Knowing the difference between monetary and fiscal policy

When President Donald Trump assumed office, he implemented numerous changes that are in stark contrast with the policies the previous administration had enacted. One of those is how the economy is run. Former President Barack Obama based the economy on monetary policy, while Trump intends to run it on fiscal policy.

While both approaches are intended for achieving higher economic growth and balancing inflation, there are major differences between the two policies.

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Monetary policy

This policy is typically carried out by the Central Bank or other financial institutions or authority. The Central Bank, which is also called The Fed, influences the supply of money by incentivizing individuals and businesses to borrow and spend, resulting to an economy that grows faster than normal.

The Fed also sets the base interest rates in order for the economy to reach the target inflation rate. By increasing interest rates (to a safe level), the borrowing costs become higher, while consumer spending and investment weaken. This leads to decreased aggregate demand and inflation.

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Fiscal policy

In a fiscal policy, it is the government which adjusts tax rates and levels of federal and overall spending. If the government perceives a need to raise demand and economic growth, it will cut taxes and increase spending, which results in a higher budget deficit. On the other hand, the government will raise tax rates and lessen spending, if demand and inflation need to be reduced.

Springer Financial Advisors uses a comprehensive and holistic approach in formulating wealth management strategies for its clients who aim to build a fulfilling post-retirement life. For more advice and insights about financial planning, visit this website.

On The Watch: Spotting a Bear Market In The Horizon

At the turn of the year, the US stock market hit rough roads.  Thankfully, the market did not officially turn bearish.

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Investors dread bear markets, which indicate an economic slowdown or a recession and a fall in the prices of securities.  And unlike a market correction, a bear market lasts for more than two months, and the bottom of the market is indeterminate.  Profit losses are difficult to recover, more so when the proper strategies had not been implemented prior to the downturn.

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A bear market is augured by a decline of 20 percent from a market high in various broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor’s 500 Index (S&P 500), over two months.  The slide early this year was tabbed at around 14 percent.

Still, smart investors know how to prepare for the onset of a bear market by watching out for several signs including:

i) Volatility in the Federal Reserve

ii) General decline in earnings among companies

iii) A low confidence score from small-business optimism indexes

iv) Decreasing consumer confidence

v) Unhealthy GDP rates

vi) Indications from analysis of fund flows

vii) Economic and political uncertainties

Economic coping strategies for a looming bear market include one of the most common: short selling. This is offering borrowed shares for sale and buying them back at lower prices.  Or people could just wait out bear markets before they buy stocks again.

 

For more advice on financial planning, especially for a post-retirement life, visit this Springer Financial Advisors blog.

Cutting The Tax Bill In Retirement

Financial stability is every retiree’s goal. But just because you are not taking home a paycheck doesn’t mean that you are free from paying your taxes. With smart planning, strategic money moves, and timing, you can avoid huge tax bills. In retirement, the crucial steps for financial preparation should be taken a couple of years before the ‘long holiday.’ Here are some steps to take:

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1. Consider opening a Roth IRA account, besides 401(k) or IRA. Here, your money grows tax-free and there are no levies on qualified withdrawals. Married couples who earn less than $193,000 qualify for a Roth IRA.

2. Use your health savings account as your retirement account. This is especially true if you are investing more in your health savings. In this case, your money grows tax free, same as the Roth account. Also, withdrawals aren’t taxed as long as they’re used for qualified health expenses.

3. Donate to your favorite charity. This is the largest and most common tax deduction strategy most financial planners suggest. While legally cutting on your levies, you are also making a difference in the world by supporting the cause of your charity.

As soon as you retire, the most crucial aspect to look into is making a solid withdrawal plan. You can start making withdrawals from your tax-deferred accounts early in retirement. This means that you are paying less taxes because you are in a lower tax bracket. You can also make your Roth account as a contingency fund.

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Springer Financial Advisors help retirees equip themselves with the best retirement plan that will help them live conveniently despite the ever-changing economic situation. For more information, visit this website.

Some Ways to Counter Unnecessary Spending

Unnecessary spending is one of the biggest derailments to a disciplined money management effort. Sometimes it is easy to lose track of the proper way to channel your budget especially in a world where aggressive marketing strategies and advertising seem to prey on the emotions of people. Here are a few small adjustments to counter overspending.

Eat a square meal before you hit the grocery. This might seem funny and weird, but doing so actually conditions your brain and neutralizes the instinct to consume food. When a person is hungry, it affects his priorities. At the grocery, this instinct may be at work when you make purchasing decisions.

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Filter your desktop. You can block websites that pop up on your computer screen that only tempt you to click your way into a rabbit hole. Remember, advertising is aggressive, and a lot of entities that are good at it can colonize your computer browser on your workstation and tempt you to make purchases that you do not need. They are all after your credit card.

Subscribe to an investment plan, even just a simple one. Not only does an investment plan give you security in its rewards but it also forces you to relinquish your money to a fixed commitment, which removes you from bringing your money elsewhere. Needless to say, choose a good planner.

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All of these are effective ways that allow you to channel your money in a disciplined fashion. But the truth is, they only supplement the willingness to save, and that can come only from you.

Springer Financial Advisors is an authority on matters of investments and other concerns, including savings. Explore more about how the firm works by visiting this website.

Everyday Tips On Saving Money At Home

A huge chunk of a person’s monthly income goes to the home. Rent, mortgage, utilities, and everyday expenses usually leave very little to the common worker’s savings. But this doesn’t have to be the case. People can save more if they know how cut costs. Here are some amazing cost-cutting tips people for people to apply when it comes to home expenses.

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i) Make sure electronic devices that do not need to plugged at night are unplugged. Even if these gadgets are switched off, they still consume electricity if they’re plugged in a socket. People can save a little over $8 a month doing this.

ii) Low-flow water faucets are highly recommended. They cost around $10-$20, but they’ll be saving people more than half of their water bill.

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iii) Insulating hot water tanks can delay the cooling down process of water, which means the heater won’t need much usage. This can save people as much a tenth on their bill.

iv) Use coupons or coupon codes. Go through the internet and magazines. People should look for coupons for stuff they would otherwise buy from an online shop.

v) Speaking of purchases, people should purchase generic brands on items that are not that important to them. Branded items usually cost a lot more.

vi) Just like checking out coupon and coupon codes, people ought to make plans to go on shopping sprees while there are ongoing store-wide or mall-wide sales. Stores are very generous with their products during these joyous occasions.

Springer Financial Advisors help their clients save money for rainy days, and retirement. To learn more about the firm, and to read up on more tips for saving money, like thisFacebook page.