Money Monday

posted by Brian Thomas - 

MONEY MONDAY 1/22/18

 

 

KIBBLE

For you as an investor, a government shutdown has historically been a "non-event." Remember, keep your eye on the long-term (unlike Congress, ha)

Topic A

There are two big companies making headlines in Cincinnati right now: Amazon and GE. Simpl Money wants to explain what's going on… and the potentential impact on you.

Cincinnati didn’t make the “short-list” of finalists for Amazon's second headquarters (Columbus and Indianapolis did)

The Amazon HQ2 would have been about a $5 billion investment that created about 50,000 highly-paid jobs

Mayor Cranley says he has no idea why Cincinnati didn’t make the short-list, but Amazon says it’s going to provide applicants with “constructive feedback”

But maybe we dodged a bullet? After all, the tax breaks Amazon would have gotten would have been ridiculous - the residents and taxpayers of whichever city DOES ended up getting HQ2 may pay the price for Amazon's deal in the form of higher taxes. 

Side note: Amazon will be raising its monthly Prime membership from $10.99 to $12.99 - that's an 18% increase! (yearly subscription is still $99)

Plus, state and local governments would be faced with additional expenses for services such as police, schools and infrastructure like roads and bridges to accommodate the additional Amazon employees.

Cranley says that, “We’ve got to go for Apple now” – and that local development officials are already working on a bid package for Apple’s new campus

As for General Electric: the rumors are still swirling that the company might break up (this is to help with its finances)

GE employees about 9,000 workers in the Tri-State, with the majority of those at GE Aviation (7500)

The good news for Cincinnati: GE Aviation (in Evendale) is a bright spot for the company given that it’s the most profitable

If carved into a separate company, GE Aviation would be large enough to make the Fortune 500

The bad news for Cincinnati: a break-up could spell trouble for The Banks. Why? When the GE Downtown Global Operations Center opened in 2016, it was seen as a stabilizing presence at The Banks – workers would bring business to the restaurants and might even decide to live in the apartments

But this center’s main function is to consolidate back-office functions for multiple divisions, something that probably wouldn’t be needed if the company split

GE also has a pension problem – it’s severely underfunded ($31 billion). This is the largest deficit among S&P500 companies

600,000 current and former GE employees are relying on these benefits

The lesson here? Understand that, these days, NOTHING is guaranteed - not even your pension (just ask state employees and teachers). Even if you're lucky enough to have a pension, you should still be saving on your own on the side.

HERE'S THE SIMPLY MONEY POINT

Use this GE situation as a reminder that even the oldest, most well-known companies go through hard times. As you look toward retirement, you should plan for the worst and hope for the best - no matter who you work for.


 

 

#2: Enquirer

Every Sunday, Simply Money is answering your money questions in the Cincinnati Enquirer.

Tony in Burlington: My employer matches my 401(k). Does this extra money count toward my yearly limit?


 

 

#3: Budgeting / family expenses

As Americans we LOVE to spend money! After all, about 70% of our economy is comprised of "consumer spending." And since we're so good at spending… it probably shouldn't be any surprise that we're really bad at saving. Consider some of these stats:

More than half of Americans don't have enough to cover a $1,000 emergency: Car accidents happen, furnaces go out, kids go to the ER… you know that unexpected expenses are going to pop up - do you have enough money set aside? (Simply Money rule: your emergency fund should cover 3 to 6 months worth of your living expenses)

Americans are more worried about paying for their next vacation than saving enough for retirement: More Americans report being more concerned  about affording vacation (36%) than having adequate retirement savings (32%). Yes, we know you're probably dreaming about Spring Break or summer vacation and escaping this Cincinnati cold. But as you plan that next trip, think about how much time you've spent planning for your long-term future.

Americans have racked up $1 trillion in credit card debt: Consumers now owe $1.0004 trillion on their cards, up 6.2% from a year ago; this is the highest amount owed since January 2009. You should be paying off your credit card in full, every month. Keeping a balance on your card DOES NOT help your credit score - THAT IS A MYTH!

OK, so as a country we're not great with money. So how can you buck the trend?

Yes, I'm going to say the "B" word: budget. But if you associate budgets with those that can’t make ends meet financially, you're thinking about budgets all wrong. The truth is budgeting isn’t only for the times you’re short on cash, it’s for everyone - rich, poor, young and old.

Few rich people got where they are without understanding the importance of having and following a budget. That means knowing what’s coming in, what’s going out and how much is left over.

Having a budget helps you prepare for the short and long-term expenses that you’re sure to have. Buying a house, paying the expenses of having a child and then paying for college and planning and paying for a retirement all need a budget. With one you’ll know how your spending your money and where and when you need to cut back.

A budget can help prevent a financial crisis. You never know when your home or car will need repairs or when you’ll get sick. Having a budget, knowing what you’re spending and saving, will help cover for those unexpected expenses.

HERE'S THE SIMPLY MONEY POINT

Following a budget is the foundation for creating a sustainable lifestyle… both now and into retirement


 

Brian Thomas

Brian Thomas

Based in Cincinnati, OH, the Brian Thomas Morning Show covers news and politics, both local and national, from a conservative point of view. Read more

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