Good day. The U.S. government has been in debt since its inception, but in recent years, that debt pile has grown into an entity of its own. Can you guess how much it's grown over the last decade alone? a. 50% b. 73% c. 94%. Follow the wave 🌊 below for the answer. Here are the topics for today: - Is America's Debt Becoming Unsustainable?
- Money Moves for Dual Income No Kids Households
- Tips For a Better Retirement
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ECONOMY Is America's Debt Becoming Unsustainable? | | | | Depending on who you ask, it's generally accepted that the U.S. has hit (and raised) the debt ceiling in some form or another at least 90 times in the 20th century. Another revision was tacked onto the list on June 3rd, as Congress averted a crisis after an elongated standoff. But at what point, if ever, does carrying these levels of debt become a problem for the U.S.? What we need to know - The debt story: The U.S. hosts the most robust economy in the world, but holding that title doesn't come cheap — it runs on debt. The U.S. government was essentially born in debt, and after years of ebbing and flowing, it's been consistently piling up for almost a century now.
- The history: Congress formally created what we know as the debt ceiling back in 1939 and 1941 via the Public Debt Acts to keep things from getting out of hand. That limit has subsequently been amended countless times ever since to keep up with spending needs.
- Its composition: That debt now stands at roughly $32.4T, and it might not be comprised of what you think. The public owns about 78% of that debt in the form of debt securities, and about 23% of that is owned by foreign nations and investors. The remaining amount is due to intragovernmental debt, which is money the Treasury has borrowed from other government agencies.
Why it's getting concerning - The cost of doing debt is the interest you pay on it, and the US government is en route to some hefty interest bills. Last year, interest payments on the debt accounted for about 1.86% of GDP, projected to hit 2.5% this year, and a massive 6.7% by 2053. At this point, the cost of interest would surpass the cost of many government programs like Social Security.
- The deficit: Going back over 5 decades, the government has run on a budget deficit pretty much every year. That deficit is expected to top 5.8% this year, a level that's only been exceeded 7X since 1962.
- The GDP ratio: Although highly ambiguous, most economic data sets set the threshold for unhealthy government debt at around 77% of a nation's GDP. Beyond this, the World Bank estimates that every extra percentage point of debt results in a loss of 0.017 percentage points in annual real growth. The U.S.'s current level? 118%.
- Potential impacts: Higher interest costs could result in less money to invest in the nation and economy itself, reduced private investment and fewer economic opportunities for citizens as a result of crowding out, and even potential threats to national security.
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FINANCIAL PLANNING Money Moves for Dual Income No Kids Households | | | | It's apparent in the anecdotes that the traditional household is changing, and perhaps for good. Back in 1972, the average age for new mothers and fathers was just 21 and 27, whereas now those numbers are 26 and 31. People are getting married, having kids, buying homes, and essentially doing everything a bit later in life now, meaning there are more "DINK" (dual income no kids) households out there than ever before. But this is somewhat of a unique situation, and one that comes with some extra financial freedom too. For the DINKs out there, what should you do with your money? Moves to get ahead - Prioritize goals: Children can be a blessing, but also expensive. On average, it costs $310,605 to raise a child up to age 17, and being child-free subsequently frees up a lot of money (and time) to prioritize your own goals. This time can be a great opportunity to get ahead, especially if you plan on having kids later in life.
- Getting ahead on saving and investing is a great example of this. If you and your partner make $100,000 per year, having no kids will spare you roughly $1,522 a month. Even if you save + invest just 2/3rds of this at about $1,000, that can quickly turn into a lot more in a rainy day fund or retirement account.
- Divide your incomes and conquer: When you have the luxury of two incomes, it can be easy to give into lifestyle creep. This is avoidable if you dedicate each income to separate aspects of life — one for the bills, one to invest for the future.
- Diversify holistically: If a couple each has their own respective investment accounts, it's easy to end up duplicating your diversification instead of treating the composition of your accounts like one big pool. For example, you might end up each paying extra fees, duplicating investments, and spreading yourselves too thin.
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MONEY TIP Tips For a Better Retirement | | | | It's possible to have maxed-out retirement accounts and still lack a well-thought-out retirement plan. Sure, the barns are full now, but what will you do with all that hay? Planning for retirement financially is extremely important, but perhaps equally important is to plan with your goals in mind too, leaving room for adjustments as you and your ideals change over time. Often overlooked retirement planning tips - Goals first, money second: Ultimately, it's the goals behind them that determine almost everything about the details of your retirement money. Having a general idea of what you want your post-working life to be like will drive how you plan, invest, and spend in the present, and allow you to mold your future accordingly.
- Keep an open mind: Per a study done late last year on new retirees (2 years or less), 46% say that they've struggled to find their new purpose. It's easy to think you know what you want in retirement, only to get confronted by a totally different reality once it arrives. This is why keeping an open mind and experimenting is important, and knowing going into it that things will change.
- Leave room for error too: Because of the inevitable reality of the unexpected, we have to leave room for error in our planning too. This means expecting the unexpected both financially and mentally—saving a little more than needed and saving time for mental adjusting too.
Take this related lesson and earn 🟡 Dibs: | | | |
🌊 BY THE WAY | - 🏦 Answer: 94%. Our pile of government debt has grown from roughly $16.7T in 2013 to over $32.4T today
- 🚀 Signs of hope for late-stage valuations (Axios)
- 🎓 ICYMI. Plan for student loan repayments (Finny)
- 🤖 Threads is already giving businesses more bang for their buck than Twitter (Quartz)
- 🏌️ Finny lesson of the day. If you're planning ahead and imagining a better retirement, perhaps an ideal place to start is by boosting your contributions toward it:
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| Advisory services are offered through Origin Financial, a Registered Investment Adviser registered with the U.S. Securities and Exchange Commission. The status of registration as an Investment Adviser does not imply a certain level of skill or training. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services. All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor, is it intended to be a projection of current or future performance or indication of future results. | | | | | | | |
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