What Will You do With Your Tax Cut?

Q.  My husband and I are anticipating an increase in our paychecks because of the tax cut. We are trying to decide on the best use of this extra money. Improving our financial health is one of our New Year’s resolution. We would also like to invest in some fun and relaxation for the whole family. Any suggestions on where to start?

A. The Tax Cuts and Jobs Act (TCJA) went into effect on January 1, 2018. In comparison to previous tax brackets and tax rates, the new rates due to TCJA are slightly lower and the brackets are generally slightly broader.

Individual income tax rates

Pre-existing law. There were seven regular income tax brackets: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.

New law. There are seven tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. These provisions sunset and revert to pre-existing law after 2025.

Under the 2017 tax brackets and rates, a single taxpayer with $40,000 of taxable income would be in the 25% tax bracket and would have a tax liability of $5,739.

Under the 2018 tax brackets and rates, a single taxpayer with $40,000 of taxable income would be in the 22% tax bracket and would have a tax liability of $4,740.

Tax cuts are not equally applied. Therefore, depending on your income bracket, you may or may not see an increase in your take-home pay. It would be a good idea to wait until you receive your February paychecks to see if your take-home pay actually increases.

According to the National Endowment for Financial Education (NEFE), 69% of U.S. adults set a New Year’s financial resolution. At the same time, two thirds (63%) of Americans experienced an unexpected expense in 2017. Financial setbacks add to distress and can keep us from accomplishing our resolutions or reaching our goals.

The first step in improving your financial health is to have an emergency savings. An emergency savings will help you weather any unexpected expenses that occur. Having an emergency savings keeps you from going further into debt when the unexpected happens. Saving any increase in take-home pay is a painless way to increase your savings.

Once you have an emergency savings, paying down debt is a good step to take to improve your financial health. Setting a goal to reduce your debt by 5% to 10% is a way to make progress. Paying down debt also has a positive effect on your credit score. The higher your credit score, the less interest you will pay when you borrow money. This means you save even more money.

Having both an emergency savings and paying down debt will bring you closer to achieving your New Year’s resolution. Spending money for fun and relaxation is not investing and will not bring you closer to your resolution of improving your financial health. However, with a little thought and preparation, you can still have some fun and relaxation.

Why not take steps to improve your financial health and also plan some low-cost family activities? Good luck with your Near Year’s resolution.


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Valentine’s Day On A Budget

By Bonnie Spain, American Center for Credit Education

Q. My husband and I are determined to reach our New Year’s Resolution to reduce our spending and improve our finances this year. We talked about what we can do for Valentine’s Day and do not want to use our credit cards. Any suggestions on ways to curb our expenses and not incur more debt while still celebrating?

A. Congratulations on your dedication to sticking to your resolution. So often we set a goal and at every turn we find a distraction or obstacle. Keeping focused on what you really want is crucial to be able to reach your goals.

It is important to set a budget you agree upon for the day. You can celebrate without spending any money or limit spending to a small amount.

There are ways to celebrate Valentine’s Day without spending any money. Consider exchanging handwritten notes regarding a special memory. Create homemade coupons for each other. For her, perhaps it is an afternoon all to herself without the kids. For him, perhaps it is an afternoon to watch his favorite sport without interruption. Be creative and think about something the other person values.

There are also ways to celebrate with spending only small amounts of money. Consider finding a small gift to commemorate your first date or the first trip you took. Or maybe your partner has a favorite coffee or a bottle of wine. Look for a way you can say to the other, “I know you, I appreciate you, and I love you” without breaking your budget.

You don’t even have to go out for dinner to celebrate the day. Set a special menu for a dinner you both can enjoy and roll up your sleeves and make dinner together. Not everyone cooks, but anyone can help with the preparation and clean-up. Add a little romance and dine by candlelight.

It only takes a little thought and some creativity to make Valentine’s a special day. Keep in mind the best gifts often do not cost a lot of money, rather they reflect your appreciation of those you love.

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6 Rules For True Riches

By Chuck Bentley

Most of the financial principles I live by I learned because I was doing it all wrong. For the majority of my young adult life, and well into my marriage, I was focused on all the wrong things. Being a success in the eyes of the world was the most important thing to me. I had grown up in church and knew the biblical principles well, I just never thought any of it had to do with how I earned or spent my money.

But through God’s grace and 21 years of my wife’s prayers, God changed my heart through a Crown Bible study in 1999. Ever since, I’ve been learning to live my life as a steward – a manager, instead of an owner – of all God has given me.

With these lessons have come discipline, joy, freedom, and peace – all elements of my financial picture that were severely lacking. I’m now passionate about helping others to align their lives and finances with what God’s Word says, and these 6 Rules for Riches are the most basic of the principles.

Basic in nature, but not in action. They’re not necessarily “easy” and are certainly contrary in many ways to how the world would tell you to spend your money. But they’re straight from Scripture and I believe they will help you avoid the sin of the Rich Young Ruler, and instead acquire true riches.

Rule 1: Live Beneath Your Means

Too often we become accustomed to living beyond our means, spending 110% of our income and racking up debt. Your income is like a limbo bar and every month you need to be able to get under that bar. A budget is what helps you to do this. Don’t get distracted with sales, “good deals” or the mentality that you can just pay it off later.
1 Timothy 6:8 – “But if we have food and clothing, we will be content with that.”

Rule 2: Use All Cash

It’s been proven over and over that an all-cash budget will help you spend less money. Even if you don’t use cash for every single expense, at least cash out the categories of your budget you tend to overspend in, like groceries, eating out, entertainment, and miscellaneous.
The envelope system is a tried and true form of budgeting that I would encourage you to adopt now.
Proverbs 26:23-24 – “Be sure you know the condition of your flocks, give careful attention to your herds; for riches do not endure forever, and a crown is not secure for all generations.“

Rule 3: Avoid All Debt

Now, the only exception to this rule is a mortgage. But even if you have a mortgage, I strongly recommend you put down at least 20% as a downpayment to avoid PMI (Private Mortgage Insurance). Debt is not a sin, but the Bible warns us to avoid debt because of all the stress and burden that comes along with it.

If you have debt of any kind, I want you to go through Crown’s 5 Steps to Debt-Free Living Mini Course. It’s just 4 short videos you can access for free that will help you understand, get out of, and avoid debt. If you’re struggling with credit card debt and need help, get in touch with Christian Credit Counselors.
Proverbs 22:7 – “The rich rule over the poor, and the borrower is slave to the lender.”

Rule 4: Build Emergency Savings Fund

Only 38% of Americans could cover a surprise $1,000 expense with cash, meaning the remaining 62% would have to turn to some form of debt. The best way to combat this is to have an emergency savings fund. You start with a goal to save $1,000 (you can find some ideas to get you started here), and then work towards 3 months’, 6 months’, and a year’s worth of living expenses. The Money Map can help you make and reach your savings goals.
Proverbs 6:6-8 – “Go to the ant, you sluggard;  consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest.”

Rule 5: Buy Used Cars

Cars are depreciating assets, meaning they will only lose value, never gain value. Instead of paying for the 10-11% depreciation of driving a car off the lot,  I like to avoid the steepest depreciation and buy my cars used, in cash, and drive them into the ground. I’ve been driving the same car for over 15 years and I take extremely good care of it. I’ve never had an issue with it and intend to drive it until it won’t drive anymore.
Galatians 6:4 – “Each of us should test our own actions. Then they can take pride in themselves alone, without comparing themselves to someone else.”

Rule 6: Learn to Be Frugal

Now this rule is really where my wife’s strengths shine through. She’ll put on a fantastic outfit and tell me that from head to toe the whole thing cost her less than $20. She just has a skill and a discipline to find good deals and spend very little money. There are many ways you can be frugal and save hundreds, if not thousands, of dollars.
Luke 12:15 – “Take care, and be on your guard against all kinds of greed, for one’s life does not consist in the abundance of his possessions.”

I hope these 6 rules are helpful guidelines for you as you continue to seek financial freedom. They’re principles my family and I base our lifestyle from, and they’ve been a personal blessing to us. Remember that stewardship is about aligning your heart with God’s Words, not just changing a pattern of behaviors. I hope you find freedom and peace in your finances.


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