Month: December 2022

Mobile applications have become ubiquitous. While many of these apps are games and social media platforms, an increasing number have been developed to help individuals with their personal finances. Which leads to an interesting question: what should you look for in a personal finance app?

Category

One of the first things to consider is what type of financial apps may be most useful. Five basic categories of these apps exist:

Budget tracking apps allow users to record expenditures as they are made, in order to keep track of bank balances and budget categories. Some allow users to make a budget and then watch how closely expenditures are tracking to it.

Financial assistant apps collect, store, and report information from users’ various savings and investment accounts, providing a single place to keep track of asset performance.

Loan calculator apps estimate payments and current balances for loans. Some also track how long it will take to pay off one or more loans.

Spending and saving apps allow users to perform a wide range of activities, including “what-if” scenarios.

Banking apps offer FDIC-insured banking options, including (in some cases) faster direct deposits, bill paying, and other choices for your account.

Criteria

Once a user has decided on a category of app that may be useful, there are additional criteria to consider.

Credibility. As everyone knows, not everything written on the internet is true. For example, The Wall Street Journal and The New York Times are generally considered more credible than an anonymous blog. The same principle applies to apps: understand who’s providing the information.

Security. Before using any financial app, read the privacy or security statement. This can typically be found at the bottom of the company’s web page or in the “About” section of their website. If you don’t find one online, contact the company to request a copy.

Clarity. A personal finance app should provide information that is easy to understand. There are some apps that provide detailed charts of stock performance using a wide variety of financial analyses. However, if you don’t understand the underlying analysis, the app may be useless.

Relevance. Remember the old saying: “I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.” The same applies to financial information. A mutual fund company may be a great source of information about investing concepts, but it may be less useful at providing information about tax management.

Using an app to help with your personal finances may be a great first step in becoming a better money manager, but asking yourself a few key questions before you download may help you select the app that best fits your personal finance needs.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

Every year, about 140 million households file their federal tax returns. For many, the process involves digging through shoe boxes or manila folders full of receipts; gathering mortgage, retirement, and investment account statements; and relying on computer software to take advantage of every tax break the code permits.¹

It seems a shame not to make the most of all that effort.

Tax preparation may be the only time of year many households gather all their financial information in one place. That makes it a perfect time to take a critical look at how much money is coming in and where it’s all going. In other words, this is a great time to give the household budget a checkup.

Six-Step Process

A thorough budget checkup involves six steps.

1. Creating Some Categories. Start by dividing expenses into useful categories. Some possibilities: home, auto, food, household, debt, clothes, pets, entertainment, and charity. Don’t forget savings and investments. It may also be helpful to create subcategories. Housing, for example, can be divided into mortgage, taxes, insurance, utilities, and maintenance.
2. Following the Money. Go through all the receipts and statements gathered to prepare taxes and get a better understanding of where the money went last year. Track everything. Be as specific as possible, and don’t forget to account for the cost of a latte on the way to the office each day.
3. Projecting Expenses Forward. Knowing how much was spent per budget category can provide a useful template for projecting future expenses. Go through each category. Are expenses likely to rise in the coming year? If so, by how much? The results of this projection will form the basis of a budget for the coming year.
4. Determining Expected Income. Add together all sources of income. Make sure to use net income.
5. Doing the Math. It’s time for the moment of truth. Subtract projected expenses from expected income. If expenses exceed income, it may be necessary to consider changes. Prioritize categories and look to reduce those with the lowest importance until the budget is balanced.
6. Sticking to It. If it’s not in the budget, don’t spend it. If it’s an emergency, make adjustments elsewhere.

Tax time can provide an excellent opportunity. You have a chance to give your household budget a thorough checkup. In taking control of your money, you may find you are able to devote more of it to the pursuit of your financial goals.

1. IRS.gov, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

Have you ever had one of those months? The water heater stops heating, the dishwasher stops washing, and your family ends up on a first-name basis with the nurse at urgent care. Then, as you’re driving to work, you see smoke coming from under your hood.

Bad things happen to the best of us, and sometimes it seems like they come in waves. That’s when an emergency cash fund can come in handy.

One survey found that over two in three Americans are not confident that they have enough emergency savings to cover a month’s worth of expenses. Another survey found that 43% of Americans said they wouldn’t be able to cover an unexpected $1,000 expense with money from their savings account.^1,2

How Much Money?

How large should an emergency fund be? There is no “one-size-fits-all” answer. The ideal amount may depend on your financial situation and lifestyle. For example, if you own a home or have dependents, you may be more likely to face financial emergencies. And if a job loss affects your income, you may need emergency funds for months.

Coming Up with Cash

If saving several months of income seems unreasonable, don’t despair. Start with a more modest goal, such as saving $1,000, and build your savings a bit at a time. Consider setting up automatic monthly transfers into the fund.

Once your savings begin to build, you may be tempted to use the money in the account for something other than an emergency. Try to avoid that. Instead, budget and prepare separately for bigger expenses you know are coming.

Where Do I Put It?

Many people open traditional savings accounts to hold emergency funds. They typically offer modest rates of return. The Federal Deposit Insurance Corporation (FDIC) insures bank accounts for up to $250,000 per depositor, per institution, in principal and interest.³

Others turn to money market accounts or money market funds in emergencies. While money market accounts are savings accounts, money market funds are considered low-risk securities. Money market funds are not backed by any government institution, which means they can lose money. Depending on your particular goals and the amount you have saved, some combination of lower-risk investments may be your best choice.

Money held in money market funds is not insured or guaranteed by the FDIC or any other government agency. Money market funds seek to preserve the value of your investment at $1.00 a share. However, it is possible to lose money by investing in a money market fund.⁴

Money market mutual funds are sold by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

The only thing you can know about unexpected expenses is that they’re coming. Having an emergency fund may help to alleviate the stress and worry that can come with them. If you lack emergency savings now, consider taking steps to create a cushion for the future.

1. Bankrate.com, February 23, 2023

2. Bankrate.com, March 16, 2023

3. FDIC.gov, 2023

4. Investopedia.com, March 14, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

Some people approach buying a car like they approach marriage, “’til death do us part.” Others prefer to keep their options open, trading in every few years for the latest make and model, the most cutting-edge technology, or the highest horsepower. Whichever describes you best, we all face a similar decision when it comes to acquiring a car: finance, lease, or pay cash.

When shopping for new vehicles, about one-quarter of consumers choose to lease, while the majority choose to finance. From an investment perspective, which choice is best? That depends on your lifestyle, cash flow, and personal preferences.¹

For many, paying cash for a car is the simplest way to get one. When you drive off the lot, you own the vehicle outright and are free to do whatever you want with it. You face no penalties or mileage restrictions, and you have no monthly payments. However, you have paid cash for a vehicle that is expected to depreciate over time.

Financing a new car requires a smaller initial outlay of money, usually 20% or more of the vehicle’s value, in the form of a down payment. When you drive off the lot, the bank owns the car, not you. As with most loans, you make monthly payments of principal and interest with the promise of eventual ownership. The amount of your payment depends on a variety of factors, including the value of the car, the length of the loan, and the interest rate offered by the lender. Car dealers sometimes will offer “no money down” or low annual percentage rate loans, which can make financing more manageable.²

If you like to have a new car every few years, leasing is an approach to consider. Leasing a car is like renting an apartment. You pay a monthly fee to use the car for a specific amount of time, usually three to four years. Monthly payments are typically lower than when you finance since you are paying for the depreciation on the car while you drive it. In certain situations, lease payments may also have tax considerations. However, there are caveats to leasing. For one, a lease typically stipulates the number of miles you are permitted to drive during the course of the lease. At the end of your lease, you may face penalties if you have exceeded the total number of miles in the contract.^3,4

Whatever your relationship with your car, it may eventually come time for a new one. Familiarize yourself with your options. You may find that changing your strategy makes sense in light of your lifestyle or financial situation.

1. Experian.com, June 1, 2023
2. Investopedia.com, January 9, 2023
3. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.
4. Bankrate.com, June 1, 2023

Each month, you settle down to pay bills. You pay your mortgage lender. You pay the electric company. You pay the trash collector. But do you pay yourself? One of the most basic tenets of sound investing involves the simple habit of “paying yourself first” – in other words, making your first payment of each month a deposit into your savings account.

The saving patterns of Americans vary widely. And too often, short-term economic trends can interrupt long-term savings programs. For example, the U.S. Personal Savings Rate jumped from 2.9% in April 2008 to 7.3% in May 2008 during the housing and banking crisis. It then rose and fell sporadically as the economic environment appeared to stabilize. As of 2023, the average rate has fallen significantly from COVID-era highs of 33.8% in April 2020 to 4.3% as of June 2023.¹

The Genius of Pay Yourself First

Anyone who’s ever managed their own finances knows that saving can be a challenge. There seems to be an endless stream of expenses that demand a piece of each month’s paycheck. Herein lies the genius of paying yourself first: you get the cream at the top of the bucket, and not the leftovers at the bottom.

The trick is to prioritize. Make it a point to put your future first. At first, saving may mean a small lifestyle change. But most individuals want to see their net worth increase steadily. For them, finding ways to save becomes more of a long-term commitment than a short-term challenge.

Putting Your Money to Work

What will you do with the money you save?

If retirement is your priority, consider taking advantage of tax-advantaged investments. Employer-sponsored retirement plans, such as 401(k)s, can be a great way to save because the money comes out of your paycheck before you even see it. Also, as an added incentive, some employers offer to match a percentage of your contributions.²

For money you may want to access before retirement, consider placing the funds in a separate account. When the balance hits your target, you may want to move the money into investments that offer the potential for higher returns. Of course, this may mean exposing your money to more volatility, so you’ll want to choose vehicles that fit your risk tolerance, time horizon, and long-term goals.

In the pursuit of growing wealth, sound habits can be your most valuable asset. Develop the habit of “paying yourself first” today. The sooner you begin, the more potential your savings may have to grow.

1. Fred.StLouisFed.org, 2023
2. In most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 73. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

The government prints millions of notes a day. Here’s a quick look at what goes into creating a $20 bill and what determines when a bill’s lifespan ends.¹

Paper

A $20 bill starts out life as part of a large sheet of paper. While most paper is made primarily from wood pulp, the paper used by the U.S. Bureau of Engraving and Printing doesn’t contain any wood at all. Currency paper is composed of a special blend of 75% cotton and 25% linen. It’s made with special watermarks and has blue and red fibers embedded in it along with a special security thread.²

Each blank sheet is tracked from the time it leaves the mill until it is printed, and the entire shipment is continuously reconciled to make certain all are accounted for.

Printing

These blank sheets of cotton and linen paper get printed four times. Background images and colors are printed – both sides at once – using offset presses that are over 50 feet long and weigh over 70 tons. After drying for 72 hours, the portraits, vignettes, scrollwork, numerals, and letters are printed on the back using Intaglio presses that are a mere 40 feet long and weigh only 50 tons. After drying for another 72 hours – in special guarded cages – more portraits, vignettes, scrollwork, numerals, and letters are printed on the front using the Intaglio presses. Finally, the serial numbers, Federal Reserve seal, Treasury Department seal, and Federal Reserve identification numbers are printed using a letterpress.³

Cutting and Wrapping

Once dry, these printed sheets are gathered in stacks of 100 to be cut by a specially designed guillotine cutter. Each new stack of 100 $20 bills is wrapped with a special paper band. Ten of these 100-note stacks are gathered, machine-counted, and shrink-wrapped into a bundle. Then, four of these shrink-wrapped bundles are collated together, given a special barcode label, and shrink-wrapped again to create a brick of 4,000 bills, worth $80,000.³

Distribution and Circulation

The Treasury Department ships these newly printed $20 bills to the Federal Reserve Banks, who in turn pay them out to banks and savings and loans – primarily in exchange for old, worn-out bills. The new bills are handed out to customers of these institutions as they withdraw cash, either through tellers or through automated teller machines.³

An average $20 bill will change hands often, but even the U.S. Bureau of Engraving and Printing isn’t sure how many times a bill will move from one pocket to the next. Contrary to popular belief, the government doesn’t have any way to track individual bills.

There is a polyester security thread embedded in the paper that runs vertically up one side of each bill. If you look closely, the initials USA TWENTY, along with the bill’s denomination, and a small flag, are visible along the thread from both sides of the bill. This thread makes currency more difficult to counterfeit, but cannot be tracked electronically.²

Withdrawal

Banks gather worn-out and damaged currency, sending it to the Federal Reserve in exchange for new bills. The Federal Reserve then sorts through these bills to determine which are still usable. Those bills deemed usable are stored until they can go out again through the commercial banking system. Those deemed no longer usable are cut into confetti-like shreds.⁴

1. Federal Reserve, 2023
2. USCurrency.gov, 2023
3. BEP.gov, 2023
4. BEP.gov, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

The U.S. personal saving rate stood at 3.4 percent at the end of 2022, down from the 7.5 rate at the end of 2021.The personal saving rate is the federal government’s estimate of what percent of their incomes U.S. households are saving. But market watchers and economists are mixed on what can be learned from swings in the saving rate.¹

Why Economists Struggle

They struggle with the personal saving rate because it’s a derivative number – that is, it’s not measured directly. Instead, the Bureau of Economic Analysis derives the saving rate from other estimates. Here’s how it’s calculated:²

1. The Bureau of Economic Analysis subtracts payroll and income taxes from personal income to get disposable personal income.
2. The Bureau then subtracts its estimate of personal outlays, which include expenditures, interest payments, and payments, from disposable personal income to get an estimate of personal savings.
3. The personal saving rate is calculated by dividing personal income by personal savings.

As currently structured, the U.S. Personal Saving Rate does not include capital gains from the sale of land or financial assets in its estimate of personal income. This effectively excludes capital gains – an important source of income for some.

Gaining Insight

Gaining a bit of insight into a popular economic indicator can help you better understand trends as they are discussed in newspapers and websites. However, don’t let your long-term savings program be influenced by a national number.

1. StLouisFed.org, 2023
2. BEA.gov, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

American households carry an average revolving credit card balance of $7,876 from month to month.¹

The wise use of credit is a critical skill in today’s world. Used unwisely, credit can rapidly turn from a useful tool to a crippling burden. There are a number of warning signs that you may be approaching credit problems:

1. Have you used one credit card to pay off another?
2. Have you used credit card advances to pay bills?
3. Do you regularly use a charge card because you are short on cash?
4. Do you charge items you might not buy if you were paying cash?
5. Do you need to use your credit cards to buy groceries?
6. Are you reluctant to open monthly statements from creditors?
7. Do you regularly charge more each month than you pay off?
8. Do you write checks today on funds to be deposited tomorrow?
9. Do you apply for new credit cards so you can increase borrowing?
10. Are you receiving late and over-limit credit card charges?

It is important to recognize the warning signs of potential credit problems. The more quickly corrective action is taken, the better. Procrastinating might result in financial difficulty down the road.

1. NerdWallet.com, January 10, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.