The U.S. Government will never give Student Loan Relief – Here is why

So Wednesday again and another blog post. This will not be a political post. When I say “U.S. Government” it doesn’t matter what party is in charge. Student loans are a huge issue in the U.S. Two generations have been saddled with this corrupt system of overcharging for a commodity (education) and those institutions (universities) having the debt secured by the government. The losers? Millennials and Gen Z. Government loans guaranteeing universities ridiculous tuition on the backs of the future earnings of teenagers is sinister IMHO.

So of course politicians will promise “Student Loan Relief” to get votes but they will never deliver it. That’s a bold claim and its one you will rarely see supported by finance professionals but there is a clear profound reason why, and I will explain it concisely in a minute. You see everyone in the finance world focuses on debt, in the context of student loans. You rarely if ever see a finance professional tell you the other side of that equation. AHHHHH now we get to it. Yes the other side of the equation is someone holds that debt as an asset.

Anytime you take a loan, you incur a debt the person giving you the loan secures an asset. This is why the government will never give Student Loan Relief. They hold the asset. Now I am going to give you some FY2022 numbers, don’t let your eyes gloss over it will be brief. For the math nerds/finance professionals I will provide a link to the data so you can go read it yourself.

In 2022 The U.S. Government had 5.0 trillion in net assets. AGAIN people always talk about the U.S. deficit but we do have assets too. Of the 5.0 trillion, 1.3 Trillion is student loans. That 27% of the total net assets of the federal government. This is the single largest asset class the U.S. government holds. Source  Let that sink in for a minute. Lets think about this logically. Even if you have only had a basic business class you know no entity in the world is going to “forgive” their biggest asset without replacing it with something else.

So let me do a quick summary here. The U.S. Government will never give student loan relief because student loans represent 27% of its total assets. This would be suicide financially without a huge increase in taxes. The simple reason being is liabilities (deficits) are 5 times the amount of the assets. If the U.S. had a smaller fiscal deficit student loan relief would be possible but that is not likely to happen anytime soon. Any politician telling you that they will give you student loan relief is full of shit.

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Finance Tip – 3 quick ways to get more money

Below are 3 things you can do right now to get more money. These will not be side hustles, or huge amounts of money but they will save you money over time and thus increase your income and allow you to become more financially solvent. As a reminder any finance advice you see on this blog is my opinion only, based on my decades of experience in the finance industry. Before making any financial decision always obtain as much information as you possibly can.

  1. Consumption apps: What does this mean? Simple example the Starbucks app. If you consume coffee, food, gas and you frequent a particular place regularly you should see if that place has an app that offers discounts. So many of them do now, drug stores, grocery stores, fast food, sit down restaurants you name it. What many of them do is offer you discounts based on your purchases. If you are going anyway why not? Do not go out of your way to buy more, just keep your consumption at its normal level and take advantage of their promotions and you will over time save money.
  2. Health plan reimbursements: Many health plans have an annual reimbursement for gym memberships, and working out. If as an example you walk regularly, you can have your doctor sign a letter stating you do so and submit it to your health plan. Many health plans give a % back to you of your cost (gym membership, shoes) or have a flat reimbursement annually $100-$1000 if you prove you were exercising preventatively. This can mean basketball league, after work softball, a gym membership, a martial arts class, yoga instruction. Even several state sponsored and federally sponsored health insurance plans have this kind of reimbursement.
  3. Sell stuff you aren’t using: Old golf clubs, Clothes, kids toys, pets supplies as examples. There is an entire economy out there on EBay and craigslist (and others) of people buying and selling used items. It’s not hard to set up an eBay account and sell things, with the internet you can get a good idea of the value of items as well. It maybe that you have an old leather jacket in your closet you haven’t worn in years and don’t plan to. What if that sold for $75 on EBay?

Bonus Tip!

Look through your stuff and see if you can identify hidden gems. Have an old comic book collection? An antique watch? A vase from your great grandmother? Some of these items may be worth a lot of money. Ever see a show called the Antiques roadshow? Most of those people have no idea what they have, and who knows, maybe that random painting you have in storage is worth something….

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Anxiety Issues – 5 Easy tips for investing when you have anxiety

Money can generate immense amounts of anxiety. We all depend on money to live. Food, shelter, electricity nothing is free. All of us, by whatever means generate income. Income is the basis by which you can obtain items you need to live and the luxuries that improve your quality of life. If you are like me, you are affected by moderate amounts of anxiety. You are functioning, likely have a full-time job and thus have to deal with all the regular poop that comes with life.

If you live in the states or in any other western culture, there is a large emphasis placed on retirement and saving. Putting your money in a bank account and collecting interest is no longer enough as bank interest is extremely low. If you are at a point in your life where you have enough income to invest, for whatever reason, it can be overwhelming and daunting.

Here are 5 easy tips that will help you.

  1. Have the money automatically drawn from your pay or your bank account: This eliminates the stress of you must transfer it yourself. Many employer plans will do this for you, and in many cases, it will be pre-tax money, lowering your tax burden.
  2. Determine what the money is for: Is this for income generation? Is this for retirement? For a new car? Decide what this money is going to be used for BEFORE you start investing.
  3. Where to invest, Large Cap Growth funds: I know your eyes are glazing over… These types of funds are normally comprised of strong companies that generate revenue and are considered very well capitalized. Companies like Apple, Boeing, Microsoft. These companies aren’t going to fold up over night if there are bumps in the economy.
  4. Time: Most investment vehicles have a return average over time. You can get this measure over 5years, 10 years etc. Look at mutual funds that have a 10-20-year track record. What was their rate of return? A 20-year avg return is a great measure because it accounts for ups and downs in the market.
  5. Trust yourself: There is no “trick” to investing. Consistent investment over years generates good returns. Don’t look for short cuts, you will regret it.

Money can equal stress, but it doesn’t have to. Remember the story of the tortoise and the hare? Slow and steady wins the race. If you stick with a long-term consistent plan you will be a successful investor. Once every 3-6 months check your investments make sure they make sense. If you have an employer with a retirement plan, sit down with HR and ask your questions. This will help with your anxiety, and that’s their job.

Remember you have anxiety, this won’t be simple, you will worry, you will react, you will make mistakes. However, you can do this, and someday with a lot of persistence and patience you will have accumulated a nice chunk of change!

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One simple way to determine if you are healthy financially

Not a long post today. Remember the finance posts you see on my blog are opinion pieces and not meant as financial advice. When making financial decisions you should seek out several resources and do your diligence and research. Now that out of the way there is one simple way to determine if you are healthy financially.

Do you pay the full balance of your credit card every month?

If you pay your credit card balance every month and never carry a balance this means you have enough income to cover all of your expenses. Now this has to be consistent, you cannot do it one month and then the other 11 not do it, but if you are paying off your CC balance every month this is a clear indication that you are healthy financially.

You see millions, tens of millions of people actually cannot pay their CC balances off every month. This means they spend more than they make, and that is the simplest way to know you are unhealthy financially. Simply put, if you can pay everything month to month you have created a sustainable financial life. Now do not confuse this with being wealthy, that is completely different.

Cash is still king

It does mean that you are financially healthy, now can you be healthier? Sure. You see what happens ideally is after you pay everything off every month you have money left over to save. That is how you move into wealth building and that is another post altogether. Remember this is simple, do not over think it. If you pay off all your CC balances monthly it is highly likely you are healthy financially.

You are living within your means. Now if you are skipping car payments and mortgage payments to make these CC payments that’s a problem but generally people skimp on the CC payments because there is a minimum payment which enables them to retain the balance to apply to other non-minimum payment bills, like mortgages.

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Finance Tip: How do you tip?

So leaving a tip is actually a big deal in U.S. culture. It is pretty much everywhere you go now, if not on the screen you pay at then there is a jar on the counter. Tipping isn’t a bad thing, many people make ends meet by living off tips. My son delivers pizza as he gets through college, he comes home with 50-150 cash depending on the days he works just in tips. Now that nearly every transaction can be done digitally? You are prompted to tip more.

Quick example: My son who delivers pizza when the order comes in it can come in via phone or online. The customer can leave a tip prior to delivery. Often he’s getting 20% tip on the order before the food has been prepared, or he has delivered it because they ordered it online. Again tipping isn’t a bad thing but 20% up front? This is more and more prevalent and if you are interested in your personal finance +20% cost on your dinning purchases can add up fast. So how do you determine what to tip and when to tip? I have a pretty basic rule of thumb, if someone delivers something to me at home or to a table I am sitting at I will leave a tip. If I have to go obtain the item myself I do not leave a tip. I am not cheap I normally tip 15-25% it really depends on the level of service and the attitude of the person I am tipping.

Will they be asking for Bitcoin tips in 2050?

Really be mindful here because excessive tipping can add up quickly. Are you always dropping your change in the tip cup at Starbucks? Are you prepaying your tip before you receive service? Are you letting the Ipay pay screen steer you towards a higher than average tip? It’s important to reward great service that’s what a tip is for. Sadly, the hospitality industry has chosen to take advantage of the generosity of people who tip and pay staff less.

The theory is staff will “make it up” via tips. I think it should be opposite, I think you should get a tip if you perform a great service and it’s like a small bonus for your hard work. Culturally I don’t see this changing anytime soon in the U.S. but what can change is your personal approach. Remember it’s your money, tipping isn’t mandatory (in most cases) and tipping before you’ve been served isn’t wise, the person might not deserve it.

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Am I contagious?

Personal Finance – 3 journeymen (not advanced) finance tips

Like every finance piece I do on this blog this is my personal opinion based on 30 years of working in the finance industry. You should research thoroughly any advice you receive before making any financials decisions. The tips in today’s piece are moderate, they aren’t for beginners and those advanced in their financial journey probably have already encountered these concepts.

  1. Reviewing your insurance profile: Regularly you should be reviewing and understanding your insurance profile, likely twice a year. Now insurance is to mitigate disaster/negative situations. This is more than auto insurance or homeowner’s insurance; this should include things like long term disability insurance to replace income. Long term care insurance to mitigate costs of nursing homes or assisted living and umbrella policies that give another layer of coverage for you beyond specific policies (like home owners or auto)
  2. The care of loved ones: This extends to your elderly parents or your children. Do you have a plan for either? What if your parent becomes sick? Who will assist them? This can take on many forms, maybe you have siblings who can help as well. Point is, have a plan here because it’s when you don’t then it presents itself. Kids? Anything can happen here. From the unthinkable of devastating medical injury to helping them pay for college. You should have some plan in place to set aside some money “just in case” hopefully you can help your kid get a head start in life financially, worst case you have to support them for the rest of your life because of a medical issue. Yes, that happens.
  3. Running your finances like a business: This is the hardest one to pull off, but your check book (or whatever you use to ledger your money) is like a Profit and Loss statement for a business. You have to review this regularly, really be clear on how your business is running and call in the executives for meetings regularly on spending and revenue. I know it sounds silly doesn’t it? What this does is, it takes the “personal” out of it and all the stake holders (spouses, kids) become officers of the company who have a vested interest in its success. If you can get to this point on your personal finance journey you are one step closer to expert status, not many people get to this point.
How much is this going to cost?

In the end, a strong personal economy = better outcomes. You can be more generous, you can have things you want, you can afford a good life. When you don’t know where your money is going and you don’t assign a mission to every dollar you place yourself in a weaker position mentally and financially. Anyone can win with money; your income level doesn’t matter you just have to get a handle on where everything is going. This takes maybe an hour a week to do and over time it will take less and less, you can do this.

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How to weather the financial rollercoaster?

So its 2023 and the rollercoaster we have been on financially in 2022 looks like it’s not going to let up in 2023. High inflation, low job force participation, governments manipulating interest rates, high demand from consumers and then the X factors, war’s pandemics etc. This is a unique point in time for global economics, any finance professional telling you what is going to happen is honestly full of @#$%. No one really knows, things are very unpredictable and on top of all that in the U.S. 2023 will start the 2024 presidential election process in earnest which will destabilize economic outcomes more.

So how do you “weather” this and get by? To be honest there is really only 2 things you can do directly to ensure you get through this. The first is increase your income, the second is decrease your spending. Now ideally you do both at the same time but one or the other should produce the outcome of you have more disposable income. Simply put, you should have more cash to spend or save and that’s what we want. Now increasing income can be a new job, a side hustle etc. Cutting expenses? Only you know what you can cut.

Money can’t buy you happiness, but it can buy you peace of mind

The point here is you need to increase your surplus cash anyway you can and bank it. Like I have said in other finance pieces basically increasing your “rainy day” fund. You see the finance industry will throw a lot of terms at you, nuanced financial strategic plans, and language that requires a financial planner to unwind. It’s how they make money, keeping you confused and frightened. Personal finance is a lot like losing weight, there is only really one way to lose weight, you eat less calories then you burn every day.

Don’t over complicate your personal finance. Spend less then you make. It’s a simple concept that requires discipline and planning to pull off. No one is going to do this for you, you have to do it. If you do you will create excess of cash that can be used to “weather” the financial storm or better, enable you to make purchases now that you otherwise weren’t able to because you did not have the discipline to create this excess.

Personal finance is a long term play. Be consistent, have a plan, get disciplined. You can do it, and if you achieve even modest results it can be very liberating.

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Finance: Interest Rates

So from time to time on this blog I do finance pieces. I have been in the finance industry now over 30 years (yikes I am old). This is not financial advice only my financial opinion. You should consider multiple sources when making any financial decision and become as educated as you can. So the subject today is interest rates and how in the U.S. the federal reserve manipulates them to create false narratives in the economy.

Let me be clear here there are several factors in the U.S. economy that contribute to its overall health and well-being. The availability of credit though is a major factor and manipulating interest rates has a dramatic impact on financial outcomes. IMHO one of the biggest travesties in the U.S. economic model is the propensity to promote debt as a means to obtain assets. Of course there are times when you need credit for large purchases you don’t have the capital on hand to cover. Houses, vehicles, machinery that’s traditionally what credit was meant for. Now? You buy your lunch on credit.

The issue then becomes “how much is this purchase costing me?” you see it’s not the 8.99 for the sandwich and soda it’s the interest charge you incur on the purchase when (or if) you don’t pay off your credit card every month. Which, most Americans don’t do. The federal reserve’s rampant meddling with the federal reserve rate (the rate in which banks lend to other banks) has created horrible economic outcomes in the past.

The Fed’s need to relax on rate hikes for at least a quarter.

There is a good article here from Forbes that discusses the changes. Essentially what happens is the higher the interest rate the more valuable currency becomes. This is actually a viable method to combat inflation. Inflation often occurs when too much money is in the system or to little supply of products. Post pandemic we have both of these issues which is why the Fed is raising interest rates so much so fast.

Prior to the interest rate hikes over the last 2 years the fed rate was too low. You see the issue really is the U.S. federal government manipulates the value of their currency as a buttress against its monumental debt spending. Now all governments do this to a degree but the U.S. is on a whole other level. We had the prime rate in the U.S. at .5% for years and under 1.0% for a long time. Everyone knew that was way to low but the economy was humming along we had good times so no one complained much.

The problem with that approach is you put off the pain and here we are. Had the fed maintained a more pragmatic approach to interest rates, bringing them back to historic norms incrementally over the last 20 years we would have less inflation now. In the year 2000 the prime rate was 5.75% high by today’s standards but a reasonable rate in my estimation. Why? Because what it does is requires those who use credit to make purchases to think carefully as the interest expense on the debt is high. It’s a big commitment financially to borrow anything at 5% IMHO.

So how do we get out of this manipulation? You can do rate caps but that’s another artificial means to an end. You do what’s called settling the rate market. You get to a point say 4% and you do not raise or lower the rates for 2 full quarters to see how the economy adjusts. The problem now is you have the government changing rates every month. They are doing this to manipulate the economy due to severe inflation. I get why they are doing it but had they not kept interest rates artificially low for nearly a decade the huge increases now wouldn’t be necessary.

I know all of this is fairly dry and not something most of you will probably want to read through. Here is the net bottom line. Leave interest rates alone for 6 months, let things play out see how the economy does. You then adjust .25 -.50 % from there and then wait again. Market adjustments take more than a quarter to take hold and because interest rates were so artificially low for so long it’s going to take well into 23, if not 2024 to flush out the current inflationary situation we have.

Hang in there and remember, your personal economy is paramount. Have a 6-month emergency fund, secure your income sources by diligence at work, and keep an eye on your spending.

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Finance Tip: How to pick great company stocks

First and foremost, let me say that I am not a financial advisor, any finance posts you see on this blog are my own opinion based on decades of being in the finance industry and living my life. Now disclaimer out of the way, there is a method by which you can pick single company stocks that normally beat the indexes. It is another one of those dirty little secrets that a finance professional won’t tell you, but with a little common sense you could figure out on your own.

To be clear, I am talking about stock in one company like Apple, not mutual funds. These come with a much higher risk as your money is tied to the performance of one company exclusively. This method is one that I have employed in the past when helping to set up an investment portfolio for someone in my family circle. It is by no means full proof or for that matter scientific (from a math perspective) at all. It relies on a very subjective business measurement, done by multiple firms.

So what is this method? It is tracking annual lists of “the best places to work”

I know that sounds half assed, simplistic and an uncouth way to make a stock pick. Here’s the thing though, if companies are listed as “best places to work” isn’t the logical conclusion that they must have happy workers? Happy workers usually mean better services and products and that usually means higher sales which equals revenue.

How much is this going to cost me ?

Don’t dismiss this simplistic formula out of hand. Here is a few of the companies that made it on to multiple best places to work for 2021:

  1. Microsoft
  2. Nvidia
  3. In & out burger
  4. Google
  5. Delta Airlines

These aren’t small companies, as a matter of fact most of the are publically traded and provide great dividends. Now this method of stock picking isn’t absolute, companies can fall off the list at any time but the metrics used to evaluate “best places to work” are usually worker centric. That’s the secret sauce here because as I stated, happy workers = good products & services = profits = return on investment.

There is no one catch all best places to work list you should use, there are hundreds of them (if not thousands). What you want to do here is aggregate several (5-10) lists. So if Nvidia appears on 7 out of 10 chances are that’s a great place to work and this investment strat should be employed.

This ties in well to another piece I did about Aristocrat stocks here, combined if you employ both for a mid to long term investment cycle (5-25 years) you should do very well. Remember investments into the stock market are not guaranteed and should be done only after doing research and obtaining a good comfort level.

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Quick Finance Piece: Is this a recession?

Yes, it is.

So before I go too far let me do the normal disclaimer. I am a finance professional and any advice you see on my blog is my own opinion only and is not meant as investment advice. So that out of the way, yes we are in a recession. “But the media says we aren’t in a REAL recession”. I don’t trust the media, if you do I can’t really help you….

An economic recession has been defined for decades as two quarters of economic decline as measured by GDP. Now that’s not the technical definition but that is what has been used as the gauge for many years. The United States is in a recession. Now there are DEGREE’S of recession and that is where the nuance comes in.

This is not a hard recession by any means. We have great job numbers (which is an interesting situation in of itself), but we have horrible inflation, a slowing housing market etc. You see what you aren’t hearing much about is the horrific impact that Covid shut downs had on industries and supply and demand economics. You shut down global production for 6 months, you just don’t flip a switch and it comes back to normal.

The ride shouldn’t be to bumpy this time around

Throw in a war, a decrease in domestic Oil refining, divisive politics, on and on. The situation is dynamic and fluid there is no one catch all correction to fix this. You had decades of artificially low interest rates now creeping up again. A hard recession would see the market decreasing, layoff’s and a higher unemployment rate.

Companies are reporting good earnings that means DEMAND is still there and that bodes well for a quick recovery. They call that a V shaped recovery. I suspect we will see another decline in the 3rd qtr. and possibly into the 4th but the basis for good economic outcomes are there. First, the job market is healthy, you can work and make money. Second, demand for goods and services is still robust, so companies are still making profit (which fuels point 1).

I think 2023 will be a better year economically, unless again something extraordinary happens (a pandemic, another war. Be prudent here and tighten things up as best you can and save a bit more than usual but I don’t suspect things to get horrible soon, but things will still remain in the current state for the near term.

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