Your Financial News Roundup
December 14, 2022
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- World: The EU may adopt a law banning imports of products from deforested lands; Bangladeshi protestors are demanding reforms and for PM Sheikh Hasina to resign.
- Tech: The publishing of the “Twitter Files” reveals the social media giant’s controversial 2020 election content moderation practices; Starbucks launches an NFT-based rewards program.
- Economy: Boomers may pass on less wealth due to inflation and recession concerns; Americans expect inflation to fall in the coming year.
🇪🇺 The EU Protects Forests: The EU plans to ratify a law banning the import of products linked to deforestation next year, including land-intensive products such as coffee, chocolate, timber, beef, and soy. If the law passes, companies must prove they did not use land deforested after December 2020 and be subjected to strict supply chain checks. The EU anticipates the new rules will have little effect on consumers, stating that it would reduce carbon emissions by 31.9M metric tons and protect 278+ sq. miles of forest annually, equal to 100K soccer fields. While environmental groups laud the proposed law, the bloc’s trading partners, including Brazil and Canada, say it would stifle international trade. (Source)
🇧🇩 Rising Protests Against Corruption: In Bangladesh, growing protests in the capital of Dhaka are calling out the government’s economic failures and demanding autocratic PM Sheikh Hasina’s resignation, who has been in power since 2009. Bangladesh’s economy is dependent on its garment exports, but soaring energy prices shrunk global demand and devalued the country’s currency, the Taka. Over the summer, the Hasina regime raised fuel prices by 40-50%, causing sharp inflation that is contributing to popular unrest. Seizing the moment, the Bangladesh Nationalist Party is organizing large protests demanding reforms but has been met with crackdowns typical of the Hasina regime. (Source)
👩🏼💻 Twitter Drama Continues: Working with Elon Musk, journalists Matt Taibbi and Bari Weiss published internal documents on Twitter’s content moderation of the 2020 U.S. election and Hunter Biden’s laptop story, which portrayed the Biden family and the FBI in a highly unfavorable light. Before the 2nd batch was released, they found out that Twitter lawyer and former FBI agent Jim Baker blocked the journalists’ requests and the Biden laptop story (in 2020) — backing the FBI’s claim that the story was an example of foreign interference in the election. Musk swiftly fired Baker, leading former Twitter CEO Jack Dorsey to call on Musk to release all internal documents to boost transparency. The publishing of the “Twitter Files” is ongoing and has contributed to a politically polarized conversation about social media censorship. (Source)
☕️ Coffee Enters the Metaverse: Joining the Web3 trend, Starbucks launched Odyssey, its coffee-themed NFT loyalty program, to its 1st round of beta users. It’s meant to offer Starbucks’s most loyal Rewards Program customers a mix of online and real-world experiences, such as an espresso martini class or a trip to the company’s Costa Rican coffee farm. Using the Polygon blockchain, Odyssey users can engage in activities, such as quizzes and puzzles on Starbucks’s history, to earn Stamps — the stand-in name for NFTs. The company reports higher-than-expected interest in the program. Starbucks CMO Brady Brewer says Odyssey expands the existing rewards program and that its customer experience is designed to be seamless so users won’t know they are using the blockchain. (Source)
💰 A Not-So-Great Wealth Transfer: Boomers were initially expected to pass on $68T+ in wealth to their Millennial children in the biggest generational wealth transfer ever. Though Boomers own a greater share of wealth than previous generations, they may pass on less wealth than anticipated. Many feel uncertain about their upcoming retirements due to inflation, global unrest, and fears of a recession. An Edelman Financial Engines report found 4 in 10 parents still support their adult children financially while only 37% of parents have written plans to transfer their wealth. Jason Van De Loo, head of Edelman’s wealth planning team, urges families to have open conversations about finances and inheritance. (Source)
🎈Lower Inflation Ahead: On Monday, the New York Federal Reserve reported that Americans expect inflation to decline in both the short and long term. Its November Survey of Consumer Expectations shows that 1 year from now, people predict inflation will run at 5.2%, down 0.7% from the last survey — the largest month-to-month decline on record. In 3 years, consumers expect inflation at 3%. The Fed considers the public’s take on inflation seriously because it is a leading indicator for inflation trends, as inflation is partly driven by those expectations. Today, the Fed is predicted to increase interest rates by 0.5%, bringing them to a range of 4.25% to 4.5%. (Source)
Finance Concept of the Week
Setting Yourself Up For Financial Success — Part 1/6
Before you start investing, it’s crucial to build a financial safety net to protect yourself. This is where emergency funds and sinking funds come in.
An emergency fund is made up of money you set aside for unplanned expenses, such as job loss, medical bills, or car repairs. Think of it as your backup for when something goes wrong in your life and you need money ASAP. The rule of thumb is to save at least 3-6 months of your monthly expenses.
To determine how much you should save:
- Go through your last few months of expenses and calculate your average monthly spending.
- Separate your expenses by needs (rent, mortgage, utilities, groceries, etc.) and wants (concert tickets, dining out, etc.).
- Calculate how much you spend on your needs each month and use that to find out how much money to hold in your emergency fund for how long you want it to last.
A sinking fund is strategic and meant for known expenses, such as a vacation or home down payment. Think of it as a way to save money and track your progress toward specific financial goals.
By using a sinking fund, you can avoid dipping into your emergency fund or checking account. For example, if you are planning a trip to South Korea in 6 months and know it will cost $1800, you should save $300 per month for the next 6 months.
To build a sinking fund:
- Decide what you are saving for, whether its an upcoming wedding, school tuition, home renovations, a new car, etc.
- Calculate how much to allocate to your sinking fund, which will depend on your finances and goal.
- Incorporate your sinking fund into your monthly budget to keep yourself accountable.
Once you have a number in mind for your funds, open a savings account and start making regular deposits to it. We recommend keeping your emergency fund and sinking funds separate from your checking account so you won’t be tempted to spend the money. Instead, open a high-yield savings account (HYSA) with an online bank like Marcus by Goldman Sachs or Ally Bank to earn some interest as you save.
Emergency funds and sinking funds are powerful tools you can use to fulfill your financial goals. With a bit of patience and planning, you can set your future self up for financial success.
Tip of the Day
💵 Learning value investing, the preferred investing method of famed billionaire Warren Buffet, will make you a better active investor by finding undervalued assets.
- How to Handle Taxes on Your Venmo and PayPal (CNBC)
- A Minimalist Guide on Personal Finance (Matt D’Avella / YouTube)
- Can Younger Workers Speak Up Without Managers Bristling? (BBC)
- 2022 Chase Sapphire Preferred Credit Card Review (Finance Futurists)
- The Number of Americans with Negative Views on Crypto Doubled (TechStartups)
- How I Became a Millionaire in Real Estate by 26 (Graham Stephan / YouTube)
Personal Finance Resources
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