Happy Monday!
I hope you enjoy this edition of The Change-up, my weekly newsletter sharing the latest market news and personal finance tips. If you're interested in learning more about working with me, reply to this email or click my Calendly link at the bottom.
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Quote of the Week
““The way to stop financial joyriding is to arrest the chauffeur, not the automobile””
*As of market close 2/3/2023. For the week of 1/30/2023.
The Story
This week has lots of news to sort through, including a rate hike, a strong unemployment report, and surprising earnings. We started the week down, a pullback from a solid result the week prior. Stocks then rebounded on Tuesday and Wednesday after the Federal Reserve announced another rate hike. Then on Thursday, the NASDAQ, in particular, had an outstanding day after Meta (Facebook's parent company) announced it would buy back $40 billion in shares this year, reduced its cost estimates, and showed solid revenue expectations. Meta was up 23.2% on Thursday following the news. Stocks then traded lower on Friday after other big-tech companies showed weak earnings and the unemployment rate fell to 3.4%.
My View
Another Fed day. Another rate hike. Another mystery as to how this will all play out. The Federal Reserve raised the fed funds rate another 0.25% last Wednesday, bringing their range to 4.5%-4.75% (Click here to read about what rate hikes are). As a reminder, it was 0% a year ago. Chairman Powell acknowledged his satisfaction with some industries' disinflationary environment, but other areas are holding strong. The unemployment rate, for instance, went down to 3.4% in January. That's the lowest reading in over 53 years. Couple that with Powell's statement that his greatest risk is not doing enough and having inflation accelerate, and it starts to tell a more cautious tale.
In my opinion, the stock market is pricing in one more 0.25% rate hike in March, a holding period throughout the summer, and a pullback in rates at the end of the year. But I'm not so sure. The Fed might end up tighter than the market is anticipating. And if it does, I will be glad they prioritized long-term health over short-term relief.
Coming Up This Week
Earnings reports continue
December's consumer credit (Tuesday)
F.I.R.E. is all the rage these days. It stands for Financially Independent, Retire Early, and is a movement to become free from employment well before turning 60. This goal is certainly achievable, but it takes the right mindset, plan, and discipline to turn the dream into reality. If you don't plan correctly, your F.I.R.E. lifestyle could turn into a Fyre Fest.
So let's talk about how to make it happen. Whether you want to become financially free before 45 or retire in your mid-50s, some serious planning needs to take place to achieve this goal. While this is a good starting point, reach out to me if this is a dream of yours. I'd love to help you craft and implement that plan.
1️⃣ Establish Goals
What does your early retirement life look like? Are you on the beach? How about in a foreign country? Are you working part-time on your own schedule? Crafting a clear picture of what you want your life to look like is a necessary first step. Generic saving doesn't help us much with this goal. Once we put words and a timeline to your dream, the rest is just math. But we need the dream to start the planning process.
2️⃣ Sacrifice
Martin Luther King, Jr. has a great quote on sacrifice: "Human progress is neither automatic nor inevitable... Every step toward the goal of justice requires sacrifice, suffering, and struggle; the tireless exertions and passionate concern of dedicated individuals." This quote was obviously for a much bigger cause than early retirement, but I share it because the principles remain true for any goal. If you accelerate your retirement timeline, you'll most likely need to sacrifice in the present. Less spending, more discipline and savings. But if you truly want to retire early and commit to the struggle, you'll find joy in the journey.
3️⃣ Supercharge Your Income
Investing wisely will certainly help your early retirement cause, but the best way to reach your goal is by making more money. You can increase your income by working harder at your current job, starting a business, or even picking up a side hustle. The more income you have coming in the door each month, the faster you'll reach your goal.
4️⃣ Prioritize a Bridge Account
401ks and Roth IRAs are awesome tools, but there are some restrictions around accessing them before 59 1/2. So while you need to be sure and fund these accounts for later-stage needs, you also need an after-tax account to pull from before you reach 60.
5️⃣ Decide on Income Sources
Once you stop working full-time, you'll need some income sources to fund your retirement. This can be done through a number of avenues like real estate, investment accounts, a pension, or even a part-time consulting job. Keep this income source in mind when you're building wealth so you are all set up to go when it comes time to retire.
Thanks for reading and have a great week,
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