TOGETHER WITH  | Good day. Can you guess which of the following country ranks the highest on the happiness scale? a. Finland, b. Madagascar, c. Canada. Whether wealth and prosperity are legit measures of happiness has been debated for centuries. Follow the wave 🌊 below for the answer and more. Here are today's money topics: - Should you flinch at these higher rates?
- Job market trends to watch
- DIY your own 50/30/20 rule
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MARKET OUTLOOK Should You Flinch at These Higher Rates? | | | | The financial markets of the world move in cycles, and it's incredibly tempting to try and exploit those oscillations for our own benefit. In some instances, this can end up being a savvy move for an investor, but this tantalizing market timing venture could also be a trap. 2023's version of this includes some historically elevated bond yields due to the Fed's aggression and an increased allure by international investment options too. The question is — are these opportunities worth pursuing, or should we just stand pat? Checking the facts - Bonds: Thanks to 2022's rapid rate hikes, we're getting bond yields that haven't been seen since 2006. With an inverted yield curve, investors can also get an even better return on shorter-term bonds thanks to the short-term uncertainty. Dating back to April 2020, the U.S. 30-year bond yield is up 167%, the U.S. 10-year Treasury is up 461%, and the U.S. 6-month Treasury has gained a colossal 3,012% relative to its pitiful 0.16% yield in 2020.
- International: 2023's Q1 market rebound was fervent at first, but has since waned as investors become ambivalent about the prospects of a soft landing. To make matters worse, U.S. growth is not expected to keep up with that of developing nations like China, India, and others in the near future, and markets are taking notice. So far in 2023, investors have moved a net $14.4B to funds that buy international stocks while pulling -$34.1B from domestic funds — a migration that's increased its speed in recent weeks.
- Timing the market: Unfortunately, U.S. Treasuries won't be offering these 5% yields forever, and when the economy does finally return to some form of "normal," it's likely that domestic growth prospects will do the same. If you feel led to pursue these yields, that's something to keep in mind, understanding that this is just a near-term opportunity.
- Cost-benefit analysis: Is this allure worth chasing though, or could your lack of consistency end up costing you gains? That depends. If you're able to diversify into these higher-yield opportunities without subtracting from your normal investing routine, that would be a worthwhile venture. But it's important to stay the course with your retirement investing, as it's probably not worth robbing your long-term compound interest for some temporarily elevated yields.
Take this related lesson on this topic and earn Dibs 🟡 while you're at it: | | | |
ECONOMY Job Market Trends to Watch | | | | The labor market has seen historic changes over the last few years, and it's been chaotic, to say the least. A massive pandemic layoff crunch, the evolution of remote work, rapidly increasing wages, record-low unemployment, and now waves of layoffs have welcomed us into 2023. When does all of the moving and shaking come to an end? No one knows, but certainly not this year. It seems like the job market has a lot more shuffling up its sleeve, and we're keeping a watch for what's to come. What we're watching now - Shortages continue: On the last day of January, U.S. job openings topped 10.8M. Meanwhile, the most recent unemployment data shows that 5.9M people are unemployed. That's still 1.83 job openings per unemployed person, meaning the current active labor market cannot possibly fill the massive void out there. Even as certain sectors continue layoffs, the reality is that demand will still outstrip supply when it comes to the need for workers.
- Benefits & education: Employers are expected to spend 6.5% more on employee benefits in 2023, topping $13,800 per employee. Meanwhile, 68% of U.S. employers said that they're increasing both the salaries and benefits of their employees this year. Employers are also taking a more holistic approach to benefits this year, with 48% of respondents noting that they'd include education and development resources in those packages.
- Freelancers on the rise: In 2022, almost 40% of U.S. workers performed freelance work to some degree, further growing the gig economy to an output of $1.3T. Historically speaking, economic troughs have often contributed to booms in contract work, and the present situation is no different.
- Remote is here to stay: As of late 2022, over a quarter of the U.S. workforce was conducting their business remotely. Despite some slight pullback toward the norm, the truth is that remote work, in some form or another, is here to stay. In fact, 85% of managers believe that remote work will become the new norm and the litany of benefits that come with this arrangement back that thesis up.
- Salary transparency: According to Payscale, roughly 1 out of 4 workers in the U.S. will be covered by legislation that requires businesses to be transparent about their wages. A slew of bills requiring more salary transparency have been enacted across several states and municipalities over the last 12 months, and it's making money less of a taboo topic.
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MONEY TIP DIY Your Own 50/30/20 Rule | | | | There's a litany of rules and guidelines out there that want to advise you on how to allocate your money. You've got the 50/30/20 method, the 20% rule, the 4% rule, and a seemingly never-ending laundry list of various other rules of thumb proposed by financial gurus. The reality is that none of these rules are gospel, they're just guidelines to point you in the right direction. And the truth is that everyone's percentages will be different from one another. But we can still draw some inspiration from guidelines like these and make them our own. The blueprints - The basics: The 50/30/20 iteration of budgeting states that 50% of your income should be dedicated to necessities, 30% to discretionary spending, and 20% should go towards saving and paying down debt.
- Tailored to you: This particular formula is not for everyone, and while it provides a good parameter, it's also a bit generous. The composition of your budget should be determined by your financial situation and what your current goals + challenges are, and that will look different for everyone.
- Example: For someone with a monthly income of $5,000, a small emergency fund, and $10,000 in credit card debt, the breakdown might look like this. 60% toward necessities such as housing, food, insurance, etc., 20% toward debt payments, 10% toward additional savings, and maybe 10% toward discretionary spending. This particular person might like the 60/20/10/10 split, but another might prefer a more aggressive approach to things and choose to allocate more to debt and less to discretionary purchases.
Take this related lesson on this topic and earn Dibs 🟡 while you're at it: | | | |
🌊 BY THE WAY | - 😊 Answer: Finland is ranked #1 for the sixth year in a row. Measuring things like happiness and life satisfaction is tricky business. The map below is a global snapshot of life satisfaction around the world. It utilizes the World Happiness Report—an annual survey of how satisfied citizens are worldwide—to map out the world's happiest and least happy countries (Visual Capitalist)
- 📦 Amazon to lay off 9,000 more workers in addition to earlier cuts (CNBC)
- 🌼 ICYMI. Give your finances a spring cleaning (Finny)
- 💼 Institutional investors are relying on Reddit for investment decisions (Insider)
- 🖼️ Learn to invest in fine art. The Gist readers are invited to join the exclusive community investing in blue-chip art (Masterworks)
- 📌 Finny lesson of the day. Creating a budget is one thing, and making it stick is another:
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| Finny is a financial wellness platform. The Gist is Finny's twice-a-week (Tues & Thurs) newsletter covering personal finance, market trends and investing insights. Finny does not offer investment and stock advice. Please support our corporate sponsor — Masterworks — as they make rewards on our platform possible! If your company is interested in sponsoring The Gist, please reach out to us. And if you have any feedback about this edition or anything else, please email us. | | | | | | | |
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