14 Critical Financial Results Businesses Have Seen From The Remote Work Movement

What started out as a necessity has turned into a way of life for many: remote work. Over two years after the start of the Covid-19 pandemic and the subsequent shift to remote work, experts are starting to see some of the financial implications of moving work out of the traditional office setting.

While results are largely promising and several experts point to various ways remote work has helped businesses financially, the members of Forbes Finance Council have been observing both positive and negative financial trends among businesses newly engaged in remote work. Below, 14 of them share some key financial results they’ve observed for companies that have switched to remote work and why these insights should matter to every business leader.

1. Companies Are Paying Compliance Fines

While financial implications are usually positive, we’re actually seeing challenges caused by remote work—specifically, around monitoring communications for compliance purposes. With the move to remote work, compliance staff were basically left blind as to what is going on in their organizations. Those organizations that didn’t adapt fast enough are now receiving regulatory fines of $200 million and up. – Shiran Weitzman, Shield

2. Companies Are Spending Money To Improve Communication Applications

When an organization is considering remote work options, thought must be given to maximizing communication efforts. Before making the switch, measure the tradeoff. Yes, you are likely able to recognize cost savings in certain areas, but where do you need to spend to improve your communication applications to maintain efficiencies? – Kacey Butcher, Adaptation Financial

3. Industries That Require In-Person Training Are Struggling To Maintain Productivity

Remote work is not helpful or workable in a growing number of industries that require training younger employees to be experts in their fields. It’s hard to train new lawyers and accountants on how to do their jobs if they can’t work alongside someone and learn how it works. This lowers productivity and impedes the ability to replenish the workforce, which ultimately impacts profitability. – John Ward, Bridge Investment Group

4. Struggles With Customer Service Are Causing Some Companies To Lose Business

While some companies have made the transition seamlessly, others have failed miserably. We have moved our bank accounts and our P&C brokers. Both are big names in their respective industries. It feels like there is a lack of supervision. I have waited days for a return call for basic services. Companies that can operate remotely and still provide excellent service thrive during this new period. – Michael Seltzer, Vérité Group, LLC

5. Remote Work Culture Can Get Watered Down

Culture is defined as the values, ideas, attitudes and goals that characterize a firm. Firms work extremely hard at developing a great culture. If there is a large contingency of employees always working remotely, a firm’s culture can get watered down. This can have a ripple effect throughout the organization. – DeLynn Zell, Bridgeworth Wealth Management

6. There Are Hidden Costs In Maintaining A Strong Culture

A fully remote business requires a strong company culture to ensure a sense of purpose and shared passion for your employees. While the overhead costs might be lower with a remote team, it is vital to consider the hidden costs of maintaining a strong culture while working remotely and investing in technological changes and employees’ future prosperity, retraining and role in the community. – Peter Goldstein, Exchange Listing LLC

7. Managing A Multi-State Workforce Is Challenging

Remote work is not for every company or role, and oversight is important. The biggest impact is the inability, especially in small businesses, to cope with a multi-state workforce. They are not equipped to manage multi-state systems for payroll and benefits and are struggling with remote people management. Seek help on regulatory and personnel management and development matters. – David Kelley, Mailprotector

8. Expenditures On Rent Can Be Significantly Reduced

If work is consistently completed in a timely manner, remote work could provide a potential windfall in expense savings for a business owner. Moving to smaller offices brings down rent costs, as does allowing employees to work from remote locations. In addition, employees saving commute time will be happy to have the flexibility and will feel motivated to be sure their work is done on time, efficiently and accurately. – Christopher Drake, Drake Consulting Group, LLC

9. Companies With Large Office Spaces Are Considering Leasing Or Selling

We might have switched to a “hybrid office,” but in reality, we’re only using about 20% of our office space. That’s a huge financial responsibility for a space we aren’t using to its full capacity anymore. Now, we’re starting to ask ourselves if we should lease or sell our property. That’s a tough decision, but at the end of the day, we need to do what makes sense for the business. – Christopher Hurn, Fountainhead Commercial Capital

10. Remote Work Can Add Complex Tax Implications

A company can get a nasty surprise when its remote workers move to states the company wasn’t registered in. This creates new payroll and income tax exposures. Additionally, some states and cities are still trying to hold onto potential tax revenue, even if the employees no longer work or live there. The short-term result is more tax exposure, fines, paperwork and compliance. – Aaron Spool, Eventus Advisory Group, LLC

11. There’s A Higher Risk Of Costly Data Breaches

A data breach is one of the most significant financial risks that come with remote work. Remote offices still need to maintain data integrity and security, especially during periods of high employee turnover. Files are shared remotely and in different time zones. Confidentiality within a household can’t be verified or secured. Companies that want to shift to remote work must set up data integrity systems first. – Jared Weitz, United Capital Source Inc.

12. Businesses Are Investing More In Cybersecurity

Although business leaders generally expect to cut operating costs by implementing a remote work environment, doing so does require additional investment to enhance cybersecurity measures. Before switching to a remote or hybrid work environment, business leaders and advisors alike must ensure that they have the right tools in place to secure their network while keeping costs in line. – Mara Garcia, Phonexa Holdings, LLC

13. Companies Are Incurring New And Increased Tech Costs

There has been an increased investment in technology and process creation for operational efficiencies. Examples include internal and external communications SaaS products that were previously not present in our business, VO VO +1.7%IP phone systems, messaging systems, video conferencing software, shared digital document storage, and tech equipment, including laptops, headsets and high-speed internet. – Cynthia Hemingway, Fourlane, Inc.

14. Models For The Cost Value Of Production Are Changing

Managing production and the cost value of production in a remote workforce is more difficult than it is within a controlled office environment. Efficiencies in a remote workforce are lower than those in a physical workforce, and this difference is greater within industries that require a high level of collaboration between co-workers. Financial models for the cost value of production have changed. – Joseph Orseno, Tiltify

Source: 14 Critical Financial Results Businesses Have Seen From The Remote Work Movement

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The Single Most Important Thing to Know About Financial Aid: It’s a Sham

 

In early March, a 17-year-old high school senior I’ll call Ethan got a text message from Ursinus College, a small, private liberal arts school located about 45 minutes outside of Philadelphia. It said, “Great news, [Ethan]! Ursinus College has awarded you additional money! Log into your portal to view your updated financial aid award.”

A few days later, Ethan got a letter from Ursinus repeating the same offer. “The Office of Student Financial Aid recently received additional information regarding your application for financial aid and, as a result, a change has been made to your original award,” it said. In December, Ursinus had offered Ethan a “Gateway Scholarship” of $35,000 to offset the college’s listed price of more than $72,000 for tuition, room, and board. Now it had added a “Grizzly Grant” (Ursinus’ mascot is a bear) of $3,500 to the mix.

It was puzzling. Ethan is not financially needy. One of his parents is a nonprofit executive and the other is a public school teacher in suburban Maryland. They own their home outright and earn well over $200,000 per year, putting them comfortably in the top 10 percent of household income nationwide. Ethan’s standardized test scores were good and grades were fine, but mostly not in the kind of rigorous Advance Placement–type classes that are mandatory for admission to selective universities.

All of this was in the application he sent to Ursinus last year, and he hadn’t talked to them since. What “additional information” were they talking about? Meanwhile, Ethan has a cousin who is also a high school senior. I’ll call her Ashley. Her overall academic profile was better than Ethan’s—higher grades and lots of AP courses, somewhat lower SATs. But her economic circumstances were not.

Ashley also lives in Maryland. Her mother, a single parent, dropped out of community college and works in the back office of a local restaurant chain. Her income is well below the median for someone with college-age children, and she has no real financial assets to fall back on.

Yet Ashley wasn’t getting unsolicited text messages offering her more financial aid. Penn State, a public land-grant university that allegedly has a mission to provide broad access to college, had recently sent her a financial aid letter. Like Michael Corleone in The Godfather Part II, their offer was this: nothing. Tuition, room, and board would be $49,200—almost $16,000 more than private Ursinus College wanted to charge her wealthier cousin. To pay, she was welcome to get a job, or take out loans.

Ethan and Ashley were learning a lesson about the way the business of higher education actually works in this country: College financial aid is largely an illusion. Government financial aid is real, if inadequate—federal Pell grants and state appropriations to reduce tuition at public universities definitely exist. But the financial aid purportedly provided by colleges themselves is mostly fiction.

The whole public-facing system of college admissions—in which admissions decisions are based on rigorous academic standards and financial aid is supposedly provided to those who are most academically and financially deserving—is an elaborate stage play meant to flatter privileged families and the reputations of colleges themselves. The real system, hidden behind the scenery, is much closer to the mechanics of pure capitalism, driven by an industry of for-profit consultants and relentlessly focused on the institutional bottom line.

That’s a huge problem for students and parents trying to make expensive, life-changing choices about higher education. Many families make bad decisions based on the misleading vocabulary colleges use around financial aid, leading to broken futures and, increasingly, unaffordable student loans. If you have children and are planning to help them go to college anytime soon, understand this: Much of what colleges are going to tell you about money isn’t true.

There are, to be sure, a few extremely wealthy institutions that really do provide financial aid. If you are among the small number of low-income students that Harvard chooses to admit after filling much of its class with legacies, athletes, and the children of wealth, status, and power, you won’t have to pay tuition. The Ivies and a handful of other elite schools have “need blind” admissions, which means they consider your application regardless of your financial circumstances, and offer generous aid to those who need it.

Parents can also find good, reasonably priced public options in some states, which allow them to avoid the shell games involving financial aid. Public universities in North Carolina remain very affordable, for instance. And some states also provide grants to students that are in fact based on their financial needs or academic achievements.

Tuition and fees for the State University of New York system are relatively low to begin with, roughly $8,000 to $10,000 for in-state students. But the state of New York also runs a state need-based scholarship program that, combined with a federal Pell grant, can be enough to cover tuition and part of room and board.

But if you live in a less generous part of the country and your kids are applying out-of-state, or they have their sights set on a private college without an Ivy League endowment, then you have wandered into a very different kind of market, one that has a lot more in common with airlines hawking seats or dealers selling cars than you might realize.

The language of admissions and financial aid suggests that colleges review every application with two questions in mind: “Does this applicant meet our academic standards? If so, how much scholarship aid, given their financial circumstances and academic merit, do they deserve?”

In reality, the large majority of undergraduates attend a college that accepts most or all applicants. And while the “sticker price” for tuition at some institutions exceeds $50,000, most colleges don’t have enough market power to charge anything close to that. For them, the real concerns are, “How likely is this applicant to enroll, if we accept them? And what’s the most amount of money they’d be willing to pay?”

To answer those questions, many colleges hire expensive consulting firms to help them manage a complex process of marketing, admissions, and pricing. The firms design social media campaigns and produce the flood of glossy brochures that pours through the U.S. postal system every year.

They take the wealth of detailed financial information that parents are required to disclose on the Free Application for Federal Student Aid, or FAFSA, and feed it into the same kinds of complex algorithms that airlines use to constantly change the price of seats in the months, weeks, and days before a flight.

They also use a probabilistic strategy for deciding whom to admit, based on a combination of how much they think parents are willing to pay and how likely students are to enroll. Because of online systems like the Common App, it’s easy for students to apply to many colleges. At less desired colleges—the safety schools and fourth choices—“yield” rates, meaning the percentage of admitted students who enroll, are often below 20 percent.

So they admit 3,000 students to fill a freshman class of 600 and hope that past statistical patterns hold. If too many students enroll, there’s no room in the dorms. Too few, and the college goes broke. The whole process is called “enrollment management.” To understand how important enrollment management is in the higher education industry, look to administrative hierarchy:

Ursinus College, for example, has a director of admissions who reports to a vice president and dean of enrollment management and marketing. When Washington College mailed Ethan three “VIP admission” tickets and an all-access lanyard with his name printed on it for an “Admitted Students Day Music Festival” in April, it was trying to increase its yield.

When one college after another sent Ethan a letter offering him tens of thousands of dollars in scholarship money, in most cases it probably had nothing to do with their evaluation of Ethan’s achievements. It was more likely because market research told them that students like the feeling of being awarded something, and the enrollment management algorithm suggested that full tuition minus $25,000 or $30,000 was a price his parents might be willing to pay.

The Ursinus College Office of Student Financial Services did not receive any additional information regarding Ethan’s application. That was a fib. An Ursinus spokesman confirmed for me that the extra award was based on his original application and “other financial considerations.”

It would not be surprising if those “other financial considerations” included a report from an enrollment management consultant—the firms Ruffalo Noel Levitz and EAB are two of the biggest—showing that acceptance and pricing projections as of early March were looking soft. When colleges find their enrollment numbers lagging, they act like a car dealer with too many of last year’s models on the lot, and put tuition on sale.

Like most colleges, Ursinus’ $72,000 list price is an imaginary number; on average, it charges students only about one-third of that. It is not providing Gateway Scholarships and Grizzly Grants from a pot of actual money. It’s just pretending to, because that’s what students and parents like to hear.

Colleges, unsurprisingly, are shy to discuss the consultants that shape the inner workings of their aid process, and will resort to linguistic contortions when asked about it. When I asked Ursinus whether it awarded its “Grizzly Grants” based on a report from an enrollment management consultant, a spokesman responded that it works “in partnership with a financial aid leveraging firm” and that “we monitor the progress of the first-year class on a routine basis throughout the enrollment cycle.”

A spokesman from Clark University, which tried to entice Ethan with a “$68,000 Robert Goddard Achievement Scholarship,” told me that the school “does not rely on an enrollment management consultant.” Instead, they said, it “occasionally” hires “outside analytical support” that does “not tell us how much aid to offer any student or group of students” but does “crunch large volumes of data in a timely manner that we then use to assess our progress toward our enrollment goals and estimate/project our total aid expenditure through that enrollment cycle.”

So, not an enrollment management consultant. Just, you know, a consultant that helps them manage enrollment. But while schools may not love talking about it, nothing about this system is a secret within higher education. For instance, after taking a job in the enrollment management industry, former Ursinus vice president for enrollment Richard DiFeliciantonio wrote an essay for Inside Higher Ed in which he explained that the “financial aid matrix” colleges rely on is essentially “the same pricing technique taught to M.B.A.s and commonly used by corporations for commercial products.”

He noted that the formula considers a student’s academic achievement mostly as a “proxy” for their willingness to pay for college (as opposed to a measure of merit). This is also why, despite her financial need and solid high school achievement, Ethan’s cousin Ashley was not being inundated with texts and letters offering her more money. As DiFeliciantonio wrote: “Wealthy families are more able and less willing to pay for college while the poorer families are more willing and less able.”

In other words, parents of means who themselves have finished college are often sophisticated consumers of higher education and are able to drive a hard bargain, whereas lower-income, less-educated parents feel an enormous obligation to help their children move farther up the socioeconomic ladder and blindly trust that colleges have their best financial interests at heart. So colleges obey the algorithm and offer more financial aid to the Ethans than to the Ashleys, one of many problems identified in a recent Brookings Institution report.

Ashley submitted financial aid forms with information about her family’s modest income because everyone and everything about the process told her college aid is based on how much money you need, or deserve. She had no idea that information could be used against her. In May, New York University offered her admission if she would agree to delay enrollment until spring 2023—when, maybe not coincidentally, her good-but-not-stellar academic record would not count in the rankings data NYU submits to U.S. News & World Report.

Their price? $79,070. Their aid offer? $0, take it or leave it, with 96 hours to respond. Federal statute limits how much the Department of Education can lend to undergraduates. Freshmen can only borrow $5,500. But there is no limit on how much the department can lend to parents through a program called Parent PLUS. Nor does the department check to see if parents have the means to pay PLUS loans back.

So NYU “offered” Ashley the opportunity to borrow $5,500 and take a $1,500 work-study job. Then it offered Ashley’s mother the chance to take out a $72,099 Parent PLUS loan—more than her gross annual salary, before taxes—for the first of four undergraduate years.

Fortunately for Ashley and her mother, they knew someone who offered sensible financial advice. They turned down NYU and its offer of gargantuan loans and chose a less expensive public university. But as the countless individual stories that compose the nation’s $1.7 trillion student loan crisis show, many families make different choices. They are drawn in by a combination of optimism, blind faith, and familial obligation, and end up with debts they cannot repay. Colleges know this will happen.

Colleges do this because they want and need money. The business of filling up a class has gotten more difficult as the number of new high school graduates continues to recede from the peak millennial years, with further declines expected starting in 2025. Small, private colleges are especially vulnerable, and some have gone bankrupt in recent years.

Understanding the true nature of the college market should reduce some kinds of student stress. If you’re a high school graduate in reasonable academic standing, there are scores of good colleges ready to admit you. The real market tuition price in the big middle of the higher education sector is probably about $25,000, not the $50,000 or $60,000 you might have heard. Applying to college there isn’t like being vetted to join an exclusive social club. Nobody is really judging your worthiness for financial aid. College is just another service with a price.

The words colleges use in the admissions process, embedded in the broader portrayal of higher education in popular culture, tell a different tale, leaving first-generation students with the least money and social capital most vulnerable to exploitation. Colleges are full of great educators who want to help you learn. But when it comes to money, you’re on your own.

By Kevin Carey

Source: College financial aid: It’s a sham that depends on what colleges think families will pay.

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Is This Stock A Better Pick Over Schlumberger?

The shares of Baker Hughes (NASDAQ: BKR) currently trade 50% above pre-Covid levels observed in January 2020 while the shares of its competitor Schlumberger (NYSE: SLB) are up by just 3%. Does that make SLB stock a better pick over BKR? Both companies provide oil field services including drilling & completion and production solutions to upstream oil & gas companies in the U.S. and abroad. Due to lower benchmark price expectations in the long term, SLB and BKR incurred sizable impairment charges in 2020.

However, the recent uptick in the oil benchmark due to strong demand, supply constraints by the OPEC, and economic sanctions on Russia, have increased demand for oil rigs across the world. Given Baker Hughes’s lower financial leverage, comparable topline to Schlumberger, and a low valuation multiple, Trefis believes that the stock is a good pick to realize more gains.

We compare a slew of factors such as historical revenue growth, returns, and valuation multiple in an interactive dashboard analysis, Baker Hughes vs. Schlumberger: With Return Forecast Of 109%, Baker Hughes Is A Better Bet

1. Revenue Growth

Baker Hughes has observed a lower decline in revenues in recent years as compared to Schlumberger. Baker Hughes revenues observed an annual decline of 4% from $22.8 billion in 2018 to $20.5 billion in 2021, whereas Schlumberger reported an annual decline of 11% from $32.8 billion in 2018 to $22.9 billion in 2021. Top line contraction has largely been due to a decline in rig count figures and capital control measures implemented by upstream companies.

  • Schlumberger’s four operating segments, Digital & Integration, Reservoir Performance, Well Construction, and Production Systems contribute 12%, 28%, 36%, and 24% of total revenues, respectively. The uncertain demand environment had persuaded upstream companies to limit capital expenses in the last two years. However, the surge in benchmark prices due to the Russia-Ukraine war has rekindled demand for oil field services – taking worldwide rig count figures from 1,521 in December 2021 to 1,850 at present. Moreover, the company’s digital solutions business is likely to assist margin expansion in the coming years.
  • Baker Hughes’ four operating segments, Oilfield Services, Oilfield Equipment, Turbomachinery & Process Solutions, and Digital Solutions contribute 47%, 12%, 31%, and 10% of total revenues, respectively. The company’s international operations have been assisting the top line in recent times, which observed a 10% contraction from pre-pandemic levels and contributes 80% of total revenues.
  • After reporting relatively flat revenues for FY2021, Baker Hughes and Schlumberger are expected to observe strong growth in FY2022. (related: How Does Schlumberger Make Money?)

2.Returns (Profits)

As both companies incurred sizable impairment charges leading to 25% contraction of the balance sheet, we compare their cash generation capabilities. In 2021, Schlumberger generated $4.6 billion of operating cash from $22.9 billion in total revenues – implying an operating cash flow margin of 20%. Whereas Baker Hughes reported $20.5 billion in total revenues and $2.3 billion of operating cash flow – resulting in a margin of 11%.

  • Schlumberger’s cash generation capabilities have been stronger than Baker Hughes which has resulted in a sizable difference in the P/S ratio. In 2021, Schlumberger and Baker Hughes’ P/S multiple was 1.5 and 1.2 respectively. Historically, it has been observed that there is a difference of 0.5 units between Schlumberger and Baker Hughes.
  • However, the difference between Schlumberger’s non-cash depreciation charges and capital expenditures was higher than Baker Hughes – affecting the operating cash flow margin figures.
  • Before the pandemic, Schlumberger returned 50% of operating cash to shareholders as dividends and invested 30% in property, plant & equipment as capital expenses.
  • Whereas, Baker Hughes had been investing its operating cash in capital assets.
  • Both companies implemented cash control measures and limited capital expenses as well as dividend payouts due to the pandemic. Given Schlumberger’s higher cash generation capabilities and historical dividend trends, it is a good pick to earn consistent dividend income.

3.Risk

Per annual filings, Schlumberger and Baker Hughes reported $13 billion and $6.7 billion of long-term debt, respectively. While a shrinking asset base due to impairment charges is a drag on shareholder returns, Baker Hughes’ lower financial leverage is a boon during uncertain times.

  • Higher financial leverage coupled with continued revenue growth augments equity returns. However, interest expenses weigh on finances as revenues decline – limiting dividend payouts and capital expenses.
  • Schlumberger’s higher financial leverage compared to Baker Hughes, despite similar revenues and a comparable balance sheet size, makes SLB stock a riskier bet.
  • In 2021, Schlumberger and Baker Hughes’ total assets were $41 billion and $35 billion, respectively.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

Led by MIT engineers and Wall Street analysts, Trefis (through its dashboards platform dashboards.trefis.com) helps you understand how a company’s products.

Source: Is This Stock A Better Pick Over Schlumberger?

.

Critics:

U.S. oil field services company Baker Hughes said Saturday that it was suspending new investments for its Russia operations, a day after similar moves were announced by rivals Halliburton Co. and Schlumberger.

The steps from the Houston, Texas-based businesses come as they respond to U.S. sanctions over Russia’s invasion of Ukraine. In its statement, Baker Hughes, which also has headquarters in London, said the company is complying with applicable laws and sanctions as it fulfills current contractual obligations. It said the announcement follows an internal decision made with its board and shared with its top leadership team.

“The crisis in Ukraine is of grave concern, and we strongly support a diplomatic solution,” said Lorenzo Simonelli, chairman and CEO of Baker Hughes. Halliburton announced Friday that it suspended future business in Russia. Halliburton said it halted all shipments of specific sanctioned parts and products to Russia several weeks ago and that it will prioritize safety and reliability as it winds down its remaining operations in the country.

Schlumberger said that it had suspended investment and technology deployment to its Russia operations. “Safety and security are at the core of who we are as a company, and we urge a cessation of the conflict and a restoration of safety and security in the region,” Schlumberger CEO Olivier Le Peuch said in a statement.

Oil companies ExxonMobil, Shell, and BP, along with some major tech companies like Dell and Facebook, were among the first to announce their withdrawal or suspension of operations. Many others, including McDonald’s, Starbucks and Estee Lauder, followed. Roughly 30 companies remain.

Ukrainian President Volodymyr Zelenskyy on Wednesday asked Congress to press U.S. businesses still operating in Russia to leave, saying the Russian market is “flooded with our blood.”

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Americans Are Still Spending Ahead Of Holiday Season Despite Inflation Surge

Personal spending rose 1.3% last month in a sign that consumers are continuing to spend more despite higher inflation, which continues to rise at its fastest pace in three decades, according to new data from the Commerce Department on Wednesday.

Prices climbed by 5% in the year through October, the fastest gain in over 30 years, according to the latest Personal Consumption Expenditures price index report.

Inflation is surging at its fastest pace in three decades, data shows: October’s annual jump in prices is more than last month’s reading, which showed prices for the year through September climbing 4.4%.

Despite the lingering Covid-19 pandemic, the reduction of stimulus payments and ongoing supply chain issues adding to investor fears about inflation, consumer demand remains steady amid rising private wages and salaries, the Commerce Department’s report said.

Personal consumption expenditures (or PCE)—a key measure of consumer spending—rose 1.3% in October, while personal income rose 0.5%, according to the data.

Both measures of consumer strength were up sharply from recent months: The elevated spending levels ahead of a busy holiday season could help boost the broader economic recovery, experts say.

The increase in personal spending comes as Americans benefit from large pay increases and healthy household balance sheets, especially after several rounds of government stimulus, according to the report.

“Within goods, increases were widespread, led by motor vehicles and parts,” according to the report. Energy prices increased over 30% and food prices nearly 5%. Excluding both of those, the PCE price index for October gained 4.1% from a year ago.

Whether rising inflation starts to cut into consumer demand. While spending on consumer goods is now well above prepandemic levels, Americans with lower incomes could start to defer purchases if price increases continue, economists warn.

genesis-1-1-1-1-1-1-1-2-1-1

In a more positive sign for the U.S. economic recovery, weekly jobless claims fell substantially to their lowest level in 52 years, according to new data on Wednesday. The latest report from the Labor Department showed that the jobs market has continued to make a comeback in recent weeks. Around 199,000 people filed initial jobless claims in the week ending November 20, which was down 71,000 from the previous week and the lowest level since November 1969.

Stocks continue to remain near record highs—with the S&P 500 up 26% so far this year, though markets could be more volatile in 2022, experts warn. Rising fears about higher inflation, the Covid-19 delta variant, supply chain issues and Federal Reserve policy are all top of mind for investors going into the end of the year.

Further Reading:

This Wall Street Firm Sees A Negative Year Ahead For The Stock Market (Forbes)

New Jobless Claims Unexpectedly Sink To 52-Year Low Despite 2 Million Americans Still Receiving Unemployment Benefits (Forbes)

Stocks Jump After Biden Reappoints Jerome Powell To Lead Federal Reserve (Forbes)

Follow me on Twitter or LinkedIn. Send me a secure tip.

I am a New York-based reporter covering billionaires and their wealth for Forbes. Previously, I worked on the breaking news team at Forbes covering

Source: Americans Are Still Spending Ahead Of Holiday Season Despite Inflation Surge

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How Financially Literate Are You? 3 Things You Should Know About Your Money

Most of us received little guidance or instruction on how to handle money when we were growing up. That’s OK — we can learn now, a little bit at a time. Let’s start with the basics.

How do most of us learn how to use our money wisely and well? When we’re growing up, we’re given special instruction in important subjects — swimming, driving, sex — to arm us with info and keep us from harm.

Yet when it comes to managing our money — an activity that every one of us needs to do, every day — we receive surprisingly little preparation. We’re not taught much about it in school, because education systems leave it to us to learn from our families and friends. However, those people often don’t fill in the gaps because money can be such a loaded or taboo topic.

Natalie Torres-Haddad, who grew up in southern California, saw many people around her struggling with debt and financial instability. She was determined to be the exception, and she purchased her first rental property in her early 20s and earned an MPA in Finance & International Business. In the process, however, she became buried in debt. Only by teaching herself the basics of money — basics that she’d never learned — was she able to steady herself and her finances.

Today she leads workshops and sessions to prevent others from falling into the money pit. (She’s also the author of the self-published Financially Savvy in 20 Minutes ). She’s found that even among the college-educated people she meets, “the majority feel confused and overwhelmed about balancing their income and expenses,” she says. The stats show they’re not alone. A 2015 Ohio State University study reported nearly 70 percent of college graduates in the US say they don’t feel equipped to manage money and deal with their debt.

Not only must we get up to speed on the basics, we also need to start having honest conversations with each other about money, says Torres-Haddad. In the same way we’d tell family and friends that we’re cutting out refined sugar from our diets or practicing yoga to increase our flexibility, we should be open with them about the steps we’re taking to boost our financial health. That way, we can get advice and support. This transparency, she adds, can also make us less susceptible to peer pressure-related spending. How many of us have agreed to a pricey meal or weekend trip because we didn’t want to come clean about our money concerns?

Becoming financially literate does not require a huge time investment. Torres-Haddad believes we can start by dedicating 15 – 20 minutes a day to developing our skills and knowledge by learning new terms and resources. Just like attaining literacy in a foreign language, she says, “it’s an ongoing education.” Here are three things you need to know about your money.

1. Know How Much Money You’re Bringing in Every Month vs. How Much You’re Spending

Most of us can rattle off our salaries in our sleep, but could you do the same for your monthly after-tax income and where you’re spending your money every month? If you can’t, that’s normal. But now is the time to learn your actual take-home pay and your actual expenses (and not just ballpark figures or estimates).

For your income, look at your physical or online pay stubs, and start keeping a record of the after-tax amounts. If you’re a salaried employee, that number should be fairly steady; if you’re not, those numbers will vary.

For your monthly expenses, Torres-Haddad suggests writing down — whether it’s in a physical or online notebook — every single daily purchase (coffee, take-out, Uber, online shopping, etc) you make and every single ongoing payment you make through autopay or credit cards (Netflix, gym membership, car insurance, utilities, etc.).

If you’ve never done this before, you may find this uncomfortable — even painful — but it will force you to face up to your spending habits. It will also make these purchases visible. Often, our regular outlays (such as Netflix, Hulu, etc.) can go unnoticed or unquestioned, and our daily spends — especially if we pay by debit card so the funds are instantly drawn from our bank accounts — can go forgotten. Torres-Haddad calls the latter “runaway spending” — “when the little things that you thought cost only a few dollars actually cost much more” in the long run. Take a daily $5 green smoothie. By making them at home, you could save yourself a few hundred dollars in a month.

After you have a fundamental understanding of income and expenses, you can download an app to help you track these categories; see your bank account, credit-card and loan balances; and organize your purchases into buckets so you can identify areas where you might cut back. Two free apps to try are Mint or Charlie, says Torres-Haddad. But, she cautions, apps can be a little “out of sight, out of mind,” meaning if you need extra help to be aware of your spending, stick with the pen-and-pad (or fingers-and-keyboard) method a while longer.

2. Know Your FICO Score and Your Other Credit Scores

While you don’t need to have a good credit score to be financially literate, you must know what it is. ( Note: Most of the information in this section applies to people living in the US.) In the US, FICO was the first company to offer a three-digit credit-risk score for lenders to use when deciding whether or not to approve a loan or line of credit, a credit limit, and an interest rate. There are three other national credit reporting bureaus — Experian, Equifax and Transunion — which also keep track of all your loans (student, auto, personal, etc.) and your balances and histories for all your credit cards (whether issued by banks, stores or businesses).

However, the FICO score is the one most frequently used when you apply for credit cards, mortgages and most types of loans; rent an apartment; or sign up for utilities. FICO scores range from 300 to 850; 670 and up is seen as a good score and 800 and up is excellent. While the FICO score is calculated with a proprietary algorithm, the primary factors that go into it are your repayment history (do you pay your credit-card bills on time? how late are you?), how much debt you’re carrying on cards and loans, how long you’ve successfully held a credit card or loan for; and whether you’ve managed to hold a mix of different kinds of credit.

Most banks and credit cards offer free access to your FICO score on their mobile apps and websites ( here’s a list of the ones that do). If you don’t use one of these companies, you can also find out how to access your score on FICO’s helpful FAQ, including a chart showing where your score falls between “Poor” and “Exceptional.”

Besides checking your FICO score every year, do an annual check of the reports issued by Experian, Equifax and Transunion. This is so you can verify that they’re correct, make sure no one has opened up a line of credit in your name, and see where you might improve. You are entitled to a free copy of a credit report from each bureau once a year. Beware: Many sites will charge you a fee, so use the federally approved and secure Annual Credit Report site.

If it’s your first time checking or you’re about to make a big purchase (such as a car or a home), Torres-Haddad suggests getting all three reports at once. After that, she recommends spacing them out throughout the year. That way, you can quickly catch any errors, fraud, identity theft or any other actions that could hurt your credit history. Mark your calendar so you know when you can request your next free credit report.

3. Know How Much Credit Card Debt You’re Carrying

Knowing how much credit-card debt you’re carrying — and how quickly it’s increasing due to interest — is critical to your financial literacy. Make a list (on paper or on a computer) of each of your credit cards, their current balances, and their current interest rate. Then, put them in order from highest interest rate to lowest.

In general, says Torres-Haddad, this should be how you should prioritize paying them off, paying as much as you can towards the card with the highest interest rate while paying the minimum on the other cards. Called the “ debt-snowball method,” this was popularized by money expert Dave Ramsey.

If you have any cards that offered a 0% APR as a promotion when you signed up, mark down the date on which the promotional rate expires because that’s when you can expect your debt to accumulate at a high interest rate (20% or more). Try to budget your monthly payments so that this card will have little to no balance when that expiration date arrives.

Believe it or not, having a credit card can be a great thing for a person’s FICO and credit scores — if you use it responsibly. Of course, carrying no debt on your cards is best. Otherwise, Torres-Haddad recommends using no more than 30 percent of your available credit limit. So if you have two credit cards with limits of $6K apiece, totalling $12K in available credit, make sure the total balances you’re carrying do not exceed $4K.

If you’ve managed to pay off a credit card, congratulations. But while you may be tempted to close it, Torres-Haddad advises against it. Why? Closing the account will shrink your total amount of available credit and cause your credit score to dip. Instead, delete the card number from any online shopping accounts, cancel any auto-pays billed to it, and freeze the card in ice. It may sound silly but it means that if you want to use it, you’ll be forced to wait for it to defrost — and forced to take a little time to think about your purchase.

When choosing a new credit card, look for ones that offer incentives — such as travel points or cash back — which could help you and your finances. Torres-Haddad recommends going to nerdwallet.com and bankrate.com to compare credit card offers.

Obviously, these three points represent just a small part of financial literacy. That’s why Torres-Haddad urges people to be patient and to learn gradually. Two books she recommends are Napoleon Hill’s Think and Grow Rich!  and Robert T. Kiyosaki’s Rich Dad, Poor Dad. For those who like to get information through listening, she suggests the “Popcorn Finance” and “Her Dinero Matters” podcasts.

When you can, supplement your research with an in-person workshop, adds Torres-Haddad. “Even going to one financial literacy workshop can have a life-changing effect,” she says. A good time to find free workshops is April, which is Financial Literacy Month in the US. One of the best investments you can make in your life is to educate yourself about money, says Torres-Haddad. “It can really give you a lot of peace of mind.”

By: Erin McReynolds

Source: How Financially Literate Are You? 3 Things You Should Know About Your Money

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