Capital Gains Tax 101: Basic Rules Investors and Others Need to Know

Capital Gains Tax 101: Basic Rules Investors and Others Need to Know

Orla O'Connor, Principal, Tax   Mon, July 18, 2022

Billionaire business owner Warren Buffett once famously commented that his secretary paid taxes at a higher rate than he did. Although there are surely many factors at play – among them Buffett's intentionally low salary and his large charitable donations – a big part of the story is that Buffett earns a relatively large share of his income from capital gains.

Income in the form of capital gains has historically been taxed at substantially lower rates than ordinary income like wages, tips, unemployment compensation, gambling winnings, and the like. That's because capital investments are generally viewed by policymakers as engines of growth that stimulate the economy.

The lower tax rates are designed to encourage this beneficial activity. And it's not just the buying and selling of stocks and bonds that receive favorable capital gain treatment. The lower capital gains tax rates apply to profits from other types of investments as well, like the capital gain from the sale of real estate (including your home) or even a small business.

Since the capital gains tax applies to so many types of investment transactions, it's an important piece of the overall tax picture for millions of Americans. But most people don't know much about the capital gains tax – or certainly don't know enough to make informed investment decisions based on the tax consequences of their actions.

The following guide will help you understand the basic rules for the federal capital gains tax. It covers a variety of topics, including what are capital gains, when they're taxed, how to calculate your gain, and what tax rates apply. It also identifies IRS reporting requirements and provides tips for taking advantage of the preferential rates. It's not a substitute for sound professional advice, but it will help investors of all sorts understand the general capital gains tax framework and identify areas where professional help is needed.

What are Capital Gains?

Capital gains are the profit you make from selling or trading a "capital asset." With certain exceptions, a capital asset is generally any property you hold, including:

Investment property, such as stocks, bonds, cryptocurrency, real estate, and collectibles; and

Property held for personal use, such as a car, house, or home furnishings.

There are, however, various special rules that may affect your property's classification or treatment as a capital asset. For instance, if you sell frequently to customers, your property might not be treated as a capital asset. Instead, it may be considered business inventory – and profits from the sale of inventory aren't taxed as capital gains. So, watch out if you sell too many Gucci handbags or real estate investment properties, as these may be treated as inventory, and the tax on any gains will be at the higher ordinary income tax rates.

Similarly, if you sell or exchange depreciable property to a related person, your gains will be taxed as ordinary income.

In addition, intellectual property (e.g., a patent; invention; model or design; secret formula or process; copyright; literary, musical, or artistic composition; letter or memorandum, etc.) is not considered a capital asset if it's held by the person who created it or, in the case of a letter, memorandum or similar property, the person for whom it was prepared or produced.

Plus, although real or depreciable property used in a trade or business is not a capital asset, gains from the sale or involuntary conversion of them may nonetheless be treated as capital gains if they were held for more than one year. So, for all practical purposes, this type of business property is treated as if it was a capital asset.

When are Capital Gains Taxed?

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/capital-gains-tax-101-basic-094206350.html

Take These 6 Key Steps Today to Retire a Millionaire

Take These 6 Key Steps Today to Retire a Millionaire

Looking to retire comfortably? Take these steps now.

ADAM MCFADDEN | May 1, 2022 | Updated July 6, 2022

GOBankingRates maintains editorial independence. While we may receive compensation from actions taken after clicking on links within our content, no content has been supplied by any advertiser prior to publication.

Retiring as a millionaire is the dream of many Americans, and while a million dollars isn’t what it used to be, that level of wealth would make retired life comfortable for many. The good news for you is that this goal is achievable, especially if you have plenty of time before retirement.

Retiring a millionaire is simple, but not easy. The key? Act right now.

1. Find The Right Expert For Your Situation

Sure, you can search for financial advice online, but it’s never going to be specific to your financial situation. The best option will always be an experienced professional who can look at your finances and advise you on what to do. But who has time to sift through thousands of advisor profiles?

WiserAdvisor does all that work for you, matching you to the best financial advisor for your specific situation so you get in an expert in the areas you need.

There’s no cost to you and no obligation to hire the advisor, so there’s not much to lose. Plus, WiserAdvisor screens advisors to make sure you’re only getting the best experts.

Find the best expert for free.

2. Start Saving ASAP

It’s never too early (or too late!) to start saving for retirement. The sooner you start saving, the sooner you’ll be able to invest and have your money going to work for you. You could retire a millionaire a lot faster if you throw more money into these accounts sooner.

Sign up for a new SoFi Checking and Savings Account today so that you can start stashing cash. You can earn a cash bonus of up to $300 with direct deposit and you can get up to 1.25% APY (Annual Percentage Yield) on all checking and savings balances with no balance cap restrictions.

To continue reading, please go to the original article here:

https://www.gobankingrates.com/easy-things-you-can-do-to-start-preparing-for-retirement-now-1165700/?utm_campaign=1173427&utm_source=yahoo.com&utm_content=8&utm_medium=rss

15 Mistakes That Deplete Your Wealth

15 Mistakes That Deplete Your Wealth

Cynthia Measom  Fri, July 15, 2022

Proper planning is crucial when it comes to your finances -- not only for the decisions that can affect your wealth now but also for those that will influence your bottom line long term. But knowing how to make the best financial decisions isn't innate. And if you don't fully understand how to manage your finances, you're likely to make mistakes that can take your net worth from well-cushioned to barely getting by -- or force yourself to stay stuck in a constant financial struggle.

The good news is that the longer you have until your target retirement date, the easier it will be to recover from financial blunders, but what if you could avoid money pitfalls altogether? Take a look at these 15 mistakes that deplete your wealth so you can sidestep them and achieve personal financial freedom.

Proper planning is crucial when it comes to your finances -- not only for the decisions that can affect your wealth now but also for those that will influence your bottom line long term. But knowing how to make the best financial decisions isn't innate. And if you don't fully understand how to manage your finances, you're likely to make mistakes that can take your net worth from well-cushioned to barely getting by -- or force yourself to stay stuck in a constant financial struggle.

The good news is that the longer you have until your target retirement date, the easier it will be to recover from financial blunders, but what if you could avoid money pitfalls altogether? Take a look at these 15 mistakes that deplete your wealth so you can sidestep them and achieve personal financial freedom.

Not Updating and Adhering to Your Budget

If you're interested at all in building your wealth, you already know how important it is to create a budget. However, if you don't adjust your budget frequently based on your current income situation, your old budget isn't doing any good. Mark your calendar to adjust your budget every six months, or whenever you have a career change. This way, you can update your savings goals, make sure your paying down debt if you have it and make bigger contributions to your savings if that's available to you.

Investing Blindly

Brian Stivers, investment advisor and founder of Stivers Financial Services, said that one of the biggest mistakes that depletes wealth is investing in areas you have no experience in or don't truly understand.

"The media and internet are filled with fringe investments that promise great wealth with little risk," he said. "Yet, many of these are extremely aggressive and have a substantial downside. It is important for those who are accumulating wealth or have already accumulated wealth to make sure they fully understand the risk involved in any new investment and how that investment works. For most investors, it makes more sense to stay with traditional investment strategies that are easy to understand and have a long track record of success."

Buying New Cars Frequently

You might think that because you have the money, buying a new car every few years isn't a huge problem. However, this practice can really bring down your net worth. Unless you're paying the full amount for your car in cash, you're adding another payment, or debt, to your portfolio. If you get a loan to buy the car, you're paying interest on something that is actively depreciating in value. Try to only buy a new car when you need to, and pay it off as soon as you can.

Ignoring Your Interest Rates

To continue reading, please go to the original article here:

https://www.yahoo.com/finance/news/15-mistakes-deplete-wealth-180001302.html

Lifestyles - The Quality Of Your Life Is Shaped By Whom You Want To Impress

Lifestyles - The Quality Of Your Life Is Shaped By Whom You Want To Impress

Jul 6, 2022 by Morgan Housel

“Their outcomes seemed to center on the fact that Crowhurst was addicted to what other people thought of his accomplishments, while Moitessier was disgusted by them. One lived for external benchmarks, the other only cared about internal measures of happiness.”

Fifty-four years ago this month, in a push for publicity, The Sunday Times offered £5,000 to whoever could sail solo nonstop around the world the fastest. It was technically a race, but that was an afterthought, as no one had ever completed the feat.  There were no qualification requirements and few rules. Nine men joined the race, one of whom had never sailed. Just one man finished, 312 days and 27,000 miles later. But it was two participants who never completed the race that generated the most news. One ended up dead, the other found himself happier than ever. Both outcomes came from decisions made at sea, but neither had anything to do with sailing.

The two men, Donald Crowhurst and Bernard Moitessier, are astounding examples of how the quality of your life is shaped by whom you want to impress. Their stories are extreme, but what they dealt with was just a magnified version of what ordinary people face all the time, and likely something you’re facing right now.

Donald Crowhurst was a tinkerer who came up with his own boat modifications. Convinced his innovations could propel him to win the Sunday Times race, he faced just one obstacle: he was broke, and stood no chance of financing the race himself.

Crowhurst struck a deal with an English businessman who agreed to cover the cost of the race under two conditions: They would orchestrate a media frenzy, portraying Crowhurst as a sailing savant. And if Crowhurst didn’t finish, he would owe all the money back.

Crowhurst left Teignmouth on October 31st, 1968, the last day participants of the race could begin their voyage. His boat, the Electron, had been so heavily modified, so weighed down with half-finished gizmos and gimmicks, that it was barely seaworthy for a short sail near home, let alone a solo trip around the globe. Crowhurst knew it. He broke down in tears in front of his wife the night before he left.

Two weeks into the race, as Crowhurst had covered less than half his intended distance, the Electron sprung a leak. “This bloody boat is just falling to pieces due to lack of attention to engineering detail,” Crowhurst wrote in his diary. In the calm waters of the South Atlantic, the small leak posed little threat and could be bailed with a bucket. But continuing on to the treacherous Southern Ocean would bring certain catastrophe.

So Crowhurst seemed to have two options: Continue the race and face ruin at sea, or return home and face bankruptcy and humiliation.

He in fact chose a third option, which was outright fraud.

By mid-November Crowhurst began loitering in the south Atlantic, drifting in circles in calm water. He then began sending fake coordinates back to England, giving the impression that he was still on track, rounding Cape Horn, on his way to circle the globe.

He went virtually nowhere for months, which was the plan: By mid-summer, when enough time had passed to have plausibly circled the globe, Crowhurst hoped to quietly sail back to England, “finish” the race, and hope no one noticed that during his round-the-world voyage he never actually left the hemisphere.

As Crowhurst sailed back to England he realized he did not want to appear to win the race, because if he did the media and judges would scrutinize his logs and uncover the deception, whereas no one cares about the runner-up. After receiving word on the location of other race participants, Crowhurst timed his return so that he would finish the race in third place, which seemed good enough to maintain dignity yet low enough to avoid suspicion.

But then the boat that was in second place sank. And after miscalculating his return time, Crowhurst was suddenly on track to beat the sailor who had been in first place.

To continue reading, please go to the original article here:

https://www.collaborativefund.com/blog/lifestyles/

The Playbook For Films – Theatre and Investing

The Playbook For Films – Theatre and Investing

Jun 23, 2022 by Ted Lamade

Guest post by Ted Lamade, Managing Director at The Carnegie Institution for Science

Maverick is back and given the Top Gun sequel has raked in more than $800 million to date, it is already the biggest blockbuster of Tom Cruise’s career. A lot has changed since the original nearly four decades ago, but the secret to its success lies in what hasn’t changed — its “playbook.”

When one of the movie’s producers recently described how his team approached the script, he highlighted a conversation he had with Cruise shortly before the project started. The message was clear. Cruise said,

“This is a competition film. It’s about family, emotion, and the characters. We have to stay true to the original.”

While the Top Gun sequel employed modern technology and implemented a plot to fit the times, Cruise knew that its ultimate success (or lack thereof) would boil down to how well it followed the playbook that made the original so successful. The producers executed on that vision.

Top Gun’s playbook is simple — appeal to the nostalgia of those who saw the movie in the theaters in the mid-80’s. Remind them of the time they bought their first aviators after seeing Maverick wear them on the runway at Miramar, echoed the line “you can be my wingman anytime”, and rolled down their car windows, cranked up the volume, and driven a little faster when Kenny Loggins’ “Danger Zone” came on the radio.

The journalist Rich Eisen said it better on his show a couple weeks ago after seeing the movie,

“I cannot tell you how awesome this movie is. It was spectacular. It made me feel like I was back in high school again in 1986. It was great. Just terrific. It gives you everything you want, everything you are hoping for. You get the sunrise over the tarmac, Cruise on a motorcycle, Kenny Loggins singing Danger Zone, and the script is straight out of the original Top Gun. The flying scenes are incredible and Cruise looks the same. You have to see it in the theater. It is everything you’d want out of a sequel. I was just flying man, literally and figuratively.”

The key to Top Gun’s playbook is that it did not require the perfect backdrop, environment, or ideal release date to be successful. After all, it has generated nearly a billion dollars at the box office despite Covid-19 still making parts of the country hesitant to attend the movies. It just needed to stick to the durable themes from the original script, echo those emotions, and highlight the characters in the film that reminded the viewers of Goose, Slider, Charlie, and others. It has done just that.

Investing Playbooks

The same is true for the most effective investment playbooks. They are not constrained by or dependent on a certain time period, geography, sector, or interest rate environment. Instead, they are effective across a wide variety of situations and circumstances.

Few in the investment world have implemented a better playbook than David Swensen. When Swensen took over Yale’s endowment in 1986, coincidentally just months before the original Top Gun was released, he believed the university could generate stronger returns with similar (or even less) risk by taking advantage of the “illiquidity premium” that existed in the private markets.

As a result, over the next three decades he and his team transformed Yale’s endowment from one invested 100% in liquid securities to one that is nearly 70% illiquid today. It was such a novel concept that it even received a new moniker - “The Yale Model.”

Yet, while Yale’s “liquidity trade off” has been an integral part of the endowment’s strong performance, Swensen still did not consider it the “secret” to Yale’s success. If not, what has been?

To continue reading, please go to the original article here:

https://www.collaborativefund.com/blog/the-playbook/

Anyone Can Be A Billionaire If You Have The Right Structure

Anyone Can Be A Billionaire If You Have The Right Structure

Notes From the Field By Simon Black  June 28, 2022

On the November 27, 1095, Pope Urban II gave an impassioned speech at the Council of Clermont in central France, calling for Christian warriors to take up arms in a Holy War against the invading Seljuk Turks. This was the start of the First Crusade. And over the next few centuries, several more would follow.

Soldiers from across Europe joined up and traveled great distances to fight in the Holy Land; quite often they were away from home for years at a time.  Eventually these fighters— and particularly the land-owning nobles— realized that they needed to arrange their business and personal affairs appropriately before leaving for war.

They wrote wills, they appointed property managers. And in some cases they actually transferred ownership of their estate to someone they trusted— someone who would have the full authority to act as lord of the manor in the nobleman’s absence.

Upon the knight’s return, however, it was expected that the property would be transferred back to him.

This legal precedent developed into what we know today as a Trust.

The idea behind a Trust is that a “Grantor” or “Settlor” hands over legal ownership of assets to a “Trustee”, who then manages those assets on behalf of “Beneficiaries”.

Sometimes a Trust can be revocable, whereby the Grantor can shut down the arrangement and take back the assets, just like a Medieval knight fighting in the Crusades.

Other Trusts are irrevocable, meaning they are permanent. Irrevocable trusts have substantial benefits when it comes to asset protection, which is a big reason why they are popular.

Want to ensure you and your loved ones can survive and thrive, no matter what happens next? Download our FREE Ultimate Plan B Guide now to discover fully actionable strategies you can start putting in place right now...

Trusts also allow you to easily pass on assets to your heirs while minimizing bureaucratic legal proceedings associated with wills and probate court. The Trust seamlessly distributes your assets according to your wishes, with all the legal work done ahead of time.

This is a common use of trusts; people will often establish a trust and transfer assets like stocks, real estate, cash, etc. Years later when they pass away, the Trustees distribute the assets to the Beneficiaries (children, grandchildren, etc.), and then the trust is would up and dissolved.

But REALLY far-sighted individuals set up something called a Dynasty Trust.

Unlike a typical trust used for estate planning, a Dynasty Trust doesn’t distribute all of its assets and dissolve once the original Grantor passes away.

A Dynasty Trust is a legacy asset that’s designed to last for generations… or even forever.

In other words, you can establish a Dynasty Trust, move assets into it, and know that your future descendants who won’t even be born for decades will benefit from your long-term thinking.

And that’s the thing about a Dynasty Trust: it forces you to think very long term.

In establishing a Dynasty Trust, you essentially have to create your own Constitution. You have to think about how you want the assets managed, how you want the money distributed, how new Trustees and managers are brought in.

Now before we go any further, let me say this is NOT just for the super wealthy who already have generational wealth.

If you’re thinking, “This sounds great, but I don’t have enough money to do this.” Well, guess what— you absolutely do! You just might not have it yet.

Never discount the time value of money. Even if you have, say, $50,000 to start with today, you could establish a Dynasty Trust that does nothing else but invest in a portfolio of assets that YOU designate.

It might take a while— 100 years or more. But eventually, decades of compounding returns will grow that $50,000 into hundreds of millions of dollars (in today’s money).

If you had an ancestor set up a Trust back in 1872 with just $2,500 (worth about $50k today) and order that the money be invested in the S&P 500, that $2,500 Trust would be worth $1.4 BILLION today.

Sure, it took 150 years, but that’s the amazing thing about a Trust: you can leave whatever instructions you want to allow your wealth to grow long after you’re gone.

You can also stipulate that, once the Trust’s assets reach a certain level, to begin making distributions to your future descendants, or charities, or anything else that you think of.

There are virtually limitless options in what you can choose to do and how you can set up the Trust’s Constitution.

You can decide that, once the assets reach $5 billion, to endow a new university or art museum named after you.

Or you can decide that future Beneficiaries must have read George Orwell’s 1984 and have a Cholesterol level below 200 before receiving any distributions.

It’s your money, so they’re your rules. You can decide whatever you want.

You can also elect that the Trust operates like an investment fund— where professional managers oversee a portfolio of business and real estate investments. You can come up with rules for how those future professional managers are selected, i.e. create your own voting laws that the Trustees and Beneficiaries have to follow.

You could also have the Trust run like a family office, which owns controlling stakes in private companies.

Your future descendents could then have the opportunity to join those companies and work their way up to senior leadership positions, growing the businesses and creating even more value for the Trust.

The possibilities are really endless. And, again, you don’t even need to be wealthy to do this. You just have to be able to think very long-term.

If you want to learn more about how Trusts can help you leave a legacy for your family, protect your assets, and make it easier to pass on your wealth without death taxes, join Sovereign Man: Confidential today.

(If you’re already a member of Sovereign Man: Confidential, you can read more about Dynasty Trusts here.)

PS: Alternative residency or citizenship generally forms the backbone of any robust Plan B. But there are WAY more things to consider. That’s why we created our 31-page Ultimate Plan B report to help you get to grips with this topic, and you can download the full, unabridged report here - 100% FREE.

https://www.sovereignman.com/investing/anyone-can-be-a-billionaire-if-you-have-the-right-structure-35740/

How To Conduct a Financial Checkup

How To Conduct a Financial Checkup

By Jim Probasco Updated March 21, 2022

Reviewed By Andy Smith  Fact Checked By Yarilet Perez

Here's a simple system for assessing your fiscal fitness

Many experts suggest that people make a point of conducting a personal financial checkup on an annual basis or after a major life event (such as a marriage, divorce, birth, or death). The question is, what does that mean exactly?  To make sure you don’t miss something critical to your financial well-being, here are the main topics you should plan to cover.

A financial checkup is a systematic look at the complete state of your finances.

It can be useful to perform a financial checkup annually and after any major life event, such as a marriage, divorce, birth, or death.

Your checkup should include your retirement accounts and other savings, your debts, your estate plan, and your insurance coverage, among other topics.

Review Your Life Changes

To begin with, review any major changes in your life that have taken place since your last financial checkup. Have you changed jobs, gotten married or divorced, welcomed a new family member, received an inheritance, bought a home, moved, or retired?

Each of these life events can alter your overall financial picture. As you go through the sections below, consider how any recent life changes could affect your plans moving forward.

Set or Reset Financial Goals

Building an adequate retirement fund is one example of a financial goal. Others include creating an emergency fund, saving up for a down payment on a car or home, starting your own business, or anything else that requires money you don't already have.

Evaluate your progress toward your financial goals and adjust as needed. Once you achieve a goal, cross it off the list and replace it with another.

Sketch Out a Budget

Your budget is a blueprint for handling your income and expenses on a recurring basis. A budget should be monitored and adjusted as needed.

The idea is to make sure you have enough income to cover all your usual expenses, with some extra set aside for your longer-term financial goals. You can maintain your budget with pencil and paper, a computer spreadsheet, or one of the many available free or inexpensive budgeting software programs.

Assess Your Debt

Review your progress in paying down all debt, including loans and credit cards. If your debt is rising, especially high-interest credit card debt, it might be time to adjust your spending so that those balances start to decline again.

To continue reading, please go to the original article here:

https://www.investopedia.com/personal-finance/how-conduct-financial-checkup/

Declaring Intellectual Independence

Declaring Intellectual Independence

Notes From the Field By Simon Black July 1, 2022

Happy Canada Day to our Canadian friends. And Monday, of course, is Independence Day in the United States.

It’ll be an odd one for sure. Many cities are reportedly cutting back on their fireworks displays due to… yes… supply chain shortages. And many people may scale down their traditional backyard grilling due to insanely high food price inflation. There’s undoubtedly a lot of reason for concern right now, and people of all personal philosophies across the political spectrum feel it.

Those on the left are angry about recent Supreme Court decisions and concerned that they may lose other rights. Those on the right fret about cancel culture. Almost everyone is concerned about inflation… and we constantly hear the cry that ‘Democracy is under attack’.

There’s a mountain of problems and no real solutions on the horizon.

More importantly, it seems like intense social factions have developed. Public “debate” and civil discourse is governed by those who feel but don’t think… by people who are professionally outraged but outrageously ignorant.

And it is under these odd circumstances that citizens celebrate the birth of their nations this weekend.

Today I wanted to provide a little bit of historic context. There are problems, yes. But you might have a more hopeful outlook for the future after hearing more about the early days of America.

Click here to listen to today’s conversation… and we wish you a safe and relaxing holiday weekend.

To your freedom, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/podcast/audio-declaring-intellectual-independence-35760/  Episode #2

https://www.sovereignman.com/podcast/is-this-what-they-mean-by-democracy-is-under-attack-35726/  Episode #1

Secrets to Recession-Proofing Your Finances

4 Experts Share Their Secrets to Recession-Proofing Your Finances

Heather Taylor   Mon, June 27, 2022

Is the United States heading toward a recession?

Amid a high inflation period, many Americans are concerned about the risk and what this might mean for their personal finances. Fortunately, there are certain steps everyone can take now that will enable them to better navigate an uncertain time.

Follow these steps to prepare and recession-proof your finances.

Establish an Emergency Fund

If you have not already created an emergency fund, now is the time to start building one. An emergency fund works to help you weather the storm in the event of sudden job loss or an unforeseen major expense without resorting to liquidating retirement assets or relying on loans or high-interest credit cards.

Adam Deady, CFP and investment analyst consultant with MassMutual, said a general rule of thumb is to save at least three to six months of living expenses in a risk-free, liquid investment vehicle you can easily access. Investment recommendations include a money market account or a high-yield savings account.

Start Eliminating Unnecessary Expenses

You don’t have to wait until a recession hits to eliminate unnecessary expenses from your budget.

Deady recommends using this time to carefully review your spending habits. Then, cut back on any nonessential spending — e.g., cancel rarely used subscription services or do maintenance on your own at home instead of hiring help. You can put the money saved into your emergency fund or an investment or retirement account.

If you’re struggling to determine how much you should be saving, Brittney Castro, financial expert and Mint’s in-house CFP, recommends thinking of saving as a fixed expense and factor it into your budget.

The 50/30/20 rule can help you estimate how much you should be saving — 50% on needs, like food or rent, 30% on nonessentials and 20% on savings,” Castro said. “The most important thing is remembering to live within your means. You never want to end up in a situation where you’re stretched too thin with your finances.”

Pay Down Debt

“Paying off high-interest debt, like credit cards or student loans, should be a priority when the economy is strong,” Deady said.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/4-experts-share-secrets-recession-120004013.html

How Has the COVID-19 Pandemic Changed Money Advice?

How Has the COVID-19 Pandemic Changed Money Advice?

Jenny Rose Spaudo    Mon, June 27, 2022,

Since the start of the pandemic, Americans have endured an economic rollercoaster with fluctuating interest rates, massive layoffs and skyrocketing inflation. It’s no surprise, then, that around half of non-retired adults say the pandemic has made it harder for them to achieve their financial goals, according to the Pew Research Center.

So how can you best manage your finances in today’s uneasy economy? GOBankingRates spoke with several financial experts to see how the pandemic has changed their money advice.

Be Careful With Easy Online Spending

When lockdowns began, in-person shopping shrank while online shopping rose to new heights. In 2020 alone, e-commerce sales increased by 43%, according to U.S. Census data.

But the ease of online shopping can also make it more tempting to spend, said Tom Siomades, CFA and chief investment officer of AE Wealth Management.

“I believe the pandemic has further eroded people’s ability to gauge value and their view of money,” he said. “The pandemic accelerated all things online. People want stuff now, paying with electronic money. They no longer save or, worse yet, have the discipline to save. They don’t consider the cost–only convenience.”

While many Americans have increased their online spending, Brian Meiggs, founder of the personal finance site My Millennial Guide, said the pandemic is also forcing people to take a more practical approach to their personal finances.

“The pandemic has highlighted the need of having a budget, building emergency savings, and creating a financial plan that suits their lifestyle,” he said.

Timeless Financial Management Principles Still Apply

Christopher Drew, an investment advisor representative with Drew Capital Management, believes it’s more important than ever to follow timeless money management principles. With inflation at astonishing highs, Drew encourages his clients to spend less and save more.

“Be more cautious about your spending habits due to the increase in inflation,” he warned.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/covid-19-pandemic-changed-money-130041569.html

4 Financial Experts Reveal How They Spent Their First Big Paycheck

4 Financial Experts Reveal How They Spent Their First Big Paycheck

Bob Haegele   Mon, June 27, 2022

When you think about financial experts, you might imagine someone who is extremely savvy with their money, meticulously planning and optimizing their every penny for maximum wealth generation.  While that can be true in some cases, it’s not as though there is some law or wealth accumulation creed to which every financial expert is beholden.

Sometimes, financial experts spend their money in ways that may seem consistent with how most people spend money. In other words, they spend money on things they want, or even on surprises for their loved ones. Sometimes, they spend their money on nothing more than paying down debt and shoring up their savings accounts.

I interviewed a few successful financial experts and, indeed, they spent their first big paychecks on things indicative of someone who is far from rich. Nevertheless, it’s clear they had a few more dollars in the bank than they had in the past.

Debt Repayment

According to the New York Fed, total household debt in the first quarter of 2022 was $15.84 trillion. With such a staggering number, it would serve most of us well to pay down those debts before spending on most other things. So, it’s no surprise that (at least) one expert focused on debt repayment with his first big paycheck.

“This is going to sound boring, but I simply paid down some debts and banked it, enjoying the feeling of not having to live paycheck-to-paycheck for the first time,” said Chris Motola, financial analyst at MerchantMaverick.com. It can be tough to make those debt repayments when you don’t have much. But when you start to earn a real paycheck, it makes sense to start repaying your debt.

Student Loans

Student loans are another form of debt, but they are worth mentioning separately because of how large the national student loan debt burden has become. According to Experian, student loans are now the second-largest type of debt, with only mortgages having a larger collective balance. Many jobs require at least a bachelor’s degree, but the cost of tuition at many schools has risen rapidly. This highlights the need to pay student loans down to avoid falling too far behind.

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