The Value of Financial Literacy
Financial literacy is an important topic for people of all ages. Being able to understand how to manage your money and budget are essential to lifelong success. In the U.S., many students go through school without any formal training on handling personal finances. To fill these gaps, we can focus on a few crucial lessons we can share with our friends, family, and community. Family conversations It’s never too early to start the process of developing financial literacy for children. While having an in-depth conversation about complex economic concepts with your five-year old may not be feasible, there are ways to help instill financial values even in your children. There are a number of financial apps that provide kids with a means to save for certain goals, like that new toy, and educate them along the way. Starting at a young age can help develop good financial habits as they get old enough to understand the concepts and can help carry these habits into adulthood. Budgeting Following a budget is at the core of building good financial habits. A budget helps show what is coming in every month and what is spent each month by type of expense. A budget can help differentiate between necessities; such as paying the rent or a mortgage, versus spending that can be eliminated if needed. A budget can be done with an old-fashioned Excel spreadsheet or via one of the many budgeting programs or apps that are available. Whichever tool that you use, the key is ensuring that all information is entered and tracked. Looking at your monthly budget can help identify areas of spending that can be eliminated and also opportunities for saving. Spending vs. saving If you turn on your TV or browse the internet, there are continual ads for things to spend our money on. Cars, furniture, health and beauty, clothing, travel and a multitude of other things. Avoiding the temptation to spend aimlessly is crucial. Budgeting and setting priorities can help you set goals for savings. Many experts suggest people start with an emergency fund. A typical rule of thumb here is to have six months-worth of liquid savings available in the event of a job loss or an unexpected major expenditure, such as the need to replace your home’s air conditioner. Beyond this, we all need to look at longer-term goals like funding our children’s education, saving for a down payment on a new home, and of course for retirement. For these and other goals, automating your savings can be an effective tool. Saving via a 401(k) plan is a good example. Contributions are deducted from your paycheck, there is no need to write a check and send it to the plan. The contribution is built into your take home pay, you never miss the money. One of the biggest impediments to saving and attaining financial security are credit cards. There are ads seemingly everywhere for various credit cards touting different features. There is nothing wrong with credit cards, in fact if used responsibly they offer a level of convenience. However, they can cause problems when they are used irresponsibly. Easy credit makes it easy to overspend. This leads to the inability to pay off the balance each month, which leads to high interest costs. These costs can add to the balance and lead to many people to accumulate huge amounts of credit card debt. Paying off this debt prevents saving for other goals. Credit cards are great for larger purchases as long as you have the money to pay your bill in full within a month or two. Using a credit card can offer protections when making a larger purchase, such as on home improvement. Debit cards, which are essentially check cards, are more appropriate for everyday purchases like groceries that you would normally pay for out of your checking account. Protecting your hard-earned money With technology and many types of online accounts comes the risk of identity theft. This means that scammers are looking to steal your information such as bank account numbers, your Social Security number of other information they can use to steal your identity. This can lead to these scammers opening credit cards in your name, taking out a fake mortgage, and filing for unemployment benefits in your name. There are ways to help avoid identity theft. Use strong passwords and two-factor authentication with your online accounts. Freeze your credit report with the major credit reporting bureaus. Don’t click on links contained in the fake emails we all receive. Overall be diligent. In accumulating savings, there are several types of accounts to utilize. The basics are a checking account for current expenditures and a savings account to short-term savings. There are many options for both including banks and online options. Beyond this, there are brokerage accounts for investing, as well as retirement accounts like your company’s 401(k) plan and an IRA for retirement savings. Financial literacy is the key to building wealth. Teaching our children about money can help ensure that future generations can be fully independent. Building financial literacy for people at all stages of life is important. It’s never too late to learn good money habits. Looking to build a financial plan based on your goals while considering market trends and risk factors? Click here to check out our approach to Wealth Management. Disclosure These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a
Understanding the Biden Agenda on Infrastructure
The Biden administration has proposed a $1.9 trillion infrastructure plan also known as the American Jobs Plan. This is a far-reaching plan and covers a number of areas, many of which seem a bit removed from what might commonly be thought of as infrastructure. What does the proposal include? The largest component of the plan is for transportation, estimated at $621 billion. This includes money for roads, bridges, railroads, airports, public transit, and other types of infrastructure. Caregiving services for aging and disabled Americans would consume $400 billion of the proposal. There would be $300 billion in support for manufacturing. Money is earmarked for housing, research and development, education, and support for our water infrastructure. There is $100 billion designated for our digital infrastructure as well. According to Wedbush Managing Director Steve Massocca, “Infrastructure is one of those projects that anyone near the middle of the US political ideology supports. It is the details that create disagreement.” He adds, “There is a sense that the US is falling behind especially when compared to Asia. American’s making International trips (back when that was allowed) will witness new airports and roads that are newer and better than at home.” Major areas of spending While the portion earmarked for transportation clearly makes sense, the rationale behind some areas of the legislation may not be as apparent. For example, the $400 billion allocated to home care services will be used to help improve access to services like Medicaid and to boost the wages of home health workers. The $100 billion designated for workforce development will help dislocated workers, as well as providing high school students with insights into potential career paths before they graduate. Massocca says, “The final legislation, if successful, will by necessity contain many items far removed from infrastructure. One of the current internal battles within the Democratic Party is the insistence by large state representatives that the cap on SALT deductions be removed.” He adds, “Many other special interests will seek amendments. Politicians from farming communities as an example will want help for agriculture. The final details will be a flurry of spending far removed from the original topic.” High speed broadband for all The Biden plan calls for $100 billion to provide high speed internet access for all Americans. The plan will promote competition among broadband providers. Massocca feels that, “High speed broadband should enjoy bi-partisan support. Many Republicans come from rural districts, the very ones that will benefit from greater broadband availability.” If passed as is, this proposal could commoditize the internet and remove the competitive advantage some providers currently enjoy. This could reduce their profitability and potentially drive their share prices lower. Creation of jobs Estimates of the number of jobs that the plan would create vary widely depending upon the source and the measurement used. One area where jobs would likely be created is in the construction industry. Workers and managers will be needed to man the various types of infrastructure and home building projects envisioned under the plan. Jobs will likely be created for home healthcare providers as well. The R&D component of the plan will create the need for jobs in research, development and innovation in climate science and related areas. The path to becoming law According to Massocca, the path to this plan becoming law may be complicated. He says, “Political disagreements are significant in Congress. Democrats will have to use reconciliation to avoid a Republican filibuster in the Senate. There are many aspects of Biden’s plan that cannot happen without Republican support and will likely fall by the wayside as a result.” He adds, “Democrats will use Infrastructure to pursue other unrelated goals like raising the Federal minimum wage and rules making it easier for Unions to organize. Republicans will attempt to block several aspects of what they view as government overreach and over spending. It is very difficult to predict the final details of any successful legislation.” As we’ve seen since the start of the Biden administration there are certain senators that are key, notably Senator Joe Manchin (D-West Virginia) and some other swing Democrats and Republicans. Recently the GOP countered this proposal with an infrastructure proposal of their own with a much lower price tag that is under $600 billion. As Steve Massocca has indicted, the final version, if passed, will likely be the product of much negotiation back and forth. Investors will need to watch the process to try to determine the impact on their portfolios and on various segments of the economy. Looking to build a financial plan based on your goals while considering market trends and risk factors? Click here to check out our approach to Wealth Management. Disclosure These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.
How Electric Vehicles are Reshaping the Automotive Industry
Electric vehicles are a disruptive force in the automotive industry. From Tesla to the mainstream automakers, sales of EVs are expected to exhibit continued growth in the coming years. Historical view Global sales of electric vehicles topped 3.2 million in 2020, up from about 2.3 million in 2019. This is in the face of an overall decline in vehicle sales in 2020. A decade ago, these numbers were well less than 1 million vehicles per year. Predictions for 2021 and beyond look promising. Quoted in a recent article for CNBC, Wedbush Managing Director Dan Ives said that he expects the electric vehicle industry to grow into a $5 trillion market by 2030. This figure is estimated at about $250 billion for 2020 by Fortune Business Insights. Disruptive technology Ives views the shift to electric vehicles to be a “green tidal wave” for the industry. He says, “China, GM, Ford, VW and others are all jumping on the electric bandwagon.” He feels that the success or failure of their efforts with electric vehicles will cause many auto stocks to be rerated. Ives believes there will be many winners beyond automakers, he cites firms like Baidu and Apple as potential winners for their contributions on the technology side. Additionally, companies that make batteries and related equipment for these vehicles should share in this growth as well. Ives calls the move toward electric vehicles by the auto industry a “massive headwind” for the oil and gas industry. He cites this and the Biden infrastructure plan that focuses on clean energy as factors that will cause a shift away from oil and gas towards clean energy sources for cars in the future. The future of cars While it’s hard to say exactly what the future of cars will look like, there are more and more new entrants in the electronic vehicle segment all the time. Ives calls this the “fourth industrial revolution.” The demand for electric vehicles is currently highest in China. Demand in Europe is rising as well with Tesla and many of the European automakers rolling out new models. U.S. sales are expected to increase in 2021 as new models are being delivered from a variety of companies. Ford has announced an electric Mustang, with a similar announcement coming from GM regarding the Hummer. Consumers can also expect new options for electric pickup trucks. A related industry that will be impacted not only by the move to electric vehicles, but by technological innovations like autonomous driving and even different methods of car ownership and usage is the insurance industry. Autonomous driving could have safety implications which could impact their risk models. Different types of car usage such as car sharing might reduce the need for individual auto policies which are commonplace today. The impact of a changing industry on investors In the CNBC article referenced above, Ives had said, “In my opinion EV stocks could be up another 40- 50% this year, given what we’re seeing in terms of a green tidal wave globally.” Ives and other analysts feel that the boom in electric vehicles will benefit not only Tesla, but also the stocks of traditional automakers who are able to ride the wave, so to speak. Overall, the prospects for electric vehicles seem bright. Tesla and traditional automakers have solid opportunities here, as do companies that supply batteries and other technology to these companies. To the extent that these trends are realized, it will have a major impact on industries like oil and gas producers, as well as the auto insurance companies among others. Looking to build a financial plan based on your goals while considering market trends and risk factors? Click here to check out our approach to Wealth Management. Disclosure These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.