First Quarter Summary of Webinar Take-Aways

 

We are already one-quarter of the way through 2026 and it’s time for another summary of takeaways from webinars that I have recently attended. Below are nine nuggets that stood out to me as I reviewed notes taken in my personal learning journal:

Retirement Challenges- Retirement is more of an adaptive challenge than a technical one. With adaptive challenges, there is no expert to help you. Rather, it is up to retirees to look inside themselves to determine their purpose and what brings them joy.

 

Non-Financial Changes- Many retirees face the following: Loss of work identity and a sense of purpose, increase in unstructured time (about 2,500 hours per year), increased time with spouse or partner, reduced social connections outside of work, and health challenges from the aging process.

 

Retirement Resources: Eight things can help retirees thrive: 1. Spirit (meaning and purpose), 2. Physical health, 3. Heart (optimism and resilience), 4. Connection (nurturing relationships), 5. Mind (creativity and mental challenges), 6. Work (paid or volunteer) to contribute personal talents, 7. Place (having a “sense of home,” and 8. Money (managing resources to live within your means).

 

Relationships- The greatest satisfaction in life comes from relationships. Think of relationships as an investment portfolio that requires ongoing deposits and maintenance and will change over time. Time is a finite resource so ask yourself what investments you want to make in different people.

 

Sequence of Returns Risk- Losses in an investment portfolio early in retirement is a risk that cannot be diversified away from. To avoid withdrawals from equity assets during a market downturn, spend conservatively and/or meet spending needs from other sources (e.g., cash asset buffer account). Big caution: retirees’ income plan should not overly rely on market performance.

 

Financial Education- 30 states have passed laws requiring a semester-long financial education course for high school graduation. The true ROI of these courses is what students do with the knowledge they gain (e.g., early investing, less debt) and expanded horizons for their future.

 

Wealth Accumulation- Wealth is what people don’t see. Everything can be bought with borrowed money. It is not what people earn that creates wealth but how they spend it. Money is not a goal in and of itself but a tool to allow you to reach lifetime financial goals.

 

Tax Planning- A “permanent” tax law change is one that is not set to expire. Congress can always pass future tax laws. Three ways to lower modified adjusted gross income to reduce taxes are tax-deferred plan contributions, Roth conversions, and qualified charitable distributions (QCDs) after age 70 ½. Some people roll an employer account balance into a traditional IRA to make a QCD later.

 

LinkedIn Tips- LinkedIn is the #1 way that people find jobs and “put themselves out there.” Ways to stand out on LinkedIn include a professional head shot, an interesting “About” section, highlighting your skills and experience, regularly posting new content, a customized URL, endorsements, and completing as many profile sections as possible.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Financial Tasks for a Cold Winter Day

Cold outdoor weather during the winter months means that now is a great time to perform indoor personal finance improvement activities. In addition to preparing an income tax return, below are ten financial management tasks to consider doing now so your finances are well organized when the weather gets warmer and you want to do things outside:

Financial Records Makeover- Develop a record-keeping system that works for you including folders in a desk drawer, plastic tote box, or file cabinet or digital records housed in a cloud server. Also take the time to shred unnecessary documents that contain sensitive personal information.

Credit Card Inventory- Make a list of all of your credit cards, their account number, expiration date, and CVC (security) code, and the phone number for customer service. If a card is lost or stolen, this information is readily available to report to the issuer.

Digital Assets Inventory- Make a list of usernames, passwords, PINs, and other data needed to turn on electronic devices and access accounts such as those for financial accounts, retailer accounts, and other online spaces. Doing so will help you and trusted others quickly access this information.

Automated Bill Payment List- Review the bills that you pay automatically and make list of the accounts that they are charged to (e.g., a checking account or credit cards). Also take some time to set up automatic bill-paying for recurring expenses (e.g., utilities, cell phone, and rent/mortgage).

Net Worth Statement- Add up the value of what you own (assets) and what you owe (debts) and subtract the debts from the asset to calculate your net worth. Net worth provides a “snapshot” of someone’s finances at a point in time and should be updated at least annually to monitor progress.

Credit Report Check-Up- Use the website www.annualcreditreport.com to review your credit report at the “Big Three” credit bureaus: Equifax, Experian, and TransUnion. Look for errors and evidence of identity theft. Also check with your bank or credit card issuer for a free credit score.

APY Comparison- Review available annual percentage yields on bank/credit union savings accounts, CDs, and money market accounts. Media outlets like NerdWallet and Bankrate identify high-paying insured accounts. The higher the APY, the more interest earned on savings.

Retirement Savings Analysis- Try at least three online calculators to see what they say you need to save to meet your retirement income target. Expect different results because their data inputs and assumptions vary. A range of numbers can inform financial decisions (e.g., amount of savings).

Beneficiary Designation Review- Make sure that people and/or organizations named as beneficiaries in your life insurance policies, annuities, and retirement savings plans are still those that you want to select. Ditto for personal representatives for your estate and your health care proxy.

Insurance Review- Make a list of your current insurance policies (e.g., auto, renters or homeowners, health, disability, and life) and their current cost. Then contact your current licensed insurance agent or agents from competing companies to discuss policy options and available discounts.

Stuck inside to stay warm? Got cabin fever? Choose one or more of the financial tasks listed above.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

Financial Planning Strategies with the Number 250

 

The numbers “2,” “5,” and “0” are hot this year as we celebrate our country’s founding 250 years ago in 1776. Upcoming events celebrating the big “250” got me thinking…why not “double dip”:  celebrate America’s birthday in 2026 and improve our personal finances at the same time? 

A bit far-fetched? Maybe. But consider the following examples that include the number 250 or variants of it:

Small Savings- Save 25 cents a day and you’ll have $91.25 at year’s end. This is a great goal for children, perhaps with parental matching or a year-end “top off” to $100. Of course, higher amounts of coin can also be saved such as 50 cents per day ($182.50 at year end).

 

Higher Savings- Save $2.50 a day and you’ll have $912.50 at year’s end, plus interest. Some people use change jars or piggy banks for daily savings. Save $250 per month and you’ll have $3,000 at year’s end, plus interest.

 

Increased Retirement Savings- Consider increasing your contribution to a tax-deferred retirement plan by 2% or 5%. The easiest time to do this is when you get a salary increase or when a household expense, like child care or tuition or a car loan, ends.

 

Save Your Tax Refund- The average income tax refund in 2025 was $2,942 but let’s use $2,500 as an example. It’s close enough and fits the theme. If you save $2,500 a year for 10 years and earn 7% interest, you’ll have over $34,000 in 2036.

 

Invest Automatically- Sign up for a mutual fund automatic investment plan and authorize the mutual fund to debit your bank account monthly by $25, $50, or $250 to purchase shares. You can also do this with over a thousand publicly traded companies that sell stock directly to investors. 

 

Slash Your Debt- Pay more than the minimum due on credit cards…in multiples of “2,” “5,” and “0,” of course. For example, pay $25 more or $250 more than you are currently paying to dig out of debt. The avalanche method prioritizes paying off debts with the highest interest rates first, regardless of the balance. The snowball method prioritizes paying off debts with the smallest balances first, regardless of the interest rates.

 

This 250^th anniversary thing is catching, isn’t it?

 

In honor of America’s milestone birthday, I’m issuing all of my Money Talk blog readers a challenge: take one or more actions that are relevant to your life to improve your finances in 2026 in honor of our county’s 250^th anniversary.

 

I’ve given you six ideas that include the numbers “2,” “5,” and “0” to get started. There are also others including the $2,500 Savings Challenge, the Rule of 25, and the 50/25/25 budget rule.

 

Happy 250^th America! As we celebrate our country’s independence throughout 2026, let’s also work to improve our own individual financial independence. You can do it! One small step at a time.

 

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Financial Highlights of 2025

 

My one-person company, Money Talk (read: me), may be the only entity in the U.S. that does a generally focused “deep dive” annual summary of personal finance research, events, and trends. I recently presented a webinar for the Association for Financial Counseling and Planning Education (AFCPE).

Why look back on the past year? For context and insights about how to manage money during the year ahead. Below are ten data points that caught my attention during 2025:

Affordability Crisis- This was a key theme throughout the year as prices for many consumer “basics” rose faster than household incomes. Examples include food, utilities, property insurance, new and used vehicles, and housing.

Inflation Trends- The Consumer Price Index (CPI) announced in January was 3.0%. It decreased for three months (February-April) and then increased for five months (May- September). The CPI for the change in prices from November 2024 to November 2025, announced in December, was 2.7%.

Interest Rates- The Federal Reserve Open Market Committee (FOMC) held interest rates steady for the 5^th consecutive time in July at a range from 4.25 to 4.5%. This was followed by three quarter point decreases in September, October, and December to a range from 3.50% to 3.75%.

Credit and Debt- Outstanding credit card balances increased to an all-time high and there was a record-high percentage of credit cardholders making minimum payments. Another first was credit cards with rewards payable in bitcoin.

Vehicle Purchases- By Q2, seven-year car loans comprised 21.6% of new vehicle financing and six-year loans, the most common loan type, 36.15%. For the first time ever, the average price of a new vehicle topped $50,000.

Homeownership- Mortgage interest rates decreased slowly from over 7% in January to about 6.2% in November. Home prices hit a record high in June and started to decline. A typical first time home buyer is 40 years old and there was an upsurge in the use of adjustable rate mortgages.

Stock Investing- The closing price of the Dow Jones Industrial Average (DJIA) on 12/31/24 was $42,544.22. This was followed by a market correction during the winter months and numerous fresh highs, especially in November and December after interest rate cuts. Closing DJIA on 12/31/25: 48,063.29.

Income Taxes- The IRS ended its experimental Direct file program as well as the ability to buy paper-I-bonds with a tax refund. The OBBBA mega bill made tax rates and tax brackets from the 2017 Tax Cuts and Jobs Act permanent and introduced several “limited time offers” through 2028.

K-Shaped Economy- Wealthy Americans boosted the economy. The top 10% of U.S. earners accounted for almost half of all spending while low- and moderate-income households struggled to make ends meet. Shopping at thrift stores increased as did smaller package sizes of food and other items.

Legislative Changes- Two impactful new laws were the Social Security Fairness Act, which repealed the Windfall Elimination Provision and Government Pension Offset. Another was OBBBA. 2025 also ended with 30 states mandating a personal finance course for high school graduation.

For additional information about 2025 events, click here for the slide deck for my recent webinar.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

 

Seven Financial Guidelines and Shortcuts With Numbers

 

I recently taught a new class about common financial planning guidelines that include numbers. I started the class by noting that a guideline is a recommended principle, course of action, or piece of advice. Unlike rules and laws, which are mandatory, guidelines are not action steps. Instead, people follow them voluntarily to guide their daily actions and decisions.

 

Interestingly, however, many personal finance guidelines do use the word “rule.” Examples include the 4% Rule and the Rule of 72. Once again, they are not rules, as in required actions, but, rather, suggested calculations. Some financial guidelines involve ratios which are derived from combinations of numbers.

 

Below are seven examples of ten financial guidelines with numbers:

 

20/4/10 Rule- This is a guideline for car loans. It suggests making a 20% down payment (e.g., $10,000 for a $50,000 new car), financing the car loan for no more than four years, and keeping monthly expenses under 10% of gross income (e.g., $5,000 with a $50,000 income).

 

50/30/20 Rule- This is used as a guideline for household budgeting. It suggests spending 50% of household income on needs, 30% for wants, and 20% for savings and debt repayments. For example, with a $50,000 annual income, $25,000, $15,000, and $10,000, respectively.

 

Consumer Debt-to-Income (DTI) Ratio- Suggests that all monthly debt payments (excluding a mortgage) should not exceed 15% of net (take-home) pay and a 20% DTI ratio is considered a “danger zone.”  For example, the ratio for monthly debt of $600 and $4,500 net income is 13.3%.

 

Rule of 25- A common retirement savings target is 25 times your desired retirement spending (not covered by guaranteed income like Social Security and a pension) by the time that you retire. Example: if you need $60,000 per year, 25 x $60,000 = $1,500,000

 

Rule of 72- This is a shortcut to estimate how long it takes to double a sum of money at a certain interest rate, Simply divide the interest rate into 72. For example, with 6% interest, it takes 12 years (72 ÷ 6) to double your money.

 

Three Fund Rule- This is a simple guideline to build a low-cost, globally diversified, investment portfolio with just three mutual funds: a U.S. total stock market index fund, an international stock index fund, and a U.S. total bond index fund.

 

Three to Six Rule- Setting aside enough savings to cover three to six months of essential living expenses (e.g., housing, food, utilities, insurance, transportation, and debt repayments). If this is not possible, save what you can. Any emergency fund savings is better than none!

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

 

Ingredients for a Fulfilling Retirement

I recently attended a webinar titled Creating a Fulfilling Retirement presented by Fidelity Investments. Below are eight of my key take-aways: 

 

Three Happiness Components- The speaker noted that money (income and wealth) is only one part of the retirement happiness equation. While happiness improves with higher earnings, especially guaranteed income like a pension or annuity, two other key factors are relationships (interestingly, a spouse and friends but not children, according to one study) and health.

 

Happiness Investments- All three retirement happiness factors (money, relationships, and time) are “investments” that require regular time allocations. For example, time for exercise and eat well and to build and maintain relationships. The greatest wealth is good health.

 

Retirement Pursuits- When people are working, their weekend activities are a getaway. In retirement, when “every day is Saturday,” they need to think about how they will fill their days. Otherwise, they can become bored, depressed, and/or isolated. A common retirement task is finding balance among different activities.

 

Spending Money- Retirement spending can be very successful if it provides an entry into socialization activities. An example of so-called “social spending” is purchasing a classic car to be able to participate in car shows and informal get togethers of car enthusiasts.

 

Congregate Living- There are different stages of aging and different mindsets associated with each one. For example, people who reach their 80s are often happier to live in shared housing arrangements for less isolation, less maintenance, and more well-being checks vs. “young old” retirees in their 60s and 70s who still prefer to live in single-family homes.

 

Long-Term Care (LTC) Need- The need for LTC is not determined by age but by life events and an inability to perform activities of daily living (ADLs). Not everybody needs LTC insurance, but everyone needs a LTC plan, including a liquidation plan to sell assets to free up money for LTC.

 

Common Errors of Retirees- Two common errors that were mentioned were underestimating health care costs (estimated to be $165,000 for 65 year olds for the remainder of their lives, excluding LTC) and underestimating irregular expenses for things like car repairs and dental bills.

 

Guaranteed Income Sources- Retirees with a “retirement paycheck” of regular monthly income from Social Security, annuities, and/or pensions that pays all of their living expenses are generally happier- and spend more money in retirement- that those who have to withdraw money from invested assets (e.g., a 401(k) plan) and worry how long their money will last.

At the end of the webinar, attendees were encouraged to "make retirement the best chapter of your life." For many people, the last third of their life is their happiest.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

Take-Aways From a “Free Dinner” Seminar

 

Once again, I decided to go “undercover” and attend a free dinner investment seminar with a friend. The beginning was a bit rough. Both of us are pescatarians (vegetarians who eat fish) and there were three meat entrees to choose from. We brought this to the sponsor’s attention, however, and were offered salmon. The best part of the meal, however, was a decadent chocolate cake.

Here are three “Barbservations” about the program materials and the audience:

 

¨   Fee-Based Planning: According to the materials that were distributed, the program sponsor was a fee-based firm. Fee-based financial planners earn income from both client fees and commissions on financial products they sell (e.g., annuities, insurance, and mutual funds). This compensation model may create potential conflicts of interest, as planners may be incentivized to recommend products that generate commissions in addition to providing advice for a fee.

 

¨   Confusing Terminology: Some of the participants seemed to confuse fee-based with fee-only. A fee-only financial planner is compensated solely by client fees: an hourly rate, a flat-rate, or a percentage of assets under management (AUM). Fee-only advisors do not receive commissions or incentives from product sales, reducing potential conflicts of interest and ensuring advice is aligned with clients’ best financial interests.

 

¨   No Visible Financial Certifications: Neither presenter had any designations listed on either sales literature or business cards or slides. No CFP® (certified financial planner). No ChFC® (chartered financial consultant). No CRPC® (chartered retirement planning counselor). Nothing. This raised a red flag for me because financial certifications have associated ethics standards and continuing education requirements which those who do not hold them are not subject to. If I were hiring a financial advisor, I would want one who has shown a commitment to professional development.

 

That said, there were some useful “nuggets” of information shared at the seminar:

 

¨   Retirement Risks: These were explained in detail and include longevity (outliving assets), inflation, health care costs, cognitive ability decline, physical health decline, death of a spouse, increased taxes following the start of RMDs, unfavorable government policies, unplanned spending shocks (e.g., dental bills and home repairs), and limited earning capacity in later life.

 

¨   Long-Term Care (LTC)- This causes the biggest “crack” in older adults’ nest eggs. LTC insurance typically kicks in when people can’t perform two of six activities of daily living or ADLs (e.g., dressing, eating, toileting) for 90 consecutive days. People age 65+ have about a 70% chance of needing some type of LTC at some point in their life.

 

¨   Two Phases of Financial Planning- In the accumulation (saving) phase, the goal is to have enough money to retire and the time horizon to retirement is often known. In the income (decumulation) phase, the goal is to not outlive assets and your life expectancy is unknown.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

 

What to Do With a Windfall: March 2025 Edition

Windfalls are unexpected and often sudden sources of income. In other words, a stroke of good financial luck. Common examples include receiving an inheritance or bonus and winning the lottery. 

Each year, by late March, millions of Americans have received a windfall from income tax refunds. This year, as a result of the Social Security Fairness Act (SSFA), about three million Americans (myself included) also received a retroactive payment and benefit increase as a result of the elimination of the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). 

Suffice to say, millions of Americans currently find themselves flush with cash received from income tax refunds and/or SSFA payments. This begs the question: what to do with this money? Below are a dozen solid suggestions to handle a one-time chunk cash:

1. Pay off high-cost debt (e.g., credit card bills and loans) and overdue bills.

2. Start or replenish an emergency fund with a target goal of 3 to 6 months’ essential expenses.

3. Start or increase deposits to tax-deferred employer retirement savings (e.g., a 401(k) plan).

4. Fund a traditional or Roth individual retirement account (IRA). 

5. Start or increase deposits to a 529-college savings plan for children or grandchildren.

6. Make extra principal payments on your mortgage to shorten its term and lower the total interest cost.

7. Invest in your home with improvements that have a high payback, such as landscaping and bathroom or kitchen upgrades.

8. Buy needed “big ticket” items (e.g., furniture, electronics, or a major appliance), for cash instead of using a credit card.

9. Purchase a few hours of a certified financial planner’s time to get advice and a financial check-up.

10. Take action to achieve goals on your “financial bucket list” (e.g., travel and a new car).

11. Invest in your human capital (think certification courses, college classes, and professional conferences).

12. Make gifts to family members and qualified charities.

Also remember that windfalls can have a downside. Lower income windfall recipients can be disqualified for public benefits such as housing subsidies, SNAP, utility assistance, and Marketplace health care plan premium subsidies. 

Higher income recipients could find themselves in a higher tax bracket, paying increased taxes and, for older adults, the IRMAA surcharge on Medicare premiums. 

It is wise to double check your tax withholding for 2025 if you are the recipient of a substantial windfall.

Just Do Ten Things Right

Recently, I was hired by the Marion County (FL) Medical Society to do a keynote presentation at their meeting. A pre-program survey of their members indicated they wanted to learn about a variety of financial topics in 45 minutes. What to Do? I remembered the book, The Index Card, where ten tips related to many aspects of personal finance were shared on an index card. 

I titled my presentation “Just Do Then Things Right.” Below are the ten recommended action steps that I discussed with my audience that I consider essential for financial well-being:

Spend Less Than You Earn- Live below your means with positive cash flow; i.e., where income is greater than expenses. You can’t save, invest, or build wealth for retirement if you don’t get this foundational action step right. Spending plan (budget) worksheets are a useful resource.

Strive to Pay Credit Card Balances in Full- Try to pay credit card balances in full every month as a convenience user so no interest is charged. If this is not possible, pay more than the minimum payment to reduce the cost of interest and shorten debt repayment time.

Try to Save At Least 15% of Your Income- Save as much as you possibly can and gradually work up to a 15% savings rate if you cannot save that much now. Studies have shown saving 15%+ of income can result in a significant nest egg- sometimes as much as $1 million- in later life.

Invest for the Long Term- Consider investing in equities (e.g., stock, growth mutual funds, stock exchange-traded funds) for financial goals that are five or more years away. Buy inexpensive securities with low expense ratios and beware of pitches for fraudulent investments.

“Max Out” Tax-Advantaged Retirement Savings Accounts- Contribute as much as you can afford, up to annual IRS maximum limits, to retirement savings accounts including traditional (pre-tax) and Roth (after-tax) IRAs and qualified employer plans (e.g., 401(k), 403(b), TSP).

Diversify x 3 (D3)- Diversify investments three ways: 1. Investment diversification (different asset classes; e.g., stocks, bonds, and cash), 2. Time diversification (hold investments over time to reduce their volatility), and 3. Tax diversification (mixture of tax-deferred, taxable, and tax-free securities).

Protect Yourself With Adequate Insurance- Insure against large financial risks including disability (to protect your earning ability), liability, and property damage. Consider adding an umbrella insurance policy if your assets (not exempt by state law against judgments) total $1 million+.

Practice Tax Avoidance- Take advantage of legal strategies in the tax code to reduce your tax liability. Specific strategies include retirement savings plan contributions, Roth IRA conversions, tax deductions and credits, tax loss harvesting, tax-free investments, and gifting to qualified charities.

Get Your Estate in Order- Prepare legal documents (e.g., will, living will, power of attorney) and update them as needed, discuss end-of- life wishes with personal representatives, review beneficiary designations on insurance policies and retirement plans, and prepare a digital assets inventory.

Keep Learning About Personal Finance- Learn one new thing every day about a personal finance. Ways to do this include books, newspapers and magazines, blogs, podcasts, seminars, social media platforms, and traditional media outlets (e.g., radio and television). 

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Q&A About 2024 Events and Trends

As I noted in an earlier post, I recently presented a 90-minute 2024 Personal Finance Year in Review webinar for OneOp, an organization that provides professional development for military family service providers. After the webinar, I answered follow-up questions from webinar participants. 

Below are some questions that were asked and my responses: 

If CPI (inflation) rates are coming, why are prices not coming down? What is the relation of one to the other?

Unfortunately, there is no direct relationship between the Consumer Price Index (CPI), which measures the rate of change in prices of a “basket” of goods and services over a 12-month period (e.g., 2.7% from 11/23 to 11/24), and prices for individual goods and services themselves (e.g., housing, child care, cars, food, and insurance). Therefore, even though inflation, as measured by the CPI, cooled somewhat during 2024 from 3.1% in January to 2.9% in December, prices on many items have not gotten lower for many reasons (e.g., rising labor and material costs, natural disaster losses, supply and demand issues). This is especially hard for young adults, who never experienced the aftermath of inflation before, to comprehend. Many expected prices to return to where they were five years ago before the pandemic. In addition, inflation “bubbled up” several times in 2024, reversing the CPI’s downward trajectory.

As mortgage interest rates come down, do you think we will find people who are more willing to move and/or buy other homes if refinancing at a lower rate will enable them to have more income to work with?

Yes, but it will take some time. Remember, about 60% of current homeowners with mortgages have interest rates below 4% and, as of 12/19/24, the average 30-year fixed mortgage rate was 6.72% (5.97% for 15-year mortgages). That is a big difference, which is contributing to the “rate lock effect” (sellers staying put) and a housing stock shortage. Eventually, as market interest rates for mortgages get closer to homeowners’ current interest rates, they may be more likely to sell.

With the U.S. savings rate based on disposable income, is this net income (after taxes)?

The U.S. personal savings rate, published by the Bureau of Economic Analysis (BEA), is calculated by dividing personal saving by disposable income in a series of steps as follows: 1. Start with personal income, 2. Subtract personal taxes, 3. Subtract personal outlays (i.e., expenses), and 4. Divide personal savings by disposable personal income. Disposable personal income is the portion of people’s incomes left after they pay taxes and spend money. For more details on the BEA personal savings rate formula, read more here.

Have you seen an increase in people choosing to lease a car instead of buying?

Leasing made a comeback in 2024 and now accounts for 25% of new vehicle purchases, up from 17% during COVID era inventory shortages. SUV vehicles dominate vehicles being leased and EV leasing is growing. For more details, read more here.  

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Financial Highlights of 2024

My one-person company, Money Talk (read: me), may be the only entity in the U.S. that does a “deep dive” summary for clients of each year’s personal finance research, events, and trends. I recently presented a 90-minute 2024 Personal Finance Year in Review webinar for OneOp and wrote a blog post about 2024 financial milestones for 403bwise.

Why look back on the past year? For insights about how to manage money during the year ahead. Below are ten data points that caught my attention during 2024:

SHED Study- The 2024 Federal Reserve Survey of Household Economics and Decision-making (SHED) study found that 63% of adults could cover a $400 emergency with cash. Conversely, 37% of survey respondents could not. Not surprisingly, inflation was reported as the top financial concern.

Value of Financial Education- A study by Tyton Partners and Next Gen Personal Finance calculated a lifetime benefit of about $100,000 per student as a result of taking a one-semester course in personal finance. Impacts resulted from avoiding high-cost debt and larger retirement savings.

Retirement Planning and Longevity- Healthview Services issued a white paper cautioning consumers and financial advisors not to automatically assume a life expectancy of age 95 in retirement savings calculations and to consider health status and chronic diseases as key variables.

Inflation- The Consumer Price Index (CPI), which measures price changes over a 12-month period (e.g., November 2023 to November 2024), was “sticky” in 2024. The CPI was 3.1% in January and 2.7% in November. At two points during the year, the CPI trended upward after previously declining.

Interest Rates- There were three Federal Reserve interest rate cuts during 2024 totaling 1% bringing the federal funds rate to a range between 4.25% and 4.5%. Consumers were impacted as borrowers (e.g., lower interest on credit cards) and as savers (e.g., lower interest on money market funds).

Credit Cards- Annual percentage rates (APRs) on bankcards hovered around 20% during 2024 and the average APR on retail credit cards was over 30%. One reason: record high margins charged by credit card issuers above the prime rate or other metrics that variable rate credit cards are tied to.

Housing- “Rate lock gridlock” continued during 2024 with an estimated 60% of homeowners having mortgage interest rates below 4% and unwilling to sell their homes, which would require them to have a higher rate mortgage. Home affordability fell to low levels not seen since the 1980s.

Savings- The U.S. personal savings rate declined throughout the year from 5.5% in January to 4.4% in November. In addition, banks started to pay lower annual percentage yields (APYs) on savings accounts after the Federal Reserve started cutting interest rates.

Investing- Both the stock market and cryptocurrency (e.g., bitcoin) had noteworthy gains in 2024 but also major price pullbacks. In short, volatility was the name of the game. Major stock market indices all reached fresh highs (e.g., the DJIA started at 37,715 and crossed 45,000 before retreating).

Taxes- Final regulations for required minimum distributions by non-spouse beneficiaries of tax-deferred plans were finalized and the IRS processed tax returns through its new Direct File program.

What’s next for 2025? Time will tell. Best wishes for happiness, success, and financial well-being.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

My Final Quarterly Webinar Summary of 2024

 As 2024 winds down next week, it’s time for my final quarterly summary of take-aways from recent personal finance classes, conferences, and webinars that I attended. Below are some “nuggets” that you might find useful in your personal financial planning:

Offense and Defense- Financial offense involves earning money from one or more sources (e.g., paycheck, interest). Financial defense is spending what you earn with a plan. Just like football teams, offense and defense are both very important to achieve financial well-being. 

Couple Finances- One study found that 43% of couples merge all their money, 34% have a joint account for shared expenses only, and 23% keep all their money separate. There is no one “right” way for couples to set up financial accounts but many experts do advise paying bills in proportion to each spouse’s income in proportion to total household income.

Working Past Age 70- Benefits of continued work include: increased Social Security (if earnings replace low-earning years from young adulthood), increased retirement plan savings, the “still working exception” for required minimum distributions (RMDs), continued access to employer benefits, and fewer years to support yourself without a paycheck in later life. Pitfalls are possibly triggering a Medicare sign-up penalty and premium surcharges called IRMAA.

Retirement Challenges- Five issues in later life are longevity (outliving savings), stock and bond market volatility, inflation (reduced purchasing power), cognitive decline, and sequence of return risk. The latter is when an investment downturn occurs early in retirement, people need to sell shares for living expenses, and funds are no longer available for a rebound. Also, with tax-deferred retirement plans subject to RMDs, savers are “in a partnership with the IRS.”

Diagnostic Tools- Useful documents to understand an individual or couple’s finances for planning purposes are net worth and cash flow calculations, saving and investment account statements, and income tax returns. Investors should also review their portfolio (e.g., asset allocation weights and investment performance) “for 2-3 hours every 2-3 years.”

Emerging Adulthood- Many adult children are still on “the family payroll” with only 45% of young adults age 18-34 completely financially independent from their parents. Sometimes, subsidies total thousands of dollars that parents could have saved for retirement. For example, a transfer of $8,000 to adult children over the course of a year for rent, auto insurance, cell phone, etc. could have funded the maximum 2024 IRA contribution for a worker age 50+.

Prenup Analogy- A prenuptial agreement, a legally binding contact between soon-to-be married individuals, is similar to an auto insurance policy. You are planning for the possibility of an accident (i.e., divorce), but want to do everything possible to avoid it. Every married couple has a prenup: one they prepare themselves or decisions made according to state law.