"If you have no money, be polite." - Danish Proverb

SavingAdvice.com Blog

Bridging the gap between saving money and investing


Join Now or Login

Politics

How Will The New Budget Deal Impact Your Finances?

By Leave a Comment

new budget deal

According to a new HarrisX poll, 27 percent of Americans believe the new budget deal won’t have any direct impact on their finances, which is likely true. Here is what other Americans think about the deal and how it may impact the economy.

What Americans Think About The New Budget Deal

HarrisX surveyed 1,000 registered voters between July 27 and July 28 to get Americans’ thoughts on the latest budget deal. The poll also found that 14 percent of Americans think the deal would actually improve their finances, while 16 percent believe it will worsen their current financial situation.

Not all Americans have made up their mind regarding the latest two-year budget though. Around 42 percent reported they need more information before deciding how it will impact them. Fifty-one percent of independents who participated in the poll said they’d need more information. Some Democrats (41 percent) and Republicans (34 percent) felt the same way.

There is a small divide when it comes to political parties as well. Republicans were more likely to think that the newest budget deal would help improve their financial situation (24 percent). Only 14 percent of Democrats and 5 percent of independents reported believing that to be true.

Around 22 percent of Democrats polled said they thought the new budget deal would likely hurt their finances (compared to 12 percent of Republicans and 14 percent of independents).

About The Latest Two-Year Budget

The new budget deal is shooting to increase federal spending and borrowing limit over the next two years. According to The Hill, this includes raising military and domestic spending by more than $320 billion. President Trump signed it into law on Friday, despite resistance in the Senate. In fact, more than 20 Republican senators voted against it.

Many people opposing the deal argue it isn’t focusing on decreasing federal spending as we should be.  Even though spending is typically a good thing for the economy, the latest budget changes would add about $2 trillion to the national debt over the next 10 years. The national debt has already increased by $2 trillion since Trump took office in 2017.

Final Thoughts

When it comes down to it, many of us won’t recognize any immediate (or large) impact on our finances. However, you may see increases in your taxes over time. Many people who are self-employed or those who are in a higher tax bracket may find they are paying more in than they have in past years.

But, when it boils down to it, many people won’t see a huge impact on our personal finances. The U.S. government, on the other hand, is continuing to increase the national debt. If this continues, our economy won’t be able to hang on for long.

Readers, what do you think about the new budget deal? How do you think it will impact your finances

Read More

What the New Lower Federal Interest Rate Means

By Leave a Comment

 

What the New Lower Federal Interest Rate Means

Interest rates are going down. The Federal Reserve has reduced its federal interest rate by 0.25%. The overnight lending rate is the basis for lending between banks and affects the rates offered to consumers for various loans. The last rate cut was almost twelve years ago after the real estate bubble burst in 2008. Conversely, rates have been raised nine times in nearly four years.

What is the Federal Reserve?

The Federal Reserve, or the Fed, was created in 1913 to stabilize the financial system in the United States. It’s also known as the central bank of the US and one of the most powerful financial institutions in the world. The Fed controls the monetary policy for the US. Its mandate, set by Congress, is “maximum sustainable employment, stable prices, and moderate long-term interest rates.” The Fed uses increasing and decreasing interest rates to combat the effects of inflation and stimulate the economy.

Reasons for the Decreased Federal Interest Rate

This latest reduction is said to mitigate global risk amid worsening relationships and trade concerns. The stock market and the current administration wanted a more significant decrease of 0.50%. The stock market reacted negatively to the news since lower rates present a weak economy. The S&P 500 decreased over 1%, to its lowest point in the last two months.

The Fed Chairman, Jerome Powell, alluded to the possibility of more cuts. However, there are no long-term cuts planned. The rate decrease was to prepare for future economic uncertainties. The administration is not particularly happy with the initial reduction and blames Mr. Powell’s policy decisions for slow economic growth. However, unemployment has been low for quite some time, and inflation has been steady. Conservative decreases as a preventative measure may contribute to more prolonged results.

What It Means When Interest Rates are Low

Federal interest rates affect how much it costs to borrow debt. Consumers are more likely to make big purchases when rates are lower. The hope is that lower rates will decrease spending on debt and increase consumer spending elsewhere. Lower rates also incentivize businesses to take out loans for expansion, equipment, and other enterprising efforts. Rates usually are reduced when the economy is in a recession, so this an unusual situation. The economy is strong, yet the Fed decreased the rate. The Fed previously reduced the rate to combat recession in 2003. The rate was 1.25% then. The current rate range is 2 to 2.25%

If you’re looking to finance a property, a car, or business expenses, now may be the time to strike. Also, now be a great time to refinance. If you took out a loan within the last four year, when the rates were increasing, the lower rates might be especially appealing. You may see a significant reduction in your monthly payments or total interest paid over the life of your loan. However, don’t feel pressured to accrue unnecessary debt because rates are low. The economy and markets are cyclical. Stick to your goals and financial plan.

Read More

Can Senator Warren Really Really Wipe Out $640 Billion in Student Loan Debt?

By Leave a Comment

 

student loanAs April 2019 drew to a close, Senator Elizabeth Warren revealed an ambitious plan to help American families overcome student loan debt. If the plan was implemented, about 75 percent of Americans with student loans would see their debt vanish. For another 20 percent, at least some of their student loan obligation would disappear. But can Senator Warren really pull it off?

Senator Warren’s Student Debt Cancellation Plan

Senator Warren – who is also campaigning to be the next president of the United States – has a bold plan for tackling the student debt crisis in the United States. She wants to cancel up to $50,000 in student loan debt for any American household earning up to $100,000 a year. For approximately 75 percent of student loans holders in the U.S., that would mean cancellation of all of their remaining student loan debt.

However, 95 percent would at least get some degree of relief. If a household earning less than $100,000 had over $50,000 in debt, the plan would dismiss at least $50,000. For example, if a qualifying family had $65,000 in student debt, only $15,000 would remain after $50,000 worth was canceled through Senator Warren’s plan.

Additionally, partial debt cancellation for households that earn between $100,000 and $250,000 a year would also be available. The value of the cancellation would decrease by $1 for every $3 earned over $100,000. For example, households with incomes of $160,000 would get $30,000 of their student debt canceled. At the $190,000 annual income mark, the family would see $20,000 of their student loan debt wiped away.

Households with federal student loans wouldn’t even have to take action. Since the government has access to their loan and income data, it could be handled without the family having to take any steps. Private student loan debt would also be eligible in the plan, but the government would need to work with borrowers to get the loan details and coordinate the debt elimination with the lenders.

Many lower- and middle-class families struggling with student debt would get some relief, especially since the debt elimination wouldn’t be taxed as income. Senator Warren equated the plan to “an enormous middle-class stimulus that will boost economic growth.” And she didn’t stop there. If her plan was implemented, about 42 million Americans would at least get partial relief from their student loan debt.

Senator Warren’s Free College Plan

Another part of Senator Warren’s policy that could have a massive impact on American families is her plan for universal free college. She wants to make two- and four-year public colleges available without any tuition or fees, significantly limiting how much a person would have to spend while pursuing higher education.

While that plan might not bring the cost of college to zero – as it does not address other expenses like room and board or supplies – to say it would make a substantial difference would likely be considered an understatement.

The Drive for College Degrees

Many Americans believe that a college education is critical for their future success. One 2012 Pew study showed that 94 percent of parents with children under the age of 17 expected their kid to go to college.

Additionally, it is widely known that individuals with college degrees generally earn more than those who stop going to school after receiving their high school diploma. Those who have a four-year degree earn about 26 percent more than those with two-year degrees and college graduates bring in 56 percent more than high school graduates.

Employers are also increasingly seeking out workers with college degrees. One study by Georgetown indicated that 65 percent of jobs in the US would require at least some level of higher education by 2020.

Paying for Senator Warren’s Plan

Most who oppose Senator Warren’s plan first point to the price tag, which is estimated at $1.25 trillion over 10 years for both the debt elimination ($640 billion) and universal free college components. To put it simply, eliminating that much student loan debt and making college free wouldn’t be cheap. However, Senator Warren says she has a plan for that too.

She would like to fund her plan through an “Ultra-Millionaire Tax.” Families with $50 million or more in wealth – a total of about 75,000 households – would be subject to a 2 percent annual tax, which Senator Warren says would cover universal free college and the debt cancellation.

However, many legislators believe that Senator Warren’s plan is just too expensive. Additionally, some think it would be unfair to erase student loan debt when so many others have already paid off their hefty loans.

Concerns about ensuring schools would control their costs have also been expressed. Since 2001, tuition at four-year institutions has risen over 100 percent (including after being adjusted for inflation).

Can Senator Warren Wipe Out Billions in Student Loan Debt?

In her position as Senator, she does not have the power to move ahead with this plan alone. She would need significant backing from Congress and the President to turn this vision into reality, as it would have a massive impact on the budget.

If Senator Warren was elected in 2020 to become the next President, she could also then try to push this plan forward. However, since it would involve updates to the tax code (to implement her Ultra-Millionaire Tax), changes in the US educational system and funding dedicated through the federal budget, putting it into motion without the support of Congress would incredibly unlikely.

Now, if Senator Warren did garner enough support – either while in Congress or if she becomes President – then wiping out that student loan debt isn’t impossible. Similarly, making public college tuition and fee free is technically something that could happen. It’s just important to understand that there is a long road ahead if that is a plan she wants to implement and, without the proper support from other key government officials and legislators, it probably won’t become a reality.

Are you struggling with student loan debt? Do you think Senator Warren’s plan is a good idea? Tell us about your experience an share your thoughts in the comments below.

Read More:

If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

January Jobs Report Shows Growth Despite The Shutdown

By Leave a Comment

January jobs report

The January jobs report was released on Friday and, despite the government shutdown, there was growth in the job market once again. This marks 100 months of consecutive growth. President Trump took to Twitter to celebrate the latest Trumponomics triumph.

The Job Market Post-Government Shutdown

Although there were another 304,000 jobs added to the market in January the employment rate went up slightly. There is no doubt this is due to the fact that many government workers were forced to file for unemployment or assistance during this time.

That being said, many people were pleasantly surprised by the post-shutdown jobs report. It showed the economy added 304,000 jobs during the first month of the year. The number 304,000 does not reflect any jobs impacted by the shutdown because the Labor Department knew those individuals would be paid eventually and, therefore, were reported as gainfully employed.

What Did The January Jobs Report Say?

The unemployment rate was up due to government workers not able to collect a paycheck. However, it only increased by 0.01 percent from December. There is speculation that the unemployment rate should have actually been higher (4.1 percent).

Another note to take away from the January jobs report is the number of people taking on part-time jobs increased. This was likely due to people being out of work during the shutdown. The Labor Department reported that 490,000 more people were working part-time in January but were searching for full-time work. So, there is still plenty left to be desired where the United States job market is concerned.

Despite the continued growth in the job market, the government shutdown did have a real impact on 800,000 workers in the U.S. Some people were unable to pay bills or put food on their table. Not to mention, the unemployment rate is on the rise again (largely due to the shutdown). And, if no agreement is made soon, it will happen again.

Readers, what do you think about the possibility of another shutdown? What do you think the long-term impact may be?

Read More

5 Ways the Federal Government Shutdown Has Affected the Economy

By Leave a Comment

the federal government shutdown

One estimate by Standard & Poor’s, a financial rating agency, showed that the cost of the latest government shutdown to the economy was $6 billion. Everything from lost productivity – based on federal worker furloughs – to slowed purchasing activity at various businesses plays a role in the final price tag. If you are wondering just how much the federal government shutdown has affected the economy, here are five.

1. Slowed GDP Growth

Although no one knows the exact impact of the shutdown, there was damage to the U.S. gross domestic product (GDP). Quarterly economic growth was likely cut by about 0.13 percent points for each week it carried on. This led to about a 0.65 percent estimated decline since the shutdown lasted nearly five weeks. An estimate also suggested that around 380,000 workers were not producing services that they typically would during the shutdown period.

It is true that GDP growth losses may recover by the second quarter. However, since the government may shut down again if a deal isn’t reached by mid-February, there could be more damage.

2. Household Spending

During the shutdown, about 800,000 federal workers weren’t receiving paychecks. Additionally, individuals who contract with the government but are not official employees may have also seen their wages paused.

As a result, spending changed dramatically for many households. In some cases, people spent less on groceries. They also spent less on gas for their vehicles, and other common categories to increase their odds of remaining solvent during the shutdown. Others tried to negotiate with creditors to get some relief. Unfortunately, many may have to face interest or fees because of non-payment, also impacting their budgets.

When people spend less, the economy feels it. Businesses bring in less money.  Less revenue impacts their profits and ability to pay their bills. Then, it just keeps trickling down. From one company and household to the next.

3. Delayed IPOs

A few high-profile IPOs were planned for the beginning of 2019, including Pinterest, Lyft, and Uber. However, when the government shutdown, the Securities and Exchange Commission (SEC) was only handling emergencies. All pending administrative proceedings were put on hold.

As a result, there was a delay in IPOs, which not only impacts those companies but also the potential investors and the stock market as a whole.

4. Airlines Lose Business

Airlines across the country all saw their pocketbooks becoming a little lighter thanks to the government shutdown. Since federal workers and contractors were mostly furloughed, they weren’t traveling. This resulted in fewer airline ticket purchases.

Similarly, some other travelers may have changed their plans because of the shutdown. Some TSA workers called in sick instead of working without pay, and security lines got substantially longer. Travelers may have decided it was better to delay their travel plans than contend with the nuisance. As air traffic controllers also began calling in sick, other potential passengers may have forgone their original itinerary based on fear as well.

5. Small Business Impact

The shutdown also did a number on small businesses around the country. Along with slower household spending, something that can affect a company of any size. Companies were unable to approve Small Business Administration loans. This may have caused a squeeze on small business owners who needed the money to maintain operations or go forward with a big project.

Similarly, microbreweries couldn’t get approvals of labels from the Alcohol and Tobacco Tax and Trade Bureau (TTB), hindering their ability to get new batches out for customers.

Ultimately, the government shutdown was hard on the economy. The examples above only skim the surface of the full impact, and the true nature of the damage may not be clear for months. Plus, if the government fails to strike a deal by mid-February, another shutdown could occur, making a tough situation potentially much worse.

How has the government shutdown affected you? Tell us about your experience in the comments below.

Read More:

If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

How the Government Shutdown Impacts Your Mortgage

By Leave a Comment

government shutdown mortgage

The partial federal government shutdown has complicated life for thousands of Americans and now it has begun to complicate things for homeowners and homebuyers as well. Those looking to get an FHA, VA, or USDA loan can expect delays. Not to mention, if you are one of the 800,000 employees affected by the shutdown, you may have trouble making a house payment.

How the Government Shutdown Affects Homebuyers

The U.S. Department of Agriculture announced it isn’t approving any new USDA loans during the government shutdown. This has the potential to impact tens of thousands of Americans.

In general, people looking for home loans through the United States government will see delays of up to two weeks. However, many industry leaders are still conducting business-as-usual. A survey was taken by a group of 2,211 members of the National Association of Realtors. Around 75 percent of those who responded to the survey said the shutdown hasn’t had an impact on any closings.

The numbers are telling a different story though. Around 25 percent of Realtors said buyers have decided not to go through with a home purchase simply because of economic uncertainty. About 9 percent of Realtors had a client decide not to buy a home because of lost income due to the government shutdown. On top of that, 17 percent said closings were delayed awaiting USDA loans, 13 percent have been delayed because of IRS income verification issues, 9 percent have seen delays in FHA loans, and another 6 percent have seen delays with VA loans.

Support staff at the VA and Department of Housing and Urban Development are unavailable during the shutdown. While the processing of these loans will continue, you will likely have to wait longer than usual. Because workers are not readily available, there is no good estimate of how long the wait might be.

How the Government Shutdown Impacts Homeowners

U.S. government employees experience the effects of the shutdown the most. As many news outlets point out, these employees aren’t receiving paychecks at this time and some aren’t able to pay their bills on time. If this is the case, be sure to contact your loan servicer and explain the situation. The loan provider should be able to provide payment arrangements and alternatives.

  1. Forbearance. One option for government employees without an income during the shutdown is forbearance. This is a type of payment arrangement that helps homeowners during financial hardship. Forbearance is typically granted on an individual basis.
  2. Short-term loans. Although no one really wants to take on additional debt, taking out a short-term loan could prevent you from falling behind on your mortgage. The Navy Federal Credit Union is offering zero percent APR loans for federal employees and active-duty members of the Coast Guard who usually have direct deposit.
  3. Communicate! Overall, communicating with your loan provider is the most important thing to do if you are fearful of falling behind. Speaking with them and keeping communication open can keep your credit score from suffering while you’re out of work.

Mortgage Rate Lock During the Shutdown

If you have been considering buying a home but the government shutdown is making you nervous, you may want to hurry up and lock down the current rate. When the shutdown began on December 22, mortgage rates fell. Although the shutdown is causing problems for many, this is the one instance it could benefit you. Homebuyers have the chance to lock down the current mortgage rate (even if they aren’t able to close until the shutdown is over).

“Our expectation is that this will be a short-term blip and you’ll be glad if you were able to take advantage of the drop in mortgage rates,” said Danielle Hale, chief economist for Realtor.com. The current rates are likely to rise later this year.

Readers, how does the government shutdown affect you? Let us know in the comments below.

Read More