Young adults face financial complexities such as student loans, new mortgages, or car debt, coupled with low-paying entry-level jobs. With so much on their plate, those in their early twenties might feel overwhelmed by the words “saving,” “retirement,” or “investing.” If you’re in this situation, is it too early for you to start investing?

Whew!  Nothing like waiting until the very last possible minute for a November newsletter, huh?  We don’t care what science says these days, we still blame the tryptophan.

It feels like we have been writing about benefits elections ad nauseum recently, but after a quick glance back through the last few months’ newsletters, apparently that’s not true.  So with a couple weeks left to make or change your elections (at least for the Healthcare exchange and likely for your own workplace benefits platform as well), let’s go through a Rundown of different places you can put your money.  Just don’t eat the Konlobos, it’s worse than tryptophan.

What a World Cup!  I hope you all enjoyed that month of magic and drama.  Sometimes literally with the drama - did you see that Neymar spent 14 full minutes lying down?  That’s ⅙ of an entire match. On his back.

As for the real drama, Croatia, a country with a total population less than our very own Atlanta metro area, nearly pulled off a crazy upset by winning the World Cup over the likes of heavily favored Brazil, Belgium, Germany, Argentina, and Spain.  And they did it through two shootouts and an extra time win in the knockout rounds. In the end, however, it was like something out of a Hanson song, with France finally capturing the title that was just a Zinedine Zidane headbutt away 12 years ago.  In fact, France only conceded 6 goals the entire World Cup. Croatia gave up 9, England 8, and Belgium 6. The importance of saving, indeed!

After the World Cup, Cristiano Ronaldo got transferred to Juventus for roughly £105M (or £500,000-ish per week) and, to bring it back to things that matter in American sports, LeBron James moved to the LA Lakers for $154M ($740,000-ish per week for a four-year contract).

These guys are all set for life now, right?  Who needs four years, give us $740,000-ish per week for six weeks and we’ll be set.*  Unfortunately, more often than not that’s not how it works out.

T-minus 1 month!  To what, you may ask?  Why, Tax Day of course!  For the most part, we feel that “tax” is shorthand for “government theft” (sure, we agree with the principle of a certain level of taxation in order to fund certain iterations of social benefit programs, but without getting real deep down a policy and government bloat rabbit hole, let’s just agree that taxes are a pain and move on), and yet Tax Day fills us with a giddy sort of joy.  Why, you may ask again? Freebies!

Great American Cookies is giving away a free birthday cake cookie.  Schlotzsky's is apparently giving away a sandwich with the purchase of a drink and a bag of chips.  And we have no idea what a HydroMassage from Planet Fitness is or if we would even want one, but evidently those will be free too.

In the “not free, but I see what you did there” department, Bruegger’s is selling a baker’s dozen bagels and two tubs of cream cheese for $10.40.  Or $10.47, if you want to include the sales tax that will be applied. A little bit ironic, don’t you think?

Most people are thrilled to receive a tax refund in April.  It feels kind of like free money, right? Consider the flip side of that coin for a second though - a tax refund really means that you loaned your money to the government last year at a zero percent interest rate.  Actually zero, too, not the 0.01% “zero” that your checking account is getting you. If you owe taxes, on the other hand, you essentially got an interest-free loan from the government.  Mmmhm.  Morty’s Mind Blowers has nothing on us.

So.  In honor of St. Patrick’s Day, let’s take a look at how to keep a little more green in your pockets and out of the clutches of the vampire squid of government.

Happy 2018!! (Blows noisemaker.).  POP!  What’s that?  The sound of the market bubble popping?  The crypto bubble popping?  (Confetti rains down).  Ahh.  Just the confetti popper thing.  (Sigh of relief).

The first newsletter of this new year is brought to you by the letter “A”.  As in “Active Management”, inspired by a real-life conversation with a JP Morgan salesperson last month.  

We take an inordinate amount of pride - nay, a fiendish diabolical pleasure - in playing little games that one-up the financial system.  For example:

A few years back (8 years ago, to be precise), Bank of America had this thing going - any debit card purchase would get rounded up to the nearest dollar, with the difference being transferred over to your checking account.  Apparently they wanted to try and help people save really tiny amounts of money?  So say your morning coffee costs $2.85.  You would see $3 come out of your checking account and $0.15 get transferred over to your savings account.

As an added incentive, Bank of America offered to match your savings “round ups” for the first six months, up to something like $500: free money!

So.  Yours truly was in business school at the time, and taking the T everywhere, which cost…$2.00 a ride back then if memory serves?  Anyway, the point is, instead of loading even-dollar amounts on the Charlie Card, I would load the minimum amount possible, to get the biggest savings round up and therefore the biggest match from BofA.

(For those curious, five cents is the minimum amount you can load on a Charlie Card at any one time, and you can only do four add-value transactions in a 1-hour window...so yes, multiple times a day I would trek to the T station and load five cents on to my card four times.  By the time I had enough loaded for an actual T ride, I had gotten a free $38 from Bank of America.  And yes, of course I got the full $500 from them before the 6 months was up.)

A little bit obsessive?  Undoubtedly.  Slightly absurd?  Perhaps.  But nothing quells that giddy little flame of joy that springs up at the thought of taking advantage of the system.

And now, fast forward to the present and the end of the calendar year presents another opportunity for us to quasi take advantage of the system on your behalf: tax loss harvesting.

Happy Thanksgiving everybody!  We hope your holiday was as filled with good food, family, friends, and involuntary naps (aka food comas) as our was.  We learned two things anecdotally this holiday season:

1. Gone are the days when being at your grandmother’s house in the middle of rural Maryland means you’re disconnected from everything; it does, however, mean that your cell data lasts approximately a day and a half.
   
2. The eye test at Best Buy on Black Friday indicated that people apparently have money to spend.  
   

They don’t necessarily know what they’re buying (yours truly having had to try and explain the difference between “Roku TV” and “Smart TV” to confused shoppers - apparently blue plaid flannel is close enough to the Best Buy employee uniform?), but they’re buying.  And the preliminary numbers back this up: apparently, American consumers spent over $6B on Thanksgiving/Black Friday, up 15% from last year.

That must be a good thing, right?  Yeah!  It is.  Probably.  Increased sales mean increased revenues for companies, which can be translated into higher (or at least supported) stock prices, even as profit margins have been falling over the last couple years.

More importantly to us, however, increased sales *should* indicate something about people having more disposable income, which is categorically a good thing.  We say *should* with little asterisk offsets because in this day and age one doesn’t have to have current disposable income to purchase something.  They could purchase it with debt (credit cards), and essentially borrow from future disposable income.

And, in point of fact, that is exactly what has been going on for the past several years.  Enjoy these charts  from the NY Federal Reserve (interactive up-to-date data available here, for anyone interested):

The general trend has continued through this year - total household debt is at all time highs now, and the main drivers of this are student loan debt (up 100% since 2009) and auto loan debt (up almost 60% since 2009).  This is not necessarily an issue in and of itself, given that the charts are in absolute dollars and not percentages.  However, real wage growth has been mostly nonexistent for most of the population, causing us to cast a moderate amount of side eye on that Black Friday shopping.

So.  What does your balance sheet look like?

First off, an apology.  We hear that there were some formatting issues which prevented the Venn diagram in last month’s newsletter from showing up for anybody.  That’s a shame, because it was pretty hilarious.  But, lesson learned.  No more Venn diagram jokes.  We'll stick to .jpg based humor.

The Fed met again this month, in a quarterly show that has become increasingly Rocky Horror-esque.  No rate hike at the moment, though they expect to hike again in December and 3-4 times next year as well (I’ll take the under on that one if anybody’s interested…).  The bigger news out of the meeting was that they are (finally!) starting to reduce the size of their balance sheet.

In response to the Financial Crisis, in 2009 the Fed launched their Quantitative Easing “QE” program, whereby they bought US bonds with money they created out of thin air.  About $3.5 trillion (that’s trillion with a “t”), to be exact.  The thought was that you could avoid a repeat of the 1929 depression by expanding the amount of money in circulation.  And, yay, no depression as of yet, but also no sign of the inflation the Fed has been trying to ignite.  Why?  Because most signals point to QE not working at all, and in actuality perhaps even hampering the recovery of the last 8 years.  All that $3.5 trillion ended up...where exactly?  Not circulating in the general economy you say?  Ah yes, that’s right, it’s pretty much all held as “excess reserves” at the banks.  Fun fact - the Fed pays banks interest on these excess reserves.  So, to recap, the Fed creates $3.5 trillion dollars and gives it to the banks.  The banks don’t lend it out, they hold on to it.  And by “hold on to it”, they say, “Oh hey Fed, we have more cash than we need to at the moment, why don’t you keep some of it safe for us and pay us interest on it”.  Brilliant.

All that to say the biggest news of the Fed meeting was probably Janet Yellen herself saying it was a “mystery” why inflation hadn’t been picking up.  Yes, that was her exact word.  That means that either 1) nobody at the Fed has any clue how the experimental monetary policies they’ve been engaging in actually transmit through the economy, or 2) they know it doesn’t work but can’t actually come out and admit that, so it gets explained away as a “mystery”.  Dammit Janet indeed.

Sigh.  Now, after that inordinately long introduction (we can be a little prone to ranting about Fed policies), here is what we actually wanted to talk about this month: what to do when you’re on your own.  Fitting, perhaps, for the back-to-school season, but this really came about through conversations with multiple clients and prospects in the last couple months.  If your employer doesn’t offer a 401(k) plan of any type or you are perfectly at home in the “gig economy”, what should you be doing for yourself and your future?