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Paper Route and Diamond Ring
Written by Steve | Published: |
I was reminiscing with my Mom this week about my Dad who passed away almost seven years ago.
One of the stories that we chatted about was when he was ten years old he started a paper route. After he made his collections he would take a portion of his earnings and head down to the local jeweler.
He picked out a diamond that he thought looked nice and made lay-a-way payments until he had the diamond paid off by the age of sixteen.
That is some serious foresight from a young age! He knew he wanted to get married someday and he wanted to do something valuable with his money.
Later after he met my mom and they dated for a while he used that diamond and had a custom made setting to ask my mom to marry him…
The rest is history.
The reason I share that story is because it doesn’t take too much foresight to figure out where things are going right now.
This chart from the U.S. Bureau of Economic Analysis, it shows consumption expenses spent on national defense and federal expenses on interest.
If you look at the ‘hockey stick like’ growth of the interest payment line since 2022 the government is now spending close to the same amount on interest payments as they do on defense.
So if you had to apply some foresight here. What do you think are some possibilities?
Effectively print more money by lowering interest rates causing more inflation (devaluing the dollar) or raise taxes on you and I to cover more expenses.
Maybe a mixture of the two right?
So what can you do to become prepared for that?
Many of our clients right now are doing ROTH conversions i.e. paying the tax on their 401ks/IRAs now while taxes are relatively low and putting them in assets that are protected and grow and outpace inflation.
This strategy is not for everyone but can make sense for some that are trying to avoid rising taxes and decrease their lifelong medicare IRMAA cost if they can do it early enough.
Let us know if you see what we are seeing in the market and need some help matching your planning with your foresight of where things are going.