“Blessed are those who find wisdom, those who gain understanding.” Proverbs 3:13

While we are huge proponents of avoiding the use of credit cards in any fashion, we realize that is not what many of our readers choose to do so we’ll take a look today at the responsible use of credit cards.

A huge push by the marketing campaigns of credit issuers focuses on the points you can earn by using the advertised card. Those offers often seem way too good to pass up. After all, if you plan on spending the money anyway, why not earn points you can use towards other things?

In order to be wise in your decision making, there are a few questions you should ask yourself about any credit card that offers you points.

1. Do you tend to carry a balance on your credit card?

If so, the interest you will be paying will quickly outweigh the benefits of the credit card points.

2. Are you paying more for the annual fee on the card than you are receiving in point benefits?

For example, if you racking up $50 worth of points but your card has an annual fee of $60, you’re better off without the card.

3. Are the points good toward anything you need?

Some credit cards offer points that can be redeemed in the form of a discount in particular stores or in trade for things in their catalogue. If you don’t need any of the things you’re being offered, the points are not worth their while.

4. Do the points expire?

It can take a long time of point accumulation to get anything of value in return. By the time you have racked up enough points it is possible that they have expired.

5. Does your debit card already offer incentives?

Many people use their credit card on a regular basis in order to earn points. However, they may be passing up the opportunity to use a debit card that gives them an instant discount — like the Target debit card. you may have better incentives already available, without the annual fees and interest rates of credit cards.

6. Does your card have spending requirements before they begin awarding points?

If so, you may find yourself using that plastic card even when you don’t need to, or justifying an unnecessary purchase since you have to hit their minimum spend limit.

We realize that credit card incentives are very appealing, and sometimes they really do make sense. If you are a disciplined person and can find a card that offers points toward something you regularly use, pay that credit card off in full every month, and take advantage of the points you earned before they expired, great! However, that tends to be more the exception than the norm. It is just like the casino and gaming industry, some will absolutely win, but the entire system is designed in the favor of the credit issuer.

If you must use a credit card, be wise as you choose a card and don’t let incentives that appeal to your emotions overrule a sound decision.

"A gray head is a crown of glory; It is found in the way of righteousness." — Proverbs 16:31

When you work for a large company, saving for retirement is often as easy as enrolling in your company’s 401k program or working for the company long enough to qualify for a pension. Some companies even match the contributions you make to your retirement account. When you’re self-employed, planning and saving for a Christian retirement requires a little more effort.

Types of savings plans plan for the self-employed

There are several types of saving plans available to those who own their own businesses or work as freelance writers, designers, artists or consultants. Below are just a few to consider:

1. SEP IRA — A Simplified Employee Pension (SEP) IRA is an easy way for any self-employed person to save, no matter what their income. This type of account can be opened at most any bank or financial institution and there are few, if any, fees associated with these account. You are allowed to contribute up to 25% of your earnings, up to a cap that increases annually. (The 2013 limit is $51,000.) Your contributions are tax-sheltered until you withdraw the money at retirement.

2. Solo 401k. A solo (or traditional) 401k allows you to contribute both as an employee and as a boss. The maximums are currently $5,500 as an employee ($6,500 if you are over age 50) and 25 percent of your income as a boss. Both amounts are discretionary, so you can contribute a lot in a good year to help reduce your tax liability and scale down your contribution in a lean year. As with the SEP IRA, your contributions are not subject to income tax until you withdraw the money.

3. Simple IRA. A Savings Incentive Match Plan for Employees (SIMPLE) IRA is a good choice for a self-employed person who plans on hiring employees at some time in the future. With a Simple IRA, you can continue to contribute to the same plan even after your company grows. The current maximum contribution to a Simple IRA is $11,500 ($14,000 if you are over 50), but you’re required to match 3% of your employees’ contributions. Like the SEP IRA, your contributions are tax-sheltered until retirement. However, this plan has a hefty penalty (25% compared to the SEP’s 10%) if you have to withdraw your funds before retirement.

If you’re self-employed and having trouble finding extra money each month to set aside towards planning for a Christian retirement, perhaps we can help. Faithworks Financial is a Christian debt relief company. If credit card bills and other installment payments are keeping you from creating a secure future for you and your family, a debt management plan can help you pay off those debts so you can start paying yourself and saving for your retirement. Call us at 877-232-5109 to discuss your options with one of our caring Christian debt counselors.

With the cost of education skyrocketing over the past decade, you will probably want to begin saving as soon as possible if you plan to help your children with the cost of their college education. Whether you want your child to attend a Christian college or a secular school, you probably want to add a budget line item for their college savings so that it is a regular part of your financial plan.

For the 2012-2013 academic year, the average cost for a standard academic year of college (including books, tuition, room and board) was $22,261 for in-state public tuition and $43,289 for a private school, according to collegedata.com. Despite the expense, it is possible to fund a college education on less than $50 per week.

Start Small — Finish Big

The earlier parents establish a saving plan for college, the more time there is to watch investments grow. Even small regular deposits over 18 years can pay for the first full year of college or more. For example, if you start making monthly deposits of $50 into an account earning 2% (the top rate for most accounts today) when your child starts first grade, your investment will grow to more than $8100 before high school graduation. Double that to $100 a month and the account will be worth $16261 — more than enough to cover the first year if your child lives at home.

Take Advantage of Tax Incentives

A saving plan that allows tax-free distributions called the Coverdell Savings Plan allows parents to put up to $2000 a year (that is less than $40 a week) into an interest-earning account. The funds are not tax-deductible; however, your child will not pay tax on the earnings as long as the money is used before the child reaches the age of 30 and the money is spent on education.

Series EE Government Bonds

With interest at such low rates, some people don’t consider government savings bonds a great investment. However, this is one tool where you are guaranteed that your invest will at least double in a twenty year window.

You buy EE Bonds at half the face value — $25 for a $50 bond, $50 for a $100 bond, and so on. These bonds start earning money immediately and interest is compounded twice each year, so you earn interest on interest. You can pay tax on the earnings each year, or wait until your child cashes the bonds to pay for college.

Interest rates are fixed, but if the interest surges in the future, you can sell the bonds early and buy new bonds at a better rate. There is a penalty of 3-months earnings if you cash out within the first five years. Unless interest rates return to 4% or 5%, cashing out probably isn’t the best option.

Another Look at Simple Savings

If you watch interest rates carefully and convert simple savings accounts into a CD Laddering plan when interest rates go up, you can earn more money. Even increasing your weekly deposits slightly can make significant differences. For example, if you start your savings account with $1000 today in an account paying only .25%, and make weekly contributions of $40 over the next ten years, your balance will grow to more than $22,000.

One popular savings challenge that makes its way around the internet every now and then is the weekly savings challenge. The basic premise is to deposit an increasing amount each week. Start with one dollar the first week, two dollars the second, up to fifty-two dollars the last week of the year. Even without interest, you save almost $1400 each year.

We suggest following the same goal, except in reverse. This way, it will get easier and easier to save the money. Plus, you’ll get more of a return on the interest you are earning, assuming you are using a savings account. If you use that money to buy bonds, you are on the way to doubling your investment.

There are many ways to fund an education from 529 state sponsored plans and Coverdell accountsm to CDs and government bonds. The key is to get started early!

Whether you are thinking of buying a homestead or considering buying property as an investment, the option of purchasing a foreclosure has likely crossed your mind. Understanding the pros and cons of buying foreclosed property will help you make better decisions.

Bankers and realtors use the term “distressed property” to describe homes that are either already involved in the foreclosure process or that are subject to repossession soon. There are three general types of distressed property.

Foreclosed

Foreclosed property is owned by the financial institution that issued the mortgage. This means that homeowners stopped making payments and the bank went through the legal processes to reclaim the property.

While selling prices can be significantly less than market value (30% to 85%), buyers must be cautious.

Usually when an individual has gone through a foreclosure, they had other financial obligations go awry as well. Because of this, some foreclosed properties may have liens attached to them from other creditors.

If the property is part of a bankruptcy filing, settling the purchase could take years to resolve.
A few states allow borrowers to pay the full balance at any point prior to auction, effectively stopping the foreclosure.

If you are considering a foreclosed home, verify the home is unoccupied, free from liens and not subject to any settlement agreements. Of course, if the price is substantially below market-value, you could make an offer, providing you have protection against loss if the property is pulled from the market for any reason.

Auction-ready

After lenders satisfy all legal requirements for foreclosure, homes go on the auction block. Typically the auction is held on the court house steps at the county seat where the home stands. Starting prices may be fixed or open.

A fixed starting price means that the bank sets a base price that is the lowest amount they are willing to accept. This might be the balance due on the original loan or a discounted figure based on property condition.

An open bidding platform means that the bank is ready to get the property sold and is willing to accept the highest bid offered — even if it does not cover the loan balance. Some banks do this because the state where the property is located allows banks to recover the difference through a judgment against the prior homeowner. Sometimes the property needs extensive repair and it is a financial liability to the lender. In either event, these are often very good investment opportunities.

Buying property at auction means that you have cash in hand, a certified check or a letter of credit from your bank. Loans are generally not accepted on this type of purchase.

Pre-foreclosure

When a bank notifies a homeowner that foreclosure is imminent, but not in progress, this is called pre-foreclosure. Homeowners can legally list the property for sale themselves or list with a licensed realtor, as long as they disclose the mortgage status to potential buyers.

Finding property for sale in pre-foreclosure status generally means you should be ready for a quick closing. Sellers who want to avoid bankruptcy or repossession are usually willing to discount the property. Financing options for homes in this category are similar to other on-the-market homes. Most qualify for FHA, VA or Conventional loans if they are well-maintained or need minimal repairs.

It might seem harsh to haggle for a bottom-dollar price when someone else is struggling financially. The best way to approach this type of transaction is with the understanding that it can be beneficial to both parties.

Things to Keep in Mind

1. Inspect all property before you bid or make an offer, extensive damage must be repaired before FHA, Conventional or VA loans receive approval.
2. If you need financing, check with your lender to find out what type of loans are available for distressed property.
3. Understand your state and local laws about occupancy. Some states do not allow eviction if a tenant has a current legal lease.

FaithWorks Financial provides counseling services for debt management and financial planning. If you are trying to get your financial house in order before you can purchase a home, contact us for a free debt relief consultation.

Todays article is a continuation of our Retirement Planning Basics series.

You may also enjoy:    Traditional IRA       401(k)

Planning for a Christian retirement involves good stewardship and seeking wise counsel. It is crucial to fully understand any investment vehicle before getting started, especially when planning for your retirement. This article will cover the basics of the Roth IRA, but be sure to do your due diligence and consider speaking with a financial advisor before making any commitments.

Understanding the Basics

Like many other retirement plans, the Roth IRA is a tax-advantaged, interest-earning account. Unlike the 401(k), there are no employer or government matching fund elements. All money that goes into a Roth IRA comes from your job income. You can deposit into your Roth IRA as long as you are earning money from work activity, regardless of your age.

The primary difference between the IRA and the Roth IRA is that the Roth IRA is not tax-deffered at the time of deposit, you still need to pay taxes on the funds you deposit. However, whereas a you pay your taxes at the time of withdrawal with a traditional IRA, your withdrawals are not taxed with the Roth IRA.

Flexibility and Freedom

On the surface, the Roth IRA might not sound so beneficial, but the structure gives you flexibility and freedom that other accounts don’t offer. Since you have already paid taxes on this money, you can withdraw any amount, any time, for any reason without a penalty as long as you leave all dividends in the account. No fees, no taxes, no hoops to jump through. When God says “Go”, you are ready. This makes the Roth IRA preferable to individuals who are uncomfortable with risking a penalty if they need to access their funds before age 59 1/2.

Quick Facts

• There is no mandatory withdrawal — you can leave the money to heirs; they pay no inheritance tax.
• You can withdraw interest earnings without tax/penalty to purchase your first home (up to $10,000) or if you become disabled.
• You pay taxes, but no penalty, for interest earnings used to pay for secondary education for yourself or family members.
• Accounts must be designated as a Roth IRA when opened.
• Deposits are not tax deductible; you must report interest earnings on annual tax return.

Is A Roth IRA Right For Me?

Though you will want to seek wise counsel as well as prayerfully consider any investment, a Roth IRA is thought to be especially beneficial for young adults who are planning for a Christian retirement. This is because young individuals are likely not at the height of their career, and are likely in a lower tax bracket than someone who is more established. The longer that the account is open, the more compound interest the funds earn. Many people starting their careers who earn less than well-established professionals don’t rely on tax deductions and typically aren’t negatively impacted. Also people in higher-tax brackets appreciate the tax advantages for their heirs.

Though there are limits and exceptions not discussed in this article, the Roth IRA can be a great route to consider if flexibility and access to your money is important to you.

FaithWorks Financial is proud to sponsor a $1,000 gift card giveaway!

We realize how difficult the Christmas season can be financially, so we’re teaming up with several great Christian bloggers to give away a $1,000 Visa gift card right in time for Christmas.

Enter the giveaway by following the instructions in the Rafflecoptor form below. Be sure to sign up for the FaithWorks Financial newsletter and like us on Facebook to increase your odds of winning.

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While you probably strive to give all throughout the year, the Christmas season provides a wonderful opportunity to expand on your financial giving. By planning ahead, you can enjoy the blessing of giving even more this Christmas season by helping others in need.

There are many ways in which you can help others through your financial giving this Christmas season. Here are a few opportunities for you to give more this Christmas.

Adopt a Family

Last year, we spoke with our church and asked if they knew of a family in need. They were able to facilitate our “adopting” a family anonymously so that we did not need to know who it was that was having difficulties, and they did not need to know who was helping them. It was a wonderful experience to be able to help someone out expecting not even a thank you in return.

Donate a Dinner

Your church or a local community service may be organizing programs to help struggling families enjoy a meal this Christmas. Taking part in a food drive is an excellent way to help others even if you are in the midst of a Christian debt consolidation program. Even if you cannot afford to pick up some extra food at the grocery store and cannot find any food to offer from your own cabinets, offering your time at the food drive is often the most helpful thing you can do.

Support a Charity

You can also consider giving financially to your favorite charity, missionaries, orphanage, homeless shelter or other worthy cause. In today’s difficult economic times, there are multitudes of people in need. Your giving can make a marked difference in the lives of others and have a positive effect on their future.

Give the Gift of Charity

Just can’t figure out what to get for that one family member? Consider supporting a cause that is dear to them. This is a great way to truly embody the spirit of Christmas giving, and they will probably appreciate that you are supporting something that is meaningful to them.

Maintain Your Budget

By having financial goals, you can maintain a more Biblical financial perspective. Your future objectives may include saving money for your children’s higher education, investing in a new home, buying a new car, expanding your business, etc. Maintaining your budget through the Christmas season can be difficult, especially considering all of the media hype and the ad-frenzy that is poured upon us. Maintaining your perspective in spite of the hype is a part of a Christian’s financial responsibility.

Christmas is a time that we should view as an opportunity to extend our giving above and beyond our normal tithe so that we can share the Christmas spirit with others. As the year comes to a close, it’s always a good idea to incorporate giving into your Christian budget in preparation for Christmas.

Merry Christmas!

Our last article launched our Retirement Planning Basics series by covering the Traditional IRA. In todays article, we will discuss another hugely popular retirement vehicle, the 401(k).

Whether you are finishing up a Christian debt settlement program, just starting your career as a recent college graduate with a new job or you are preparing for a Christian retirement, planning for your financial future is wise. First Peter 1:3 tells us that all the power we need to navigate our life — including our financial future — comes through the hope we have through Christ Jesus.

Part of exercising that power is educating yourself about retirement plans and packages before you make financial decisions. This article discusses some basics about 401(k) savings plans.

If numbers are any indication, this plan is one of the most popular retirement savings vehicles today. There are about 50 million individual 401(k) accounts in the United States.

Originally, 401(k) designers envisioned a tax-deferment vehicle purely as a tax break that pushed tax liability to a future date when earnings were used. Today, it is part of a retirement income stream that includes personal savings, pension and Social Security disbursements.

A 401(k) plan is an employer-sponsored plan where workers choose to contribute through payroll deductions. The maximum annual contribution for 2013 is $17,500. Plans are portable, you can rollover the account into a new account without penalties if you change jobs.

There are three distinct benefits of using a 401(k) to save for retirement.

1. Convenience of automatic deposits.
2. Employers match a percentage of deposits — typically 3% to 6% of annual salary.
3. Tax is deferred until you withdraw the money after age 59½ or for a qualified hardship.

As with any retirement plan, there are some drawbacks as well. Just like with the Traditional IRA, if you withdraw money early, you’ll pay a 10% penalty-tax along with tax on earnings. Also, some employers don’t allow early withdrawal except for resignation or termination.

People planning for a Christian retirement need to know how their investments are managed.

Employers typically contract with financial management companies to pool the funds into a basket of diverse stocks, bonds and mutual funds. Employees choose where to invest contributions from a list provided by their employer. Investments earn dividends, but there are many fees associated with a 401(k). Most fees are low — 1% to 5%; however some unscrupulous fund managers charge fees ranging from 15% to 50%. Some employers even negotiate a commission based on employee participation.

Even a small fee can devour your savings. Take this example. Let’s assume John is 40-years old, has a 401(k) balance of $10,000 today, and plans to contribute $5,000 annually until he is 65. With an 8% assumed return on investment, and a 3% fee structure, John will have $272,499 when he is ready to retire. If the fee was only 1.5%, his nest egg would be $342,715 — a difference of $70, 216.

As with any investment, do your research before selecting individual stocks or bonds. Ask about fees and rates. Calculate your tolerance based on your age, job stability and financial situation. Working with a Christian financial counselor can help your assess your finances and establish a solid saving plan for your future.

Whether you are nearing the end of a Christian debt management program or simply wanting to begin planning for your retirement, one of the first things that you will likely be investigating is the Traditional IRA. Today we’re going to discuss the basics of the Traditional IRA and explore why it should be at the top of your list of methods for funding your retirement.

What is an IRA?

Let’s first break down the abbreviation- an IRA is an Individual Retirement Account.

There are several kinds of IRAs, such as a Roth IRA, a Simple IRA, and a SEP IRA. For the purpose of this article though, we are simply going to focus on the Traditional IRA.

For a very simple explanation, an IRA is an investment account that you can utilize to save funds for your retirement with a few tax benefits along the way.

What does an IRA actually do?

The IRA provides you with an account where you can deposit pretax money, currently up to $5,000 annually or $6,000 annually if you are over age 50. The increase is because you may need to save more as you get closer to your retirement. The money in that account can then be used to purchase investments such as stocks bonds etc. This is considered to be tax-deferred, because you will not pay your taxes on the money until you pull it out of the account.

That tax deferment is the primary benefit of the IRA. Let’s suppose you are a single filer and earn $40,000 per year; by todays standards you would fall into the 25% tax bracket. To pay taxes on $5000 (the max annual IRA contribution under 50) at this point in time would cost you 25% of that income, or $1250. The expectation is that when you retire, your income is going to be reduced pushing you into a lower tax bracket. Let’s say that your income has dropped from $40,000 per year to $30,000 per year; you are now in a 15% tax bracket and instead of paying $1250 for that $5000, it would instead be $750. If you are using the IRA to its full capacity and making the maximum annual contribution year after year, this can add up to a very significant tax benefit.

What happens Inside the IRA?

While you are funding your IRA, the money is not just sitting there earning no interest. Within the IRA you are able to purchase investments. Assuming your investments are wise you are likely to receive a return on your investments, and again the income earned on the investments are tax-deferred. Over the years of making your annual contributions and in turn earning a profits from investing those funds, you are not yet paying the taxes on the income.

The difference in the tax rate from when you are in the height of your career compared to being newly retired with a reduced income can cause a major flux in your income tax bracket. As that IRA account grows and the profits from your investments accumulate over the course of say 20 years, the tax savings brought about by being charged at a different tax rate can be very substantial.

What’s the catch?

Based on everything that we’ve shared with you so far it seems very clear that this is a smart thing to do when you are saving for your retirement and, generally, it is! However, there is one very important factor to consider before starting with this type of retirement savings- the early withdrawal penalty.

As is mentioned in its name, the IRA is a retirement account. As such, you cannot access the funds without penalty until age 59 ½. If you do withdraw from the account prior to this point you are going to not only pay the taxes on the amount that you withdraw but also incur a penalty, currently 10% of what is withdrawn. Every situation would certainly be unique, but generally the benefits of an IRA will be lost if the funds must be withdrawn at a penalty.

An IRA is a great investment tool that will provide a vehicle in which you can conduct your other investments. If you have created your emergency fund, paid off your credit card debt (on your own or through our Christian debt relief program) and are ready to begin planning for your retirement, this is one avenue you will definitely want to explore.

For most people, financial uncertainty is something that is faced at one point or another. For Christians who go through financial difficulties, we have a loving God to rely upon, to give us faith that all will turn out according to His will.

A friend recently confided in me that he has not finding himself able to trust God’s provision. A year ago, his home’s septic broke, and he did not have the money to fix it. Facing another winter of showering and laundering at other people’s houses, he began doubting that God would provide. He started Christian financial counseling and eventually managed to save enough money to repair the septic, but he felt that he had been abandoned by God during his time of need. How can he and others like him trust God when it seems like He isn’t providing?

1. Keep a Gratitude Journal

If you are reading this article, you have the subject of money on your mind. Undoubtedly, financial hurdles are a reality in your life, be it in the past or present. When financial insecurities arise or you worry about how you are going to make this months credit card payments, take a few moments to count the dozens of blessings you do receive every day. Write down even the simplest of things- that meal you had with a friend, the unexpected refund from a utility company and the blanket you pick up instead of turning on your heat on a cold day. These things that we often take for granted are blessings.

As you focus on your blessings, your faith in God’s provision will grow. Starting every day with a gratitude journal will put you in good spirits.

2. Pray Honestly

In addition to recording all the ways God provides, consider writing down your emotions and thoughts. Like the psalmist David, your honest emotions become prayers as you pour out your fears that God won’t provide and your frustrations about your financial situation. If possible, share your struggles with a trusted friend or and pray together regularly.

3. Meditate on Scripture

God reminds us in His word that He does provide. Meditate, think on and memorize powerful scriptures like:

Matthew 6:28-31: “And why do you worry about clothes? See how the flowers of the field grow. They do not labor or spin….If that is how God clothes the grass of the field, which is here today and tomorrow is thrown into the fire, will he not much more clothe you—you of little faith? So do not worry, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’”
Luke 12:24-26: “Consider the ravens: They do not sow or reap, they have no storeroom or barn; yet God feeds them. And how much more valuable you are than birds! Who of you by worrying can add a single hour to your life? Since you cannot do this very little thing, why do you worry about the rest?”
Philippians 4:19: “And my God will meet all your needs according to the riches of his glory in Christ Jesus.”

4. Speak with a Christian Debt Advisor

Approaching finances from a Christian perspective is critical as you trust God to provide. You may need assistance in maintaining a household budget, reducing debt or talking with your spouse about money. Seek godly counsel as you wait on God to meet your needs. It can often be difficult to reach out to a stranger for help, but in the end you may find the right solution for you.

God’s timing is always perfect, but it is very easy for us to question whether or not He will provide. Instead of doubting, take advantage of these four tips that will build your trust. Then, wait with patient trust for His provision.