What Effect Do High Gas Prices Have on the Economy?
WLTX viewers recently expressed outrage on the WLTX Facebook page over a Gallup Poll that asked, “When will rising gas prices affect the economy?” During a recent appearance I responded to these viewer concerns.
How will higher gas prices affect the economy?
On average, Americans spend roughly 5% of their disposable income on gas. Although this expenditure is not a large portion of their budget, it is very top of mind; so psychologically, a rise in gas prices can negatively affect consumer behavior. To put it in perspective, a 20% increase in gas prices means that a consumer will need to cut back roughly 1% of their spending elsewhere to make up the difference (20%x5%=1%). So the effect is not huge from a dollar and cents standpoint, but if it affects the consumer psyche such that Americans will delay large purchases and reduce travel, like these Facebook posters suggested. Now for people in lower income brackets where gas is a larger portion of their budget, this increase drastically affects their lifestyle. Read More
Top 10 Lessons I Learned From the College Admissions Process
This Easter marks over one year since our family started the college search and admissions process. As with most families, it is ending in somewhat unexpected ways. Ultimately, I believe my son has found an excellent fit for both his academic and athletic needs. But the road to this decision has been bumpy, frustrating, and often perplexing. Hopefully, those of you are just starting this process now can learn from our experience. Here are my top 10 tips. Read More
How to Pay Off Student Loans in the Most Effective Way
According to this recent Wall Street Journal article total student loans outstanding has now reached $1 Trillion. This may well be the next bubble to burst. Students are betting that a college degree is their best ticket to the American dream, increasing demand. College costs have escalated in response to dwindling state funds and increasingly kids are taking upwards of six years to complete their degrees. Unfortunately upon graduation, they are finding a less than hospitable job market and many are forced to take minimum wage jobs. A recent question from a WLTX viewer underscores the severity of this issue. She and her husband are using a large portion of their income to make minimum payments alone and ask how they can pay these off in the most cost effective way. Read More
Is the Economy Healing?
The economic recovery is extremely fragile. To use a metaphor, our economy is like a patient in the ICU and every time its health becomes more acute, the government puts it on life support in the form of quantitative easing. First QE1, then QE2, and still there is hope in the financial markets for QE3. Unfortunately we have little to show for this explosion in liquidity. Our economy has been merely limping along in large part due to these programs, in addition to unprecedented stimulus in the form of transfer payments like unemployment and food stamps. Eventually, the patient has to get up and breathe on its own. What remains to be seen is whether or not the economy is healthy enough to experience strong growth in absence of government stimulus. Read More
Long Term Care Crisis- Are You Covered? What You Need to Know
Prudential Insurance recently announced that they would no longer be writing individual long-term care policies. Their move follows that of Met Life Insurance, who also decided to no longer write these policies. This reduces the number of carriers available to provide coverage and means you could be paying more for a policy.
Why is this important to you and how are you preparing for long-term care event? Read More
Should you pay off that mortgage?
A mortgage payment can feel like a proverbial “monkey on your back.” For some Americans, reducing all of their debt prior to retirement is a high priority. Their monthly mortgage payment is likely their highest expense, and removing that provides peace of mind. From a financial standpoint, the general rule of thumb is that if the effective rate of your mortgage is greater than the rate of return you would make after taxes on investments, then accelerating your payoff make sense. Read More
