| Bite-sized money insights across a broad range of topics—from budgeting, taxes, buying a car or home, to investing, equity comp, crypto and more. |
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| | Here's the Gist today Happy Tuesday Origin Member. Net worth is defined as someone's assets minus their liabilities, and it can often be a good indicator of overall financial health. But, can you guess what percentage of Americans say they have a net worth of $0 or less (in the negatives)? A. 25% B. 35% C. 43% Here are the topics for today: - Beware of Taxes on Your 2023 Interest Income
- How to Check Your Financial Health
- Figuring Out Your Risk-Tolerance Level
- A Few Money Mistakes to Fix ASAP
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| Beware of Taxes on Your 2023 Interest Income |
After years of being relegated to the basement, rapidly rising interest rates have suddenly brought fixed-income investing and high-interest saving back to the limelight. With plenty of assets and accounts offering yields north of 5%, it's easy to see why investors have trended back toward cash. But is it too good to be true, and what's the catch, if anything? In short — yes, there is a catch; it's the taxes you'll owe on all those passive gains when you file this year (or next). The Congressional Budget Office estimates that U.S. taxpayers will owe on roughly $282B of taxable interest and dividend income for tax year 2023, a 19% jump from the last available data in 2019. What you need to know You can avoid paying taxes (for now) on high-yielding debt securities like bonds if you hold these assets in the right account. Interest income generated from bonds can be deferred if you hold them in a tax-deferred account like a 401(k) or IRA, and pay taxes on your gains later, ideally once you're in a lower tax bracket.
Income issued from municipal (state, city, and local governments) bonds is also generally exempt from federal taxes.
Interest income you receive from a high-yield savings or money market account is taxed at the same rate as your earned income. For example, if you've got $1,000 of interest income in the 32% tax bracket, that's an extra $320 of tax you'll owe.
Taxes owed on interest and capital gains aren't deducted from your paycheck, but rather an adjustment made when filing your taxes. If you're lucky, maybe your deductions were high enough to cover what you owe, but don't expect that. Plan ahead for the interest + gains you accrued in 2023 and budget for that in your taxes, especially if you regularly receive high amounts of income in this format. "If you receive significant interest, dividends, or realize a lot of capital gains, it may make sense to make quarterly tax payments" — Matt Shapiro, Origin CFP |
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| How to Check Your Financial Health |
When you visit your doctor for an annual check-in, there are some preliminary vital signs that will always be checked first. Things like height, weight, blood pressure, oxygen levels, and any medical concerns or questions you might have at the moment. These general, easy-to-read signs can pretty quickly give you and your doctor a good idea of your health. Even if they seem mundane, routinely checking on important indicators like these helps ensure we stay healthy. Your finances are exactly the same, and they deserve to be checked in on as if they were a patient. Treat your money how you'd treat your health, and get a reading on these areas to see how you're doing. Financial vitals to check Your situation: Why did we put this first? Your situation will help to inform you on how all other areas are doing relative to where you want to be and what stage of life you might be in. Checking in on your budget (income, expenses) will come with a different standard of success for a college student as opposed to a full-time employee — they have different goals and expectations. So, check your situation first, and apply that to everything else.
Your budget: Examine your monthly income and expenses to get an overview of how you're allocating your resources. Are you in the green, aligned with your goals, and making progress? Look for areas where you can cut unnecessary expenses or increase income, and make sure your budget allows for saving, investing, and paying down debt too.
Your debt levels: Evaluate your total debts, and try to measure just how much they're weighing down your expenses each month. Are you making progress, or is the interest outpacing your payments? Aim to focus on high-interest obligations to alleviate financial strain, and look for opportunities to accelerate debt repayment, such as consolidating high-interest debt.
Your savings: Review emergency funds and long-term savings goals, comparing where you are now with where you want to end up. Do you have an emergency fund, 3-6 months of expenses, or even more? Look for ways to increase savings, whether through automated transfers or finding additional income sources.
Your expenses: Analyze your spending habits and see if there are certain categories where you might be over-indulging and hurting other aspects like saving and investing. Try to identify cost-cutting opportunities that align with your financial priorities, looking for discretionary expenses that can be reduced without sacrificing essential needs.
Your investing: Check on how you're progressing toward investment goals. Are you investing at all, are you investing enough, and do you know how much you should be investing? Outlining your investment goals, if you haven't already, will help answer these questions. If you're already investing, assess your portfolio considering risk tolerance, goals, and market conditions, look for opportunities to diversify or rebalance, and regularly review your strategy.
Your credit report: Regularly review your credit report for inaccuracies, addressing discrepancies promptly. See where your credit score stands relative to your standard, and how that might impact the cost of debt, your ability to get approved for a loan, etc. Look for areas where you can improve your credit score, such as paying bills on time and reducing credit card balances. | |
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| Is My Portfolio Too Concentrated? |
As stoic philosopher Seneca once said, "Excess in anything becomes a fault." Is that always true though? Not particularly. Sometimes honing in on a single focus can yield great results, that's why the modern job market is so specialized. Other times though, being too narrow can leave you vulnerable, meaning you might need to find a middle ground. In short — concentration can be both the creator and destroyer of wealth, so where's the right balance? All investors are concentrated to some degree Passive concentration Most investors are passive investors, and for good reason too. Timing the market is next to impossible, an emotional rollercoaster, and often unsustainable, which has led us down a natural progression favoring passivity, and ultimately, index funds. It's a great invention, but it may have its potential pitfalls in certain market cycles like we're in now, such as the problem of being top-heavy. For example, the S&P 500's top 10 holdings make up around 32% of the index's weight. The bottom 10 don't even make up one-tenth of a percent. Mega caps move the markets. Love it or hate it, this method has outperformed equally weighted strategies too—just compare $SPY with $RSP. Concentration via familiarity Let's say you're an Apple fanatic and believe wholeheartedly in the company and its products. You can fix any iPhone issue, name their marketing director, and quote their intraday book value like your first-born child's birthday. You invest consistently in the stock over time, build a substantial position, and are up massively. But suddenly, in 2025, Apple has a mishap and drops 35% in a day. And you might have just lost five figures. It's good to know what you're investing in, but you can also easily hone in on one company you like to a fault, essentially putting the blinders on for risk. Compensation concentration If you've been or are being compensated by your employer with equity, you may have some concentration vulnerabilities too. If too much of your net worth is tied up in company stock and stock options, your net worth may be at risk. Figuring out your risk tolerance level Determine what you're okay with. Your risk tolerance is the most preliminary step here because it's far from the deciding factor in deciding how diversified you should be. What are your short and long-term investing goals? How much risk are you willing to take for each of those goals? Your risk tolerance and time horizon are key inputs here. Knowing where your redline sits is important and can help you determine to what degree to let your portfolio's allocations deviate from the norm. If you're 60 with a $1M nest egg with 50% of it in $QQQ, well...we miiiight have a problem, but if you're 20? That's dodgy, but maybe that's okay since your time horizon is more like 45 years (assuming you retire at 65 years old). Ultimately, concentration to some degree is unavoidable. It's the nature of the markets — big winners tend to win more. Sure, that's "risky" in some sense, but it's also the best method of investing we've found so far. If you want to mitigate your risk to the best of your ability, the best way to do that is to invest for a long, long time. Over a long enough period of time, the markets have proven time and time again that all of the bumps along the way are pretty inconsequential when you zoom out. | |
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| A Few Money Mistakes to Fix ASAP |
Managing money wisely is crucial for financial success, yet many individuals make common mistakes that can hinder their financial well-being. Recognizing and rectifying these errors is essential for a secure and prosperous future. Not earning A high yield on your savings - Mistake: It's estimated that some 82% of Americans keep their money in low-interest or non-interest-bearing accounts, missing out on potential earnings.
- Solution: Explore high-yield savings accounts or investment options that offer better returns to maximize your savings.
Saving too much - Mistake: While saving is important, stashing away too much money in low-return accounts can lead to missed investment opportunities.
- Solution: Strike a balance between saving for emergencies and investing for long-term growth to optimize your financial strategy.
Not actively seeking cost-reduction opportunities - Mistake: Overlooking opportunities to cut costs, such as negotiating bills, adjusting insurance policies, or finding more affordable alternatives, can hinder financial progress.
- Solution: Regularly review expenses, negotiate bills, and actively seek ways to reduce costs to increase your overall savings.
Not setting specific, measurable goals - Mistake: Without clear financial goals, it's challenging to track progress and stay motivated to save and invest.
- Solution: Define specific, measurable, and time-bound financial goals to provide direction and purpose to your financial journey.
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| By the way 💸 Answer: A. — 25% say they have a negative net worth. (Nasdaq) 📈 Inflation remains stubborn, hampering the case for rate cuts (BLS) 📱 Reddit ramps up IPO preparations, eyeing $6.4B (Axios) ✈️ Want a better view of the eclipse? Delta has a flight for that. (Fortune) 👨👩👧👦 47% of parents are spending $1,384 per month to support adult children (CNBC) |
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Advisory services are offered through Origin Advisory Services LLC ("Origin RIA"), a Registered Investment Adviser registered with the Securities and Exchange Commission and a wholly-owned subsidiary of Blend Financial Inc. DBA Origin Financial. Origin RIA's registration as a Registered 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.
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