Summer Savings Sprint: Building Wealth with Small Changes
As we approach summer, our thoughts often turn to summer fun such as a vacation, weekends at the lake, baseball games and other outdoor activities. The kids are off from school, and it can be a fun time for you. Along with that fun, it is important to stay on top of your finances and also to ensure that you do not neglect good spending and savings habits. Improving Financial Habits This Summer Any time of the year is a good time to look to improve your financial habits. Some tips for this summer include: Put your financial goals in writing. You can think about them or even discuss them, but until you commit your financial goals to writing they are not official and there is nothing to follow. Create a budget for spending. Set savings goals. Again, commit these to writing so you have something to follow. This includes an emergency fund and longer-term savings plans or goals such as retirement and college. Make a plan to pay down your debt. As we move to the midpoint of the year, be sure to review your tax situation for the year. Are you having enough withheld from each check to ensure that you do not end up with a big tax bill at tax time? If not, this can result in a big outlay that can cause you to spend down money you have saved for other reasons. How to Save Money on Everyday Expenses and Increase Savings The key here is to have a formal budget and to track your progress against that budget each month. The budget should include where money will be spent including your monthly essentials such as housing, food, debt payments and other regular expenses. During the summer, it is important to budget for fun, whether this is a formal vacation or some smaller excursions. The money must come from somewhere, so be sure that summer fun does not ruin your overall financial wellbeing. Ensuring that summer fun is covered within your overall budget can help ensure that you do not overspend during the summer. This can help ensure that you are able to meet your savings goals; hopefully these are also outlined in your monthly budget. Beyond developing and sticking to a budget, it is important to be a smart consumer. Shop around when planning a trip or making any sort of purchase. With the internet saving money on even everyday purchases can be easier than ever. The savings on each purchase may not add up to a lot, but getting into the habit of being a selective and frugal shopper can add up to significant cumulative savings over time. Small Changes Can Have a Big Impact While all of us would love to win the lottery or inherit a large sum, the reality is that this is very unlikely to happen. Rather, small changes can make a big impact on your savings and your ability to accumulate wealth over time. Some examples of small changes include: Get in the habit of saving every month. Whether it is saving to accumulate an emergency fund or to save for a major purchase, saving a little bit extra each month as your ability to do so grows can add up over time. Contribute to your company’s 401(k) or other retirement plan as soon as you are eligible. Even if you can only contribute a little, it is a start. Make sure you increase your contribution amount at least a little each year. Over time you will be amazed at how much this adds up to. As you earn more money, beware of “lifestyle creep”. There is nothing wrong with using extra income to buy some of the things you want but be sure that you do not stray from having a budget and monitoring your spending. Build and maintain an emergency fund to help mitigate the financial impact of unforeseen major expenditures like weather damage to your home beyond what insurance might cover or expenses arising from a serious illness or a job loss. Talk to your Wedbush financial advisor for other ideas as to ways to jump start your savings and your investments. Disclosure Wedbush Securities does not provide tax or legal advice. Please consult your tax or legal advisor. 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. Fixed income securities are subject to increased loss of principal during periods of rising interest rates and are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors. Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges, and expenses. You can request a prospectus by contacting your Wedbush Financial Advisor and/or Registered Representative.
Economic Outlook: Mid-Year Review and Forecast
So far 2024 has been an interesting year economically. Interest rates remain relatively high and the Federal Reserve has not indicated for certain whether or not they will indeed cut the Fed Funds rate as many as three times this year. The stock market, though volatile at times, is hovering at near all-time high levels for the Dow, the S&P 500 and other major indexes. Home sales remain robust, and inflation is definitely still here as well. And of course there is the huge potential economic wildcard, the 2024 election. Here are some thoughts as you review your portfolio and overall financial plan at mid-year. The Economy So Far As we write this, the housing market is doing very well with demand for housing seemingly not impacted by relatively high mortgage interest rates. Inflation is still with us as anyone who visits their local supermarket can attest to. The U.S. job market remains strong into the spring in terms of hiring, but many experts are looking for some sort of slowdown there this year. There have been a number of articles in the media cautioning new college grads that they may be facing a tougher job market than grads in recent years. Employment rates remain high and many people are doing well. This can help fuel the economy, whether this happens and to what extent remains to be seen. Key Indicators and Trends Inflation remains at relatively high levels. At the end of 2023, the Federal Reserve had indicated that they would be looking to implement three rate cuts of 75 basis points each. However, with inflation still on the higher side it remains unclear as to whether the Fed will follow through with any or all of these rate cuts. The strength in the stock market is an opportunity for investors. At some point it can pay to look at taking profits in some areas if the markets remain on their current path. At the very least reviewing your portfolio for rebalancing is critical so as not to take on more risk than is appropriate for your individual situation. Which companies and market sectors will benefit from the current economic situation is hard to say. Potential Opportunities and Risks for Investors in the Second Half of the Year One opportunity for investors looking to invest in fixed income or various types is that interest rates remain high on many bonds, CDs and other types of fixed income investments. This may be a good time to consider a bond or CD ladder to lock in these higher rates. Inflation and high interest rates both remain risks to the economy. Higher inflation can convince consumers to cut back on their spending for groceries, dining out, entertainment spending and other areas. Lower spending could hurt companies in these and other industries. Certainly, the presidential, senate and congressional elections this fall pose both risks and opportunities for investors. We may not know the full impact of the election until very late in the year or into 2025. Tips for Conducting a Mid-Year Portfolio Review As with any year, it is important to look at your portfolio at mid-year to see if your various holdings are performing within your expectations for each type of investment within their respective asset classes. Does your portfolio need to be rebalanced? Are there opportunities to harvest any tax losses in the rebalancing process to offset gains elsewhere? Are you on track with the growth of your portfolio relative to your over financial planning time horizon? One thing to consider regarding the fixed income portion of your portfolio is whether you are taking advantage of the current high interest rates. A bond or CD ladder can help lock in these rates while providing cash payouts at set intervals. You can decide how to best use this money when the various “rungs” on the ladder mature. In general, do not overreact to market or economic trends this year or any year. Focus on your long-term investment strategy and how it dovetails with your overall financial plan. You may need to adjust your investment strategy periodically, but refrain from doing this in reaction to current market events. Chasing the market is often a losing proposition for investors. Be sure to consult with your Wedbush financial advisor to discuss your portfolio and your financial planning to help ensure that you are on the right track towards achieving your financial goals. Disclosure Wedbush Securities does not provide tax or legal advice. Please consult your tax or legal advisor. 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. Fixed income securities are subject to increased loss of principal during periods of rising interest rates and are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors. Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges, and expenses. You can request a prospectus by contacting your Wedbush Financial Advisor and/or Registered Representative.