Good day. Budgeting is one of the most paramount tools of financial wellness and stability, but can you guess what portion of the nation consistently follows one? a. 45% b. 64% c. 74%. Follow the wave 🌊 below for the answer. Here are the topics for today: - Our Top Budgeting Tips
- Is it Time to Give Annuities a Look?
- A Few Realistic Ways to Save on Tuition
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BUDGETING & SAVING Our Top Budgeting Tips | | | | Budgeting is at the foundation of a healthy financial life. We can accomplish almost nothing without a budget of some kind, even if it's an unofficial one. Every time you make a purchase, decide to set aside savings, or even choose how to spend your time, you're always budgeting. It's easy to become overwhelmed by it though, especially for those without a personality attuned to organizing. It can undoubtedly be stressful for some of us to sit down and make a plan, but assigning every dollar a name can be one of the most empowering feelings once you've got it under control. Our Top 5 budgeting tips - Use "rules of thumb" as nothing more than guidelines: There's a litany of these that want to advise you on allocating your money. You've got the 50/30/20 method, the 20% rule, the 4% rule, and a seemingly never-ending list of 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.
- Don't always think in dollar signs: Spending $10,000 per year on item X might sound like a lot until we add in the context of a $150,000 income. Dollars don't often tell us as much as percentages do, and the amount means a lot less than the proportion sometimes. Thinking in dollars can often lead us to an allusory feeling about how much we're actually spending, so context is important.
- Account for irregular expenses: Take a look at your spending over the last 12 months and take inventory of all your irregular expenses (i.e., gifts, kid's stuff, seasonal expenses like landscaping or Halloween decorations, etc.). Then, divide that amount by 12 and set aside that amount monthly so you're better prepared when they come up.
- Account for potential and overlooked expenses: So, maybe your car is doing just fine right now, but it's 19 years old after all and you never know when the transmission might go out. That's a potential expense and one that's probably not budgeted for. It may never even happen, but a surprise expense like this could derail a budget if not accounted for before it even happens. Take the time to make your best educated guesses here.
- View budgeting as a lifestyle: Budgeting is like working out and taking care of yourself. If you want to live in a way that's both comfortable and less susceptible to the ails of life itself, it's a must. Budgeting helps us to be conscious of our money because it's not something that's done once and forgotten, but a habit we integrate into our lives and come to appreciate for the sense of control it gives us.
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INVESTING Is it Time to Give Annuities a Look? | | | | Planning for retirement can oftentimes be like aiming at a moving target. Life is rarely stable for long, and it's very difficult to consistently plan and save for the future without that stability. As a result, it's very easy to fall behind on our retirement savings timeline. Even if you do manage to save the recommended amount and then some, there is still a lingering fear of uncertainty there. What if I outlive my retirement? What if something happens to the markets? These are normal concerns to have, and they're exactly why the concept of buying guaranteed income was created. Yep, annuities are still a thing. - Annuities are actually one of the oldest investments in the book. These fixed-income assets date all the way back to the Roman Empire, and possibly even before. While their popularity in modern times has waned in recent years, it seems that they're now making a comeback.
- Recent changes: Thanks to the Secure Act 2.0, Americans can now use up to $200,000 of their retirement account savings to purchase qualified longevity annuity contracts (QLACs.) This is an upward revision from the previous limit, which capped the contribution limit at the lower of $145,000 or 25% of your account balance.
- Americans were already cashing out, too. 2022 saw a record-high $312.8B in annuity sales — a 23% jump from 2021 and also 18% higher than the previous record of $265B set back in 2008.
- Why are investors flocking to annuities? In a word, uncertainty. A rocky stock market coupled with inflation, rising rates, and abysmal growth outlooks pushed more retirees to look toward guaranteed income assets like annuities, and higher contribution limits are now helping to fuel that fire.
Heads up - Annuities are an insurance product, not an investment, meaning they're not insured by the FDIC or the SIPC. Essentially, retirees are exchanging a lump sum of cash for a guaranteed income arrangement over a set period of time.
- The risks associated with annuities mainly lie in the realm of their complexities. There are several kinds of annuities, and they'll require you to read up on a whole new list of financial vocabulary. They're also illiquid and impose withdrawal penalties, they'll miss out on market gains, and your payouts may not keep up with inflation.
- On the plus side, annuities can provide a steady, consistent source of retirement income that isn't subject to market fluctuations while also lowering your qualified minimum distributions (QMDs) from age 73 onward.
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MONEY TIP A Few Realistic Ways to Save on Tuition | | | | Over the last two decades alone, the average cost of tuition at private four-year universities has increased by about 124.2%, outpacing inflation by 172%. Tuition has an annual average inflation rate of 6.2% at these private institutions, so the average on-campus student will now pay about $223,360 for a bachelor's degree at their university. For most families, this is unaffordable, to say the least, and with student loan forgiveness off the table for now, it's more paramount than ever for families to find ways to save on education costs. A few primary tips - Bankroll and budget: Also known as the "pull yourself up by your bootstraps method", this old-fashioned way of avoiding debt is the simplest way to save on education costs. Essentially, do everything you can to pay for college in cash. Work part-time jobs, side hustles, attend community colleges, or a cheaper university, at least temporarily, and if you take a loan, pay it off as soon as possible.
- AP courses: Students can often take advanced placement courses in high school that universities will award college credits for upon enrollment and transcript approval. This could end up saving you anywhere from hundreds to thousands of dollars depending on how many qualifying credits you obtain.
- Appeal your financial aid: If you haven't filled out your annual FAFSA documents, you could be missing out on thousands of dollars in potentially free financial aid. On top of that, you can actually appeal your award offer if you feel it's not enough for your situation.
- Start early, way early: While it might be too late for soon-to-be enrollees, it's not too late for new parents to start contributing to a 529 plan. If you're there now and have or are planning to have children, the best possible way to be prepared for the cost of tuition and avoid student loans is to start saving now.
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🌊 BY THE WAY by the way | - 🧾 Answer: 74%. A pleasant surprise, right? But, while roughly 74% of Americans do have a monthly budget, 83% also say they overspend (Nerd Wallet)
- 💬 The race to best Twitter — TikTok launches text posts (Axios)
- 👀 ICYMI. Mutual funds are falling prey to ETFs (Finny)
- 🚪 The IRS is no longer conducting house calls (CNBC)
- 📚 Finny lesson of the day. Crafting a budget is one thing, crafting one that sticks is another:
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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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