'll pay yourself is likely less than what you could have earned if you left it in the account. So it means your money will grow at a slower rate.

So it's not compounding like it would be in there. And although this may seem unlikely, you know, if you were to separate from the company or, you know, if you work for the government from the government, then you would have to pay it back or it would all be taxable to you. So I'm not a big fan of borrowing from retirement accounts.

If anything, I would say temporarily dial back your new contributions and redirect that toward another priority like, you know, rebuilding your emergency fund or paying down credit card debt. I would try to stay away from borrowing from that DSP. Okay. Okay. Thank you. You are welcome. Thank you for your call.

Veronica in Coral Springs, Florida. You go right ahead. You're next on the program. Hi.

Thank you for taking my call. I have a question about tidying. My husband and I, we do the tidying. But recently, four months ago, I started a business. So the three, four months, I didn't do that well.

But last month, I'm doing well. So from the beginning, I started tidying. But what happened is for me to be able to do this Amazon seller, I have to invest some money. But in the form of I open a credit card that gives me the option, no interest and all that until next year, like summertime. And I'm still paying that investment because I'm buying and selling, buying and selling. So one person, a Christian woman told me, you know, you shouldn't be tidying right now because you're paying your investment. You still don't have any income that you're bringing home. So you have to pay the debt and then you're tied. So I'm a little confused because I always tied in anything I have.

You know, like in the growth, whatever thing we bring, we do the tidying. So I'm a little confused and also about the taxes. So the accountant that I have to do our taxes told us that I should take the 30 percent to pay the taxes. And so I don't know, I am taking the 30 percent and I'm like, I'm not making anything yet, but I don't want to have any problems. But I'm saying I'm taking the 30 percent, but I am not paying.

I'm not doing the tidying. So I'm like, I'm a little confused in that. Yeah, let's talk about that.

We have just about a minute left here in our program today. But let me try to explain the difference, I think, between your personal finances and your business. When it comes to your personal finances, the income you're receiving, whether that's W-2 income because you're an employee or a gift you receive, or in the case of a small business owner where it's your business, it would be the amount you pay to yourself as income. I would, if you're going to give a tithe on that, then you would give a tenth of the gross amount. You're not able to do that, though, in a business because you actually, your increase is really your profit. You think about a grocery store, they might make a few pennies on the sale of a product, the margin between what they bought it for and what they're selling it for. If they tithed on the gross amount, they'd be out of business.

So you really have to take all the income as the business, pay yourself, pay all the expenses, and then at the end of the quarter or the end of the year, if the business has a profit, well then if you want to tithe on that business profit, you would give a tenth of that. You wouldn't be able to do it on the gross. Stay on the line. We'll talk a little bit more off the air. That's going to do it for us today, folks. Thanks for being with us. MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. We'll see you tomorrow. Bye-bye.