The Weekly Commentary - 07/12/2021

The US Economy Recovers Faster Than Expected Rate

Over a year into the crippling effect the pandemic had on so many of us – mentally, physically and financially – the recovery of the US economy is faster and quicker than expected, according to a recent report by Reuters. That is great news for those of us who were worried about our personal finances – either because our incomes diminished, or because we were saving more of our paycheck in an effort to protect ourselves in the future.

The report is based on the recent release of the minutes of June’s US Federal Reserve meeting. The minutes identify a discussion regarding possibly reducing the $120billion a month bond purchases. Policymakers will only follow through with such action if the surrounding data supports it. And, arguably it does – as backed up by many of the bullish views of those policymakers.

For example, the unemployment numbers in the US continue to improve. In June, more than 850,000 people found roles. Plus, inflation is higher than both anticipated and, perhaps, wanted. The latter may be a reason for the Fed to stop their spending spree earlier than they would otherwise have liked. For, one of the other options open to them to dampen inflation is to raise interest rates, which they are likely more reluctant to do. They have already brought forward their forecasts for when they will raise interest rates from their current, historically low levels.

Giving Money to Family Members Without the Awkward Chat

Usually, on our website and weekly commentary, we discuss how to improve your personal finances or at least topics that could affect your personal finances. However, a recent article by Yahoo finance identified an interesting topic in helping family members’ personal finances. Some of us may be in a position where we want to give away some of our wealth – either to avoid hefty estate tax bills or simply because we worry about the state of financial affairs for our loved ones.

While we can teach our kids about money, there may be times that we want to give money to others, like our parents. The latter is increasingly common as healthcare bills skyrocket. Yahoo’s report used a recent study by AARP that found over 40% of middle-aged adults already expect to give their parents some financial help. Over half also expect to support adult children to some degree.

That is a huge proportion of people. Yahoo’s report found that the key to avoiding any financial disasters is to get ahead of the curve. Setting up an emergency fund for unforeseen, yet inevitable medical bills is a good example. However, the article also identified the need to ensure that a person does not cripple themselves financially by helping another family member out. Most interestingly, however, the article identifies a cultural issue that means those in the US find giving money away an awkward thing – yet so many people are financially interdependent, particularly in families.

The Future of Cryptocurrencies

Regulars of the weekly commentary will know that there is not often a week that goes by without mention of cryptocurrency – often with Bitcoin front and center. In this week’s latest cryptocurrency news, experts have asserted their views in a recent report by CNBC that looks at the future of Bitcoin and its peers, and what that future will look like.

While the views varied greatly from one expert to the other, the resounding theme that underlined all opinions was that cryptocurrencies will definitely still be around. That they are not a flash in the pan thing. So, much like stock markets that have historically increased by an average of 10% every year since inception, cryptocurrencies could well be an alternative investment to add to your portfolio – for both diversification and growth purposes.

While some may still want to invest in hard money and coins, now is arguably the time to get to grips with how cryptocurrencies will disrupt the traditional realms of finance. For, one of their biggest advantages is that they work outside of central banks and currency fluctuations. That being said, some experts do advise a word of caution – which is to be aware of better technology usurping what is thought of established brands. While Bitcoin is undoubtedly still the top dog when it comes to cryptocurrency, that is not always necessarily going to be the case. For example, even now, there are some cryptocurrencies that run a much greener ship which has sparked a fair bit of interest, like Cardano for instance.

Budgeting in a Post-Pandemic World

Finally, CNBC broached another interesting subject this week in their commentary on budgeting in a post-pandemic world. The pandemic played havoc on so many of our finances due to reduced incomes, yet not all of us did suffer in this way. In fact, some people fared well through the pandemic. Some personal finances were bolstered due to diminished outgoings as well as stimulus checks from the Government and even better benefits like an improved child tax credit scheme for many.

CNBC’s article advocates revisiting your budget and going over what you can and cannot afford. So many could be tempted to overspend this Summer as restrictions lift and the weather improves. While one-off splurging is no bad thing – it has been a very hard year for everyone – if it turns into a regular habit, your budget could take a battering. Your personal finances will therefore deteriorate while inflation may start to make a difference on what you can afford day-to-day too.

The article, ultimately, simply advises caution. For those with money burning a hole in their pocket, it may be a good idea to think about where those funds could best be spent. Otherwise, it is very easy to simply dip into those savings more and more, before all that cash is spent. And for those who did not fare well through the pandemic, now is the time to talk to your bank and any other credit lenders to ensure that you make the most of their COVID-related support before it is tapered or stopped altogether.