The Personal Finance Geek

Fedspeak is a term used to describe the jargon and acronyms used by the Federal Reserve when it comes to things like interest rates and how much money is in circulation. It can be difficult to understand for people who don't have a lot of financial literacy, but it's important to be able to follow what the Fed is saying in order to make informed financial decisions, because what the Fed says directly impacts, for example, how expensive it is to buy a house or a car because interest rates change as a result of what they say. Here are a few things to keep in mind when trying to understand Fedspeak: The Fed uses a lot of acronyms. Some of the most common ones include: FOMC: The Federal Open Market Committee, which is the group that sets monetary policy. QE: Quantitative easing, which is a tool the Fed uses to buy assets (usually bonds ) in order to stimulate the economy. (and the corresponding selling of bonds in order to "tighten") IOER: Interest on excess reserve...

The Fed wants money to be about half as valuable, every 30 years give or take one or two, on account of inflation. Learn how to estimate the pace of inflation with a simple exponential equation that can reveal information both about the past and the future. Between 1995 and 2019—before the economic effects of the COVID-19 pandemic—the average annual inflation rate in the US was 2.18%. This is close to what the Fed wants to happen every year, and when there isn’t a major disease ravaging the world, it’s a pretty good average of the inflation rate of the modern US economy. Prices go up some—low inflation like that is natural and helps the economy grow, year over year—but the process isn’t a runaway train without anyone at the controls. One can find how much less their money is worth by simply plugging in a few numbers into a simple exponential function: take the quantity (1 + the inflation rate) and raise it to the power of the number of years you want to move. Use a positive number ...

Most assets don't stay at one fixed value forever. In general, there are those assets that over time are expected to gain more and more value the longer you hold onto them and those that are expected to lose more and more value the longer you hold onto them.  When an asset gains value over time, it "appreciates," and when it loses value over time, it "depreciates." In both cases, this happens as the addition or subtraction of some percentage of the value of the asset over time. Because the value in a certain year is proportional to the value in the previous year, gains and losses add up very quickly. In either case--appreciation or depreciation-- the higher the value of the asset, the quicker it will gain or lose value.  Think about it: there are 2 cars, one worth $10,000 and another worth $50,000. Cars depreciate, so both cars will lose 15% of their value in one year. A year later, the car that used to be $10,000 is now only worth $8,500-- that's a loss...

Saving for retirement-- and actually retiring-- is a daunting prospect for someone at the beginning of their career. But it doesn't have to be, and it won't be if you take the time and put in the effort! You can start very easily by telling your employer how much to withhold from your paycheck to be deposited in a retirement account when you’re setting up payroll at your job. There are significant financial advantages to contributing early and often to your retirement plans, even if you’re only in your 20s, and you don’t see yourself retiring until your 60s or 70s, because of the power of compounding. Money compounds over time: that is, your gains make gains. When you invest $1,000, and you make 10% returns a year, the first year, you get 10% on your $1,000. But the second year, you don't get 10% on just $ 1,000-- you get 10% on $1,100. The year after that, you get 10% of $1,100; then 10% of $1,210; 10% of $1,331; and so on. You get returns rest paid on your original balanc...