• Nate Baim, MBA, CFP®

Amazing Views


Enjoy this week's edition of the Planner's Beta


Beta (n) - climber's jargon that designates information about a climb This digest's purpose is to share observations, ideas, and treasures found this week which you may also find insightful. Sharing does not mean it's an endorsement. I am endorsing the pursuit of knowledge and exploration.



A Break from the News


Becky and I made it back to Silver Star Mountain Scenic Area this weekend for an overnight backpacking trip. We are both realizing how much camping and hiking we have not done this year due to COVID, and we are wanting to catch up. Although COVID has been challenging, it has allowed me to learn a new skill and pick up a hobby. So, now, we have a new element for our adventures, capturing photos.


This past week, I wanted to get a good sunrise and hone my understanding of my camera. So, Becky and I left Portland Thursday evening, drove an hour and a half to the trailhead, hiked about 3.5 miles, and gained roughly 1500 feet to reach our camp. It was an excellent hike. We started below treeline in the fog. But as we walked higher, we came out of the trees and above the clouds. We could see the stars and the silhouettes of the mountains around us. At about 9:30pm, we set up camp on a narrow ridge. And we stargazed for a bit. I experimented with the camera and was able to get photos of the Milky Way and city lights. After a short night of sleep, we got up at 5:00am to prep for the morning. And our hard work paid off because we caught an incredible sunrise!


Over the next couple of weeks, I'll share photos of our trip. This first photo, above, was taken late at night. We were able to capture the stars above the Portland Metro Area from our campsite.


This Week's Articles


Less than 11% of people with federal student debt are repaying their loans during COVID (CNBC) - Of the 42 million borrowers inside the federal student loan program, only 4.6 million are paying down their debts. This concerns me for three reasons.


First, the government suspended required payments and interest through the end of this year for federal student loans. When a borrower repays a loan, a portion of that payment goes to principal, and another part goes to interest. Early in the loan's repayment, the amount of the payment going toward interest is significant. And later in the repayment schedule, the majority of the monthly installment is going to the principal. Either way, an amount goes to the cost of borrowing money, interest. If borrowers can continue to pay the amount of their original payment before COVID, then a more significant portion of those funds would pay down the principal. None of the installment would go toward paying interest (assuming there is no accrued interest on the loans in question), and all of it would go to paying down the debt faster. Paying down student loans during the administrative forbearance period will result in debts being paid down sooner with less capital devoted to interest payments. Many borrowers are not taking advantage of this benefit. So, I am afraid that a certain percentage of borrowers are unaware about the best ways to manage debt and achieve long-term financial sustainability goals.


Second, it concerns me only 11% of people with student debt are paying down their loans because many folks are not proactively managing their personal finances. Holders of federal debt were automatically placed into administrative forbearance. Borrowers would need to consciously take action to make the most of zero-interest payments. I am afraid a portion of folks are not meaningfully engaged in managing their financial life.


Third. I am concerned about the number of people who have no choice but not to pay their loans because they suffer from less income and financial hardship. If 89% or even 50% of students cannot make payments due to the lack of employment opportunities, our economy has a way to go before fully recovering.

Fed's Kaplan rejects adding to QE, eyes eventual taper (Reuters) - I try to consciously share many articles about the Federal Reserve because it is a very influential, but hardly understood institution. Mr. Kaplan is a member of the committee tasked with managing a vital tool for setting the supply of money. Although his opinions are in the minority, he believes the Fed will need to tighten the money supply sooner than most anticipate. Although I am skeptical the Fed will be able to constrict the money supply (and thus increase interest rates) any time within the next 12 months, I agree with his statement. Mr. Kaplan stated, "I don't think it's healthy for the markets to be addicted, or too reliant, on Fed presence ... it engenders fragilities." Students of economics understand policy actions have intended and unintended consequences. The unintended consequences of prolonged central bank interference in the market could go beyond the economy. I don't know if this is what Kaplan is speaking to, but I sure would like to hear his thoughts on what those fragilities may be.


Chart of the Month - Issues to Consider When Starting a New Job / Planning Open Enrollment

When you start a new job, this shift can come with several changes that might impact your financial situation both positively and negatively. The same is true if you are planning open enrollment. New health plans and benefits may be available. And I find it useful for folks each year to use the open enrollment period as a way to reevaluate your job's income, benefits, and retirement plan. Use this checklist to review the potential impact of a job change or enrollment options such as:

  • Cash Flow and Income

  • Employee Benefits

  • Retirement Plans and Deferred Compensation

  • Taxes

  • Non-compete or other job restrictions

Financial planning can help you make the most of life's transitions.



 

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