Budgeting, Economy, Finance, Money Management, National Debt, Saving

Ask Chuck: Practical Advice During the COVID-19 Crisis

By: Crown Financial Ministries

Dear Chuck,

Many of the young people in my Bible Study are frightened of the Coronavirus and the threat to their families. I understand their fear. But, as an older American, I’m also concerned about their economic well-being in the aftermath of this crisis. What kind of financial advice can I offer them?

Sheltered in The Storm

Dear Sheltered in the Storm, 

We have two crises happening now and you have properly identified the third one. First, the virus has created a very real health crisis. Second, the shutdown of the economy has created a very present economic crisis and third, the government bailout will put us at risk of a future debt crisis and threat to the global economy. 

As Thomas Sowell said about our current challenges, “We do not have good choices, we simply have trade-offs.” 

Living on the Edge

The Coronavirus has revealed the financial unpreparedness of millions of citizens. Aaron Zitner, at the Wall Street Journal, reports: “Some 15% of Americans have used, or plan to use, either short-term loans or credit cards that they don’t know they can repay in order to buy emergency goods to deal with the outbreak, a survey by NORC at the University of Chicago found.” He says others rely on savings or plan to divert money set aside for other things.

It is my hope that many Americans have been better prepared for this event after making financial adjustments following the Great Recession, which started in 2008, by paying off debt, increasing savings, and living within their means. Either way, here are some practical and spiritual insights for the young people in your Bible study. 

Establish Essentials as Priority

Everyone’s situation is different. Let’s help the young people understand how to deal with the current economic crisis, and we will deal with the long-term consequences of the bailout later. Here’s how I would attempt to help those in your Bible study when meeting one-on-one. 

Regardless of what’s happening in the world, everyone needs food and shelter. Pay the bills that provide food, home, and necessary utilities. This is a time to sacrifice wants to provide for needs.

Most middle-income families will receive some sort of government assistance money. Establish or grow your emergency savings account. Always keep it resupplied as you are able. 

With job cuts right now, childcare and transportation costs may drop significantly. If possible, save that money in an emergency fund for future needs. Even a small amount in a savings account will reduce financial stress and grant margin in your life. Exercising self-control (a fruit of the Spirit) will boost your confidence and grant hope.

Face your bills with courage and hope. Pray over them and ask God to work in miraculous ways knowing He is able to do far more than you can imagine. Avoid fear and anxiety with this verse:

“Rejoice in hope, be patient in tribulation, be constant in prayer.” (Romans 12:12 ESV)

Practical Steps 

  • Limit social media to avoid online shopping. Don’t give in to your (or your children’s) wants right now. Lead by example in love.
  • Student loans: this may be the time to refinance.
  • Debt: negotiate with lenders to reduce your interest rate or balance. Seek to eliminate penalties. Demonstrate your intent to pay. Avoid maxing out credit cards. Consider balance transfers but read all the fine print. Set a goal to eliminate the debt and the method to get there (I recommend the snowball or avalanche methods). Contact Christian Credit Counselors if you are falling behind. 
  • Insurance: assess coverage and negotiate the cost. Some coverages may not be a necessity or deductibles may need to be raised to lower premium costs. 
  • Make a will. Don’t procrastinate.
  • Save: deposit something weekly, or every other week, to develop the habit. Get a fireproof, waterproof safe to keep some cash at home at all times. I recommend one month of living expenses. 
  • Wisely use your government check if you have an emergency savings account: give a portion, pay current bills, and pay down debt.
  • Income tax filing has been postponed until July 15th. If you owe money, set that money aside in a separate account.
  • Ask for help. Trade skills: haircuts for food, tutoring for computer help, etc.
  • Sell what you don’t need. Facebook Marketplace and Craigslist make it easy. Do it safely by meeting buyers in a grocery or government parking lot during daylight hours.
  • Look for opportunities. This may be the best time to start a business or take on greater responsibility at your current place of employment. Learn new skills. Take advantage of online classes. Educate yourself by reading, listening to books, watching Ted Talks, and documentaries.
  • Be generous. There are many suffering at this time. Be exceptionally generous while also being wise and discerning.

Hope for Troubling Times 

Those who are frightened, worried, angry, or frustrated must remember they are not alone. God has not left us on our own. In fact, idols are being revealed and priorities analyzed. It’s time to reorient our lives.

We all know we should live one day at a time. That requires taking one step at a time. But, what if fear overwhelms you and you don’t know what steps to take?

Imagine a sailboat drifting in the center of a large lake with no apparent destination in sight. It rocks back and forth, back and forth, unable to move forward. Suddenly, the wind begins to blow. The sails of the boat filled with air. The sailor takes action and strategically directs the boat to the desired destination. The boat glides effortlessly while the sailor works with the wind to safely arrive to shore.

The Holy Spirit is the wind. He fills our sails enabling us to know when and how to move forward. Filled with hope, we develop perspective and work toward our destination.

“May the God of hope fill you with all joy and peace in believing, so that by the power of the Holy Spirit you may abound in hope.” (Romans 15:13 ESV) 

Not Our First Rodeo

Like you, I have lived long enough to have experienced a number of crises in my life. As my friend said, “this is not my first rodeo, but this is the first time I have ever ridden this horse!” We are living through something the world has never experienced. It’s an opportunity to trust God with all our heart. May He fill you and me with all hope so we can proclaim His goodness. 

 “…we rejoice in our sufferings, knowing that suffering produces endurance, and endurance produces character, and character produces hope, and hope does not put us to shame, because God’s love has been poured into our hearts through the Holy Spirit who has been given to us.” (Romans 5:3-5 ESV)

For anyone struggling with credit card debt, get in touch with our partners at Christian Credit Counselors. They can advocate for you, helping lower payments, and organize your debt. Start your free debt analysis today.

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Identity Theft, Saving, Taxes

How to Use Your Tax Refund to Build Your Emergency Funds

By: Consumer Financial Protection Bureau (CFPB)

During tax season, there’s a lot to think about. Do you have the right forms? Where did you put those receipts? Did you do the math right? But there’s one more thing you should be thinking about: how you can use your tax refund to ramp up your emergency funds or reach other savings goals.

In 2019, around 72% of Americans received a refund on their taxes. This extra jolt of cash can be a perfect opportunity to start—or increase—your emergency savings funds.

Why save your tax refund

Your tax refund may be one of the biggest checks you receive all year. If you’re getting a tax refund, consider saving some or all of it. Putting your refund into savings can help you prepare for unforeseen expenses throughout the year, and work toward longer term savings goals such as buying a house or paying for college.

For many people, making ends meet throughout the year is tough, and saving regularly may seem unrealistic. The money you get in your tax refund could help you build or replenish your rainy day fund. Setting aside money for emergencies may help you cover some of the most common unexpected expenses people experience. Without savings, a financial emergency–even minor–could have a lasting impact on your financial well-being.

How to save money fast

Here are four things to do to save your refund as quickly and securely as possible.

1. Plan ahead

It’s likely that you already have plans for what to do with your refund—many people do. But, if you can plan to save part of your refund, even just a small amount, it could help you down the road when an emergency occurs, or you need a little extra cash to meet a financial goal.

Make a plan to save some of your tax refund, and then use this worksheet to help you make the most of your tax refund.

2. File electronically

The fastest way to receive your tax refund is to file your taxes electronically. If you file your tax returns electronically using e-file, you will likely receive your tax refund within 21 days. However, if you file your taxes by mail, it can take about six weeks to receive your tax refund. Filing your taxes electronically will also help protect you from tax fraud since you aren’t sending sensitive information through the mail.

If you need assistance filing your taxes, and meet the qualifications, you can get free tax preparation assistance from IRS-certified volunteers at a Volunteer Income Tax Assistance (VITA) or a Tax Counseling for the Elderly (TCE) location. The IRS locator tool will help you find a VITA site near you.

Learn more about filing your tax returns.

3. Use direct deposit

Receiving your tax return as a direct deposit is faster than getting a paper check in the mail, and it ensures that the money is saved safely and automatically.

4. Deposit some, or all, of your refund into your savings account

The IRS allows you to deposit your refund into up to three different accounts. You can automatically deposit portions of your tax refund into checking accounts, savings accounts, retirement accounts, mutual funds, or U.S. Savings Bonds. If you are filing electronically you can even purchase a savings bond while you are filing your tax return.

Other special accounts where you can automatically save some or all of your refund include:

Check with the IRS for more information on direct deposit and splitting your refund.

Affordable ways to file your taxes

Before you have your refund, you need to file your taxes. Be mindful that unemployment benefits may be taxable.

See if you qualify for free tax filing

You can receive free tax preparation assistance at a Volunteer Income Tax Assistance (VITA) location if you meet any of the following criteria:

  • You have an income of $56,000 or less
  • You are 60 years old or older
  • You have a disability
  • You speak limited English

If your income is $69,000 or less, you can use most major tax preparation software to file your taxes for free through the IRS Free File Alliance.

Members of the U.S. Armed Forces and their families can use the free online tax prep and e-filing program MilTax.

If you don’t qualify for free filing assistance

If your income is more than $69,000, you can still download free tax filing forms from the IRS.

While paying someone to file your taxes for you is convenient, there are plenty of affordable tax preparation software products that can walk you through the process of filing your taxes. Consider using one of these if you are uncomfortable filling out the forms on your own, but don’t want to pay a tax preparer to do it for you.

Protect yourself from tax fraud

Scammers like to take advantage of tax time to go after unsuspecting Americans. Follow these tips to protect yourself from tax fraud.

Be aware of scam phone calls. The IRS will never:

  • Call or email you to ask for personal information.
  • Demand immediate payment without first sending you a bill in the mail and giving you an opportunity to question or appeal the amount they say you owe.
  • Require you to use a specific payment method for taxes, like a prepaid debit card.
  • Ask for credit card information over the phone.
  • Threaten to have you arrested for not paying.

If any of these things happen to you, report it to the Treasury Inspector General for Tax Administration (TIGTA) at 1.800.366.4484 or at treasury.gov/tigta.

File electronically and request that your refund be deposited directly into your account.

Use ID theft prevention measures. Don’t carry your social security card with you and don’t give it out just because a business or professional asks for it. Also, don’t carry your Medicare card unless you’re going to a doctor for the first time.

Check your credit report. You can review your credit report for free every 12 months at AnnualCreditReport.com, or by calling 877-322-8228.

If you suspect you’ve been a victim of identity theft and it involves your income tax return, the IRS has more information and help on suspected fraud.

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Budgeting, Debt, Money Management, Saving

4 Steps to Spend Your Stimulus Check and Tax Refund Wisely

By: America Saves

Most Americans don’t have an emergency fund. While we’re all experiencing this pandemic very differently — some having only minor inconveniences and others finding themselves without a job or having to close their business — those without a savings cushion are vulnerable to feeling the ramifications of COVID-19 for a very long time.

With stimulus checks and tax refunds on the way, there will be tough financial decisions to make once received. Here are active steps you can take, along with things to consider to help you develop a solid spending plan.

  1. Make a list of all expenses

Write out every single expense that you have, including essentials like food and utilities. Be sure to go through your checking and savings account history to make sure you don’t have any “vampire” expenses, like monthly subscriptions that you may have forgotten about and no longer need.

  1. Talk to all creditors and lenders

The CARES Act puts into effect two mortgage relief provisions: protection from foreclosure, and a right to forbearance (pausing or making partial payments) for those experiencing loss of income due to COVID-19. However, the provisions are not automatic and are only for federal loans, so you MUST talk to your lender.

If a creditor/lender offers you a payment plan or other relief, make sure you get it in writing and take note of the names and dates of the customer service representatives with whom you speak.

Thankfully, some utility companies have announced they won’t cut off services if they aren’t being paid. Be sure you know all of your utility and service providers’ stance on this, so there are no surprises. You don’t want to make any assumptions.

If you cannot afford your DMP payments, contact your creditors directly to request for deferment on your credit cards. This will prevent your account from falling (further) past due and help to maintain your credit score. Creditors are making payment exceptions on a case by case basis. If you are granted a deferment from your creditors, please contact your CCC representative so that they can adjust your DMP payments.

  1. Prioritize expenses

Expenses relating to food, shelter, and medicine should come first. This would include mortgage, rent, utilities, groceries, diapers, and medications. It also includes medical insurance premiums and homeowners/renter’s insurance.

If you need childcare to work, that is another essential expense. Next in line are auto-related expenses, including transportation, gas, insurance premiums, and car payments.

Loans that are secured by collateral (for example, mortgages and auto loans) are generally considered more important than those without collateral, like consumer credit card debt. For example, if you don’t pay your mortgage, a bank can foreclose on your property; if you don’t pay your car loan, the bank can seize your car. While not paying your credit card bills will negatively affect your credit score, credit card companies will not come into your house and take your personal possessions.

Federal student loans are currently not accruing interest until September 30, 2020, and can be put into forbearance so that no payments are due. If you have a private or institutional loan, you will have to contact the lender for other options.

If you struggle to make the minimum payment on your credit card, call CCC at 800-557-1985 option 5 to add the account to the program for a total consolidation of your outstanding debts.

Expenses for “elective” items, like gym memberships, streaming services, and other subscriptions, come last. Before simply canceling a contract, make sure to contact the vendor – canceling may come with a hefty penalty, but you may be able to temporarily “pause” the service.

  1. Pay your debts in the order of priority.

Now that you know all your expenses, have prioritized them, and know your payment options with creditors and lenders, it’s time to make the payments in order of priority.

It’s important to note that many are still or will be receiving their tax refunds, too. If you receive a refund, you can apply the same process to that extra income.

Remember, there is no prepayment penalty on your Debt Management Program! Contact your CCC representative to apply your stimulus check and/or tax refund toward your balances and pay off your debts.

If you are still unsure or are overwhelmed with where to start, use our decision tree for guidance on what to do with your stimulus check and/or tax refund.

 
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