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The Debt Ceiling and Congressional Brinkmanship

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“I could end the deficit in 5 minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election.” Warren Buffett, Chairman and CEO, Berkshire Hathaway

Around October 18, Treasury Secretary Janet Yellen and the U.S. Treasury Department have warned Congress that the government will no longer be able to pay all its bills unless the $28.5 trillion statutory debt ceiling is increased or suspended.

Source: Congressional Research Service, Congressional Budget Office, and the Treasury Department. Data as of 05/01/2021.

Moreover, Secretary Yellen believes the economy would fall into a recession if Congress fails to address the borrowing limit before an unprecedented default on the U.S. debt.

While the U.S. has never failed to pay its bills, economists say a default would tarnished faith in Washington’s ability to honor its future obligations on time and potentially delay Social Security checks to some 50 million seniors and delay pay to members of the U.S. armed services.

“If you ask the question of Americans, should we pay our bills? One hundred percent would say yes. There’s a significant misunderstanding on the debt ceiling. People think it’s authorizing new spending. The debt ceiling doesn’t authorize new spending; it allows us to pay obligations already incurred.” Peter Welch (D-VT), U.S. House of Representatives Democratic Caucus Chief Deputy Whip

Increases to the debt ceiling aren’t new. They’ve occurred dozens of times over the last century, mostly matter-of-factly, a tacit acknowledgement that the bills in question are for spending that Congress has already approved.

One thing separating today’s debt debate from those of the past is the larger-than-ever national debt, according to Fidelity. Publicly held US debt topped 100% of GDP in 2020 and is expected to reach 102% by the end of 2021.

And the debt is projected to increase significantly in the future. The Congressional Budget Office (CBO) projects a federal budget deficit of $2.3 trillion in 2021—the second largest deficit since 1945.

Source: Congressional Budget Office, as of February 11, 2021.

Failure to address the current challenge could shake global markets even before the Treasury has exhausted its available measures to pay bills. A U.S. debt default, whether through delayed payments on interest owed on U.S. Treasuries or on other obligations, would be unprecedented.

The effect would be one of perception. And, perception can be tied to the reality that someone isn’t going to be paid on time, whether it be government contractors, individuals who receive entitlement payments, or someone else. The damage to U.S. credibility would be irreversible.

Even if a default were only technical—if payments other than interest on debt were delayed—the United States could no longer fully reap the benefits bestowed on the most reliable debtors.

Interest rates would likely rise, as would financing costs for businesses and individuals. Debt ratings would be at risk. The government’s own financing costs, borne by taxpayers, would increase. Stock markets would likely be pressured as higher rates made companies’ future cash flows less predictable. Such developments occurring while economic recovery from the COVID-19 pandemic remains incomplete makes the potential scenario all the more important to avoid.

Let it be said that no one doubts the ability of the United States to pay for its obligations, according to Vanguard. There is a minimal credit risk posed by the United States is supported by its strong economic fundamentals, excellent market access and financing flexibility, favorable long-term prospects, and the dollar’s status as a global reserve currency.

The House has passed a measure that would suspend the debt ceiling through mid-December of 2022, and the bill now goes to the Senate. Republicans in the Senate oppose any effort to raise the borrowing limit and appears intent on making Democrats address it as part of their sprawling investment in social programs and climate policy under reconciliation.

Senate Democrats could lift the debt ceiling without the GOP votes through reconciliation, although that would come with downsides. Under reconciliation, a simple majority of senators can pass a very small number of budget bills each year. The process is sufficiently complex that it would probably take a couple of weeks and distract Democrats from their negotiations over Biden’s “Build Back Bette” agenda.

Thus, the Democrats resist raising the debt ceiling through reconciliation if it means potentially sacrificing other policy goals. And, the rules for reconciliation would require Democrats to specify a new limit for the national debt which would expose them to potentially uncomfortable GOP political attack ads.

Republicans insist that since Democrats control both the executive and the legislative branches and are in a socialistic tax-and-spend binge, they should bear sole responsibility for dealing with the debt limit, which is rearing its ugly head again because the suspension included in a two-year 2019 budget deal expired on July 31.

Democrats argue that Republicans should share the burden of this unpopular chore, since (a) much of the debt involved was run up under Republican presidents and (b) Democrats accommodated Republicans on debt-limit relief during the Trump presidency.

For long term investors, it’s clearly in the best interest of the country to resolve any debt-ceiling issues, according to Fidelity. And, it’s important to understand that there will always be times of uncertainty. It’s important to take a long-term view of your investments and review them regularly to make sure they line up with your time frame for investing, risk tolerance, and financial situation.

References:

  1. https://investornews.vanguard/potential-u-s-debt-default-why-to-stay-the-course/
  2. https://www.cnbc.com/2021/10/05/debt-ceiling-us-faces-recession-if-congress-doesnt-act.html
  3. https://nymag.com/intelligencer/2021/10/democrats-can-raise-debt-ceiling-via-reconciliation-bill.html
  4. https://www.fidelity.com/learning-center/trading-investing/2021-debt-ceiling

Own Your Net Worth and Cash Flow

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8 out of 10 women will be solely responsible for their financial well-being. Some women will be ready. Many won’t. UBS Wealth Management Report

As women’s life expectancies increase and the rate of divorce for individuals over age 50 continues to climb, more women will find themselves solely responsible for their own current and long term financial well-being.

UBS Wealth Management embarked on research–Own Your Worth–to explore women’s thoughts and feelings, the challenges they faced, lessons they learned and advice they would impart to other women.

With the wisdom of hindsight, nearly 60% of widows and divorcees regrettably wish they had been more involved in long-term financial decisions while they were married, according to UBS’ findings. A full 98% of them urge other women to become more involved early on.

Unfortunately, too many women ignore the advice of widows and divorcees. In direct contrast to the advice, many married women are taking a lesser role in managing the household finances. In a counterintuitive twist, Millennials are the most willing to leave investing and financial planning decisions to their husbands.

Fifty-six percent of married women still leave investment decisions to their husbands, according to UBS. Surprisingly, 61% of Millennial women do so, more than any other generation. What’s more, most women are quite content with their backseat role when it comes to investing and financial planning.

UBS’ research reveals many reasons for women’s abdication, from historical and social precedents to family, gender roles and confidence levels.

So. why do women minimize their role in major financial decisions? According to USB’ research, the reasons vary:

  • Gender roles run deep – Gender roles are ingrained from early in life and often prove hard to shake. In many cases, married couples are simply imitating the gender roles they witnessed growing up.
  • Men are still the breadwinners – Within families, 70% of men are the main breadwinners, in part because of the gender pay gap and the career breaks women take to raise children.
  • Time constraints are challenging – Whether married or not, women have many demands on their time. They take on the majority of household duties, including childcare and chores, as well as paying bills and tracking spending.
  • Competence vs. confidence – Together, history and society have conspired to affect women’s financial confidence. Both women and men think men know more about investing, and women are less confident than men in making major financial decisions. Women consistently underestimate their own abilities while overestimating what is required to be financially involved.

Yet, most study respondents participated in some financial decisions while married, from handling cash flow and bills to saving and investing. Regardless of their level of engagement, however, most agree it wasn’t enough. The research shows:

  • 59% of widows and divorcees wish they had been more involved in long-term financial decisions
  • 74% don’t consider themselves very knowledgeable about investing
  • 64% of widows blame themselves for not being more financially involved (53% of divorcees)
  • 56% of widows and divorcees discover financial surprises
  • 53% would have done fewer household chores to find more time for finances
  • 79% of women who remarry take a more active role

USB recommends three actions to take today

The advice from women who have been there is clear: The time to become involved in your family’s present and future financial well-being is today, not when some unforeseen events happen in the future.

Women are encouraged to get involved in their financial well-being as a form of self care, much in the same way you would take care of your health by:

  1. Owning your worth – Know where you stand and what you want for the future. Take the time to add up your assets and liabilities, like loans, credit and other debts, and ask for full transparency from your partner.
  2. Finding your voice – Start the conversation with your partner. Talking about money is considered taboo to some couples, particularly before they are married. But if you found yourself alone tomorrow, do you know what you’d do to make sure you’re financially secure? There is a tremendous benefit to having open communication about money with a trusted confidante.
  3. Setting an example – Model financial partnership for your family and loved ones. According to our survey, women are repeating the gender roles they saw growing up. As you begin taking a more active role in your finances, you can set an example of financial partnership for the younger generation.

Though women are aware of their increasing longevity and the financial needs associated with it, most tend to focus their efforts on short-term financial responsibilities such as managing the household’s day-to-day expenses and paying the bills.

In contrast, taking charge of long-term financial decisions, such as investing, financial planning and insurance, can have far more impact on their future than balancing a checkbook.

By sharing decisions jointly, both women and men can face the future with optimism—and set an example of financial partnership for generations to come.

Almost 60% of women do not engage in the most important aspects of their financial well-being: investing, insurance, retirement and other long-term planning. USB Wealth Management Report

References:

  1. https://www.ubs.com/content/dam/WealthManagementAmericas/documents/2018-37666-UBS-Own-Your-Worth-report-R32.pdf
  2. https://www.ubs.com/us/en/investor-watch/own-your-worth/_jcr_content/mainpar/toplevelgrid_1797264592/col2/teaser/linklist/link_2127544961.2019551086.file/PS9jb250ZW50L2RhbS9XZWFsdGhNYW5hZ2VtZW50QW1lcmljYXMvZG9jdW1lbnRzL293bi15b3VyLXdvcnRoLXJlcG9ydC5wZGY=/own-your-worth-report.pdf

Growing Your Money

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When investing your money in the stock market, doing your research and investing in what you know are crucial elements of successful investing. You don’t have to be a financial expert to start buying stocks, but the more you know going in, the more likely your investing journey will be successful.

It’s critical to understand that stocks represent legal ownership in a company; you become a part-owner of the company when you purchase shares.

People ultimately invest in stocks with one end-goal in mind: to grow their money and build wealth.

But it’s important to note that growing your money and building wealth are not guaranteed. Investing in individual stocks carries much more risk than buying bonds or putting your money in index funds.

As you begin to research stocks, first know how much risk you can take, or your risk tolerance, and your time horizon.

Financial experts typically recommend that you only invest money that you can afford to lose and, since investment returns are typically maximized over the long term, only invest money that you won’t need in the short term (less than three to five years).

Stock’s Value vs. Price

Buying stocks equates to owning companies which lets you be a part of something that’s normally very exclusive. It allows you to invest in pieces of well-known companies, such as Amazon, Google or Apple.

A company’s stock price has nothing to do with its value, because the share price means nothing on its own.

The price of a stock will go down when there are more sellers than buyers. The price will go up when there are more buyers than sellers.

A company’s performance doesn’t directly influence its stock price. Investors’ reactions to the performance decide how a stock price fluctuates.

The relationship of price-to-earnings and return on equity is what determines if a stock is overvalued or undervalued. Essentially, You should make no assumptions based on price alone.

Knowing when to sell is just as important as buying stocks. Most retail investors buy when the stock market is rising and sell when it’s falling, but smart investors follow a strategy based on their financial plan and requirements.

Benjamin Graham is known as the father of value investing, and he’s preached that the real money in investing will have to be made not by buying and selling, but from owning and holding securities, receiving interest and dividends, and benefiting from the stock’s long-term increase in intrinsic value through compounding.

Learning how to invest in stocks might take time, but you’ll be on your way to growing your money and building your wealth when you do so. But, keep your risk tolerance, time horizon and financial goals in mind,

References:

  1. https://www.thebalance.com/the-complete-beginner-s-guide-to-investing-in-stock-358114

FinTech: SoFi Technologies

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SoFi, the digital personal finance company,

SoFi Technologies is an online personal finance technology (FinTech) company based in San Francisco, CA, that was founded in 2011. It provides several online financial services including personal and private loan management, student loan refinancing, and investment management.

SoFi’s mission is to “help people reach financial independence to realize their ambitions. Financial independence doesn’t just mean being rich”, according to SoFi; “it means getting to a point where your money works for the life you want to live.”

Currently, SoFi comprises three main businesses: lending, its largest unit, technology, and financial services.

Their financial services for borrowing, saving, spending, investing, and protecting provide their more than 2 million members fast access to tools to get their money right. Its membership comes with the key essentials for getting ahead financially. And, SoFi members get benefits like financial planning and exclusive access to SoFi Stadium in Los Angeles.

SoFi acquired the naming rights of SoFi Stadium, home of the Los Angeles Chargers and the Los Angeles Rams, which opened in July. 2020.

“As SoFi grows, we knew we needed to expand our real estate footprint to maintain our top-tier level of support for all of our members across the country,” said Anthony Noto.

Anthony Noto is the CEO of SoFi Technologies, serves on its board of directors, and is a graduate of the U.S. Military Academy at West Point.

Get Your Money Right®

SoFi’s overriding purpose is to “help you save, spend, earn, borrow, invest, and protect your money”. SoFi is a full service finance company whose goal is to help their members “get their money right”. Its products are built around their members—so that their members have the tools they need to take control of their financial futures.

“Our #1 priority is putting members first—it’s even one of our company values. If our members are successful, we’re successful. That’s why we offer exclusive member benefits at no cost.” SoFi

References:

  1. https://www.sofi.com/press/sofi-opens-new-office-jacksonville/
  2. https://thecoastal.com/buzz/sofi-to-create-300-jobs-in-jacksonville-by-the-end-of-2021/amp/
  3. https://www.sofi.com/

Avoid These 3 Cybersecurity Mistakes

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CISA warns of risky behaviours that leave networks exposed to cyberattacks

The U.S. Cybersecurity and Infrastructure Security Agency (CISA), which leads the national effort to protect and enhance the resilience of the nation’s physical and cyber infrastructure, warns that “”exceptionally risky” [cyber] behaviors that can put critical infrastructure at extra risk of falling victim to cyberattacks”.

The three cyber security mistakes and behaviors to avoid are:

  1. Using unsupported software,
  2. Allowing the use of default usernames and passwords, and
  3. Using single-factor authentication for remote or administrative access to systems

According to CISA, these are all dangerous behaviors when it comes to cybersecurity and should be avoided by all organizations.

Using multi-factor authentication can help disrupt over 99% of cyberattacks. Microsoft

Use of single-factor authentication – where users only need to enter a username and password – was recently added to the list of risky behaviors. CISA warned that single-factor authentication for remote or administrative access to systems supporting the operation of critical infrastructure “is dangerous and significantly elevates risk to national security”.

Microsoft says that users who enable multi-factor authentication (MFA) for their accounts will end up blocking 99.9% of automated attacks.

Change default passwords as soon as possible, and use a sufficiently strong and unique password. CISA

CISA describes that using fixed or default passwords as “dangerous” and should be avoided at all cost. Default or simple passwords are good for cyber criminals because there’s a much higher chance of them being able to simply guess passwords to compromise accounts.

CISA also warns against the use of passwords that are known to have been breached previously, as that means they also provide cyber criminals with a simple means of gaining access to networks.

One in three breaches are caused by unpatched vulnerabilities. ZDNet

Finally, CISA warns that the use of unsupported or end-of-life software in critical infrastructure. By using software or operating systems that no longer receive security patches or updates, there’s the risk that cyber criminals could exploit newly discovered security vulnerabilities that emerge because old software often doesn’t receive security patches.

The 2017 WannaCry ransomware attack stands a shining example of what can go wrong when patches aren’t applied. While a patch for the vulnerability exploited by the ransomware had existed for several months, many organizations failed to install the it.

Takeaway

Reducing your organization’s cyber risks requires a holistic approach. CISA

Avoiding the use of single-factor authentication, default passwords and unsupported software will also help protect you and others from falling victim to cyberattacks.

To reduce risks, here are three cyber security actions that organizations should do first:

  • Backup Data – Employ a backup solution that automatically and continuously backs up critical data and system configurations.
  • Multi-factor Authentication – Require multi-factor authentication (MFA) for accessing your systems whenever possible. MFA should be required of all users, but start with privileged, administrative and remote access users.
  • Security Patch and Update Management – Enable automatic updates whenever possible. Replace unsupported operating systems, applications and hardware. Test and deploy patches quickly.

References:

  1. https://www.zdnet.com/article/dont-want-to-get-hacked-then-avoid-these-three-exceptionally-dangerous-cybersecurity-mistakes/
  2. https://www.zdnet.com/article/microsoft-using-multi-factor-authentication-blocks-99-9-of-account-hacks/
  3. https://us-cert.cisa.gov/ncas/alerts/TA13-175A
  4. https://www.cisa.gov/sites/default/files/publications/Cyber%20Essentials%20Starter%20Kit_03.12.2021_508_0.pdf

Merck’s Oral Antiviral Pill Reduced the Risk of Hospitalization or Death by Approximately 50 Percent

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A five-day course of Merck’s experimental oral anti-viral drug (Molnupiravir) to treat COVID-19 reduced the risk of hospitalization and death in half in a Phase 3 randomized trial the pharmaceutical company reported. The results were so astounding that the trial is being stopped early, and Merck plans to apply for emergency use authorization from Food and Drug Administration (FDA).

If approved by FDA for emergency use authorization, Molnupiravir, a joint effort between Merck and Ridgeback Biotherapeutics, would become the first orally taken antiviral medicine taken for COVID-19.

In a Phase 3 study, 7.3% of patients taking Molnupiravir were hospitalized, while 14.1% of those taking a placebo had to be admitted to the hospital. Merck also reported that no participants using Molnupiravir died through the first 29 days of the tests, while eight patients using a placebo died.

“This is a phenomenal result. This is a profound game-changer to have an oral pill that had this kind of effect, this magnitude of effect in patients who are at high-risk who are already symptomatic,” says Scott Gottlieb, former Commissioner, FDA.

References:

  1. https://www.merck.com/news/merck-and-ridgebacks-investigational-oral-antiviral-molnupiravir-reduced-the-risk-of-hospitalization-or-death-by-approximately-50-percent-compared-to-placebo-for-patients-with-mild-or-moderat/
  2. https://www.upi.com/Top_News/US/2021/10/01/Merck-Ridgeback-coronavirus-antiviral-drug-molnupiravir/6021633090401/
  3. https://www.washingtonpost.com/health/2021/10/01/pill-to-treat-covid/

October is Cyber Security Awareness Month

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“Do Your Part. #BeCyberSmart.”

Cybersecurity Awareness Month was created as a collaborative effort between government and industry. Its objective is to raise awareness about the importance of cybersecurity across our Nation, ensuring that all Americans have the resources they need to be safer and more secure online.

You can make a difference during Cybersecurity Awareness Month.

Whether you have a minute, an hour or a day – or all month long – Cybersecurity and Infrastructure Security Agency (CISA) and the National Cyber Security Alliance encourage that you check out ways you can participate and support Cybersecurity Awareness Month on social media, at home, at work or school and in the community.

#BeCyberSmart Tip: If you connect it, protect it. Outsmart cyberthreats by regularly updating your software.

Important Cybersecurity Tips to Protect Your Personal Information

  • Lock down your login: Fortify your online accounts by enabling the strongest authentication tools available, such as biometrics, security keys or a unique one-time code through an app on your mobile device. Your usernames and passwords are not enough to protect key accounts like email, banking and social media.
  • Make  your password a sentence: A strong password is a sentence that is at least 12 characters long. Focus on positive sentences or phrases that you like to think about and are easy to remember (for example, “I love country music.”). On many sites, you can even use spaces!
  • Unique account, unique password: Having separate passwords for every account helps to thwart cybercriminals. At a minimum, separate your work and personal accounts and make sure that your critical accounts have the strongest passwords. 
  • Write it down and keep it safe: Everyone can forget a password. Keep a list that’s stored in a safe, secure place away from your computer. You can alternatively use a service like a password manager to keep track of your passwords.
  • Don’t overshare on social media – Cyber criminals can learn all about you, social engineering, on social media! #BeCyberSmart and make it harder for them by avoiding posting real names, places you frequent and home, school and work locations.

 


 
Cyber Security Research Findings

These cybersecurity findings are derived from two national studies – a national survey on online behaviors and attitudes for the National Cyber Security Alliance (NCSA) and the Anti-Phishing Working Group (APWG). The findings reveal that:

  • 93 percent of Americans believe their online actions can protect not only friends and family but also help to make the internet safer for everyone around the world.
  • 96 percent of Americans feel a personal responsibility to be safer and more secure online.
  • 61 percent believe that much of online safety and security falls under their personal control, and consistent with those feelings, 90 percent said they want to learn more about keeping safer on the Internet.
  • 48 percent feel their actions to stay safe and secure can have a positive impact on financial, economic, and national security of the country, indicating Americans are open to making the bridge between their own safety and the nation’s security.

Finally, when respondents were asked why they don’t always do all the things they can or should do to stay safer online, they said they simply lacked the information or knowledge, which was a surprising finding for researchers. Moreover, 12 percent said online safety was too expensive and 5 percent said they were too busy to take the extra step.

STOP. THINK. CONNECT.

References:

  1. https://staysafeonline.org/cybersecurity-awareness-month/get-involved/
  2. https://www.stopthinkconnect.org/research-surveys/research-findings

Essential Money Moves

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Your journey to financial independence is just that—yours.

In our 2021 Money Moves Survey by SoFi, they asked people what’s most difficult for them when managing their finances. 36% responded with “Knowing what to focus on next.” So, choose the moves which may be a good fit for your situation and goals.

Here are eight essential money moves that will help to get you started and help move you towards financial independence according to SoFi.

If you’re living paycheck to paycheck:

  • Start tracking expenses. – Knowledge of where your money is going is power—and a great place to start.
  • Take charge of credit card debt. – Getting into high-interest credit card debt can make saving more difficult—but if you do have it, consolidating your debt can make it more manageable.
  • Limit impulse buys. – While non-necessary spending is a part of life (hello online shopping!), the trade-off is saving more so that you have more cushion.

If you’ve got an employer match…

  • Make sure you’re meeting the minimum to qualify. Adjust your contribution so that you don’t miss out on the match.
  • Track how much of your paycheck is going toward your 401(k) so you can stay on top of your budget and save elsewhere.
  • Don’t forget your old 401(k) when you get a new job. Generally, you can leave it, transfer it to your new plan, or rollover to an individual retirement account.

If you have high-interest debt…

  • Make a list of all your debt. Order it from lowest to highest balances so you can keep track of all of it.
  • Consider the SoFi Fireball Method. This involves tackling any debt that has an interest rate greater than 7% (aka “bad debt”) before you move onto lower-interest debts (while still making minimum payments on all your debt, of course).
  • Consider refinancing or consolidating your debt. Whether you have a student loan or high-interest credit card debt, this option could help you pay it off sooner.

If you don’t have an emergency fund…

  • Calculate what three to six months’ worth of expenses looks like for you. Take a look at an overview of your finances to help you do the math. Some online tools exist to make this easier.
  • Automate contributions to make it easy. Putting your savings on autopilot can help you set aside cash to put toward your goals.
  • Make sure your funds are accessible so you can access them when you need them. Once you set up your emergency fund, you can put extra cash in places that can help you save long term.

If you aren’t saving enough for retirement…

  • Determine the right retirement account for you. Your current employment, income, and other factors can determine whether you opt for a Traditional, Roth, or SEP IRA.
  • Start somewhere. Whether it’s a 401(k), 403(b), or an IRA, save where you can, aiming for 15% of your pre-tax income toward retirement if possible.
  • Talk to a financial planner to map your retirement goals and how you might reach them. They can explore financial strategies to fit your vision for your golden years.

If you’re saving for college, a home, or other big goals…

  • Determine how long of a timeline you’ll need to hit your goals. This will help you know whether to save in cash (for the shorter term) or investments (for the longer term).
  • Save more often—without even thinking about it. You can automate your savings by getting tools that make it easy, like cards with roundups or cash back credit cards.
  • Start investing your way. Whether you want to automate your portfolio, trade your own stocks, or buy parts of stocks—there are lots of options to put your money to work toward long-term goals.

If you have a student loan or mortgage…

  • Try to get the lowest rate you can. “Good” debt is any loan with an interest rate lower than 7%—but a lower rate can be even more manageable. If you can refinance your student loan or mortgage at a lower rate, that could mean significant savings over the long-term.
  • Consider putting extra cash in the market. Instead of throwing all your extra cash at low-interest debt, consider putting some of that money to work in an investment account.
  • Use cash back rewards to accelerate good debt paydown. Credit cards that earn cash back rewards could be used to help you pay down your debt.

If anyone depends on you for financial support…

  • Protect your loved ones first. If you haven’t looked into disability or life insurance policies, or drafted a will, make sure they’re covered should something happen to you.
  • Make sure your assets are protected, too. Whether it’s your home, apartment, or your car, insurance can help ensure you’re covered.
  • Talk to a financial planner to make sure you have all your bases covered. A financial planner can help you identify everything you’ll need to take care of.

References:

  1. https://www.sofi.com/moneymoves/

Take Control of Your Finances

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There are ways to feel more in control of your financial situation–and make the money you have go farther. The key is to take a close look at your current budget and to better manage your cash flow. You can best do this by finding expenses you may be able to pare back or eliminate, and by potentially finding new sources of income.

Smart spending and saving strategies, according to FinTech company SoFi, to follow are:

Create a Budget and Manage Your Cash Flow – Take a close look at your monthly spending to get a full picture of your spending, and start tracking your spending (every cash/debit/credit card transaction and every bill you pay) for a month or so.

Once you understand your average monthly spending, compare it to what’s coming in. You can look at your bank statements for the past few months to get an idea of much after-tax income you are taking in on average per month.

Comparing what is coming in vs. going out will help you know exactly where you stand financially.

Uncovering Places to Save – Once you understand your monthly spending and group your expenses into categories, the next step is to list your expenses in order of priority, starting with the essentials and going down to the “nice to haves.”

Once you’ve established which expenses are the most important, you can start looking for places to cut some of your unnecessary spending. For example, if you are spending a lot on restaurants and take-out, you might consider cooking at home a few more nights a week.

Negotiating with Service Providers – You may be able to negotiate for a lower rate from many of your providers, especially if you’re dealing with a company that’s in a competitive market.

Before you call or email a business or provider, it is important to know exactly how much you’re paying for a service, what you’re getting for your money, and how much the competition is charging for the same or similar service.

It’s also a good idea to make sure you are communicating with someone who actually has the power to lower your rate and, if not, ask to speak with someone who does.

You may also want to let providers know that if they can’t do better, you may decide to switch to another company.

Cutting Back on Bigger Expenses – Look at the big items in your overall budget. For example, if your car payment too high, you could buy a less expensive to cut monthly payments.

If rent is eating up too much of your income, you might want to look into finding a cheaper place to live that’s still nice, taking in a roommate, or moving in with friends.

The lower you keep these costs, the easier it will be to live well within a tight budget.

Knocking Down Debt – Having too much debt can hamper your chances of achieving financial security down the line.

That’s because when you’re spending a lot of money on interest each month, it can be harder to pay all of your other expenses on time, not to mention grow your savings.

Reducing debt may seem like a tall mountain to climb, but choosing the right debt reduction strategy may be able to help you chip away and slowly improve your financial situation.

Since credit card debt typically costs the most in interest, you might consider tackling these debts first, and then move on to the debt with the next-highest interest rate, and so on.

Starting an Emergency Fund – Start putting a little bit away into an emergency fund each month a priority: An unexpected expense—like your car breaking down or a visit to an urgent care clinic—could put you over the financial edge.

If you start putting just a small amount aside each month into an emergency fund, it won’t be long before you have a decent financial cushion that could prevent you from having to run up high interest credit debt the next time something unexpected rolls around.

Spending Only Cash for Everyday Expenses – Using plastic that can make it feel like you are not really spending money. Thus, switching to cash (and leaving the credit cards at home) for other expenses can be a great idea when money is tight.

The reason is that using cash places a harder limit on your spending and helps you become more aware of your choices. When you can literally see your money going somewhere, you may find yourself becoming much more intentional in the way you spend it.

Another benefit of cash is that it’s more difficult to get into debt since you can’t spend cash you don’t have.

Starting a Side Gig – Once you’ve done some basic budgeting, it may be clear that additional income could help ease things while money is tight.

Sometimes all it takes is some extra time and energy, but taking on a side hustle, or using your talents to pick up some freelance work can bring in additional income.

Some ideas for generating extra income include:

  • Selling things on eBay or Craigslist
  • Hold a garage sale
  • Creating an Etsy store and selling homemade goods
  • Driving for a rideshare or food delivery service
  • Giving music lessons
  • Renting out a room on Airbnb
  • Walking dogs
  • Cleaning houses
  • Babysitting
  • Handling social media for small businesses
  • Selling writing, photography, or videography services to clients

Start saving and investing, immediately – Your first financial goal should be to create an emergency fund and to establish the discipline for saving by “Paying yourself first”. To take advantage of compound interest, start investing early and regularly.

Takeaways

You can gain control of your finances by calmly sitting down, creating a budget, and determining your cash flow. This entails looking at your monthly income, as well as your average monthly spending, and seeing how it all lines up.

To create a monthly budget, you must allot funds for expenses such as rent and other bills, then sets aside a small amount directly for savings and uses the rest to live off for the month

Once you have a sense of your cash flow, you can take steps to reduce unnecessary spending, negotiate to lower monthly bills, chip away at expensive debt, and even start building a financial cushion.

References:

  1. https://www.sofi.com/learn/content/what-to-do-when-money-is-tight/
  2. https://www.usatoday.com/story/college/2012/04/25/7-steps-to-take-control-of-your-financial-future/37391767/

14 Moonshot Technologies

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Bank of America Global Research group strategists published a list of what they call technology “moonshots” to help guide long term investors in their search for the next Tesla, Amazon or Apple.

Bank of America’s (BofA) Global Research group published a list of 14 “moonshots (radical technologies of the future) that the researchers said could potentially change people’s lives and “accelerate the impact of global megatrends.”

From the sixth-generation telecom network that could download the entire collection of the New York Public Library in 20 seconds to wireless electricity, things that could radically change people’s lives are not far into the future as one might think, according to strategists led by Haim Israel, BofA’s head of global thematic investing research.

Investors have developed a growing appetite for thematic investing that focuses on understandable and relatable narratives. Led by Cathie Wood’s Ark Investment Management’s exchange-traded funds, which is focused on an “innovative disruptive technology” market niche, have attracted $42 billion of fresh money this year — surpassing the total inflows for the whole year of 2020, according to data compiled by Bloomberg Intelligence show.

Getting early into the next big thing has been crucial for one’s success in stock investing. In the past three decades, just 1.5% of companies accounted for all the wealth created in the global stock market, BofA said, citing a study from Hendrik Bessembinder, an Arizona State University professor.  

Meanwhile, incumbents are displaced at a faster rate because of accelerating innovations. Take the life span of S&P 500 companies for instance. In 1958, the average company lasted 61 years. That has shortened to 24 years by 2016 and is expected to be halved to just 12 years by 2027, BofA data show.  

Investing in early innovators or moonshot companies often require a strong stomach for losses, both in terms of the bottom line and stock performance. And certainly, not everyone has the “temperament” that will allow them to succeed.

Yet, the reward from investing in the stars of tomorrow isn’t insignificant. “While moonshots start at a low market size, their disruptive nature means there is the potential for high growth,” said the BofA’s report.

Currently, the BofA team estimated that the 14 moonshot technologies represent only $330 billion in market size. Cumulatively, they could increase 36% a year to $6.4 trillion by the 2030s. For context, profits from S&P 500 companies have grown 6% a year historically.

“These moonshots could transform and disrupt multiple industries, contributing to the next big cycle of technology-driven growth,” BofA’s report revealed. Since “the adoption of many technologies—like smartphones or renewable energy—have surpassed experts’ forecasts by decades, because we often think linearly, while the progress actually occurs exponentially.”

14 moonshot technologies for the future. (Source: BofA Global Research)

Below is the list of BofA’s 14 moonshot technologies:

  • 6G telecom networks
  • Emotional artificial intelligence
  • Brain computer interfaces
  • Bionic humans
  • Immortality
  • Synthetic biology
  • Wireless electricity
  • Holograms
  • Metaverse
  • Electric vertical takeoff and landing flying cars
  • Oceantech
  • Next generation batteries
  • Green mining
  • Carbon capture and storage

Take fifth-generation (5G) cellular wireless networks. The technology is still in the initial stages of roll-out across the globe, but it will not be able to handle the exponential growth of data transmission in the next 10 years. Sixth-generation (6G) network could enable speeds up to 400 times faster than 5G, the report noted.

“These technologies must have the potential to be economical and cost-competitive. Besides, there should be mass adoption of new products that must address a gap in the market and solve a key problem … such as climate change or improve the quality of life,” noted the 2019 BofA report.

References:

  1. https://www.bofaml.com/en-us/content/market-strategies-insights/weekly-market-recap-report.html
  2. https://www.thewealthadvisor.com/article/bofa-identifies-tech-moonshots-catch-next-apple-amazon
  3. https://financialpost.com/pmn/business-pmn/bofa-identifies-tech-moonshots-to-catch-next-apple-amazon
  4. https://finance.yahoo.com/news/moonshot-green-tech-bank-of-america-170156711.html
  5. https://www.thenationalnews.com/business/technology/bank-of-america-15-radical-technologies-will-transform-the-future-1.922278