Mortgage & Housing Costs

A cautionary note (please pardon the math on a Friday) on home prices and home mortgage affordability in the short- to intermediate-term future. This note can also be useful for those with HELOC loans, or home equity lines of credit, with floating interest rates.

Inflation has recently had an overlooked side effect: a decline in the amount of home that a given monthly mortgage payment buys. The obvious factor is that interest rates on 30-year mortgages have skyrocketed from around 3% about 10 months ago to over 7% today. (Note, there is a sound but painful reason for interest rates to have risen. Historically, higher interest rates are one of the most proven ways to gradually – emphasize, “gradually” – control inflation or slow down an over-heated economy).

In buying a house using a mortgage, the situation turns into kind of a “seesaw” between the amount put down and how that amount translates into the monthly payment. 

Continue reading “Mortgage & Housing Costs”

Making the Best of Down Markets

There is no sugar-coating it: investors in 2022 have experienced the biggest – and longest – down year for stock and bond markets since the 2007-2008 financial crisis. One of the only consolations is that over the past 13 years there have been tremendous gains overall, still with a few bumps along the way. Below I outline a few more consolations, or ways to make the best of down markets.

First a quick note: For newer, younger investors it may be difficult to not yet see long-term gains having accumulated in portfolios. Know that time horizon and future earnings potential are two huge positives working in your favor.

Here are a handful of ways to make the best of down markets – and to take advantage of higher interest rates (hint: there are more positives around higher interest rates than the media lets on).

For savers with healthy balances in pre-tax 401k and IRA accounts, use the opportunity to convert pre-tax IRA monies to Roth IRA monies.

Continue reading “Making the Best of Down Markets”

Series I Bonds, Yes 9.62%

From the Archives of TGIF 2 Minutes (original post May 13, 2022) to reflect my recent purchase of I-Bonds and continued questions received:

“What are I Bonds?” The “I” in I Bonds stands for Inflation, which is why these bonds are so HOT at the moment. (Note: inflation overall is clearly not a good thing; I Bond interest rates may be one of the only things that benefit from skyrocketing inflation.)

You can skip this entire post and simply go to www.TreasuryDirect.gov and click on “How to buy Series I” under the column, “Individuals”. The website is written – literally – as if a third grader could understand it. See the * and ** footnotes below.

The “I Bond phenomenon” has heated up in the past eighteen months with the spike in inflation. Their current, high interest rate warrants taking a look.

Continue reading “Series I Bonds, Yes 9.62%”

Series I Savings Bonds, Yes 9.62%

“What are I Bonds?” Thank you to a growing number of curious and smart clients, friends and colleagues for hammering this question enough over the past several months to warrant a TGIF 2 Minutes dedicated to I-Bonds. The “I” in I Bonds stands for inflation, which is why these bonds are so HOT at the moment. (Note: inflation overall is clearly not a good thing; I Bond interest rates may be one of the only things that benefit from skyrocketing inflation.)

Inflation is higher in 2022 than it has been in over 40 years – longer than lots of TGIF 2 Minutes readers may have been alive, and certainly longer than lots of readers have been working for, earning, and spending “real money”.

The “I” in I Bonds stands for inflation, which is why these bonds are so HOT at the moment.

Continue reading “Series I Savings Bonds, Yes 9.62%”

Slaying Inflation & Stagflation

Stagflation. An economic condition not experienced since the 1970’s – which was also the last time that inflation was as high as it is today.

Stagflation is an understandable word: stagnated growth coupled with persistent, high inflation. Often high unemployment is also part of the picture but presently is not the case. The reason stagflation is currently in the conversation is that in addition to current high levels of inflation, there are potential factors that could weigh even further on the US economy: tax increases and greater government spending. Stagflation could result – or could be inevitable no matter what.

Higher interest rates and focused policy today could be a small price to pay for a more balanced future with modest growth and less inflation.

Continue reading “Slaying Inflation & Stagflation”

Murphy’s Law & YOLO Can Be Expensive

One of the most critical factors of long-term personal financial success is… guess:

  • The markets
  • Spending
  • Interest rates
  • Stock selection
  • Income level

And the answer is…. SPENDING. This fact is why a truly competent financial planner will spend the most time on discussing spending, both today and future projected, along with GOALS. (Goals are what people spend money on.)

Holding an amount of cash – un-invested cash savings – is key to surviving Murphy’s Law events.

Continue reading “Murphy’s Law & YOLO Can Be Expensive”

Taxes Make Ya Wanna Go #$%&!

Yup, it is tax season. This year as clients and friends were completing their 2021 tax returns* the cries of, “Are you kidding me?” and “This is by far the most taxes I have ever paid in my life!” were louder than ever. There were valid reasons for wealthier taxpayers paying more taxes for tax year 2021 – far more than for tax year 2020. A few reasons were somewhat UN-related to the coronavirus pandemic, and a number of reasons were directly pandemic-related.

The majority of my clients and friends simply made more money in 2021 than 2020. (Is that a bad thing? Most likely not.) The pandemic, in a delayed fashion, led to promotions and opportunities in 2021 for lots of individuals in corporate America and at companies that “dug in” amidst epic challenges in 2020. Retention and performance bonuses wound up being paid in 2021 (continuing in 2022), following a time in late 2020 when it seemed basic compensation and jobs were at serious risk. This turnaround was a huge irony and welcome relief to a number of people – and the “flip side” became higher taxes for tax year 2021.

Pandemic-related factors were to blame for higher 2021 taxes in several “hidden” ways.

Continue reading “Taxes Make Ya Wanna Go #$%&!”

Financial Satisfaction in Crazy Times

These are crazy times, almost chaotic. Chaos is defined as complete disorder and confusion – and parts of the world and our lives may be nearing that point, or at least feel that way. How does an investor get financial satisfaction in times like these? Carefully and patiently.

“Carefully” can equate to:

  • having a plan that addresses saving, spending, taxes, & investments
  • being able to monitor and adjust the plan, perhaps with an adviser
  • then continually executing the plan.

The “patiently” part can be more difficult and is just as critical.

Storms are temporary and the worst of chaos and volatility will pass – be prepared for an unknown timeframe.

Continue reading “Financial Satisfaction in Crazy Times”

IMPORTANT Cyber-Security Message

In light of the recent Russian aggression in Ukraine and surrounding areas, here is a quick and important message regarding vigilance around security of personal information, including:

  • Bank accounts – including in-person, online, PayPal, Venmo, etc.
  • Credit card accounts
  • Email & Texts
  • Tax time information
  • Social media
  • Even Crypto accounts!

It should not come as a surprise to read or hear this message. Hopefully, the major news outlets are broadcasting this warning as well:

The SEC has sent notices that the Department of Homeland Security’s Cybersecurity & Infrastructure Security Agency (CISA) issued a “Shields Up” notification.

Continue reading “IMPORTANT Cyber-Security Message”

Double-Edged Sword of Aging

Clearly another topic with multiple sequels, aging has its positives and not-so-positives. Recently a slight positive – from the IRS.

Its Life Expectancy Tables, otherwise known as the “IRS Uniform Life Tables I, II and III”, have adjusted the American life expectancy UP by approximately two more years. That means that RMD amounts, or required minimum distributions, from IRA, 401k and other retirement accounts will be slightly lower when calculated. These RMDs count as taxable income so even a small break will be welcome!

Increasing longevity is a compelling reason to develop or maintain a well-laid out long-term savings plan.

Continue reading “Double-Edged Sword of Aging”