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Afford Anything | Get Smarter With Money
First Friday: The Strange Economics of Feeling Poor While Spending More Description:
00:43:21
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Welcome to the last first Friday of 2025. On this show, we either interview guests or we answer questions from you. But there's one exception, and that's the first Friday of every month when we pause to take a look at the economy and the world around us to understand money at the macro level. Welcome to the December 2025 First Friday episode of the Afford Anything podcast. This is the show that knows you can afford anything, not everything. And we cover five pillars. Financial, psychology, increasing your income, investing, real estate, and entrepreneurship. I'm your host, Paula Pan. Let's kick off the last first Friday of the year with the topic that's on everyone's mind. Spotify Wrapped. That's right, Spotify Wrapped is out. And there are two shocking revelations. One is that they will guess your age based on the type of music you listen to, which is how I know that I have the musical tastes of a 70 year old. But more applicable to this podcast, Spotify also does a Wrapped for podcasters in which we can see what other podcasts our audience listens to. So if you're part of the Afford Anything community, which of course you are, what other podcasts do your fellow community members enjoy? And the results actually surprise me. Steve, can we go? Can we get a drum roll? Because we're gonna go from five to one in reverse order of the top five shows that people who listen to Afford Anything also listen to. Number five, the Dave Ramsey Show. Number four, Money for Couples with Ramit Sethi. Number three, choose Fi. Number two, Diary of a CEO with Stephen Bartlett. And the number one podcast listened to by members of the Afford Anything community. Extra drum roll please.
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Joe Rogan. We are ending 2025 with two pieces of knowledge. This is a community of Joe Rogan fans, and my musical tastes are old enough to almost qualify for required minimum distributions. Let's talk about the actual economy, starting with the jobs report, or lack thereof, just for review, because things have gotten a little weird. Normally, the Bureau of Labor Statistics, the bls, typically puts out a jobs report on the first Friday of every month, which is the reason that we do these monthly economic updates on this day. But the last couple of months have been different. On the heels of the government shutdown, plus a big shakeup at the BLS at the top level, here's what we know. In August, we lost jobs. In September, we gained jobs. In October, we dunno. And in November, we still don't know. The BLS did not put out a monthly jobs report today, so we are left to rely on data from Private payroll processors leading with a particular payroll processor called adp. Theirs is the biggest, and therefore, in the absence of BLS data, theirs is the second best choice. As to why we don't have a BLS report today, the agency was forced to delay the release until December 16th. So mark your calendars. December 16th because of the lingering effects of the shutdown. So we are never going to know what the monthly jobs data for the month of October was? That will forever be a mystery. We will eventually learn the November information, but we're not going to find out until December 16th. And what makes that date notable is that the next time that the Federal Reserve is going to meet is December 9th and 10th. So the next Fed meeting where they are going to make a decision about interest rates is going to happen before we get the BLS data. And if you're wondering, hey, why don't they just reschedule the meeting? It's a procedural thing. The Fed, before the year begins, announces their meeting dates. The Fed meets eight times a year. The December 910 meeting has been on the books for a long time. It's been on the books since last year. So the Fed is going to go ahead with their December 9th and 10th meeting, but they will not have any official BLS jobs data for either the month of October or the month of November at the time that they meet, which means they're going to be making an interest rate decision with limited knowledge. What makes this all unusual is that this is the first time in 12 years that a jobs report was delayed. And it's the first time ever that a month of household data referring to October will be entirely missed. During the last government shutdown in 2018. 2019. The BLS did not suspend its activities during the 2018-2019 shutdown. It continued to release the employment situation report, the jobs report, as normal. Okay, what did the ADP report say? Adp, which is a payroll processor, and they're looking purely at their own clients and they only have private sector clients. So the ADP report does not reflect any public sector information. But the ADP report for the month of November shows a loss of 32,000 jobs. This most significantly came from small businesses. This is the largest job drop in more than two and a half years. The ADP report showed that hiring in November was particularly weak in the fields of professional and business services, information, construction and manufacturing. And going back to highlighting that the bulk of this drop came from small businesses, defined as businesses with 49 or fewer employees. That category, small business, was the only category that dropped mid sized businesses, which are between 50 to 499 employees, and large businesses, which is 500 or more employees. Those two categories both grew, but the job losses among small businesses were significant enough that those losses offset the growth in midsize and large companies to such an extent that it led to net job loss. And that's particularly bad news for small businesses when you think about the fact that every job loss in a small business, when you're talking about a company with 49 or fewer employees, is proportionately a bigger share of that workforce. So it reflects that small businesses are disproportionately hurting, not just in raw numbers, but in impact to workforce. Now if we zoom out and look at the last three to six months of data from adp, we can see that job creation has been flat during the second half of 2025. And an analysis from the Economic Policy Institute, which uses a three month moving average, shows that ADP employment has dipped below zero for the first time since the pandemic. Running that same analysis on BLS data through September shows a similar slowdown. Now, I mentioned December 9th as the day that the Fed is going to meet, the first of two days that the Fed is going to meet. But there's another big thing that's going to happen on December 9th as well, and that is that the BLS is going to release data for September and October for what's called the Job Openings and Labor Turnover Survey, also known as jolts. Right now, the latest JOLTS data that we have only dates back to August, and it's December. We're a bit behind the curve there. Now, JOLTS data is different from the jobs report because JOLTS data is intended to provide insights into job openings and layoffs, whereas the jobs report is a snapshot of employment. So they're related, but they're distinct. In the absence of any data from the BLS that is more recent than August, we again turn to the private sector and we can look at data from Indeed.com, which in disclosure is one of the sponsors of this podcast. So we can look to INDEED for data on job postings, and we can look to a company called Challenger, Gray and Christmas for data on job cuts. So between those two sources of private sector data, we have at least a proxy for job openings and job cuts. Now, what we see from indeed, when we look at new job postings is pretty much a flat line. We see very little change. When we look to Challenger, Gray and Christmas, we see quite a bit of volatility but when we average that out into three month moving averages, we see a very slow rise in job cuts. What we can surmise from that is that the reason that the unemployment rate has been able to stay historically low is in the past year, even though hiring has been depressed, is because layoffs have also been pretty low. In other words, everyone's staying in their job, no one's getting fired, but no one new is getting hired. Which is why youth unemployment in particular the 16 to 24 age cohort, is above 10% overall. In fact, unemployment for people with a bachelor's degree between the ages of 20 to 24, non students, I should say graduates with a bachelor's degree between the ages of 20 to 24 is over 9%. What we see is a stagnant job economy. Unemployment overall is low because people are not getting fired, but people are also not getting hired. And when you have a situation where you don't have new job openings and you don't have new people getting hired, well, you, what that means is you largely don't have space for the newcomers, which are youth people under 24. So that's where we see the unemployment really peak. So that's a snapshot of what we know and more significantly, what we don't know about the current jobs market. We are currently in a situation where we have more questions than answers. And in the absence of recent data, we have proxies and guesswork that's going to make the Fed's job on December 9 and 10 quite difficult and quite controversial. Speaking of that, the big question on everyone's mind, is the Fed going to lower interest rates? Investors are currently betting yes, with CME Fed watch showing an 87 to 89% probability that, yes, the Fed is expected to cut interest rates by another quarter point at their December 9th and 10th meeting. There are, however, according to Morningstar, analysts who believe that that probability might be overstating the case because there have been public comments made by members of the Fed's Open Market Committee that show an unusual degree of division among the Fed's voting members. Some have spoken publicly in support of further rate cuts in order to help bolster jobs, while others have spoken publicly about the fact that we are still hovering above the Fed's 2% target inflation rate. Now, as we've mentioned in previous First Friday episodes, historically the Fed would always speak with one voice, publicly at least. They would want to have the public appearance of all being in agreement and in lockstep with one another. This is a culture inside of the Fed that started during the Alan Greenspan years and that has persisted until now. Now that culture is shifting and the Fed is more publicly expressing dissent and differences of opinion amongst its members, which has not happened since the Volcker years of the early 1980s, which is fitting because that was the last time that inflation was high. So if the Fed does cut rates by another quarter point, that would bring the target federal funds rate to a range of between 3.5 to 3.75%. What does that mean for mortgage interest rates? It depends on what the ten year treasury does. But what we know is that right now, according to Bankrate, the weekly national average on a 30 year fixed mortgage is 6.27%. Assuming that a reduction in the federal funds rate impacts the 10 year treasury in the way that home buyers hope it does, it might mean, maybe, and this is speculative, it might mean that mortgage rates could dip below 6%, just, just a hair below 6% for the first time in a long time. According to the national association of Realtors, once mortgage rates drop below 6%, which they predict will happen in spring of 2026, that could drive home sales up by 14. The NAR estimates predict 14% in 2026 if rates drop below that 6% sweet spot. This is because at that rate, a median priced home becomes affordable for 5.5 million more households. And NAR estimates that 10% of those or 550,000 households would buy a home over the next 12 to 18 months. That's how that number was calculated. But going back to the question of what's the Fed going to do? You know, the Fed has a dual mandate of keeping inflation in check and to promote maximum employment. And the Fed's own Beige Book, which they publish eight times a year. This is a qualitative report filled with lots of anecdotal information on the current economic snapshot. They call it beige because the COVID used to be red, but they actually changed the color of the COVID to beige because they wanted to downplay its importance. They figure people pay attention to reports that have a red cover. They don't pay as much attention to reports that have a beige cover. And so that's how this report became known, first colloquially and now officially on their website as the Beige Book. The Beige Book has contributions from all of these regional Fed banks. So the Fed is divided into 12 districts that cover the nation, which is why you'll hear people talk about the Fed bank of Boston, the Fed bank of Cleveland, the Fed bank of Atlanta, of St. Louis, of Kansas City, of Minneapolis, There are 12 of these in total, and all of them contribute to the Beige Book, and they gather anecdotal and qualitative experiences from each region. And in the latest report, around half of the districts talked about weakened labor demand, and a quarter of the districts, New York, Dallas and Minneapolis, reported slight declines in payrolls. So not not only are there fewer jobs, but people are getting paid less. Again, the Fed is really trying to downplay the importance of this, which is why they colored it beige. But when you take this in conjunction with the ADP report, in conjunction with data from Indeed and Challenger Gray and Christmas, when you put all of this together, it paints a picture of confidence that the Fed is probably going to lower interest rates. So we have that to look forward to. We're going to pause to hear from the sponsors who make the show possible. When we return, we're going to talk about the holiday season, holiday shopping, holiday spending. What do the numbers say? How are consumers feeling and how does that jive with consumer sentiment? We're going to cover all of that next.
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Kevin Harlan here. Tonight, the NBA on Prime crew and I are back with another spectacular NBA doubleheader. The action starts with one of the best rivalries in sports as Luka Doncic and the Los Angeles Lakers take on the Boston Celtics with Jaylen Brown. Then Cooper Flag and the Mavs take on SGA and the Oklahoma City Thunder. It all comes your way tonight on prime. And if you're not a Prime member, that's not a problem. Sign up for a free 30 day trial to get started today. The Lakers and Celtics. The Mavs and Thunder coverage starts tonight at 6:30pm Eastern only on Prime. Restrictions apply. See Amazon.com amazonprime for details.
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This year, give a gift that goes far beyond the moment. An Invest529 account. Whether it's a child, grandchild or someone just starting out, you're helping them save for education that can open doors for a lifetime. Invest529 is a tax advantaged way to help save for college, trade school or even apprenticeship programs. It's flexible, easy to start, and you can contribute any amount, big or small, because the money can grow tax free. It's a gift that can really build value over time. So instead of giving something that gets used up or set aside, give the gift that can change a Life. Start an Invest529 account today. Go to invest529.com to learn more and get started. Investments involve risk. Results vary. Consult with your financial and tax professionals administered by Commonwealth Savers Plan.
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You know, when you're a kid, you dream about.
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Being an astronaut or working with wildlife or all these cool things. And then when you grow up, you think about not just what you want to do, but also you think about this other layer to it which is how do I want to impact the world? What legacy do I want to leave behind and how do I want to do that through my work? For a lot of people, that's when you start dreaming about owning your own business. But to do that, you're going to need a website, a payment system, a logo, a way to find new customers. And that can be really overwhelming. And it's a big workload. That's where today's sponsor Shopify comes in. Shopify is the commerce platform behind millions of businesses around the world and 10% of all e commerce in the US ranging from household names like Mattel and Gymshark to brands that are just getting started. If you need a website, Shopify's got you from the get go. With beautiful ready to go templates.
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You can get help with everyday tasks.
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Like writing product descriptions, generating discount codes. Shopify can help you find your customers with easy to run email and social media campaigns and they have award winning 24. 7 customer support. Turn those dreams into and give them the best shot at success with Shopify. Sign up for your 1 month $1 per month trial period and start selling today at shopify.com Paula go to shopify.com Paula shopify.com Paula.
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Let's take a look at some holiday sales stats. So shoppers spent a record 11.8 billion online on Black Friday according to Adobe analytics. That's up 9.1% from last year. So one of the questions that I got, and I thought this was an excellent question, is to what extent when we report rises in holiday spending, to what extent are these real inflation adjusted numbers versus to what extent are we just talking about more money is being spent because everything's more expensive than last year? In other words, is an uptick in sales simply a reflection of inflation or rather than a reflection of an actual increase in consumer spending? And there's some mixed data. So according to Adobe analytics, with shoppers spending 9.1% more than they did last year, that is actual real increase, specifically on Black Friday itself. But in terms of what is projected, and again this is just an expectation, we'll have to see how the numbers play out in terms of what is projected across this holiday season. And the holiday season is demarcated as all sales that take place in November and December Last year people spend 976 billion. And this year the expectation, according to the National Retail Federation, the expectation is that holiday shopping is expected to top 1 trillion. That means sales growth of between 3.7 to 4.2%.
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Now, our trailing twelve month inflation for the twelve month period ending in September was 3%. So with sales growth of between 3.7-to 4.2, sales are still ticking up slightly, but not a ton. The other really interesting thing about the holiday spending stats is that the average household is actually expected to spend less. Last year the average household spent $902 on the holiday season. This year the average household is expected to spend only $890.
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So in nominal dollars, that's a $12 decrease. And it's actually more when you factor for inflation, more of a decrease. So then the obvious question is, okay, well if people, if the average household is spending less, then how is it that holiday shopping is expected to increase? It's because more households are participating in the holiday season. Last year, 183.4 million people participated in holiday spending. And holiday spending, by the way, is defined as spending on gifts, on candy, on decorations, and on holiday related food. So last year it was 183.4 million people. This year it's expected to be 186.9 million people people. All of these stats come from the National Retail Federation. So more people are participating in the holidays, but they're spending less money on average. And this actually tracks with consumer confidence data. As if you listen to first Friday episodes regularly. You know that we've been tracking the Consumer Sentiment Index from the University of Michigan throughout the year. And the University of Michigan's November consumer sentiment Data is the second lowest on record. It is just above the June 2022 low, meaning consumer sentiment is in the toilet. Consumers are pessimistic. And actually, if you look at the performance of retail stocks in 2025, this actually reflects that same story. Look at stocks in the consumer discretionary sector and the consumer staples sector. Those stocks are relatively flat. So the iShares US Consumer Discretionary ETF is up 6.4% year to date as of November 26th. And the iShares US Consumer Staples ETF is up 7.2% year to date. Those numbers might sound good on the surface, but compare that to the s and P500, which is up 17.3% year to date. Now, all of that is as of November 26th. That's a long and detailed way of saying that the consumer discretionary sector and the consumer staples sector, both of which represent retail spending, are lagging the overall economy. They're both significantly lagging the S&P 500 as a whole. But if you look inside of that, there's an exception. And the exception is discount chains. Dollar General is up 44% year to date and Dollar Tree is up 47% year to date. Those discount chains are outperforming the overall economy. And that basket of facts tells a very similar story to the University of Michigan Consumer Sentiment Index. Consumers are pessimistic. They're not spending as much on the holidays and the stock prices of discount chains are going up. While retail spending as a whole is flatlining relative to the overall economy, it's underperforming. Now, we do also see some growth in the very highest end of high end luxury, which indicates, as our former guest Peter Atwater talks about, a K shaped distribution. There's a bifurcated distribution in which the wealthiest consumers are spending. And deal hunters and bargain hunters, the discount store crowd, they're also spending. But there's a wide swath in the middle that's not, take a look at Target stock price, it is Christmas red. Take a look even at fast casual chains like Cava or Chipotle, they're down significantly year to date. So it's that middle market consumer that's pulling back. While the extreme ends of both luxury and discount, that's where we're seeing growth. Another thing is happening on the topic of holiday spending. People are starting to shop. Earlier and earlier I mentioned that the formal official definition of holiday spending for tracking purposes is any spending that happens in November and December. But nearly half of shoppers who were surveyed by the NRF, 42% to be specific, say that they are browsing and buying prior to November. So October, and we're beginning to see retailers start to react. And Amazon is the most major example. Amazon created a discount window called Prime Big Deal Days in which they offered discounts that peaked at 18%. And they scheduled that for October 7th and 8th, essentially targeting the early holiday wave. From a retail perspective, you might regard that as the unofficial start of the holiday season, stretching the discounts all the way back to early October. But with that said, according to an NRF survey Of more than 8,000 households, even though people are 42% of respondents are browsing and buying in October, 63% still plan to do the majority of their shopping over the traditional holiday weekend, Black Friday. Through the end of Cyber week. This year, 130 million people shopped on Black Friday. About half of that 67 million shopped on Small Business Saturday, and about half of that 38 million shopped on Sunday. And 76 million people shopped on Cyber Monday. Cyber Monday, by the way, really blew it out of the water this year in a few ways. A couple ways that were particularly notable. One is mobile spending, which is up 7.2% year over year. This is according to Adobe Analytics. The other is AI assisted spending. We'll talk more about that in just a moment. And then the third is Buy Now Pay Later. This year, across the month of November, Buy Now Pay later spend topped 10.1 billion, and that's up 9% year over year. All in all, consumers spent 14.25 billion on cyber Monday. That was actually up from initial projections of 14.2 billion. That's an increase of 7.1% year over year. Hottest categories are electronics and apparel, and hottest toys are Libu Boo, Lego's, Nintendo K, Pop, Demon Hunters, Manga Tiles, DIY Craft kits, Play DOH sets, Miss Rachel Learning Toys, Nerf Guns, Paw Patrol, Fisher Price, Little People, and a huge variety of gaming consoles. Okay, so back to AI assisted spending. More than half of survey respondents used AI for tasks like finding gift ideas for others, finding the best prices, spotting sales, and tracking price drops. People used AI to curate product ideas, to analyze reviews, and even to use AI agents that could call local stores to check on inventory to see if something's still in stock. People also used agentic AI to automatically buy items when prices drop. And then, of course, AI provides personalized recommendations. Surveyed consumers reported that AI made shopping a lot easier. It became easier to manage their budget, to research and compare options. And most shoppers stated that AI helped them feel more in control. So there's some good news in tech innovation for smarter shopping. It's interesting, AI is sort of the good news story, and then Buy now, pay later is a bit of the concerning news story. So there's a little bit of sun and a little bit of cloud. Overall, According to Salesforce, 22% of global sales during Cyber Week were influenced by AI. There was also another survey, this survey was done by Visa that showed that more than one in four shoppers, 28%, said they would be excited to receive cryptocurrency as a gift. And that number jumps to 45% if you're narrowing the results just to Gen Z. Gen Z is also more likely than other age groups, at 44% more likely to use cryptocurrency in order to make purchases again. That is, according to survey results released by Visa. One last note before we shift gears. And this is another piece of great news. We don't yet have final confirmed numbers for Giving Tuesday, which is one of the biggest charitable giving days of the year. But the estimates, the early unconfirmed estimates, are predicting $4.01 billion in donations in the U.S. and if that estimate does in fact get confirmed, if that is true, then that would be an 11% increase over 2024, significantly higher than what could be explained by inflation alone and notably significantly higher than even the increase in retail spending. Despite widespread consumer pessimism, despite consumer sentiment being at its lowest point two and a half years, we are still spending, but we're giving even more, or specifically we are giving at a higher increased rate. So that's a note of good news. All right, we're going to take one final break to hear from the sponsors who make this show come alive. And when we return, we'll end with some advice, things that you should remember to do for your personal finances before the end of the year.
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You know, when I was a kid.
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I remember on Christmas morning I got lots of toys, lots of books, lots of clothes, gifts. The books were always my favorite. I'd spent all of Christmas day just.
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Reading and reading and reading.
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But, you know, none of those are things that I have anymore. They were wonderful in the moment, but decades later, I have no idea where any of those things went. But by contrast, when you give a gift that brings somebody financial security, that's something that lasts a lifetime. Now, when it comes to financial security, nearly half of American adults say that if they lost their profits primary income earner, they would suffer financial hardship within six months. And so if you want to secure your future before the new year begins, lock in your life insurance today. Because that's something that you don't buy for yourself, you buy it for your loved ones.
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You buy it so that in the.
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Event that the worst were to happen, your loved ones would have some financial security. Policygenius helps you find your most affordable policy that meets your needs. They answer questions, handle paperwork. Their licensed team helps you find what you need in terms of coverage, amounts, prices, terms. They have thousands of five star reviews on Google and Trustpilot. With Policygenius, real users have gotten 20 year $2 million policies for just $53 a month. Don't wait until next year. Give your family the gift of security today with Policygenius. Head to Policygenius.com to compare life insurance quotes from top companies and see how much you could save that's policygenius.com.
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If.
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You'Re someone who's been meaning to get a real handle on your retirement plan, I want to point you to something that I think is genuinely worth your time. Bolden It's a modern retirement planning tool that takes all the confusion out of figuring out your financial future. So most calculators give you a quick estimate and call it a day. Bolden goes way deeper. You can model different scenarios, test real choices and and see exactly how things like saving more, retiring earlier, or adjusting Social Security timing impact your plan. Bolden doesn't just give you numbers, it's visual. It can give you clarity and helps.
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Make it easy to get real answers.
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Without needing to hire a financial planner. I've looked into what they're building and it's one of the smartest, most accessible tools out there to help you take control of your retirement plan. One thing I like about them is the the dashboard is really easy to see at a glance. You see your projected net worth, you see your current net worth, you see your chance of retirement success.
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It's like At a Glance gives you.
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A ton of information and you can look at the effect of taxes, state modeling, depending on where you might live. You can look at the impact of Medicare and long term care and calculate the what ifs. So if you want a simple way to get confident about your Future, check out go.bolden.com.
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That'S go.B-O-L-I-N.com afford go take a look. It could make a big difference in how you think about your financial future. Bolden is for informational and education purposes only and does not constitute investment advice.
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It's time for Cyber Monday Dell Technologies biggest sale of the year. Enjoy the lowest prices of the year on select PCs like the Dell 16.
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Plus featuring Intel Core Ultra processors and with built in advanced features, it's the.
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PC that helps you do more faster plus earn Dell rewards and enjoy many other benefits like free shipping, price match, guarantee and expert support. They also have huge deals on accessories that pair perfectly with your Dell PC and make perfect gifts for everyone on your list. Shop now@dell.com deals.
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Welcome back. We're going to close with money advice and let's start since we've been talking about shopping with my number one piece of advice about how to be a smart shopper during the holiday season because it is tempting to chase holiday deals but often deal chasing leads to spending more than we otherwise would have and so the key question to ask yourself is would I buy this at full price anyway, and this is one area in which past performance really is indicative of future results. Is this a product or service that you already use regularly? If so, and if it's non perishable or it has long times until its expiration date, then yeah, it's worth stocking up on. It's a great time to get deals on Sunblock because it's off season. It's a product that expires, but usually there are two to three years before expiry dates. But still retailers want to move inventory because they don't want to be creeping closer to that expiration date. So you've got a product with a long timeline before expiration, but that still does expire. So retailers want to move it. And it's off season and you've got holiday deals Stock up on Sunblock this is the time unless hello to my listeners who are in Australia, New Zealand or in the Southern Hemisphere. I realize this is peak summer for you, so you will also want to stock up on Sunblock, but for a different reason. It's because now is when you need it the most. But anyway, coming off of my Sunblock soapbox, say that five times fast. Let's shift our focus to year end financial moves. The good news is you do not need to max out your IRA prior to the end of the year. You need to make sure the account is open prior to the end of the year, but you have until the tax deadline of next year to fund it retroactively for the 2025 tax year. If you don't have the cash on hand to max out your contributions, you don't have to stress you've got some time, but make sure the accounts are open. If you have a flexible spending account, an fsa, remember that flex spending accounts are use it or lose it. Let me take a moment here just to explain the difference between an FFSA and an HSA, because these are frequently confused. Both FSAs and HSAs are accounts that relate to spending on medical treatment or medical issues, and given that the acronyms are only one letter apart, people often conflate the two. But they are very different. An FSA is a flex spending account. The goal is to spend the money, and that's why it's use it or lose it. Unspent funds typically do not roll over into the next year, which means if you don't spend it, you lose it. An hsa, by contrast, is a health savings account. It is meant to be saved and invested, and many people like myself actually just use it as a supplemental retirement account. I don't even think of it mentally as anything associated with medical expenses. I have mentally bucketed this as an extra retirement account. In any event, in the context of things that you should be thinking about prior to the end of the year, check your specific FSA policy to find out when the deadline is. Every workplace is different, but for many workplaces, December 31st is going to be that deadline and any unspent funds are going to disappear. But obviously check the specifics of your particular plan to find out when your particular deadline is, because results may vary. This might be a good time for tax loss harvesting. If you want to sell some of your investments at a loss in order to offset capital gains from other sales, you've got until the end of the year to do so. If you have money in a taxable brokerage account, remember that your dividends and interest are subject to taxation for the year 2025, right? The dividends and interest that you earn in a taxable brokerage account gets taxed in the year that it's received into that account, even if you yourself have not pulled the money out of the account. In other words, even if you have set your account to reinvest the dividends and interest, you will still be taxed on that dividend and interest income. Now, if you only have a small taxable brokerage balance, this is no big deal. I remember when I started investing my tax bill was like $17, you know, and if anything it was just annoying to have to fill out some paper, you know, track the paperwork. But of course the bigger that taxable brokerage balance becomes, the hopefully the more dividend and interest to income you earn and it starts to become, over time, starts to become real money. So this is a good time of year to talk to a tax professional, do a look over of all of your investment balances, and have a conversation with your tax advisor about any tax loss harvesting that you might want to do. There are a few other year end financial moves to think about. One is of course, charitable giving. I strongly recommend setting up a donor advised fund. Mine is at Schwab. And the beauty of a donor advised fund is that you can, among other things, you can transfer appreciated stock into it. You can also make your cash donation into it. So you've got some flexibility in how that's handled. And then once money is inside your donor advised fund, you can invest it and it can continue to grow. And so in the years that it's doing well, you can distribute some of those gains. But in the years that it's doing badly, you don't have to unless you want to. You don't have to necessarily make a distribution. And so by managing investments inside of a donor advised fund, you can take a basket of money and allow it to grow over time, therefore increasing the total amount of your lifetime charitable gifts. Assuming of course, that the investments go well, assuming that the economy in the future performs historically in the way that it has in the last hundred years. If you have a foundation, and I know there are probably a few of you who are listening to this going like, are you kidding? We don't have a what, a what. But it's actually quite common for individuals or households to start a foundation. So if you do have a private family foundation, then remember before the end of the year you will likely need to make a year end distribution. Because the IRS mandates what they call the minimum distribution requirement. And it's a 5% requirement that states that a private family foundation must pay out at least 5% of its average net assets for charitable purposes by the end of the year. But they give you a one year grace period. So technically it's by the end of the following year. But the rule is that you must distribute at least 5% of the fair market value of your net investment assets averaged over the prior year. That is something you'll want to keep in mind. And of course, anyone, you don't necessarily need a donor advised fund or a private family foundation. Anyone can give to charity. And if you itemize, then this can provide a tax deduction. Also, if you are 70 and a half or older, which by the way, my Spotify musical age is 70, so I guess I'm right at this threshold in terms of my musical preferences. But if you are 70 and a half or older, you can make what's called a QCD, a qualified charitable distribution from your IRA and that can count towards your RMD, your required minimum distribution. This year the limit for QCDS is $108,000. So there's a lot of room there to be able to make charitable distributions. Finally, on the topic of giving, if you are planning on giving a gift to someone, you can gift up to $19,000 per recipient in 2025 without triggering gift tax reporting requirements. And if you're married, that's per person. So if you're married, that's 38,000. This is use it or lose it so it doesn't carry over to future years. So if you do want to give somebody a gift without triggering any gift tax reporting, you have until the end of the year to do it. Oh, by the way, there's one other thing that I want to note. I mentioned at the beginning of this section that your deadline for IRA contributions is not until the tax deadline of 2026, right? So you don't need to stress out. As long as the account's open, you have until the tax deadline in April of 2026 to make contributions that would apply to tax year 2025 into your Iraq. So you're good there. But remember, for workplace retirement contributions, 401 s, 403 b's, the deadline is December 31st.
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And by the way, that's true both for W2 employees and for self employed people. So if you're self employed and you have a solo 401k, the deadline for employee contributions is December 31st. But because you are your own employer, you can still make employer contributions up until your business's tax filing deadline in 2026. And then of course, if you're W2 and you are making contributions through payroll deductions, that deadline is December 31st. And I realize I mentioned HSAs earlier, but I didn't mention the deadline there either, did I? The deadline to contribute to an HSA is April of 2026, the April tax filing deadline. So don't stress out about IRA or HSA contributions. You've got a few more months to do that. Do make sure that all of the money that you want to put into a workplace retirement plan from the employee side, make sure that that gets in there by December 31st. Oh, and then on the topic of self employed people, one final tip. This is a good time to Depending on how much you made this year and how much you think you're going to make next year, you might want to defer some income. So if you're billing clients or collecting payment for services, you know, if you've got freelance income, you might want to consider not billing until January. If you think that you're going to be in a lower tax bracket next year than you will be this year or the reverse might be true. If you suspect that you're going to be in a higher tax bracket next year, then you might want to pressure your clients to pay early so that you can book that revenue into this year. Those are year end financial moves. Happy December everyone. Merry Christmas, Happy Hanukkah, Happy Holidays. I hope you have an incredible December. Thank you so much for being part of the Afford Anything community. If you want to connect with other people, head to affordanything.com community it's totally free and you can talk to like minded people about retirement, tax planning, investing, paying off debt, setting financial goals for the new year. You can talk to like minded people about all of these topics. Affordanything.com community to join our community and it's totally free and it's on a platform that is off of social media so you won't be distracted by the pings of social Again, that's affordanything.com community. We also have a newsletter where we share tips, insights, ideas that you won't find anywhere else. To read that totally free, go to affordanything.com newsletter. That's affordanything. Com newsletter. Thank you so much for being part of this community. This is the Afford Anything podcast. I'm Paula Pant and I'll meet you in the next episode.