The US Isnt Worried About Its Massive Debt But You Should Be; The U.S. federal government’s debt load hit another milestone this month: It’s now a record US$22 trillion in nominal terms.

https://youtu.be/VDIw23JdysE

That’s $67,000 for every man, woman and child living in the U.S., and it’s up $2 trillion since President Donald Trump took office in 2017. For comparison, U.S. debt is more than the total size of the United States’ $20 trillion economy and equivalent to the gross domestic products of China, Japan and Germany combined.

This hefty sum is a reflection of the large annual budget deficits that the federal government has run, pretty much continuously, since 1931. Prior to that, surpluses were much more common, apart from the years following the Civil War.

With another round of anxiety-causing debt-ceiling debates likely to return in the coming months, like other economists, I believe it is worth asking whether we should even care about the size of government debt.

Default isn’t imminent

First of all, it’s important to note current U.S. debt levels do not indicate any risk of imminent default.

As long as the U.S. federal government remains an “ongoing concern” – fiscal institutions are strong and effective, taxing authority is maintained and the long-run productive capacity of the nation’s economy is secure – there is no economic reason to fear default on the nation’s debt. Political reasons, such as debt-ceiling mischief, are another matter.

To remain solvent and ultimately pay what it owes, the U.S. Treasury – which sells notes and bonds to investors to raise money to finance the budget deficit – needs only to balance its books over the long run, rather than over an arbitrary unit of time like a year.

Historically low interest rates on government debt suggest that bond market participants agree with this view and are not afraid of a sovereign debt default in the U.S. Indeed, with these low rates, sufficient economic growth can allow the government to borrow indefinitely.

Why it’s irrelevant

Although $22 trillion is a large number, it is essentially irrelevant to proper thinking about the economic role of the U.S. government or about responsible fiscal policy.

Government debt simply reflects the timing of taxes. Higher spending levels today require more borrowing – and a larger debt – as long as the taxes needed to pay for those expenditures are pushed into the future.

But regardless of when taxes are collected, what ultimately matters is the quantity of the economy’s scarce resources the federal government commands and controls, and how those resources are used, which essentially depend on the level and composition of government spending. To paraphrase Milton Friedman, spending is taxing.

In short, government debt can be a bad indicator of the stance of fiscal policy or its burden on the private sector. The government can be wildly intrusive in the economy and thus a hindrance to growth and welfare even if its debt is low. For example, Venezuela’s sovereign debt was only 23 percent of its GDP in 2017, yet its economy has been in turmoil for several years.

Is mortgage refinancing a good idea?

https://youtu.be/2yYRg705YvA

Refinancing a mortgage means paying off an existing loan and replacing it with a new one. There are many reasons why homeowners refinance:

Refinancing to Secure a Lower Interest Rate

One of the best reasons to refinance is to lower the interest rate on your existing loan. Historically, the rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%. However, many lenders say 1% savings is enough of an incentive to refinance.

Reducing your interest rate not only helps you save money, but it also increases the rate at which you build equity in your home, and it can decrease the size of your monthly payment. For example, a 30-year fixed-rate mortgage with an interest rate of 5.5% on a $100,000 home has a principal and interest payment of $568. That same loan at 4.1% reduces your payment to $477.

Refinancing to Shorten the Loan's Term

When interest rates fall, homeowners sometimes have the opportunity to refinance an existing loan for another loan that, without much change in the monthly payment, has a significantly shorter term.

For a 30-year fixed-rate mortgage on a $100,000 home, refinancing from 9% to 5.5% can cut the term in half to 15 years with only a slight change in the monthly payment from $805 to $817. However, if you're already at 5.5% for 30 years ($568), getting, a 3.5% mortgage for 15 years would raise your payment to $715. So do the math and see what works.

Refinancing to Convert to an ARM or Fixed-Rate Mortgage

While ARMs often start out offering lower rates than fixed-rate mortgages, periodic adjustments can result in rate increases that are higher than the rate available through a fixed-rate mortgage. When this occurs, converting to fixed-rate mortgage results in a lower interest rate and eliminates concern over future interest rate hikes.

Conversely, converting from a fixed-rate loan to an ARM—which often has a lower monthly payment than a fixed-term mortgage—can be a sound financial strategy if interest rates are falling, especially for homeowners who do not play to stay in their homes for more than a few years.

These homeowners can reduce their loan's interest rate and monthly payment, but they will not have to worry about how higher rates go 30 years in the future.

If rates continue to fall, the periodic rate adjustments on an ARM result in decreasing rates and smaller monthly mortgage payments eliminating the need to refinance every time rates drop. When mortgage interest rates rise, on the other hand, this would be an unwise strategy.

The Bottom Line

Refinancing can be a great financial move if it reduces your mortgage payment, shortens the term of your loan, or helps you build equity more quickly. When used carefully, it can also be a valuable tool for bringing debt under control. Before you refinance, take a careful look at your financial situation and ask yourself: How long do I plan to continue living in the house? How much money will I save by refinancing?

Again, keep in mind that refinancing costs 3% to 6% of the loan's principal. It takes years to recoup that cost with the savings generated by a lower interest rate or a shorter term. So, if you are not planning to stay in the home for more than a few years, the cost of refinancing may negate any of the potential savings.

It also pays to remember that a savvy homeowner is always looking for ways to reduce debt, build equity, save money, and eliminate their mortgage payment. Taking cash out of your equity when you refinance does not help to achieve any of those goals.

why you should not have a high yield savings account is because the amount of interest you receive never beats the rate of inflation, so you are guaranteed to lose money with a high yield savings account.

https://youtu.be/lDRVzNiqxKs

High-yield savings accounts function similarly to traditional savings accounts, except that the annual percentage yield (APY) is greater. The APY on savings accounts averaged 0.05% as of December 2020, according to the Federal Deposit Insurance Corporation. Rates on high-yield savings accounts have taken a hit during the COVID-19 crisis, but still come in higher than those of traditional accounts.

Putting your money in a safe and liquid investment is almost always better, as I explain in the video, low volatility and high volume is your new best friend when it comes to protecting your savings!

Why you should have a high yield savings account is because it allows you to earn interest while you save—a win-win scenario. But how much money you put into a high-yield savings account will depend on your personal savings goals and financial situation.

https://youtu.be/i0223rvbTwA

High-yield savings accounts function similarly to traditional savings accounts, except that the annual percentage yield (APY) is greater. The APY on savings accounts averaged 0.05% as of December 2020, according to the Federal Deposit Insurance Corporation. Rates on high-yield savings accounts have taken a hit during the COVID-19 crisis, but still come in higher than those of traditional accounts.

As with traditional savings accounts, you'll likely be limited in how many withdrawals and transfers you can make from a high-yield account each month. You'll also owe income taxes on the interest you earn. Still, these accounts can be quite useful for growing an emergency fund or saving money for a big, short-term expense (such as a vacation or wedding).

Because your savings goals are unique, the amount you should put into a high-yield savings account is as well. But there are ways to calculate that number for yourself.

What Is the Recommended Amount to Put in a High-Yield Savings Account?

There are a couple of factors to consider when funding your high-yield savings account. One is your purpose for saving, and the other is your savings goal—the balance amount you want to reach. Common uses for these accounts include building emergency savings or paying for a short-term expense.

Emergency fund: Your emergency fund should be able to cover three to six months' worth of expenses. The goal is to be able to afford essential expenses—rent or mortgage, utilities, groceries, prescriptions, debts—if you lose your income due to a layoff or illness, for instance.

It's a good idea to keep your emergency fund in a savings account you can easily access, as opposed to investing it in a longer-term vehicle such as a mutual fund, so you can withdraw cash immediately without risking financial loss.

high yield savings accounts, money market accounts, certificate of deposit (CD)

What is a money market account?

A money market account, or money market deposit account, is an interest-bearing savings product available at most banks and credit unions. You can usually write checks from it and may get a debit card.

https://youtu.be/umBZoT6k9_M

A money market account is considered a deposit account under the Federal Reserve’s Regulation D, so the number of transactions, such as transfers and withdrawals, are limited to six per month. There are some transactions, including withdrawing from an ATM or bank teller, that don’t count as one of the six transactions. There are also exceptions to the limits. Check with your bank to find out its policy.

It used to pay more interest than a regular savings account, but the Fed has cut rates to near zero, and yields on the two products are not that different now. If you find an MMA with a higher yield, be prepared to maintain a higher minimum balance or hold to another requirement to get the top yield.

To find the best rates, use Bankrate to compare MMAs.

What is a savings account?

A savings account is the most basic type of bank account designed for storing your extra money. When you open a savings account, you’ll deposit some money into the account. You can add money and withdraw money as you need to, but you won’t get a checkbook to access the money. Instead, you’ll have to rely on online transfers or make withdrawals in-person at your bank. Some banks will let you make ATM withdrawals if you have a debit card linked to a checking account.

Typically, banks limit the number of withdrawals you can make from your savings account each statement period. Going over the limit can result in a fee, emphasizing how the account is designed for longer-term storage of your money rather than frequent transactions.

In exchange for letting the bank hold your money, the bank will pay interest on the balance of your savings account. Each statement, the bank will make an interest payment into your savings account, helping your balance grow.

Some banks have minimum balance requirements and charge fees for their savings accounts. Keep an eye out for these types of fees as they can reduce the value of your savings over time.

What is a CD?

A certificate of deposit is an account that you can use to save money for a set period of time.

When you open a CD, you have to decide how much money to put in the account and how long you want to keep the money in the account. For example, you may choose to open a six-month CD.

Once the account is open, you cannot withdraw your money until the chosen amount of time passes. If you do, you usually have to pay a penalty fee. In exchange for this loss in flexibility, banks tend to offer higher interest rates on CDs than on other accounts.

CDs offer fixed rates throughout their term. Once you lock in your interest rate, it won’t change, making CDs good for savers who want a guarantee that their interest rate won’t drop. However, if market rates rise, the money in the CD will be stuck at a lower rate, which can make long-term CDs a risk.

How does a money market account differ from a savings account or CD?

A money market account differs from a savings account or CD in that it has checking account features. For instance, you can usually write checks from it. You may also get a debit card.

The Proper Way To Structure Your RE Investing

https://youtu.be/2NxPfGehIvE

Choosing a legal entity for your real estate investment business is an important decision that has both legal and tax consequences. The wealthiest real estate investors are not just skilled at spotting a good investment or closing a deal—they are knowledgeable and savvy about all aspects of their business, including the way it is legally organized and operated.

Sole Proprietorships for Real Estate Investing

A sole proprietorship is kind of a “default” business structure, which is formed when a person is engaging in business in their individual capacity, without having formed a separate legal entity. The assets and income of the business are entirely owned by the individual and all income from the business is taxed as personal income.

Unlike other legal entities where business income “passes through” the business to the individual, all income from the business is considered immediately earned by the sole proprietor. All property purchased by, transferred to, and owned by the business is simply owned by the sole proprietor personally.

The advantages of this business structure are that it is very easy to start. No paperwork is required to form a sole proprietorship. As a real estate investor, you simply purchase or invest in real estate. Depending on the laws in your state, there may be a requirement to register your sole proprietorship, but this registration does not create your sole proprietorship, it simply is a requirement to comply with state law. Your sole proprietorship is created automatically, by default, when you start doing business.

However, if you are a real estate investor there are major disadvantages to operating your investment business as a sole proprietorship. First, unlike other entity options, a sole proprietorship offers no degree of asset protection from creditors or lawsuits, because your business assets are also personal assets. Furthermore, depending on your debt-to-income ratio and how you choose to finance your investments, you may be able to begin as a sole proprietor, but if and when you exceed the debt-to-income ratio permitted by your lender, you will have to form a separate legal entity to obtain commercial financing.

LLC

A limited liability company (LLC) is a common entity choice for real estate investors and offers many advantages. Choosing this structure for your real estate investment business allows you to limit your personal liability in the business to the money you contribute and the debts you co-sign for. This includes personal assets that you contribute as collateral to a loan.

In an LLC, owners are known as “members”. If you are the only owner in your real estate LLC, you have a single-member LLC. In a single member LLC, all business income will “pass through” the entity and be treated as personal income for tax purposes. However, you will not be personally liability for the debts, claims, and liabilities of the business, beyond the amount you contribute. To form an LLC, you must file Articles of Organization with your appropriate state government authority.

How Is Real Estate The Best Investment?

https://youtu.be/lys7LF3x4WE

The benefits of investing in real estate are numerous. With well-chosen assets, investors can enjoy predictable cash flow, excellent returns, tax advantages, and diversification—and it's possible to leverage real estate to build wealth.

Thinking about investing in real estate? Here's what you need to know about real estate benefits and why real estate is considered a good investment.

Cash Flow

Cash flow is the net income from a real estate investment after mortgage payments and operating expenses have been made. A key benefit of real estate investing is its ability to generate cash flow. In many cases, cash flow only strengthens over time as you pay down your mortgage—and build up your equity.

Tax Breaks and Deductions

Real estate investors can take advantage of numerous tax breaks and deductions that can save money at tax time. In general, you can deduct the reasonable costs of owning, operating, and managing a property.

Appreciation

Real estate investors make money through rental income, any profits generated by property-dependent business activity, and appreciation. Real estate values tend to increase over time, and with a good investment, you can turn a profit when it's time to sell. Rents also tend to rise over time, which can lead to higher cash flow.

This chart from the Federal Reserve Bank of St. Louis shows average home prices in the U.S. since 1963. The areas shaded in grey indicate U.S. recessions.

Average sales price of homes sold for the U.S.

Source: Federal Reserve Bank of St. Louis.

Build Equity and Wealth

As you pay down a property mortgage, you build equity—an asset that's part of your net worth. And as you build equity, you have the leverage to buy more properties and increase cash flow and wealth even more.

The Problem With UGMA UTMA Account is when parents try to take it back, its FRAUD.

https://www.youtube.com/watch?v=dhDsiuBM2KI&t=1s

Imagine you open a savings account for your child at the local bank, depositing $10,000 in the hope that they will someday use it to pay for college. You put their name on the account and name yourself as the custodian. Every single financial institution that permits this sort of setup structures the title as a "UTMA account." The next week, you get hit with an enormous medical bill that threatens your solvency—you might have to declare bankruptcy unless you can work something out. In a panic, you go back to the bank, withdraw the $10,000 you put in your child's account and figure you'll replace it later.

Or how about this scenario: Your mother passes away and leaves your five-year-old daughter (her granddaughter) $150,000. She names you as successor custodian to a brokerage account she established, stuffed with blue-chip stocks like Coca-Cola, Colgate-Palmolive, Johnson & Johnson, Hershey, and Procter & Gamble. When your daughter is 13 years old, she breaks her leg in a sporting accident at a time when you are unemployed and have no health insurance. You decide to withdraw a few thousand dollars to pay her medical bills out of her account.

Here's one last hypothetical: your brother decides to give your son (his nephew) a check for $1,000 each Christmas to help pay for college. The check is made out to "[Your name] as custodian for [nephew's name]." You deposit the money in your checking account and make a rough back-of-the-envelope calculation, so you have a decent idea of what should be available for your son. Over the years, your brother gives you a total of $18,000. When your kid reaches adulthood, he asks for his money. You have $7,000 in your checking account and tell him, "We used it on the family over the years, but here's what I can give you right now." You write a smaller check.

Each of these scenarios broke the law in a significant, serious way. In the process, you've opened yourself up to everything ranging from criminal prosecution to civil lawsuits. Legal proceedings could result in the restitution of the funds you took, payment of foregone investment income that should have been generated, attorney fees, and a host of other expenses that can (and probably will) be more costly than the money you used. This may come as surprise to those who don't spend a lot of time considering financial law, but in the United States, a child's money does not belong to the child's parents or guardians.

The Reason Your Child's UTMA Assets Are Protected from You

Legally speaking, two things occurred the moment assets were gifted under the UTMA law. These occur whether or not the donor is fully aware of UTMA restrictions on withdrawals:

https://youtu.be/GT9h6hASDhI

https://youtu.be/dhDsiuBM2KI