| 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 Thursday Origin Member. The banking industry has become increasingly consolidated lately, having been prime real estate for dealmaking in recent years.
As a result, our money has grown exceedingly concentrated. Can you guess what percentage of the nation's deposits go to the nation's top 15 banks? A. 91% B. 76% C. 67%
Here are the topics for today: - How To Get Your Finances In Shape
- Banking Local is Cool Again
- Your Student Loan Payment May Drop in July
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| ๐ How To Get Your Finances In Shape |
We're officially well into the spring now, meaning it's now prime time for everyone trying to get in shape for the summer. While taking care of your health and staying in shape is important, it's also paramount that we don't neglect the health of other areas of our lives — especially our finances. Let's get your money on a workout plan — here are several steps to get your finances in shape. Spend less than you earn. With the help of a budgeting tool or software, you'll be able to better track how much you're spending and manage accordingly. It can also help you achieve the long-term financial goals you've set for yourself. Not spending more than what you earn is key to not spiraling into debt. Save, save, save. Take advantage of the concept of the time value of money — that is, a dollar today is worth more than a dollar in the future due to its earnings potential through interest and gains. Make saving money a habit, no matter how small the amount may be because somewhere down the line, those small amounts will add up. And better yet, automate your savings. Avoid debt, if you can. With credit cards and auto loans, every dollar you spend paying off those debts is money lost. With the exception of a few models, most cars depreciate to zero and cost more to fix and finance than what you'd expect to get back if you sold it. If there's no avoiding debt for you, then stick to financing investments like real estate and education that will increase in value over time. If you're already behind on your bills and having a hard time paying them off, then try to consolidate your debt. Learn continuously. Read anything and everything you can find that speaks to your personal finance interests. When asked how to get smarter, Warren Buffett said, "Read 500 pages every week. That's how knowledge builds up, like compound interest." Earn more. Everyone possesses a unique gift or expertise that they can leverage to diversify their income. Make use of your skills to create a business opportunity or look for additional ways to earn money. The additional money may supplement your full-time salary, and it may even lead to an interesting career shift. Utilize your employee benefits to the fullest. Some of the highest rates of return are found in employee benefits, such as 401(k) or 403(b) plans, HSAs, flexible spending accounts, medical and dental insurance, financial wellness and mental health resources, and more. Take advantage of those as they can be immensely beneficial by reducing your taxes and your out-of-pocket spending. Stay prepared. You'll face unforeseen emergencies no matter how much you try to avoid them. Save more money when things are smooth. That way, you'll have an emergency fund to fall back on if you face any unexpected expenses, keeping your family's financial security and your long-term goals intact. |
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| ๐ฆ Banking Local is Cool Again |
Last month, credit card behemoth Capital One announced its intentions to purchase Discover Financial, and become even larger in the process. Whether or not the acquisition will be approved remains to be seen — it still has to undergo the DOJ's scrutiny through an anti-trust lens. Concentration is rarely good for consumers, and businesses of vast size often mean higher prices and less leverage for the end-user. This is especially true in the credit card industry, where borrowers pay higher fees and interest costs with large institutions compared to small ones. How bad is the discrepancy? According to data from the Consumer Financial Protection Bureau, consumers can expect to spend a noticeable amount more on interest with large lenders. For credit scores of 619 or less, consumers get an average APR of 28.5% with large banks, and 20.6% with smaller ones. For credit scores of 620 to 719, consumers average a 28.2% APR with large banks and 18.15% with small ones.
For great credit scores of 720 and above, the average rate is 23% with large lenders and 15.2% with smaller ones.
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Is it time to start banking small? About 4,000 banks across the country offer consumer credit cards, but the top 10 issuers dominate the market share, making up about 80% of all cards. With a large bank: If you have a poor credit score, carrying a $3,000 balance and paying $100 per month on it will cost you about $2,125 of interest payments over 52 months. Consider the same scenario with the smaller bank's average APR, and you'd pay $1,165 of interest over 42 months. That's a difference of $960 and 10 months of extra debt repayments. Weighing the pros and cons The appeal of large institutions is, more often than not, convenience and technology. Large lenders like Capital One, J.P. Morgan, Chase, and others are familiar names that make setting up an account almost too easy — not to mention their apps and websites are often sleeker.
But is that really worth it? It depends. If you're someone not carrying a balance or taking advantage of an intro bonus, by all means — use a big name. However, if you're planning to carry a balance for a long time, going with a local lender is often the smart choice.
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| ๐ต Your Student Loan Payment May Drop in July |
The SAVE plan for student loan repayments rolled out last October as payments resumed, replacing the older REPAYE plan in the process. SAVE brought a few swift changes with it in October. - It increased the income exemption level from 150% of the poverty line to 225%.
- It stopped interest capitalization if the monthly minimum payment was met.
- And in February, forgiveness for undergraduate borrowers with less than $12,000 initially borrowed also began taking effect.
About 7.5M borrowers are already enrolled in the SAVE plan and reaping the benefits, while about 4.3M of those have qualified for $0 monthly payments as a result. But — that's not the end of the SAVE plan's changes. Some of the plan's implementations had a delayed onset, and are set to begin taking effect in July 2024. |
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| By the way ๐ฆ It's B., Almost 77%. (Wallet Hub) ๐จ๐ป๐ญ Blue collar careers are making a comeback with Gen Z (Axios) ๐ Biden's new, revised proposal for student loan forgiveness is here (CNBC) |
And BTW, we're easier to find than ever before. ๐️ Check out our podcast series here ๐ธ Our latest Wealth Building Wednesday post on IG here ๐ฒ And, join us on Reddit while you're at it — here |
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