Tag Archives: economics

Financial Perspective: Common Money Myths

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Dave Stanley
Integrity Financial Service, LLC

It is said: “If you repeat a lie often enough, it becomes the truth.”

Even in 21st Century America, you can find folks who believe that the Earth is flat, that George Washington had wooden teeth, or that a penny dropped from the top of the Empire State Building can kill someone.

 

It’s not surprising, then, that many money-related myths refuse to die, no matter how hard well-meaning financial advisors and educators try to drive a stake in them. Unfortunately, these myths and misconceptions can cause you to make serious mistakes with your wealth that could wind up costing you thousands in retirement dollars.

 

In the spirit of helping, you make better decisions with your cash, let’s debunk a few uncommonly bad pieces of money “wisdom.”

 

It’s always better to buy a home if you can. “You must always own your home” is one gem of wisdom that won’t go away. The reason this myth has stuck around for so long is in part because homeownership is considered necessary to achieve the American dream. However, if you are young and just starting your career, owning a home could be an albatross that keeps you staying in one place or with one employer too long. Maintenance, taxes, and other costs of homeownership can eat into your disposable income and savings.

But, if you’re dead set against renting, an alternative might be to purchase a duplex or small apartment building, live in one of the units, and rent the others out.

 

It’s not worth saving if you can only save a little. This is just not true, particularly if you start young. If you only managed to save 15-20% of your paycheck, and your employer matches your 401k, you could save enough to ensure a pleasant retirement. Plus, putting even a small amount away each month helps you develop a better money mindset and habits that will come in handy as you get older.

 

I need to put at least 60% of my money into stocks and 40% into bonds. There was a time when the “60/40 rule of investing had some merit. The idea was to invest 60% of your savings into securities and 40% into bonds. However, these days bond yields are anemic. Other safe money vehicles may give you better returns, along with flexibility and safety. Also, if you are within five years or less of retiring, having 60% of your money in the market is not recommended because any loss might be difficult to make up in such a short time.

 

You should never have credit card debt. Proving that you can use credit responsibly is necessary if you want a healthy credit score. A good credit score comes in handy later when you wish to purchase a home, rental property, or a new car. If you make an effort to pay off your balance in full every month, it’s perfectly acceptable to use credit cards. Be careful, though, to carefully track your spending and avoid emotional purchases. As most of us realize, it can be difficult and stressful to dig oneself out from under a mound of debt.

An emergency fund is unnecessary if you have credit cards If recent disasters such as the economic fallout from COVID-19 have taught us anything, it’s that having emergency funds set aside is essential. Even before COVID, it took people an average of four months to find new jobs after a lay-off. If you try and live on credit for that many months, you will have a considerable amount of debt that might prove difficult to pay off. That’s why experts say that everyone should have six months of emergency cash saved up.

 

Many other money myths could impact your ability to make sound financial decisions. It’s always a good idea to sit down with an experienced, trusted advisor and get a second opinion before making crucial money decisions.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management

GVSU economics expert: Recovery picks up steam, for now

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By Dottie Barnes
Grand Valley State University

Brian Long is a local business forecaster. Credit: GVSU

With many West Michigan production facilities resuming marginal operations, the pent-up demand has brought economic statistics back closer to break-even, said Brian G. Long, director of Supply Management Research in Grand Valley State University’s Seidman College of Business.

Long surveyed local business leaders and his findings below are based on data collected during the last two weeks of June.

The survey’s index of business improvement (new orders) came in at -7, considerably better than the -32 reported in May. In a similar move, the production index rallied to -11 from -35. The index of purchases recovered to -13 from -32, and the employment index rose to -13 from -38.

Long said many local manufacturing firms have resumed partial production schedules. He said statewide unemployment improved modesty to 21.2 percent from 24 percent, the third highest in the nation.

It appears the West Michigan automotive industry stands the best chance for recovery over the short term, compared to the office furniture and aerospace industries, said Long.

“The office furniture industry is still shipping orders that were placed before the crisis, so we don’t know what the October order books will look like,” he said. “Home offices will become a bigger market in the future, but our local firms do not seem to have many entries for this market.” 

 

Long added the implementation of face masks and social distancing can allow for much of the manufacturing industry to reopen.

The Institute for Supply Management survey is a monthly survey of business conditions that includes 45 purchasing managers in the greater Grand Rapids area and 25 in Kalamazoo. The respondents are from the region’s major industrial manufacturers, distributors and industrial service organizations. It is patterned after a nationwide survey conducted by the Institute for Supply Management. Each month, the respondents are asked to rate eight factors as “same,” “up” or “down.”

GVSU economist says recession caused by COVID-19 will be a little bigger than 2008-09 recession

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By Dottie Barnes
Grand Valley State University

Paul Isely, photo from GVSU

It will be June before there is any broad-based restart of any economic activity, said Paul Isely, associate dean and professor of economics in the Seidman College of Business at Grand Valley State University.

State health officials have said the number of COVID-19 cases in Michigan will peak in early to mid-May. Based on that, Isely said the West Michigan economy will now see a decline larger than $3 billion. 

“Right now, this recession looks like it will be a little bigger than the 2008-09 recession,” he said. “About 41 percent of the $3 billion decline is the slowdown in manufacturing and 26 percent is entertainment, food services and retail.”

Isely said about 10 million people across the country have applied for unemployment during the last two weeks, matching the level of unemployed people in 2009-10. More people are expected to apply in the next two weeks.

“The good news is many of those people have been able to apply for unemployment benefits and most, not all, will be helped by that aid,” he said.

Isely said the crisis caused by COVID-19 will be something economists haven’t seen before in modern times. 

“But, it’s still looking like there’s a possibility of a fast tail on this, meaning manufacturing will be able to ramp up relatively fast — in one to three months — once we get into late May or June,” he said. “And that means this recession, unlike the last three recessions, has the possibility of us recuperating many of those job losses in a relatively short period of time in the course of the year.”