Happy new month!
As we enter into the second month of 2023, everyone is wondering what the rest of the year holds.
Already, many think the US and global economy will continue to teeter on the edge.
Others think another black swan event is on the horizon.
Who knows right?
We reached out to Certified Financial Planner and economist Bryan M. Kuderna to give us an idea of what the rest of the year holds.
His book ” What Should I Do with My Money?: Economic Insights to Build Wealth Amid Chaos (February 7, 2023; McGraw Hill)” gives insight to anyone who is curious about where the ball is going.
Here are his thoughts and insights!
Bryan M. Kuderna CFP, Author and Economist
E-Crypto News:
How did 2022 affect personal finance?
2022 had three notable impacts on personal finance. First, inflation was the buzzword of the year and everyone felt its effects whether through buying a car to buying groceries. Second, the stock market had its worst year since 2008 as the Fed’s interest rate hikes put an end to easy money. Third, the bond market had arguably its worst year ever as the Barclays Aggregate Bond Index lost 13%, reminding investors that fixed income does not mean guaranteed.
E-Crypto News:
How does economic literacy affect wealth planning and creation?
Economic literacy can provide people with context. Without knowing why investments, financial products, taxes, inflation, and other financial variables operate the way they do, it is impossible to confidently commit to a wealth building plan. A lack of context often leads to following fads and emotional short-term decision making.
E-Crypto News:
What does it mean to be financially free in 2023?
Financial freedom starts with adequate liquidity and avoiding high interest rate debt, which hopefully leads to staying the course with a financial plan, particularly after a market downturn.
E-Crypto News:
How can those with a student loan burden still plan for the future and even for retirement?
Student loan borrowers, especially those with a high balance, must balance debt reduction with asset accumulation. This is similar to homeowners who continue to live and save in spite of a monthly mortgage payment, paying off student loans can’t be the only priority. Furthermore, eligible borrowers can take advantage of a variety of loan forgiveness programs.
Related: Why You Should Consider a Gold Retirement Plan
E-Crypto News:
What are the past, present, and future of student loans?
Past- School for clergy and agriculture. GI Bill in 1944 for WWII vets intro student loans. Federal Family Education Loans (FFEL) in 1965 private and state lenders backed by the Federal government. Affirmative action of the 1970’s and on.
Present- 44 Million borrowers and $1.7 trillion of debt, almost $38k per graduate, 92% from US government, paused since March 2020, costing $4.3 billion monthly.
Future- Community colleges and trade schools gain in popularity. Universities continue to fight for funding, but top administration is under more scrutiny. Becomes a political tool, whether to make college cheaper or not.
E-Crypto News:
Are we missing out on the best aspects of capitalist economic models?
Regulation and competing with socialist aspects of Europe are shifting the American agenda. Social political policies are blurring with economic ones. It’s still a capitalist nation but continually becoming more socialist. Still the best place to live the American dream.
E-Crypto News:
What exactly are the differences between socialism and capitalism? How can they be identified?
Capitalism is “an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.”
Capitalists focus on incentives, people responding rationally to natural motives. The harder one works, the more one deserves. The better one is, the more one gets. Its protagonist says capitalism is fair and worthy, assuming everyone will play by the rules.
The antagonist says capitalism is cutthroat and greedy, assuming people’s lust for power and money makes corruption inevitable. Competition is the lifeblood of capitalism.
Conversely, socialism is defined as “any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods, or a system of society or group living in which there is no private property.”
Socialists focus on equality. Socialism’s protagonist supports a happy utopia of everyone embracing the same standard of living, and assumes a preexisting and unending amount of government wealth. The antagonist envisions a world of lazy people milking the system amid a few suckers working hard for no reason, assuming zero incentives equals zero work.
E-Crypto News:
How can individuals learn wealth-creation habits?
Read books, keep learning, study economics, find mentors, and live within your means. My book, What Should I Do with My Money? is a great place to start as it takes you on a panoramic tour of the nine most important domains impacting your wealth.
Each chapter includes special features explaining the “macro” problem and what it means to your personal “micro” world―helping you connect the dots of global issues to your own financial plan.
E-Crypto News:
What are the best wealth-creation habits?
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Protection first- Do not overlook the individual and workplace insurances that can shelter your income and balance sheet from catastrophe.
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Always keep at least 6 months’ expenses in cash.
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Save 20% of gross income and plan for the long-term.
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Diversify your future tax liabilities- including Roth accounts, Cash Value Life Insurance, and post-tax investment accounts as much as pre tax retirement plans.
Related: A Brief Guide on How to Invest In Stocks as a First Timer
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E-Crypto News:
What is the best definition of wealth in modern times?
A state of well-being, a unique personal definition, the sum of countless variables, of which money is but one.
E-Crypto News:
What are your 2023 predictions for the American economy?
Interest rate hikes halt. Earnings reports, particularly tech, slip. Stock market priced in most of the pain and finishes flat or up, any significant dip could trigger a cut in interest rates. Added tax bill or even more debt through the new Biden bill. Real estate dip.
E-Crypto News:
Can you give us a demand vs. supply forecast for the year? How can people prepare for the events that will occur?
Microchip shortage and car shortage seem to have subsided. China is coming back online after Covid lockdowns. Demand is slowing thanks to interest rates and real estate values dip.
Labor supply is still too high, employees should prepare for layoffs by staying liquid, reigning in debt, and tuning up their resume. People looking to buy real estate might find better pricing and less competition on the buy side as higher interest rates continue to matriculate through the economy.
Buying a home for the long-term in a high interest rate environment that reduces asking prices can work out as the borrower can always refinance their mortgage when interest rates drop again. You can’t refinance the price of your house when interest rates go up.
E-Crypto News:
What are the nine domains that have the greatest impact on personal wealth?
Population, entitlements, education, economic literacy, environment, tech, war, religion, and personal finance.
E-Crypto News:
Just how sustainable are US benefit programs?
They are sustainable but do need to be modified. In the Entitlement chapter of my book, I clarify the changing population dynamics and simple math of givers vs. takers that entitlements have not been keeping up with.
In the 1940s there were over 40 tax paying workers per 1 beneficiary, people would start collecting full retiree benefits at Age 65, and often not live until 70… Now there are 2 workers per 1 beneficiary and people live until 100.
E-Crypto News:
What impact do these benefit programs have on personal wealth creation?
They are ingrained in American wealth creation. Social security is the biggest source of retiree income. Medicare is critical for health care, and Medicaid is the biggest payer of LTC.
E-Crypto News:
What will the impact of US tax policies be on wealth creation in 2023?
15% corporate minimum tax on companies earning over $1bil. Increased IRS enforcement and much more audits. Individuals and small businesses to be more careful on deductions and biz expenses. Also, the eventual end of Backdoor Roth.
E-Crypto News:
How will competition from China affect the US economy in 2023?
Ban of Tik Tok. Microchip competition in Taiwan. Empty environmental threats. Nothing imminent and no trade war like during the Trump administration.
E-Crypto News:
What role will new technologies (crypto, blockchain, web3, AI, IoT, and more) play in the US economy’s growth this year?
AI continues to take the spotlight and a step back in crypto after FTX.
E-Crypto News:
Can you give us insight into human motives and how people are guided by them when making financial decisions?
MICE- money, ideology, compromise, ego. Every choice involves all 4 motives. Every decision is economical, there is a monetary value to what you’re giving up, what you’re getting, and your time involved therein. Ideology is the belief system that determines how valuable every cost and benefit is to you.
Compromise is necessary in every decision as negotiation is what keeps humanity together. Ego is your own personal pride, the sensitivity that can make your choice seem irrational to everyone but you.
E-Crypto News:
What is the knowledge economy? What role does it play in economic growth?
An economy in which growth is dependent on the quantity, quality, and accessibility of the information available, rather than the means of production. The US has long been a knowledge and service economy.
It prompts innovation and increases in lifestyle, but carries risks amid supply chain shortages or geopolitical differences for dependent countries (manufacturing in China and Mexico, chips in Taiwan, Russian oil, etc.).
E-Crypto News:
How can anybody become a part of the knowledge economy?
Self-education, the Internet, and cultivating an entrepreneurial mindset in a free capitalist economy.
E-Crypto News:
How can anyone use the knowledge economy to create wealth?
Invest in growth sectors as opposed to value. Invest in tech. Work remotely and take gigs, become your own brand.
