Financial Wellness

Aside

Financial Wellness: Time to tune up your financial goals, plan and strategy.

Tax season is upon us meaning that the 2020 filing season officially opens on February 12, 2021, and the final deadline is April 15, unless the IRS announces changes. For that reason, it is the time to assess your financial health, gather your tax documents and get your personal finance in order.

Knowing where you stand financially before the tax filing deadline gives you time to adjust your current tax withholding and also figure out what you can contribute to accounts like traditional IRAs, Roth IRAs, and health savings accounts, based on your modified adjusted income and your overall financial picture.

“People focus on the negative. They don’t like locating all the files, math is scary, and there’s this need to be very precise,” says Andy Reed, PhD, Fidelity’s vice president for behavioral economics. “The beginning of the year is a good trigger for taking stock of your financial situation, which is good to do once a year.”

https://twitter.com/raininstantpay/status/1359117351124430853?s=21

Financial wellness

Knowing where you stand is a critical to financial wellness. “Financial Wellness” relates to thinking about and paying attention to your financial well-being. And, there is no better time than now to hit the refresh button and create a path towards financial wellness. Thus, having your financial plan and strategy in place can not only mean a great deal to you in the long term, but it may provide you some comfort in the short term.

The first thing to do is to do a financial year in review by calculating your personal net worth (assets – liabilities) and assessing your cash flow (income – expenses). Once you know where you stand financially, you can plot out how you achieve your financial goals, according to Charles Schwab financial advisors. Consequently, thinking about what you really want financially, your goals, is the first step toward getting it.

“Saving and investing wisely helps you work toward a more secure future, it also gives you freedom to focus on you.”

Your primary financial focus should be earning and saving money, managing spending and debt, and setting up an emergency fund. Cash flow is financial oxygen of financial wellness, explained Berna Anat, a financial literacy educator and creator of financial education website Hey Berna. “Once you can breathe better, you can plan better.”

To achieve a sense of financial wellness means having your financial plan, strategy and goals in place. Financial wellness can not only mean a great deal to you in the long term, but it may provide you some comfort in the short term.

References:

  1. https://www.fidelity.com/viewpoints/personal-finance/getting-started-on-tax-returns
  2. https://www.become.co/blog/january-financial-wellness-month
  3. https://www.cnbc.com/2021/01/21/12-month-roadmap-to-financial-wellness.html
  4. https://equitable.com/goals/financial-security/basics/invest-for-retirement

 

Celebrating American Heart Month

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#1 cause of death in the U.S. is HEART DISEASE!

Heart disease is a catch-all phrase for a variety of conditions that affect the heart’s structure and function. Coronary heart disease is a type of heart disease that develops when the arteries of the heart cannot deliver enough oxygen-rich blood to the heart.

Despite the devastating toll of COVID-19, heart disease remains the most costly and leading cause of death in the United States. Specifically, myocardial infarction (MI) and coronary artery disease (CAD) are the leading causes of death in the U.S. and other Western societies.

Coronary heart disease is often caused by the buildup of plaque, a waxy substance, inside the lining of larger coronary arteries. This buildup can partially or totally block blood flow in the large arteries of the heart.

Some types of this condition may be caused by disease or injury affecting how the arteries work in the heart. Coronary microvascular disease is another type of coronary heart disease. It occurs when the heart’s tiny blood vessels do not work normally.

The death rate from heart attacks has risen dramatically during the COVID-19 pandemic because people are delaying or not seeking care after experiencing mild symptoms. And, symptoms of coronary heart disease differ from person to person even if they have the same type of coronary heart disease. However, because many Americans have no symptoms, they do not know they have coronary heart disease until they have chest pain, a heart attack, or sudden cardiac arrest.

Protect yourself…

90% of heart disease and stroke is preventable through lifestyle changes and risk factor modification. During Heart Month, it is critical to recommit to fighting this disease by promoting better health, wellness, and prevention awareness in your homes and communities.

There’s a lot you can do to prevent heart disease. You and your friends and family can begin by working together to meet your heart health goals. Move more, work on your weight and salt intake, quit smoking—it’s all easier when you have social support.

Motivating Americans to adopt healthy lifestyles to prevent heart disease is the goal of Heart Month. Focusing on your heart health has never been more important. People with poor cardiovascular health are also at increased risk of severe illness from COVID-19.

Let’s celebrate American Heart month by incorporating heart-healthy cardio activity into your day today:

  • Get Moving (exercise)
  • Quit Smoking (No More Excuses)
  • Lose Weight (Your weight matters)
  • Eat Heart Healthy Foods (talk to a doctor or a nutritionist)
  • Don’t Overeat
  • Don’t Stress

Make heart health a regular part of your self-care routine.

Wish all a Happy Valentine’s Day, and to remind you to take care of your heart

References

  1. https://www.nhlbi.nih.gov/health-topics/education-and-awareness/american-heart-month/about
  2. https://www.nhlbi.nih.gov/health-topics/education-and-awareness/heart-month/help-prevent-heart-disease

Financial Opportunities

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“There’s never been a recession or depression we haven’t recovered from. We will recover from this. The economy will recover, and the markets will recover. The average recession takes about 17 months to recover.” David Bach

Learning how to look for financial opportunities during a crisis and understanding how small amounts of money saved and invested can change your life are important skills and mindset to embrace. It’s a skill that can be taught. And, you can learn how to invest, to think like an investor and believe that you can to become a self-made millionaire.

To accomplishment these goals, it starts with you needing to have absolute clarity around where every single dollar is going. You should scrutinize your expenses and spending like a broke certified public accountant and ensure every dollar is given a purpose. And you must look at cutting discretionary expenses and spending like your life depended on it. Since small amounts of money, saved for the future and invested over a long period of time, can change your life for the better thanks to the miracle of compound interest and starting early.

Thus, get rid of storage unit with stuff you haven’t looked at in a year, let the stuff go. Cancel gym memberships, social memberships, anything subscription-related. And, do not buy that shiny new vehicle that costs more than your personal net worth.

Owners get rich.

“If you don’t know where you’re going, you might not like where you end up.”

There are three types of people in the world, according to David Bach’s grandmother– the person who taught him about investing: There are those who visit McDonald’s and spend money and eat cheeseburgers. There are those who work here at minimum wage, which is a really hard way to make a living. And there are those who invest in this place and they own it. Owners of assets are the ones who build wealth and get rich, he recalls her saying since “assets make money while you sleep”.

Even during market downturns and recessions, there are companies that are going to do well. So instead of focusing on what’s not working and the negative blather coming from financial news, you need to figure out what is working. Asked yourself, “which companies are doing well right now?”

There are two escalators or avenues for retail investors to building wealth: stocks and real estate, according to financial guru David Bach, author of the best selling book “Automatic Millionaire”.

Crisis Makes Some People Wealthy

Every time a crisis happens, it creates opportunities for a lot of people to become wealthy. Why? Because assets are on sale when there’s a crisis. People sell luxury items such as homes and boats because they can no longer afford them. People sell artwork for 1/5 of the price and short-sell homes. All kinds of assets are for sale when there’s an end of the world type of mentality.

So it’s important to have a strategy for these opportunities. And, markets will tank again in the next two to three years. Yet, no one knows if or when that will happen, but what you do know that the economy and the equity market will  tank in the next 20 years. And you have to be ready for it because there will be opportunities to purchase assets on sale, if you’re prepared.

“During recessions, the markets put everything on sale, which is why recessions make millionaires”, Bach says.

Big hat, no cattle…be rich vice looking rich

If you try to get rich overnight, you will remain poor forever. Instead, you should become financially selfish and the first thing to do when you earn money is to pay yourself first. You should selfishly keep the pay or “paying yourself first” from the first hour of income each workday.

References :

  1. https://money.com/david-bach-interview-homebuyer-mortgage-challenge/
  2. https://www.creativelive.com/class/how-to-retire-early-the-latte-factor-david-bach
  3. https://www.patrickbetdavid.com/the-20-rules-of-money

Investment Plan

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“An idiot with a plan can beat a genius without a plan.” Warren Buffett

Creating budgets and financial milestones are great, but you need an actual investment plan to help you stay on track. It’s one of the most critical steps to meeting your long-term financial goals. According to Warren Buffett, “An idiot with a plan can beat a genius without a plan,” and this is especially true in investing.

Planning helps you focus on long-term goals, not short-term fears and market volatility. If your goal is 20 years away, a loss over one month or year probably isn’t all that important. Focus on your individual goals and time horizon. People who invest more time planning their finances invariably make better decisions, get better results, and achieve financial independence.

It’s also important to know why and for what you are investing in because it will influence how and in what you invest. This is the basis of an investment plan. The best investment plan is one that is tailored to you, and includes an individualized strategy and goals that will set you on the path to success. That means a plan that takes into account your individual goals, situation, and time horizon—and one that’s diversified.

“People who invest more time planning their finances invariably make better decisions, get better results, and achieve financial independence.” Brian Tracy

Diversification doesn’t mean you won’t ever lose money. But owning a mix of investments can help reduce the risk. That way if some investments drop, others may rise, helping you reach your goals. And, you should always manage your risk—by choosing an asset mix that is appropriate for your current circumstances, and creating diversification within that asset mix to improve your risk/return relationship.

Step 1: Evaluate Your Current Financial Standing

The first step in creating your investment plan is to evaluate your current financial standing and determine how much you have to invest.

Step 2: Define What You Want to Accomplish

Your short or long term goals that you want to achieve in your life will impact your investing strategy. Where do you want to be when you retire? Do you want to own a house? Do you want to create passive income? Do you want to create generational wealth for your family?

Defining what you want to accomplish will help you determine how much risk you can take and what type of investments to make that will help you achieve what you want to accomplish in your lifetime.

Step 3: Determine How Much Risk You Can Take

Rule #1 of Investing is to not lose money, but there is always some risk involved when investing in an unpredictable stock market. How much risk can you take based on what you want to accomplish (what we just talked about) and how much time do you have to accomplish it?

If you want to earn money for retirement and retirement is 30 years away, you have a lot of time for your money to grow and recover from economic downturns, so you can afford to be more aggressive. However, if retirement is only a few years away, you will need to make more conservative investments that ensure you will have enough money, but won’t lose it.

Step 4: Decide What Type of Investment to Make

You need to decide what type of investments will help you accomplish what you have set out to accomplish. Consider building a mix of stocks, bonds, and short-term investment. You should learn about the different types of investments that are available before you start investing your money.

Step 5: Establish Your Time Horizon

Time Horizon is the period where one expects to hold an investment for a specific goal. The longer the time horizon, the more aggressive, or riskier portfolio, an investor can build.  Simply put, your investment time horizon is the length of time you need your portfolio to work for you.

Planning and goals are really just the means to the end. The end being the tangible things (retirement security, house, generational wealth, etc.) you set out to accomplish. You should make a promise to yourself that you will accomplish that thing and make a plan to go after it.

And monitor your investments per you plan and progress toward your goals on a set, not-too-frequent schedule—perhaps quarterly or twice a year, or if your goals or circumstances change.

By developing and sticking to an investment plan that’s squarely focused on achieving your individual goals is essential in successful investing.

Regardless of your plan, it is critically important to recognize that investing involves the risk of loss. Having a plan that aligns with your objectives and risk tolerance, educating yourself on investing and doing your research to know the risks associated with investing are all vitally important.

Bottom line is that financial plans don’t fail people. Instead, people fail to plan.

The only way to find financial security is to draw yourself a map. Folks who have specific financial plans that detail what they want save more than people who don’t…Why? Because human beings are easily distracted (especially by shiny new things). So unless you have a road map that tells you where you’re going, it is very, very hard to get there. It’s not that the map will never change.  Revising your specific plans for the future is far better than not having any plans at all.

References:

  1. https://www.ruleoneinvesting.com/blog/how-to-invest/investment-planning/?utm_medium=cpc&utm_source=facebook.com&utm_campaign=investing-strategies&utm_content=interest&utm_term=cold&dclid=CID8g7PmzO4CFTEYwQod5T0EGw
  2. https://www.fidelity.com/viewpoints/personal-finance/financial-improvement?ccsource=email_weekly
  3. https://www.fidelity.com/viewpoints/active-investor/trading-guide-managing-investment-risks-and-opportunities?ccsource=email_weekly

Double-Masking Offers More Protection

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As more transmissible variants of the coronavirus spread, the CDC says wearing a cloth mask over a surgical mask offers increased protection against the virus.

The Centers for Disease Control and Prevention (CDC) found that wearing a cloth mask over a surgical mask offers more protection against the coronavirus, as does tying knots on the ear loops of surgical masks.

For optimal protection, the CDC says to make sure the mask fits snugly against your face and to choose a mask with at least two layers.

In laboratory testing, CDC discovered that wearing a cloth mask over a surgical mask, and tying knots on the ear loops of surgical masks and then tucking in and flattening the extra material against the face produced substantially improved protection against transmission of and exposure to infectious COVID-19 aerosols.

“A well-fitting masks provided the greatest performance at both blocking emitted aerosols and exposure of aerosols to the receiver”, CDC Director Rochelle Walensky said. “In the breathing experiment, having both the source and the receiver wear masks modified to fit better reduced the receiver’s exposure by more than 95%, compared to no mask at all.”

Walensky said the laboratory findings underscore the importance of wearing a mask correctly and ensuring it fits snugly over your nose and mouth.

Correct and consistent mask use is a critical step everyone can take to prevent getting and spreading COVID-19. Masks work best when everyone wears them, but not all masks provide the same protection, according to the CDC. When choosing a mask, look at how well it fits, how well it filters the air, and how many layers it has.

Two important ways to make sure your mask works the best it can:

  1. Make sure your mask fits snugly against your face.  Gaps can let air with respiratory droplets leak in and out around the edges of the mask
  2. Pick a mask with layers to keep your respiratory droplets in and others’ out.  A mask with layers will stop more respiratory droplets getting inside your mask or escaping from your mask if you are sick.

Where your mask after receiving the vaccine

No one knows and there is no ongoing research to determine how well do the approved Pfizer and Moderna vaccines protect against asymptomatic infection and thereby help achieve herd immunity And, the other looming mystery is how long vaccine-induced immunity lasts.

References:

  1. https://www.npr.org/sections/coronavirus-live-updates/2021/02/10/966313710/cdc-now-recommends-double-masking-for-more-protection-against-the-coronavirus
  2. https://www.cdc.gov/coronavirus/2019-ncov/your-health/effective-masks.html

GET YOUR “MINDSET RIGHT”

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“Change your thinking, change your life.” Frank Sonnenberg

If you want to be successful – in both your personal and financial life – you must have the right mindset. Essentially, your mindset represents the way you approach the world and what you believe to be true.  When it comes to success, your mindset is the most important predictor of your future success in personal finance and life. Everything in life begins with your mindset, thoughts, attitude and habits.  

Think of mindset as a set of attitudes, beliefs or ideas each person possesses. These attitudes, positive or negative, may come from your environment, home life and your personal experiences, or they might have been learned while at school. No matter their source, what you do to foster a positive growth mindset really does matter.

A growth mindset helps foster more positive thinking and a belief that intelligence can change, develop and grow. It is the belief that people can learn from their mistakes and that the brain is like a plant, always ready to soak up new information and knowledge. A student with a growth mindset might say: “I’m not going to give up,” “I’m going to keep trying,” or “I can do this.”

“Whether you think you can, or you think you can’t – you’re right.” Henry Ford

Success and financial security begins with your mindset. If you are determined to do something, and believe that you can achieve it, then you will find ways to succeed. Your determination to develop good financial habits and manage your money better are key to realizing your financial goals and achieving financial security.

Anyone can make a budget and have a financial plan to save for the future, spend less, and invest for the long term. But that is only 10% of the financial equation. The other 90% is how you think, how you behave and what you believe about money.

Your mindset is key to creating the life you desire and deserve. Your beliefs drive your habits and emotions, and in turn, these determine your behavior. If you believe you can, you will. You must believe that, “You are good enough. You are smart enough. You have unique and valuable gifts to offer the world and people notice and respect you for it.”

Studies have shown that allowing stress to overtake you can often have lasting negative effects on more than your mindset. Your health can be affected, your careers can be affected, and your entire lives can be affected!

David Bach, author of the best-selling book, The Latte Factor: Why You Don’t Have to Be Rich to Live Rich, says. “I’m super positive about things [long-term], but I think people need to be preparing themselves for volatility and rockiness.”

But there’s a silver lining to the downturn, Bach says: “Recessions create millionaires.”

If you believe that there is never ending potential to learn new things and grow in your talents, not only will you put yourself in new situations that could help you grow, you will embrace them with eagerness.  Negative feedback is more fuel for growth, not something to be dreaded.

Or, according to Carol Dweck, a professor at Stanford and the author of Mindset, a classic work on motivation and “growth mindset”: “People with a growth mindset believe that a person’s true potential is unknown (and unknowable); that it’s impossible to foresee what can be accomplished with years of passion, toll, and training… Why waste time proving over and over how great you are, when you could be getting better?  Why hide deficiencies instead of overcoming them?  Why look for friends or partners who will just shore up your self-esteem instead of ones who will challenge you to grow?  And why seek out the tried and true instead of experiences that will stretch you?”

References:

  1. https://www.dollarbreak.com/wealth-creation-mindset/
  2. https://justmind.org/mindset-matters-most/

Invest in low-cost index funds

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“Don’t look for the needle in the haystack. Just buy the haystack!” John Bogle

Warren Buffett, the ‘ Oracle of Omaha’ and the world’s most successful investor, has recommended index funds as the best way for the average investor to generate wealth. In fact, he has instructed the trustee of his estate to invest in index funds.  “My advice to the trustee couldn’t be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund,” he noted in Berkshire Hathaway’s 2013 annual letter to shareholders.

Buffett believes that the average American doesn’t have the time, knowledge, and desire to properly invest in individual stocks. Moreover, he has observed that most people don’t do a great job investing in individual stocks.

Also, Buffett feels that most actively managed mutual funds and hedge funds do a better job of compensating their managers than beating the market for their investors — especially over the long run.

The S&P 500 (also known as the Standard & Poor’s 500) is a stock index that consists of the stocks of 500 of the largest companies in the United States stock markets. The index is weighted by market capitalization, which means that larger companies make up a greater portion of the index’s value and therefore have more influence over its performance. The S&P 500 is considered by most experts to be the best indicator of how U.S. stocks in general are performing.

Over the past 90 years, the S&P 500 averaged around a 9.5% annualized return. Investing in the whole market with index funds offers consistent returns while minimizing the risks associated with individual stocks and other investments.

Bogle’s 8 Basic Rules of Investing

Simplicity is at the core of Bogle’s investment philosophy. In his famous book, “Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor,” he shares with readers his 8 basic rules of investing:

  1. Select low-cost index funds
  2. Consider carefully the added costs of advice
  3. Do not overrate past fund performance
  4. Use past performance to determine consistency and risk
  5. Beware of stars (as in, star mutual fund managers)
  6. Beware of asset size
  7. Don’t own too many funds
  8. Buy your fund portfolio – and hold it

Index funds have plenty of inherent advantages, such as:

They create instant diversification

  • An index fund tracks a stock market index, such as the S&P 500, would usually hold all the stocks within these indexes.
  • When you’re investing in hundreds or thousands of stocks at once, your portfolio is much more diversified than if you were investing in a handful of individual stocks. If you’re investing in an index fund that contains 500 stocks, one underperforming stock won’t have as much of an impact.

They’re more likely to bounce back from market downturns

  • There are many different types of index funds out there. Some are broad market funds that mirror major market indexes, like the S&P 500. One major advantage of broad market funds is that they’re more likely to recover from market downturns.
  • The S&P 500 has been around for almost a century, and during that time it has experienced countless corrections, downturns, and full-blown crashes. However, it’s always bounced back stronger than ever after each one. While there’s no way to know for sure what the market will do in the future, history shows us that if the market crashes again, the S&P 500 will very likely recover. And when your index funds mirror the S&P 500, that means your investments will bounce back as well.

They’re less expensive than other types of investments

  • Index funds are passive investments, which means that they don’t have portfolio managers choosing which stocks to include in the fund. They simply track indexes, so they automatically include whichever stocks are in the index.
  • Compared to actively managed mutual funds, index funds tend to be less expensive respect to fees. Actively managed funds do have someone choosing which stocks to include in the fund, and that results in higher fees.

In theory, actively managed funds should see higher gains than passive funds, because there’s an financial professional deliberately trying to improve the fund’s performance. However, in 2019, only 29% of actively managed U.S. stock funds outperformed their benchmarks, according to research from Morningstar. So not only are index funds less expensive than actively managed funds, but they tend to perform better, too.

Index funds are relatively low-risk investments, but they can also be less expensive than individual stocks and don’t require much management. Index funds are groups of stocks that track certain stock market indexes, such as the S&P 500. They’re considered passive investments because they simply mirror the indexes they track. In other words, there’s nobody deciding which stocks to include in the fund. This results in lower fees, often just a fraction of a percent of your total investments.

Compared to actively managed ETFs and mutual funds, index funds are generally more affordable. Although index funds are passive investments, they generally outperform their actively managed counterparts. And, a simple investment strategy in low-fee index funds is good enough for Warren Buffett, and it’s good enough for the average investor.

References:

  1. https://www.thebalance.com/index-funds-wealthy-investors-reject-4142005#:~:text=Warren%20Buffett%20might%20be%20the%20world%E2%80%99s%20most%20famous,of%20his%20estate%20to%20invest%20in%20index%20funds.
  2. https://www.thebalance.com/how-and-why-john-bogle-started-vanguard-2466413
  3. https://www.fool.com/investing/2021/01/30/3-reasons-you-should-invest-in-index-funds-and-2-r/

Financial Illiteracy is the #1 Economic Crisis

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Money can work for you or against you.  Poor financial literacy and poor financial habits, like overspending, can be passed down through generations and can lock families into a cycle of poverty for decades.

Financial illiteracy is the #1 Economic Crisis in our country and is threatening Americans’ aspirations for socioeconomic advancement and equal opportunity.  The President’s Advisory Council on Financial Literacy stated, “Financial illiteracy is not an issue unique to any one population. It affects everyone: men and women, young and old, across all racial and socioeconomic lines. No longer can we stand by and ignore this problem. The economic future of the United States depends on it.”

People of color, women and the least educated have some of the lowest financial literacy rates in the nation, a major concern for a country with a widening wealth and income gap.

What is financial literacy

Financial Literacy is not just a budget. In fact, it is also a solid financial understanding of the time value of money. It is having skills like long-term vision, the ability to plan for the future, and the discipline to use those skills every day. Being financially literate means understanding where you are today, and having the knowledge needed to develop a road map to get you and your family to the prosperous financial future, you want.

It’s time to close the gap between those who know how money works and those who don’t. It’s time to break the cycle of endless debt, foolish spending, and financial cluelessness, so anyone who wants to take control of their financial future has the knowledge to make it happen.

43% of Americans can’t answer the most basic questions about how money works.

Financial literacy equips us with the knowledge and skills to be able to make sound financial decisions that will help us manage money more effectively and even the playing field for everyone. It includes the understanding of how money works, how money is made, spent, and saved as well as how to manage debt. People with appropriate financial literacy generally are better at making financial decisions and how to manage money.

It’s important for adults who live and work on Main Street to know how to manage their finances like people who work on Wall Street.  Since economic inclusion and financial well-being begins with financial literacy and providing a financial education to as many people as possible.

Equally, its important to deliver financial literacy to Americas’ diverse underserved middle class, teach people from all generations and socioeconomic communities how money works, how to eliminate debt, cancel interest, improve credit, build equity and will optimize their ability to accumulate wealth.

Increasing financial literacy will help America close it’s widening wealth gap and can even assist in leveling the financial playing field for everyone.

References:

  1. https://www.financialliteracy.group/2020/05/financial-literacy-for-african-americans/
  2. https://www.financialliteracy.group/
  3. https://www.superbcrew.com/the-financial-literacy-group-llc-is-on-a-mission-to-help-america-close-its-wealth-gap/
  4. https://howmoneyworks.com/financialliteracygroup/challenge

Think America! – Dave Ramsey

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“When you give your income to someone else, you don’t have it anymore.  When you give your income away, you’ve given up your economic future…you, the borrower, become slave to the lender.”  Dave Ramsey

According to Dave Ramsey, you can’t borrow your way to wealth and financial security.  So, stop giving away your greatest wealth building tool–your income–to buy stuff you do not need to impress someone you do not know.

Vaccination and Economic Recovery

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As the Federal Reserve Chairman Jerome Powell reiterated, the economic recovery is dependent upon not only the course of the virus but also the vaccination progress. One silver lining is that some of the data trends, such as new cases and hospitalizations, appear to have peaked and are steadily improving. However, for a full return to normality, vaccinations for the majority of the population need to occur swiftly.

“Recovery will depend on the willingness of people to get on an airplane, stay in a hotel, and go out to dinner,” writes Raymond James chief economist Scott Brown. “A quicker rollout of vaccines will get us there sooner, but there is also a risk that vaccines will be less effective against new strains of the virus. Booster shots may be needed.”

The number of new daily COVID-19 cases has declined from recent highs, but remain elevated. Increased social distancing, whether state mandated or voluntary self-preservation, should slow the pace (and the economy) in the near term, according to Brown. The New York Fed’s Weekly Economic Index fell to -2.28% for the week ending January 23. The WEI is scaled to four- quarter GDP growth (for example, if the WEI reads -2% and the current level of the WEI persists for an entire quarter, we would expect, on average, GDP that quarter to be 2% lower than a year previously).

Yet, there are a few reasons for optimism.

  • First, President Biden’s original pledge of 100 doses in his first 100 days has been increased to 150 million as production and distribution capabilities expand. Purchasing 100 million doses of each of the high-efficacy Pfizer and Moderna vaccines is a positive.
  • Second, more experience should allow state administrators to improve communications and streamline the distribution process of the vaccine at the local level to maximize daily inoculations.
  • Third, while additional vaccines such as AstraZeneca and Johnson & Johnson have a lower efficacy rate than Modern and Pfizer, they will provide further accessibility (assuming emergency use authorization (EUA) is granted by the FDA) for people to receive some level of protection and hopefully avoid hospitalization.
  • The bottom line is that more effective distribution and additional second wave vaccine options keep the expectation of a return to normality for the US economy (and likely the rest of the world) around midyear. The biggest unknown and threat to this timeline remains the potential deterioration in vaccine effectiveness against the new mutations of the virus.

    • https://twitter.com/raymondjames/status/1353402346550644737?s=21

    References:

    1. https://www.raymondjames.com/commentary-and-insights/economy-policy/2021/01/29/weekly-economic-commentary