Mad Dog on Money : 9/27/18

Prime Rate
The current U.S. Prime Interest Rate is at 5.25%. Most all home equity lines of credit are tied to this rate. The Federal Reserve Bank announced the decision yesterday to raise short-term interest rates. What does this mean to you? Any business or personal line of credit will have your rate go up – increasing your monthly interest payment.

The economy is strong – poised for its best annual growth in a decade. The current nine-year bull market is close to being the longest in history – and the stock markets have been reaching new highs. Inflation is back up, and the Federal Reserve Bank raises rates to try to “slow” the economy down by making it harder to borrow money with the higher rates you would incur.

The Fed is trying to balance and maintain a “healthy” economy. The current thinking by the Dog says interest rates should continue to slowly rise. What could stop this? Tariffs could potentially have an adverse effect on business sentiment, investment spending, and employment. In addition, a slow housing market, which we are seeing now, could potentially slow the rate increases.

Having a Baby?
Congrats to both of you! The arrival of a new baby is a joyous affair but also a life-changing one financially. Research shows it costs roughly $235,000 for a middle-income family to raise a child through age 17, not including college savings. Some financial ideas to think about:
Whether your medical coverage is through your employer or a do-it-yourself plan, you typically have only 30 days from your child’s date of birth to add him or her to your coverage. If you miss that window you’ll have to wait until open enrollment rolls around, potentially leaving you – and your child – in the lurch.
Budget for childcare – costs vary widely. If you are both working, look for some creative solutions.
College costs: Opening a 529 college savings account is an idea. The College Board projects it will cost $200,000 for today’s infants to attend an in-state, four-year public university.

Stock Market Thoughts
The Dog is certainly not looking to make predictions on the market going up or down – I will leave that to the experts. Here is my hunch, though. When markets eventually start going down, there will be an overreaction – causing them to drop more than they should. People who have had a good amount of gain in their portfolio will not want to risk losing it – and will take their chips off the table faster – causing a more rapid decline than the economic indicators warrant. Just my thought.

Going back to my cage….bark at you soon.