Chasing Financial Freedom

Empowering Your Financial Wellness: A Deep Dive into Economic Realities

September 20, 2023 Ryan DeMent Season 5 Episode 38
Chasing Financial Freedom
Empowering Your Financial Wellness: A Deep Dive into Economic Realities
Show Notes Transcript Chapter Markers

Ever wondered how the complexities of our economy could be impacting your financial well-being? Join me, Ryan DeMent, as we dissect the current market conditions and their effects on both the macroeconomy and your personal finances. We'll delve into the significance of the Federal Reserve's dual mandates, and how their interplay with inflation can shape our financial landscape. We're also celebrating our non-profit, TruCommunity's new status as a 501c3! This opens up great opportunities, including Google's generous offer of up to $10,000 in ad spend to nonprofits.

Ready to explore the housing market's potential, even amidst challenging times? Together, we'll uncover opportunities, cautioning against the pitfalls of living beyond one's means. Through an in-depth discussion about renting versus owning a home, we will equip you with the tools you need to make an informed decision. We'll also gain insights into potential indicators of recessions like the yield between the 10-year and the two-year treasuries. Remember, education is key to navigating these financial winds. Let's face these challenges together and uncover the opportunities that lie within them.

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Speaker 1:

Hey guys, ryan Amint, hope you guys are having a great day today. On the podcast, you guys have me. I know I wanted to do a little follow-up. I had a guest schedule but she had to reschedule so I will get her back on. She'll have a great conversation, but this week keep it short. Somewhat sweet, but also a little bit of learning in all this whole process. So from the last time I was on by myself, we talked about just the nuances of what we're doing on Bayard Park loan officer. I now have an update on True Community, our nonprofit. We're officially a 501c3. Yeah, baby, 19 months later I finally got it done. That in itself has been a journey. And then today, as I'm recording this, on September 19th, I had no clue and if you're a nonprofit you need to go check it out. I just applied. Someone told me about it. Google will give up to $10,000 of ad spend, so specific Google ads, up to $10,000 for nonprofits, and they'll help you with the platform. They get you marketing so you can get donors and get exposure to your project. So that will be huge. Once I get approved, I'll let you guys know and I'll continue to go through that, but this week I really want to talk about not just ups and downs, but the crappiest times of this market. And I say crappiest because I don't think even in the great recession or the great downturn of 2007, 2008,. The market wasn't the way it was. The market is what it was, but it's not today, and all of these individuals are talking about all these same things that are happening, and it's truly not Today. We have headwinds with interest rates, we have headwinds in inventory and back then the market crashed. You had all these other financial institutions falling apart. We had all these shadow loans, properties. I lived in Vegas at that time and I was seeing people that were exotic dancers and people that really didn't have any verifiable income owning six, eight, 10 houses on arm mortgages and then, when the interest rates jumped up, they lost their houses and there was houses in my development that I was living in, that people were going in and raiding and taking the copper out and everything like that. It was crazy. Do I think there's troubles in the market? Yes, we're in them right now. For all of you guys out there, the only way to know what to say it is we've been in a recession for months. This has been a very long time coming and you can't throw all of this money into the economy and then expect there not to be inflation. And inflation has been a huge headwind in this whole process. And now it's coming down and we're going to go back up because we've got oil over $90 a barrel. We have gas prices at least out here in Arizona I'm close to $5. I just read an article this morning in the Wall Street Journal. California has now gone over $6 a gallon. Those are all additional headwinds that we're facing and when you have an entity like the Federal Reserve, everything they do has a lag effect. You can't move the levers and then expect there to be change that quickly. The system doesn't work that way and I only think things are going to change. On interest rates, whether I'm right or wrong is if something big breaks in the system and that's what I really want to talk about If there's banks that fail, we have lending issues to where we have defaults coming through. Crazy Auto industry the average interest rate on a used car note at this point is over 13%. That's just ridiculous. Crazy. Mortgages are over 7%, pushing 8%, and rents are still high, even though they say they're coming back down if you start looking in some of the hotter markets that were growing like weeds, like out here in Arizona, rents are going back up again and it's because there's not enough inventory, even though there's inventory in the backlog that's coming, it's just not coming quick enough and with people migrating and moving, you have this whole shifting of the board and the board is all over the place. But I'm going to share a technical term the yield between the 10-year and the two-year treasuries. It's been a leading indicator for the last 15 recessions and so forth, and I'm not going to go crazy into it because I'm no economist, but I can tell you the basics. The two-year and the 10-year have been inverted for almost 16 months 18 months and from that point on that really is the indicator of the recession. But the true pain doesn't come until it reinverts again and goes positive, and we're not there yet. So I still think we have more time with paying, but also headwinds in all the financial markets. The only thing that's going to change that is if, like I said earlier, if something breaks, if banks fail, lending fails, the dollar crashes. There's so many things that can go in there and I don't know all the levers, but at the end of the day, we have to be prepared for what's happening in the market, educate ourselves, but also understand. The world is not falling apart. We're just going through a downward spiral of the economy and the numbers that come in with unemployment and gross domestic product, they've all been adjusted. They've been adjusted backwards, so we're losing ground. Unemployment's going up and we're going into a election year and the Federal Reserve has two mandates Inflation, unemployment rate. So if either those two get out of control, they have to pull a lever. But unfortunately, pulling their lever means either raising interest rates or lowering interest rates, and if they do either, or it's a delay and you're not going to see much of a difference when it comes to changing the economy. I don't know about you, but for me personally, I rather see interest rates stay higher for longer than seeing a million or two million people out of a job. I want to see people working, getting through it. It being tight, I get that, but I'm also not willing to let there be two million people trying to get another job and there are no jobs to be had. That's a problem. But we also have some good news in all that, and the good news is there's still almost nine million open jobs available, even as the hiring has slowed. There's still nine million jobs to be had. So that's a positive. But in the end we have to be prepared for the worst. And I think the worst has not come yet. And I'm just being real with you guys and I'm in the market. We're building houses in Evansville. And am I worried? Yes, I'll give you an example. I had a conversation with our realtor today and I really put the screws to him to tell him hey, these houses need to get sold ASAP. You need to do everything you possibly can to get them sold. We have seller concessions. I will buy your rate down a 30 year fixed. As of today, rates change daily, hourly, sometimes down to five and a half percent. That house is being sold for 189,000. That would make the principal and interest taxes payment roughly about 1200 bucks. That's still more affordable than paying rent. In Evansville Average rent is $1400. So you're saving $200 a month, $2,400 a year. Is there upkeep on a house? Sure there is, but it's a brand new house. So you've got some delay and you'll also get a 210 builder warranty with it. But my point was this when I was speaking to our realtor. He had some excuses and that just reminded me about what we're talking about. In the economy, everyone's got excuses about what's going on or how it's happening. Instead of using an excuse, find a way to get through the hurdle. Good example, and I'm nowhere close to doing this, but I have a good idea and I write it down and I mark myself when I don't do well Budget Making sure you have a budget and keeping track of what you spend on a monthly basis. Credit cards are out of control right now. Why do you want to continue to charge on your credit card at 18, 19, 22 percent interest? Pay them off. Use the snowball effect. Take the smallest balance. Put the most towards it. Pay your minimum payments towards the other. Get out of debt. Have an emergency fund A thousand dollars or more in the savings account just in case and don't go out and chase the Joneses. You don't need the things right now, even when everything is great, you don't need all the payments. Why take on the payments if you don't have to? It just amazes me that people want to take on all these payments and then they wonder why they're having problems. I was talking to a potential buyer and they've got a thousand dollar car. Note, a thousand dollars. They're not too far off from my mortgage payment. So I said hey, man, why don't you pay my mortgage while you're at it too? It just it makes no sense whatsoever and I don't know how to explain this. Other than you should be scared Always, whether we're in a good economy or bad economy, to where you're managing your money and you know exactly what goes in and goes out, because I know you don't want to live paycheck to paycheck. And with inflation, interest rates rising and slowing down of the economy, it just makes it worse. And it's just, it's sad that we continue to let these things confess to her when we can fix these problems in our households and be able to be financially secure or sound. But we are such consumers that we feel like we're missing out on this next purchase. And I'll be the first one to tell you I'm selling houses. And the first thing I tell people when they contact us about buying a house excuse me, a home. You got a budget. How much can you afford on a monthly basis? Do you have reserves? These are questions that we should be asking ourselves on a daily basis to make sure that we're on top of exactly what we're doing, because if you're not managing your money, excuse me, if you are not managing your money, who is? And if no one's managing it, probably likely going to be having some issues, if not already and the housing market is very unique right now. There's a lot of levers you can pull, whether you're a real estate agent or a developer like me selling houses, or a loan officer like me also, you can do different things, but you have to be willing to get outside of your comfort zone to do them, and when I was speaking to a potential buyer, she thought I was crazy that I asked her what her budget was and are you ready? Are you prepared to buy a home? Because it's a commitment, and she's. I've spoken to quite a bit of people that are selling houses and you're the very first person to tell me that. Are you prepared? Do you have a budget? Do you have money saved up? Because with our homes, we have down payment assistance to where really the buyer doesn't have to come out of pocket with very much. It's very little, because having skin in the game is a good thing, but I also like down payment assistance too, but if they're not financially secure and prepared for a home ownership, they should continue to rent until they are. If they have out of control debt, they won't get approved for a mortgage. And that's the other difference, guys. Today we have so many fail safes in place to where they are not. The lenders are not giving out shadow mortgages or crappy mortgages. They're verifying everything. So from a mortgage standpoint, I don't think we're going to have a collapse there. Will we have some troubles in the auto industry? I think so because of these high interest payments on these cars $1,000, $1,200, $800. That's crazy. Somewhere that's going to break. And then now we add in student loans that are going to start being repaid next month. That also adds a layer of issues that are going to come up. But to make this short and not drawn out, you can be prepared for all these things to where you can eliminate debt, get yourself out of debt so you don't have to fight with your monthly payments and living paycheck to paycheck, by budgeting and ensuring you know exactly what goes in and what goes out. And I've said it a hundred times. I'll say it a hundred and one times If you don't know, no one else will do it for you and that will leave you in a pretty bad place. Bankruptcies will probably be on the rise out of this run, more than likely. But what can you do? You don't want to be a statistic. You don't want to be somebody that files bankruptcy, because that is just going to ruin your life for a very long period of time. The more, the more you can get into your finances and manage them effectively, the better off you're going to be. Ask people questions, especially if you are at a company that offers a 401k. You can call them. They might have financial coaching for you or financial advice. I'm not sure. Some places do, some places don't, but why not ask? They could help to put a budget together for you and then you can manage it and you're not having to pay for it. You're paying through it on a 401k, your employer is, or you potentially could be also, I should say. But in the end, use the tools at your fingertips to get yourself in the right place, because ultimately, you are the only one that's going to be able to make the change and get through all of this. It's going to be a rough ride. It's going to be bumpy, but I think there's going to be some bright spots and some green shoots coming out of it, and one I still believe is the housing market. There's still opportunity there. Prices are ripe. There's still markets out there to be had. But if you can get a mortgage interest rate at 5.5% and pay $1,200 a month, that's still a win. That's still setting you up for success. So, guys, prepare yourself, get ready. There's going to be pain in this process, but the better you're prepared, the better off you're going to be. And if you are looking for a house in the market, do your homework. Lay out all the costs of renting, lay out all the costs of homeownership and make sure that it makes dollars and cents for you. If you can't afford it, continue to rent. And if your rent is going up and you can't afford it, go find another place to rent. You have to find something that works for your budget. You can't just keep on taking it and saying, oh, I'm going to make it work somehow. Make your budget work for you and you will be taken care of financially in the long run. Could it be painful? Is it going to be painful in the short term? Of course, but once you pay off your debt and you're not living paycheck to paycheck, life is so much better. Have a go, guys. I'll talk to you guys later.

Economic Outlook and Financial Advice
Preparing for the Housing Market