Category Archives: Back to Basics

December 2021 Financial Planning and Capital Market Review – By John Kvale CFA, CFP

Hello and Welcome to our December 2021 Financial Planning and Capital Market Update!

If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast audio format as well as Video!

Newbies –

We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets thoughts and current events!

Hope you enjoy!

December 2021 Video

YouTube

Financial Planning Tip(s)

First In Back to Basics Series – “The Emergency Fund”

In the inaugural post of a neat (well we think so) new idea, here in our Back to Basics series we discuss the all important Emergency fund.

This series is a review of the basics, and will serve as somewhat of a semester study of the Financial Planning foundations all the way to more advanced topics later in the series…. We plan on a mid month release of each part and somewhere south of double digit parts…. possibly with a video added to each for additional insights…. thanks in advance for sharing with those who may find this series helpful….

With the FOMC holding rates low currently, we remind that the Emergency fund is NOT investment funds, and as such may earn little if any interest in the current environment…. but that is ok, it needs to be safe, safe safe and very liquid!

We also discuss the size of the Emergency fund, depending on your situation!

FHFA Raises Conforming Mortgage Loan Amount

This post came to us due to the much larger than normal increase in the confirming (non-jumbo) loan increase amount. We have spoken at length on inflationary increases in a variety of assets, this includes homes and this much larger than normal increase in the non-jumbo Mortgage amount to $647,200 will be helpful in allowing more entry to many into the Residential Housing market, here is the actual article. and here is the link to the FHFA announcement…..

Capital Market Comments

Interest Rates and the FOMC – On Two Different Pages at Time of Post

With such importance on interest rates, the possible raising of the rates and the FOMC’s (Federal Open Market Committee) adjustment of rates…..

This post on FOMC’s rate increases, versus what the Markets are pricing in, was at the time very different. With Markets pricing in an increase in mid year of about 20% and AT THE TIME FOMC members saying a late 2022 if at all increase.

Fast forward to today and both the markets and the FOMC are saying a 60% increases in the Fed funds rate around March may be in the cards…. hmmmm

Have a Great Day, Talk to You at the End of January!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Back to the Basics: Fun New Complete Financial Planning Series/Course, Part 1 : The Emergency Fund

This is the first of a “Back to Basics” Financial Planning Series that is meant to start from the very ground floor of basic Financial Planning and build on to more advanced techniques and strategies.

The goal of this series is a course like experience in Financial Planning that will touch every step in the process in order of importance. When complete, we will be adding Video’s and making into a full planning course/workshop.

Those of you that are long time clients have likely heard much of this before but may get an occasional reminder. 

If you know someone (kids, friends, relatives or the like) that may find this series useful, we ask you share, much like we did with the stimulus explanations during the pandemic, we are using our venue to give back and help as many as possible, while hopefully having fun and keeping a sometimes, boring subject matter, educational, and entertaining!

Without further ado … we begin the series with the most important primary foundation step of the Financial Planning process:

Meet the Emergency Fund

An Emergency fund is just what it sounds like, a non-investment, non-risk, extremely liquid savings account, without worry that is available at a moment’s notice. In our current environment of low interest rates, this fund is likely earning a low interest rate. That is fine, safety and liquidity are most important for this fund. Do not stretch to earn extra return on these funds, as this could lead to it not being there completely when you need it most… Return and risk are directly related and we are in a very low rate environment currently.

3-6 Months Expenses

The general rule for an emergency fund is 3 to 6 months expenses but there are many situations that may make this vary greatly on a case-by-case basis.

Here are some examples that may cause families to desire more than 6 months Emergency Fund

  • Income fluctuations – such as 100% commissions, or volatile income years – you know who you are, keep extra to avoid the stress in the down years
  • Occupational risk – if you are concerned about losing your job, get that emergency fund very healthy
  • Large purchase on the horizon- New asset, or known large expense, larger amount may be necessary
  • Sleep Well – If you need a larger than 6 months cushion to sleep better, NO PROBLEM, good is what will allow you to sleep well.

Low End Emergency Funders

On the other side of this are folks with very stable lives, possibly with multi family incomes. You may feel comfortable on the lower end of the 3 to 6 months. Other examples are those with very low overhead and stable expenses as far as the horizon can see you may error on the lower end. Lastly those with less or no dependents would also be a candidate for the smaller end of the emergency fund.

If your situation changes for some reason, prepare to increase, too low of an Emergency Fund leads to short term credit situations, stress and just a much less fun day in day out way of life!

There you have it, the General Rules of the Emergency fund, the fund itself, and examples of reasons to keep it higher or lower!

See … that was not that bad, Next Up in Part 2, Protection Planning!

Have a Great “First in Series Emergency Fund” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents