Your Financial News Roundup
January 18, 2022
1. Economy: Small private businesses continue to hire amid layoffs at big companies; as expected, consumer prices fell 0.1% last month.
2. Tech: Compensation packages are expected to increase in 2023 as companies vie for employee loyalty; Gemini and Genesis are next on the SEC’s hit list following the FTX meltdown.
3. World/US: Treasury Secretary, Janet Yellen, warns the U.S. could default; the IMF reports that fragmentation could cost the global economy up to 7% of GDP.
Weekly Finance Concept: Making a Financial Plan
…on how the news impacts you and your wallet
Low-interest rates and an abundance of venture capital funding made it easier to start a company in 2020 and 2021. While these trends have mostly reversed over 2022, the traction of prior years may be just enough for some of these companies to grow into the next Meta or Amazon. Meanwhile, inflation has found a stable point, spelling good news for the economy (and anyone with a loan) as policymakers are more likely to slow interest rate hikes.
2. Tech: As tech employees grapple with fears of getting laid off, survivors’ guilt, additional responsibilities, and reductions in comp packages, we may see more people take greater career risks, such as launching their own companies or joining early-stage startups. The SEC’s actions will reshape the crypto industry, imposing a higher degree of oversight over crypto projects and centralized exchanges.
Consumers could see fewer crypto tokens in the market and more use of DeFi protocols and self-custody devices, taking crypto underground. Failing companies and scam coins have lost public trust, leading remaining investors to favor Bitcoin for its decentralized design while others call for more regulation and accountability.
3. World/US: Raising the U.S. debt limit is a political hot potato as the two parties usually go back and forth before deciding to increase it. Because of American stability, the U.S. dollar has a key role in global trade and is known as the global reserve currency, held by most central banks. It’s unlikely Congress would do anything to jeopardize that status. Any political drama around the debt ceiling will likely negatively impact markets in the short term.
💡 Small Biz to the Rescue: Despite substantial layoffs at major companies like Goldman Sachs, Meta, Amazon, and Salesforce, small private companies are still hiring at staggering rates, keeping the economy from entering a recession. According to the Bureau of Labor Statistics data, the U.S. added 223,000 jobs in December 2022. Meanwhile, private sector job openings for companies with 1 to 49 employees was 85% higher back in November 2022 compared to February 2020. (MSN)
🎯 Consumer Prices Retreated in December: The consumer price index (CPI) ended the year down 0.1%, in line with economists’ estimates. That was the largest monthly decrease since April 2020, when the pandemic first broke out. Despite the decline, headline CPI rose 6.5% from a year ago, reflecting inflation’s damaging impact on the economy. Following the positive trend in the CPI report, we can expect the Fed to approve a 0.25% rate increase next month. (CNBC)
💵 Cash is King Yet Again: Back in 2020 and 2021, technology companies thrived amid the shift to digital during the pandemic. But, in 2022, tech took a serious beating as companies conducted layoffs and cut benefits to protect their bottom lines. Entering 2023, we can expect tech companies to reverse course by designing more creative compensation packages, including cash and equity, to induce employee loyalty, especially among executives. (Business Insider)
🥴 FTX Fallout Continues: The FTX meltdown continues to hurt retail investors. The SEC (Securities and Exchange Commission) is accusing crypto firms, Gemini and Genesis, of illegally selling crypto assets to thousands of investors, specifically through the Gemini Earn product. Both companies jointly ran Earn, which offered high-interest rates on cryptos/stablecoins in exchange for lending them out. When FTX filed for bankruptcy, Genesis declared it lacked enough liquid assets. 340K Earn users and $900M of their assets were affected. (BBC)
🏦 Debt Ceiling Looms: Treasury Secretary, Janet Yellen, alerted Congress that the government would reach its debt ceiling of $31.4T on Jan. 19th. Yellen warns that the Treasury will take “extraordinary measures” by reallocating federal funds to extend the government’s financial runway to June and has prompted Congress to extend the debt limit. If no action is taken, the U.S. will default — shocking the global financial system. Fortunately, Speaker Kevin McCarthy is working with Pres. Biden to approach the debt limit in a bipartisan manner. (USNews)
📉 Increase Split Up Risk: A new report by the International Monetary Fund (IMF) found that economic fragmentation could cost the global economy anywhere from 0.2% to 7% of GDP. Contributing factors to the rising global disconnect include geopolitical tensions, COVID-19, climate change, and rising costs of living. To confront this trend, countries need to work together to strengthen the international trade system, assist developing economies with debt, and address climate change. (IMF)
Finance Concept of the Week
Setting Yourself Up For Financial Success — Part 5/6
Making Your Own Financial Plan
Connecting the concepts we’ve covered works like Lego bricks — you build something better by putting them together. Creating a financial plan will organize your financial life and help you realize your vision of future financial health. Here’s a primer on our 7-step take to make your own financial plan:
1. Calculate Your Net Worth – To find your net worth, subtract your total liabilities from your total assets. Your assets include things like your house, stocks, and retirement accounts while your liabilities include student loans, credit card debt, auto loans, etc.
2. Budgeting / Cash Flow Planning – By knowing what you earn and how you spend, you can find ways to better save, invest, or payoff debt. Use an app like Mint or Personal Capital to automate the process or check out our personal finance resources if you want to do it yourself.
3. Set Financial Goals – By laying out what you want to accomplish, you can work backwards to make a roadmap of what success looks like for you. Make sure to attach a specific dollar value and a target date to your goals. Prioritize them based on which are most important.
4. Build an Emergency Fund – If you lose your job or your car breaks down, having money saved can help you make ends meet. Save enough to cover 3-6 months of your basic living expenses (rent, food, utilities) and store it in a high-yield savings account.
5. Manage Your Debt – If you have any high-interest debt, make sure to pay it off as soon as possible. Every dollar you pay in interest accrued is one dollar less towards your goals. If you struggle with credit card debt, consider using 0% APR credit cards.
6. Start Investing – Investors have many assets to choose from (e.g., stocks, bonds, real estate). Passive investors build wealth over time while active investors grow their money as fast as possible. Investing can be as simple or difficult as you make it.
7. Track Your Progress – Once you have a plan, you need to track your progress and adjust as you go. Tinker with your budget and investments as needed.
Tip of the Day
💵 Saving on a low income can be tough, but a willingness to hack your finances and learn a few tricks will help you build your savings.
- Your Financial Health and You (Finance Futurists)
- Celsius Network Gets Custody of User Assets (TechCrunch)
- California’s Rainstorm Hell (The Guardian)
- What Happens If You Don’t Use Your Credit Card? (Finance Futurists)
- Best Journaling Apps To Log Thoughts (TechCrunch)
Personal Finance Resources
🚀 We recently launched a curated collection of personal finance resources on Gumroad, featuring both free and paid options! Visit us for all your personal finance tracking needs, including:
Stay tuned for updates! In the meantime, if there’s any other product you’d like to see, feel free to suggest it here.
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