Clergy and religious workers are now eligible for Public Service Loan Forgiveness (PSLF) based on their religious work. To be eligible, the loans must still be direct, 120 payments must be made, and the borrower must work for a qualifying employer.
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How I Got An 800+ Credit Score
I’ve always assumed I had good credit based on my behaviors, but I never knew my credit score. Then, we bought a house 6 years ago and had to apply for a mortgage.
The mortgage broker was downright giddy when he pulled our credit reports and got our scores. He excitedly told me that he could count on one hand the people that he had worked with with an 800+ score. Yay, I’m a celebrity in his world!
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Free Resources To Help You Master Your Personal Finances In 2020
It’s a new year, a new calendar, and many are hoping, a new beginning, too. The sense of a fresh start with the new year leads a lot of people to make new year’s resolutions. How about you?
Since 51% of 2019 new year’s resolutions were to save money, I figure some of you are looking to tackle your finances this year and I want to help. Below, I’ve listed 15 different free resources ranging from budgeting systems and high-yield savings accounts to Social Security estimators and housing allowance tools. There’s quite a variety, so there’s something for everyone.
Basic Financial Management
Easy-To-Use Budget Template
The same study I referenced above found that 35% of new year’s resolutions were to stick to a budget. That’s a lot. Budgeting is the foundation of any successful financial life. It looks like people realize the importance of budgeting but they struggle to do it.
One of the reasons budgeting is hard is because you’re often trying to track 20+ different spending categories. I don’t know about you, but I can’t track that many things at once. That’s why I only have 2 kids.
Ben Wacek, CFP™, of Guide Financial Planning uses an innovative way of budgeting where you don’t have to do that. Instead of burning out attempting to track a bunch of different spending categories, you only focus on the handful that you really have control over. If you’ve ever struggled with budgeting, then you’ll love his system. You can download it in exchange for your email address here and he even made a video that will explain the whole process to you.
High-Yield Savings
Do you have your emergency fund sitting in a savings account earning 0.03% interest? You can do much better than that! If you transfer your money to an online high-yield savings account you can earn 60 times as much in interest. (No, that is not a typo. It is sixty.) The best part is that those accounts are FDIC-insured just like your current bank account, so you’re earning higher interest without taking on any additional risk.
Ally Bank is an online bank that offers high-yield accounts. If you click that link, they also have a great savings comparison tool that shows you the difference in interest earned among the most popular savings accounts. I moved my emergency fund from Bank of America to a CapitalOne 360 account and am now earning hundreds of dollars instead of just dollars in interest. It’s pretty cool.
Online Financial Management Tool
If organization is your priority this year, then Flourish Financial Planning has a great tool for you here. It’s a free online financial management tool where you can input all of your information to see your whole financial picture in one place. It also includes software that can help you visualize the effects of different financial situations and decisions you may be facing using your own personal numbers.
Unclaimed Property
Did you know that you may have money that you’re not even aware of? There are billions of dollars of unclaimed property out there. It could be anything from forgotten bank accounts and 401(k)s to unclaimed refunds or lawsuit settlements.
Each state has a database that you can search and you can access them all at Unclaimed.org. In addition to the 50 US states, that site also links to searches for Washington, DC, Alberta, British Columbia, Kenya, New Brunswick, Puerto Rico, Quebec, and the US Virgin Islands. Sadly, I don’t have any unclaimed property, but I found that my aunt has $40 in “misc unclaimed checks.”
Clergy Issues
Pastor’s Wallet Resource Page
A lot of you find your way to this website because you have questions about clergy-specific financial issues. There aren’t a lot of resources for pastors like you online, which is why I’m here. I just put together a brand new page chock full of free resources, including housing allowance and net worth calculators, downloadable housing allowance worksheets, a checklist for getting your finances in order, and several other housing allowance-related tools. You can check out the new page here.
Pocket Guide To The Clergy Housing Allowance
Another new resource I just created is the Pastor’s Wallet Pocket Guide To The Clergy Housing Allowance. The housing allowance is one of the most misunderstood and under-utilized financial opportunities for pastors. This is not a comprehensive guide (that would take a book, which I’m working on right now), but more of the Cliff Notes for the housing allowance. All of the most important information is presented in simple bullet points and easy-to-reference facts. It’s a special treat for those who sign up for my updates, so even if you’re already on my mailing list, go ahead and use the bar at the top of the page to get access.
Clergy Tax Withholding Calculator
One thing that gets more complicated when you become a pastor is your taxes. Because pastors are dual-status taxpayers, traditional tax calculators that you find online don’t always work. The people over at StartCHURCH had compassion on you and developed a tax withholding calculator designed for clergy and your unique issues. It’s even state-specific and you can check it out here.
Tax Resources For Pastors And Churches
Taxes are a big deal and it’s hard to find a CPA or tax professional who actually understands the intricacies of how they apply to pastors. Wayne Vinson, CPA of Vingroup, however, is well versed in taxes and how they apply to both pastors and churches. They have a resource page with helpful tax forms and a good Request for Housing Allowance that you can personalize.
Church Accounting Help
The fact that clergy taxes are complex and confusing is a thorn in the side of most church bookkeepers. Also, IRS rules regarding churches are different than for other organizations and there isn’t a lot of reliable information out there. Freechurchaccounting.com is a wonderful resource for anyone involved in church finance. The site has an amazing amount of information and, best of all, it is actually accurate!
Debt
Debt Repayment Calculator
When it comes to your financial life, debt is like a giant millstone that you have to drag around with you everywhere you go. It affects the calls you can answer and how you make financial decisions. Most people just pay their minimum payments and dream of the day that their debt will go away.
It doesn’t have to be that way, though. If you have specific goals in mind, then you can adjust your payments to allow you to reach those goals. This debt repayment calculator lets you look at debt repayment based on payment amount or desired payoff date. It also shows you how much interest is paid over time and how increasing or decreasing your balance would affect things. The calculator works for everything from credit cards to student loans.
Student Loan Income-Driven Repayment Calculator
When it comes to student loans, you often have various options for repaying them. The government has several different income-driven repayment plans that base your monthly payment on your income. This calculator, built by a family-focused financial planning firm, will show you what your payment would be under each program so that you can decide the best program for you and your family.
Investing & Retirement
Investment Calculator
Once you free yourself from the burden of debt, it is important to focus on saving for the future. This investment calculator, brought to us by the famous Dave Ramsey and crew, will show you what to expect of your investments based on your time horizon and expected returns. There are a lot of investment calculators out there, but I like this one because of the way it is laid out and the graphs it provides that show the power of compounding interest.
Dave likes to use a 12% rate of return for his calculations, but if you invest in anything other than stocks or use a target date fund, there’s a slim chance that you’ll get such high returns. It’s safer to be conservative in your estimates. Also, it’s important to remember the effects of taxes when looking at your final expected returns.
Social Security Retirement Estimator
In addition to your personal investments, Social Security benefits will be an important part of your retirement planning if you didn’t opt out or are eligible for spousal benefits. For planning purposes, you can use this estimator from the Social Security Administration to get an idea of what to expect. You should also review your Social Security earnings history regularly by setting up an account at ssa.gov to make sure they have the right numbers for your estimates.
Retirement Savings Calculator
If you want to calculate how much you need to be saving for retirement, then here is a calculator for you. You can input your age, your current income and savings, when you plan to retire, and how much you expect to receive in Social Security benefits. It will tell you how much you should be saving to reach your goals, in dollars and as a percentage of your current income. It shows a graph of how your money will grow and then be spent down in retirement and tells you how much more you’ll need to save if you put it off.
Retirement Withdrawal Calculator
There is a lot of focus on saving for retirement, but what happens when you actually retire? You have to switch things around and start spending down your accounts instead of saving into them. That can be really scary.
If you want to know how long your money will last you in retirement, then this calculator can help you. Enter the balance you will be starting retirement with, the interest you’ll be earning on the money, and how much you’ll be taking out each year. Then the calculator will tell you how long your savings will last. It’s a great calculator to play around with because you can look at the effects of increasing your savings or decreasing your retirement spending.
Professional Help
Sometimes things are beyond your DIY abilities and you need to consult with a professional to master your personal finances. Professional help is not free, but it can be more than worth it. If you’re at the point where you need to talk to a professional, you can find one here:
- XY Planning Network– These advisors are highly-trained Certified Financial Planner™ professionals who swear to work in their clients’ best interests and also offer virtual services so that your location doesn’t matter.
- Fee-Only Network– These are advisors who do not accept commissions, so their advice is less conflicted and more likely to be in your best interest.
- Garrett Planning Network– These are fee-only (no commission) advisors who are willing to work on an hourly basis.
- Kingdom Advisors– These are Christian financial professionals who have received in-depth training on the integration of the Bible with finance.
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Compound Interest: Your Best Friend Or Worst Enemy?
Sometimes in life, your greatest strength can also be your greatest weakness and your biggest disadvantage can also be your biggest advantage. Take Peter, for example. The same boldness and tendency to speak before thinking that caused Jesus to rebuke him and call him Satan is what prompted him to speak out and start the church on the day of Pentecost.
Some of the most powerful things in our lives can be used equally for good or evil. One of those things in the world of finance is called compounding interest. Compounding interest is powerful, and it can either be your best friend or your worst enemy.
What Is Compound Interest?
First of all, what is it? Referred to as both compounding and compound interest, it is simply interest that compounds and builds upon itself. For example, let’s say you have $100 that compounds annually at a 10% interest rate. The first year you will earn $10 of interest (10% of $100). Will you earn $10 again the second year?
No. Instead of $10, you will earn $11 interest. Why? Because the prior year’s interest is added to the balance before calculating the next year’s interest. You’re no longer calculating 10% of $100, but rather 10% of $110. Your interest payment grows each year because it is calculated on both the initial balance and all of the interest you’ve earned to date.
If you only earned $10 of simple interest each year, after 20 years you would have a total balance of $300 ($100 principal + $200 interest). However, with compounding interest, you finish with a balance of $672 ($100 principal + $572 interest). As you can see, that’s not straight-line growth, it’s exponential!
When Compounding Interest Works Against You
So far it looks like compounding interest is a great thing, right? It made it so you could almost triple your earnings in the above example. It is a great thing. When you’re on the right side of it.
The problem is that too many people find themselves on the wrong side of the compound interest equation. Instead of getting paid the compounding interest, you are the one paying it to someone else. That’s how credit cards work. That’s why it can be devastating to your financial life to only pay the minimum payments when you carry a balance.
Student loans work the same way. In a previous post, we discussed how graduate loans differ from undergraduate loans because the government does not subsidize them. Being unsubsidized means that interest starts accruing immediately even though you aren’t required to start making payments until you graduate.
Let’s say you borrow $40,000 in unsubsidized government loans to get a 3-year MDiv. The interest rate on these loans for the current school year is 6.08%. Three years from now when you start paying it back, is your loan balance still $40,000? Not at all! Thanks to the power of compounding interest, it has grown to $47,748.
If you think an additional $7,748 is bad, remember that the interest continues to accrue until the entire loan is paid off. Even if you get your loan paid off in ten years, you’ll still end up paying over $23,000 in interest. That’s over half the original amount borrowed!
When Compounding Interest Works For You
As you can see, you don’t want to be on the wrong side of compounding interest. But something that can be so devastating when it comes to debt can be your greatest asset when it comes to saving and investing. Let’s see how it works in real life.
Pretend that you save up $10,000 to invest for the future and are able to get an 8% return in the stock market. After 25 years, it will have grown to $68,484. You’ve earned $58,484 without lifting a finger. But what if you don’t need the money yet and can keep it invested? Maybe you put it in when you were 30 and you’re still happily working at age 55.
What happens when you leave your money invested ten more years? Suddenly, that same $10,000 grows to $147,853. Your entire balance more than doubled in just the last ten years. Just look at how much it has grown from the red arrow to the end of the graph without putting in any additional money.
How To Get On The Right Side Of Compound Interest
Clearly, compound interest is a powerful force in your personal financial life. It’s up to you whether it will be a force for good or evil.
If you don’t want it to be a force for evil, then the solution is simple: Don’t take on debt and get out of your current debt as quickly as possible. Simple, yes, but not easy. It will take discipline and may be very uncomfortable for a season. But, if your vision for the future is bigger than the discomfort of the present, you will be able to do it.
How can you make it a force for good in your life? That’s simple too. Start saving and investing. As before, simple but not easy. Just like getting out of debt, in order to save for the future, you have to make sacrifices in the present. Again, just like getting out of debt, if your vision for the future is bigger than the discomfort of the present, you will be able to do it.
I have faith that you can get onto the right side of compounding interest. Many have traveled this path before you and have been successful. If you’re one of them, what advice would you give to those who are just starting out? Please let us know in the comments.
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What Is The Difference Between Seminary Loans And Undergraduate Student Loans?
A student loan is a student loan, right? Well, not really. There are a lot of different kinds of student loans; subsidized, unsubsidized, undergraduate, graduate, federal, private, parent, etc.
Each type of loan has unique features, both advantages and disadvantages, so it’s important to understand the differences. Many seminary students take out loans not realizing that they are any different than their undergraduate loans. That can be a costly mistake. So, today we are going to discuss the difference between graduate (what you use for seminary) and undergraduate student loans.
The Government Treats You Like An Adult
When you filled out the FAFSA to apply for government aid for your undergraduate degree, you had to include all of your parents’ financial information. Even if you’re living on your own and supporting yourself, the government sees everyone below a certain age as a dependent.
Now that you’re old enough to go to seminary, the government is ready to treat you as an adult. You don’t have to include your parents’ information when you fill out the FAFSA for graduate school. One advantage of this is that it makes it quicker and easier to apply.
There Isn’t Need-Based Aid
You may think that not including your parents’ information on the FAFSA will improve your chances of getting need-based financial aid. Unfortunately, there isn’t much of that available for graduate students.
Pell grants, which are gifts that do not have to be paid back, are not usually available for graduate students the way they are for undergraduates. So, even if the government helped you pay for your undergraduate degree, don’t expect the same help this time around.
Seminary Loans Have Higher Interest Rates
I was just listening to a podcast for financial advisors about student loans. One of the student loan specialists (yes, they do exist) said something that, frankly, shocked me. She said that grad plus loans are a cash cow for the US government. Cash cow is a business term for something that earns you a lot of money with very little effort.
I always thought the government was in the student loan business to help people get an education. Apparently, though, they make a lot of money off of it. The student loan experts were saying that graduate loans have much higher rates so that they can subsidize the undergraduate loans.
For this school year that we’re about to wrap up, the rate for undergraduate federal loans was 5.05% while the rate for Direct PLUS loans for graduates was 7.6%. If you borrow $10,000 and pay it back over a 10-year schedule, that is a difference of $1,550 dollars in interest. The graduate student pays over one and a half times as much interest as the undergraduate student.
Interest Starts Accruing Immediately
Not only do you pay more interest for your seminary loans than undergraduate loans, but the interest starts accruing immediately. If you had subsidized government loans for your undergraduate studies, then they didn’t start accruing interest until you graduated and started to pay them back.
That’s not the case for seminary loans. The government does not offer subsidized loans for graduate school. That means interest starts accruing the moment you take out the loans, no matter how long you stay in school. If you were to borrow $10,000 at the current PLUS loan rates, in 3 years when you finally have your MDiv your loan balance will have ballooned to $12,457. That’s almost 25% more than you originally borrowed.
Should You Take Out Loans For Seminary?
You see, there are some very important differences between student loans for graduate and undergraduate studies. Even though you can borrow more for seminary, it will also cost you more.
If you’ve already gone through seminary and are struggling to pay off your loans, I hope this helps you understand why your balances have grown larger than you expected. If you’re planning on starting seminary in the fall and considering taking out loans, I hope you consider this information very seriously.
No one blinks an eye at someone taking out $50,000 in student loans to go to medical school. The minute that person graduates they’ll be earning at least three times that amount, often even more.
The 2018 salary poll of the Southern Baptist Convention found that full-time senior pastors age 35 and below earn an average of less than $60,000. Full-time ministerial staff of the same age earns an average of less than $50,000. Those are averages, not minimums. Also, that is just the Southern Baptists. Your denomination may pay more or less.
It is important for you to consider how it will affect your life, family, and ministry before you take out seminary loans. Will you be able to follow your call to church planting or the mission field with debt hanging around your neck? Will you feel pressured to postpone having children so your wife can keep working longer to help pay down the balances? What happens if you can’t find a church that will pay you enough to meet your obligations?
Personally, I’m not a fan of debt. I would rather go to a cheaper school or go part-time so that I could pay as I go instead of taking out loans. However, this is your life and your decision. I only ask that you think through your options and consider the consequences of each, and I hope this information helps you do just that.
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What Kinds Of Student Loans Are Available For Seminary?
As you look forward to starting seminary in the fall, perhaps the biggest thing on your mind is how in the world am I going to pay for it? If you’re like 69% of college students, you’re probably planning on taking out student loans.
Even if you used loans to pay for your undergraduate degree, things are different once you get your Bachelor’s. Your options have changed. So that you can make an educated decision, here are the loan options available to help you pay for seminary:
Direct Unsubsidized Loans
The federal government offers direct unsubsidized loans to both graduate and undergraduate students. These are not need-based, so all you need is to be enrolled at least part-time in a participating school to qualify.
To apply for these loans, you have to submit the Free Application For Federal Student Aid (FAFSA). The seminary will use the information from the FAFSA to determine how much aid (loans) to award you. The annual limit for direct unsubsidized loans is $20,500 and the aggregate limit, including undergraduate loans, is $138,500.
The current interest rate (until July 1, 2019) for these loans is 6.6% and there is also a 1.062% loan fee. Once you graduate, leave school, or drop below half-time enrollment, you will have a six-month grace period before you have to start paying back your loan. However, interest will accrue while you are in school.
Direct PLUS Loans
If your direct unsubsidized loans are not enough to cover the cost of seminary, you can take out a Direct PLUS loan from the government. These loans do require a credit check. Because of this, you are not guaranteed eligibility, though they are more lenient than most private lenders. Eligibility also includes being enrolled at least half-time.
The borrowing limit is the cost of seminary attendance (as determined by the school) less any other financial aid you have received. So, you should be able to cover all of your costs with a grad PLUS loan. The current interest rate (until July 1, 2019) is 7.6% and there is a 4.248% loan fee. As with the unsubsidized government loan, interest begins accruing immediately. However, you do have a six-month grace period after leaving school before you are required to begin making payments.
Private Loans
While the government loans above have some unique benefits, like flexible repayment options and the potential for loan forgiveness, you may also want to consider private student loans. Private loans are issued directly by banks and credit unions, not the government.
As such, they have different rules for eligibility that may be more flexible than the government rules. Also, some private loans do not have origination fees like the government loans. While direct unsubsidized loans usually have the lowest interest rates, well-qualified borrowers may be able to get lower rates with private loans than PLUS loans.
It’s important to note something that is not on this list- subsidized government loans. Those are the loans that do not accrue interest while you are in school. Unfortunately, those are only available for undergraduate students, so they are not an option for seminary.
Even if you’re very familiar with student loans from your undergraduate days, don’t assume you know everything you need to. Come back next week as we discuss the differences between undergraduate and seminary loans. You owe it to yourself, your family, and your future ministry to make sure you know what you’re getting yourself into before taking out seminary loans.
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Credit Or Debit: How Should You Pay?
Credit or debit? It’s a big debate in the world of personal finance, especially when well-known voices like Dave Ramsey have such strong opinions. Is it best to pay for everything with a credit card and earn rewards? Or pay with a debit card and avoid debt?
Let’s take a look at both options, the advantages and disadvantages of each (because there are both!), and discuss how to go about making the decision for yourself.
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Welcome To The Sandwich Generation: Launching Your Children Into Adulthood
Last week, we discussed what it means to be a member of the Sandwich Generation, those adults who are responsible for bringing up their own children and for the care of their aging parents. We discussed how hard it can be to navigate caring for two very different generations without risking your relationships, finances, or sanity.
Today, we are going to talk about the younger generation, the bottom bread in the sandwich. While strollers and soccer clubs can be pretty spendy, for most parents their greatest financial burden comes when it’s time for their kids to go to college. This is where many parents really mess up their finances and put their own futures at risk.
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Are Millennials Really Worse With Money?
It seems that in the media, Millennials are constantly getting a bad rap. They are lazy, entitled whiners living in their parents’ basements and sipping expensive coffee.
But we all know Millennials who are nothing like that. Like my son’s kindergarten teacher who spends all day shaping the hearts and minds of 20 little high-energy, snotty-nosed humans, then goes home to take care of her baby and husband (all while pregnant).
Sometimes the only way to reconcile our own experiences with what we hear in the media is with cold, hard facts. This is a money blog, so today we’re going to talk about money. Are Millennials really worse with money than everyone else? Or is that just something that old people say to feel better about themselves?
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3 Things You Need To Know Before Taking Out Student Loans
Even though to me it seems like summer is just getting started, some colleges are starting up again in only a month. This is the season when thousands of families are signing up for student loans. Personally, I don’t think loans are necessary to earn a college degree, but a lot of people still use them.
If you or your child are planning on attending college this fall and using loans to do so, you need to know what you’re getting into. Here are three very important things for you to understand before taking out student loans:
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