金融教師回答金錢問題：「把收入分配給娛樂很重要！」 Financial Advisor Answers Money Questions｜名人專業問答｜GQ Taiwan

Money Support Q&A

In this Q&A session, Kevin Matthews answers questions from Twitter about personal finance and economics.

Are We Going Into a Recession?

• A recession is defined as two consecutive quarters of negative GDP.

• Q1 and Q2 of 2022 were both negative, so technically we are in a recession.

• The National Bureau of Economic Research takes into account other factors before officially declaring a recession.

How Is My Credit Score Calculated?

• Payment history (35%), credit utilization (30%), credit length (15%), new credit (10%), and credit mix (10%) are the five main factors that determine your credit score.

• You want to pay your credit card on time, stay below 20-30% of your credit limit, have a long-held open line of credit, be careful when applying for new credit cards, and have diversified types of debt.

When Should I Start Saving for Retirement?

• Start saving for retirement as soon as possible because time is your biggest asset.

• The longer you invest, the more you can take advantage of compounding interest.

• Compounding interest is when your money makes money.

How Do I Become a Millionaire?

• Business ownership, stock market investments, and real estate are the most common ways to become a millionaire.

• Be patient because wealth depends on time and compounding interest.

Is Our Tax System Rigged for the Rich?

• There are tax breaks that disproportionately benefit those who are wealthy.

• Examples include writing off mortgage interest and capital gains tax rates being lower than income tax rates.

• Wealthy people also manipulate the tax code by loaning themselves money based on their stocks' value to avoid paying taxes on the income.

Why Do So Many People Go to College?

• The median return on investment for college is not poor.

• College graduates tend to earn more than those without a degree.

Lowering the Cost of College

This section discusses ways to lower the cost of college and how to make more money with a degree.

Lowering the Cost of College

• Going to an in-state state school or community college can significantly lower the cost of a degree.

• Engineering majors tend to have a higher return on investment because their degrees pay more.

• College is generally too expensive and should be made more affordable across the board.

What is a Treasury Bond?

This section explains what a treasury bond is and why it's considered one of the safest investments in the world.

Explaining Treasury Bonds

• A treasury bond is like a loan you make to the US government, which promises to pay you back on a certain date (the maturity date) with interest on your principle.

• Treasury bonds are considered among the safest investments in the world because as long as taxes are being collected, investors will get some portion of their investment back.

• However, returns on treasury bonds are typically low compared to other investments, making them less attractive for younger investors looking for higher returns.

How Much Debt is Too Much Debt?

This section discusses how much debt is too much debt and introduces the concept of debt-to-income ratio.

Debt-to-Income Ratio

• The debt-to-income ratio measures how much debt you have relative to your income. If it exceeds 43%, that's considered a red flag.

• For example, if you earn $10,000 per month and $4,500 of that goes to debt payments, your debt-to-income ratio is 45%, which is too high.

The 50/30/20 Rule for Budgeting

This section introduces the 50/30/20 rule for budgeting and explains why it's important to have room in your budget for enjoyment.

The 50/30/20 Rule

• The 50/30/20 rule suggests allocating 50% of your income to expenses, 30% to fun money, and 20% to savings and investing.

• It's important to have room in your budget for enjoyment because if you don't, you're less likely to stick to your budget and more likely to go into debt.

Investment Benchmarks and Philosophy

This section discusses investment benchmarks and philosophy.

Investment Benchmarks

• The S&P 500 is a standard benchmark used by many investors.

Investment Philosophy

• The speaker is a Buy-and-Hold investor who primarily holds index funds and Blue Chip stocks.

Getting Started with Buying Stocks

This section provides tips on getting started with buying/trading stocks.

Defining Your Goal

• Define your goal before buying or trading stocks as it will determine what account type you use, what stock you buy, and when you sell.

Understanding Buying the Dip and Surviving It

This section discusses the concept of buying the dip, its origin in the stock market, and how it applies to cryptocurrency. It also emphasizes understanding risks and setting limits for oneself.

Key Points

• Buying the dip is a time-tested strategy that originated in the stock market.

• Not every dip is worth buying, and not all stocks or cryptocurrencies have the same track record for recovery.

• One must understand what they are investing in, understand risks, and set limits for themselves.

• Having a stop loss or setting a price limit can help one survive dips.

Inflation: What it Is and How It Affects Prices

This section explains inflation, how it affects prices over time, and how it can be managed through monetary policy.

Key Points

• Inflation slowly increases prices over time by reducing purchasing power.

• When inflation happens suddenly, it can cause problems like food prices increasing by 10% from one year to another.

• The solution to inflation is either increasing supply or reducing demand. Increasing interest rates is one way to reduce demand.

Investing Strategies: Long-Term Diversified Portfolio

This section discusses long-term investment strategies such as having a diversified portfolio comprising of stocks and bonds.

Key Points

• A long-term diversified portfolio typically comprises of stocks and bonds.

• Asset allocation changes as one gets older; younger people tend to have more stocks while older people tend to have more bonds.

• Crypto can be a risky investment, and it is recommended to have 5% or less of one's portfolio invested in crypto.

Index Funds and ETFs vs. Mutual Funds

This section compares index funds and ETFs with mutual funds, highlighting the differences in fees and minimum investments.

Key Points

• Index ETFs and index mutual funds track the same indices but differ in mechanics.

• ETFs are usually less expensive than mutual funds, and there are no minimum investments for most cases.

• When comparing an index ETF to an index mutual fund, it comes down to fees and minimum investments.