Budgeting Basics

Have you ever thought something was difficult, so you didn't try to do it? A lot of folks think that about drawing up a budget. Hi, I'm Rob West. You don't have to be a rocket scientist to draft a budget.

Like anything, there's a bit of a learning curve, but it gets easier the more you try. I'll talk you through the basics today, and then it's on to your calls at 800-525-7000. That's 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial journey. Okay, so we talk a lot about the need for budgeting on this program, and we've developed the amazing MoneyWise app to help you do it. It has three different ways that you can set up your budget and allot money to your various spending categories.

Just look for MoneyWise Biblical Finance in your app store. We also have trained volunteer coaches who can't wait to help you draw up your budget and get you set up in the MoneyWise app, and you can connect with a coach at MoneyWise.org or in the app itself. Now, before we get into the basics of budgeting, it's important to understand that everyone needs to do it, no matter how much or how little they have coming in. There's no other way to stay on top of your spending, get out of debt, give to your maximum potential, and plan for the future.

Okay, so let's get started. Step one is list your monthly income. That means your after-tax income.

If you're a W-2 employee and your employer withholds taxes, it's the amount of your paycheck. If you have other income where taxes aren't withheld, you should only count about 70% of that and put the rest in savings for tax time. Step two is to list all of your fixed expenses, the things you pay the same amount on every month. That would include your rent or mortgage payment, auto loans and insurance, credit card minimum payments and student loans, and of course include your giving in this step.

Determine a percentage for your giving and do your best to stick to it. Step three, list your variable expenses. These change from month to month. Your electric bill would be an example if you're not on a budget billing plan. Other variable expenses would include groceries, household items and gas for the car. Obviously, these are just estimates. If you find that difficult, you can go over your receipts and bank statements to ballpark those amounts and you can adjust them in the months ahead. In fact, plan on adjusting them. Nobody gets estimated variable expenses right the first time. Now you can add up your variable expense estimates and subtract that from your remaining income.

So far, pretty easy. Okay, step four is budget some money for your wants. We've already identified your needs. Now give yourself a little spending money for a few things that make life a little easier and more enjoyable. This could be an occasional dinner out or some other favorite activity. Use these as rewards for staying on budget. And here I'll suggest a percentage. Try to keep your wants to 5% of your take home pay, 10% at the very most, because you'll need every penny for what comes next. And step five is budgeting to pay off any consumer debt you have, especially credit cards. You need to determine the amount of your remaining discretionary income that you can put toward that debt that is above your minimum payments. Let's shoot for another 5 to 10% of your income.

10% is, of course, better. And now you're probably wondering, hey, why not throw all of my remaining money at that debt? Well, that would be great, but step six is to budget something for savings. And if you have credit card debt, we'll assume you don't have an emergency fund.

So start one. Put some amount from every paycheck into liquid savings so you can get to it easily when an unplanned expense arises. You may have to split your remaining available money between paying down debt and building your emergency fund. Try to get between 5 and 10% of your remaining income into each category. Okay, those are the basics for setting up a budget, but there are two more things you should do to increase your chances of staying on it. First, look for ways to cut spending.

Can you raise or lower the thermostat to trim your utility bills? Can you cut something from the grocery budget? You may have run out of money before completing step six, and this is how you make sure you have enough money for all of them. Second, set up a system for tracking your spending as you go forward. This is essential for knowing whether you've overspent in one or more areas. Once more, the new MoneyWise app comes to the rescue. It'll tell you in real time exactly what you've spent in each category of your budget, so you can make adjustments as needed to stay on track.

Living faithfully on a budget will enable you to stay on the right side of Proverbs 21, 20, which reads, precious treasure and oil are in a wise man's dwelling, but a foolish man devours it. All right, your calls are next. I'm Rob West, and we'll be right back.

Stay with us. Thanks for tuning in to MoneyWise Live. I'm Rob West, your host. We're taking your calls and questions on anything financial today.

The number to call is 800-525-7000. Hey, before we head to the phones, let me mention, you know, many of our listeners come from the Crown Financial Days. Now, obviously, Crown Financial Ministry is still very much in existence, doing great work, producing new studies. But before that was Christian Financial Concepts, Larry Burkett's ministry. And Larry popularized the envelope system of budgeting, where you actually fund real envelopes, and mainly for discretionary spending. And when the envelope was empty, you didn't spend anymore.

And it's a very effective way to budget. A lot of folks still use the physical envelope system today. Well, then we had smartphone apps and web sites that created digital versions of that. One of the most popular, in fact, it was promoted heavily by Crown Financial Ministries and CFC back in the day was called Envelopes. Envelopes, they made the digital envelope system.

Well, Envelopes announced last week that they're shutting down, they're closing down their doors, and they're not going to be operating anymore. And if you were an Envelopes user, we would love for you to check out the MoneyWise app. In fact, there's been lots of discussion, we're hearing from lots and lots of folks who were former Envelope users who are finding MoneyWise and saying, wow, this does essentially the same thing.

We have a similar digital envelope approach, but actually with some enhancements and improvements for a modern app. And if you are either looking for a digital envelope system, a way to manage your money, or you're a former Envelopes user wondering what's next, well, again, we'd love for you to check out the MoneyWise app. You'll find it at our website, MoneyWise.org.

You can click the app button or head to your app store, wherever you get apps, and just search for MoneyWise Biblical Finance. Also, check out our community at MoneyWise.org. There's questions being posted every day, but one of the most recent conversations is folks who are coming from Envelopes who've tried MoneyWise, the MoneyWise app, and are loving it.

They're talking about it. They're in the MoneyWise community, so perhaps you can read about their experiences if you're wondering whether it will provide a solution as an alternative to Envelopes. So I just wanted to mention that today. I know we're hearing from lots and lots of folks who are finding us for the first time as a result of Envelopes going away. All right, let's head to the phones.

800-525-7000 with whatever is on your mind today, financially speaking. We're going to begin in Macon and Lee, welcome to the broadcast. Go right ahead. Okay, thank you.

I really enjoy your show. I have three questions. Should I start with the most important one or does it matter? I'll take all three. We're running a special today, Lee, so you get three for the price of one. Go right ahead.

The first? Well, we have some money in a couple of CDs that we just kind of earmarked as an extreme emergency, like the three to six month type savings, but we still have an emergency account also. But I was thinking of converting one of them.

It's about $10,000 to the I-bonds. It just seemed like it made more sense. I like that option a lot.

Well, you're the reason you helped me decide it. But the other thing that I think I read that the taxes would just be on the interest and it doesn't actually happen until you cash it in. So I was worried about that. On the I-bonds, that's true. Yeah. So you'll have to redeem the CD and is it coming due anyway? It's not, but it's only like $76 for the year.

It's not how little it's made. That's what she said at the bank. Yeah. So if you pull out of that CD, you'd have to liquidate that first, put that money in your checking or savings account, then open your online account at treasurydirect.gov. That's the Treasury's website. And then once you do that and the funds settle in your checking or savings account, you'll just electronically transfer them in to buy the electronic I-bonds. You'll pay the tax on any interest from the CD. And then with the I-bonds, you're correct. You will pay the taxes at the end when you earn the interest at the time that you redeem that bond. Great.

Okay. So the taxes that I pay on it would be like when it's time to pay taxes, but just have that money ready. Is that kind of how that goes? The taxes on the CD?

Yes, sir. Yes, exactly right. So you have during the year, the income that you receive is taxable and you'll get a 1099-INT standing for interest. And the amount of the interest earned during the year is reported on your tax return.

So whenever you file your taxes, you'll just report the amount that's provided on that 1099-INT from your bank. Okay, I understand that. Thank you.

Thank you. The other question, if you had a second, is I have many adult children. I have many children. And one in particular is doing well financially. And so they just wanted to give us like, they call it mad money, just for fun, just like do we want to travel or do some things.

And we own our own home, but we live on a pretty limited budget because my husband's retired, semi-retired. But we're doing fine. We don't really want them to support us. That wouldn't be right. So we didn't know if it was right to accept that or not.

Yeah. You know, I think that's up to you. I mean, clearly they've read the passage in scripture, honor your father and mother. This is the first commandment with a promise that it may go well with you and you may live long in the land. I'm somewhat joking there, but at the same time, we are to honor our parents. And perhaps this is a way that they're excited about doing that. They've been blessed financially. They'd love for you all to enjoy some of that.

And they want to provide some money for you all to go out and enjoy this season. I think the question for you all is, are you comfortable accepting that? I don't think there would be anything wrong with that. I think the key is to make that decision as to the parameters around which you would accept their assistance or a gift for a specific purpose. If you decide you would be open to it, then tell them, hey, here's how we'd like to do this.

We don't want you to support us. We're not looking for a monthly check, but if you all wanted to do something as a gift periodically to bless us, we're going to receive that. And there's obviously no expectation on an ongoing basis. But I think at the same time, if you decided, you know what, we just aren't comfortable with that, we'd like to have them redirect that into additional giving or something else. I think that's perfectly appropriate as well. But I think if the Lord has blessed them and they want to use that to bless mom and dad, I would just receive it and be grateful.

I appreciate that. That's wonderful. And I guess they'll get blessed as well. That's exactly right. Yeah.

They'll be thrilled seeing you guys enjoy that. I'm confident in that. Well, thank you.

And I guess that's all unless you have anything else. I think that'll do it, Lee. Thank you for your call today. If you think of anything else, give us a call back. We appreciate you checking in with us.

800-525-7000 is the number to call as we apply God's wisdom to your financial decisions and choices each day here on Money Wise. Quickly to Jackson Hole, Wyoming. What a beautiful part of the country. Jim, go right ahead, sir. Well, Rob, it's a pleasure talking to you.

And I'm sitting here in the sunshine taking a break from my painting job. Hey, here's my situation. After a divorce nine and a half years ago, we just put our house up for sale. And three days after it was listed, we got a cash offer on it and we signed all the contracts and we're rolling to a we're getting paid at the end of the contract is January 4th. And so for the first time in my life, I'm going to have some real money that I have to manage.

And I want to just get some advice on where I should start the process of addressing the fact that I'm suddenly going to have maybe $800,000 on one day from the next. Yeah. So this is not money you're planning to redeploy in real estate. Is that right? Well, that's that's no, I'm not. I can't say that for sure, because I can't. Let's do this here.

Yeah, no, it makes sense. So I've got a couple more questions for you. But let's talk about this.

I've got to hit a break. But if you'll stay right there, Jim, on the other side of it, we'll unpack this a bit more and I'll give you my thoughts. This is Money Wise Live. Stay with us. We'll be right back. Great to have you with us today on Money Wise Live.

Biblical wisdom for your financial decisions. I'm Rob West taking your calls and questions today at 800-525-7000. Looks like we have two lines remaining open. Hey, coming up a little later in the broadcast, Jerry Boyer stops by with our Friday market commentary.

Market off 400 points today, up 800 yesterday. Can't seem to make up its mind. Inflation data out this week and some notes from the Federal Open Market Committee meeting that was moving the market yesterday. We'll find out Jerry's thoughts as we evaluate all of it coming up in the final segment of our broadcast today.

All right. Back to the phones we go. Jim in Jackson Hole just before the break was sharing that he's about to come into a significant amount of money as he sold a home there in Jackson Hole quickly and he'll have more than $800,000 come January, right around the beginning of January. Jim, tell me your plans from here. What are you planning to do as far as housing is concerned? Well, I've been in a great location for the last nine and a half years. My ex and my two daughters lived in the house per our agreement just to keep them at a home base.

But one's off to college and the other's graduated from college. So I can stay here or stay in my place. I've got a place that's secure, I don't know, for another year or two. So I don't have to run away. And it's a great town, so I'm not running out of town soon. So I've got a stable place and I'm going to have the money, but it's a matter of starting for the first time in my life. And I'm 64 years old, Rob.

And the first time that I actually have to manage some money. I do have a $200,000 IRA account that's just been, you know, I've not been involved in management of that, but that's sitting there on top of this. Okay. So you have an advisor that's managing the $200,000? Yes. Yeah.

I've got a TIAA, CREF and Wells Fargo's advisors. There's two accounts actually. Okay, great. And when you say you've got a place for the next year or two, are you renting? And this was a rent, you know, this was another property that you just sold? This was a rental. Yeah, just a rental. It's a beautiful studio with $10 million views, Rob. Wow.

Okay. I can only imagine. I was just there for the first time this summer. We went on a tour, Grand Canyon and the whole thing, Grand Tetons and Yellowstone and Jackson Hole. It was amazing. I see the sunrise on the top of the Grand Teton every morning. Oh, wow.

That's incredible. Well, I think the key is to kind of put this into buckets, if you will, and just say, you know, any portion of this that you think you're going to redeploy in the next five years, we probably want to keep it pretty conservative and out of the market. Any money that you think is longer term, meaning you don't have plans for it, it's just a part of your overall assets that you're trying to grow for the future. Well, I think this is a great time to begin investing, but this is obviously a significant sum of money and so I think that's where having an advisor that somebody who's trusted and maybe that's one of the advisors you have right now, but I think having somebody take discretion over this and manage it with your goals and objectives is really clear, Jim, and necessary. And I think the other piece is just the planning side of it, you know, really taking a look at what has God had for you in the next season based on everything you know today and what might your lifestyle look like and what ultimately is your financial finish line in terms of how much you need to accumulate. And once you've established what that is, and if you're on track to get it or already there, then that gives you more flexibility with the income that you're earning to, you know, do more giving and really look at other opportunities to repurpose those assets along with your values and priorities.

But I think a plan plus the ongoing management of not only the existing 200,000, but this additional significant sum of money for that portion that is, you know, really I would say has a 10-year plus time horizon, this is a great time to get that working for you in the market while we're down, you know, 20 plus percent, right? I know. I know. I'm well aware of that. But yeah, and I'm going to meet with a CPA. He's also a CFP and, you know, he goes to the local church I go to, so he's a Christian man. So that was my one of my first steps, but I was just calling you on top of that and, you know, to meet with him and kind of start to get things dialed in.

Yeah. Well, I think you need really to start with the big picture and what are your values and priorities? Where do you feel like God's taking you in this next season? Where do you want to live? What's that going to cost you?

What's your lifestyle going to look like? How much is enough? You know, how much do you need for the future? You know, all of these things, you know, it's the why before the how, and then we just allocate the money in terms of investments and how conservative we are versus how long-term focused we are based on that plan. So I think you're doing the right thing. It sounds like that person can help you put a plan together and then whether it's that person or somebody else, then you'll need somebody to actually take responsibility for managing this money. It's a lot of money. I wouldn't put it on autopilot.

I'd have somebody really take in responsibility for it on a daily basis. So it sounds like you're on the right track, Jim. I'm confident God has a lot for you in store in the days ahead. And if we can help along the way, don't hesitate to reach out again. And thanks for listening. Let's head all the way to Florida, West Palm Beach. Hey, Victor, thanks for calling. Go ahead. Hi, how are you doing, Rob?

My question is really simple. I am a very frustrated motorist right now. I drive a Citibank Dodge van. And for some reason, I cannot seem to get a break on the insurance. People want to charge me $400 or plus a month to insure this van. With my prior insurance company, I had it until the point where they called me to reevaluate my insurance and they wanted to bring it up to $425 a month. So I just can't afford that. That's almost $50 less than what I pay for my van itself.

So I heard you say it once that we can't bargain to get cheap insurance, but I cannot seem to find anything that is worth it. Well, a couple of thoughts. Are you a homeowner?

No, sir. I'm not a homeowner. And this one is also financed. I almost don't pay for it, but it's financed.

Okay. Well, what I was going to say is if you have homeowner's insurance, looking to bundle it with one carrier can usually get a better rate. I would look at one of the online tools to find the best rates out there to shop the various options for you. I'd go to policygenius.com or thezebra.com, kind of a funny name, thezebra.com or policygenius.com. Put in all your information and they'll use that powerful search engine to go out across all the companies and find you the very best rate.

I'd start there and see what you come up with. Thanks for your call, Victor. We'll be right back.

Stay with us. This is Money Wise Live, where we come together each afternoon to understand God's heart as it relates to our money. Well, really His money that we're managing. We're stewards. He's the owner and God's word is really the best textbook going for how we should manage His money.

We pull out the principles and we apply at a high level, those big ideas to the daily decisions we're making, recognizing that if we can live within our means and avoid debt and have some margin and set long-term goals and give generously, that we'll put ourselves in a position to experience God's best. But navigating some of these decisions and choices can be challenging, and so each afternoon we get to do that together. Now, we do have some lines open. Maybe you have a question today with something going on in your financial life. If so, give us a call.

800-525-7000 is the number to call. Let's head to Chicago. Sharon, thank you for calling. Go right ahead. Hey, Sharon. Hi, I'm here. Hi. Thank you so much for taking my call. Yes, ma'am. Yes, I have a question about index funds. I heard you speak on it a while back, just a little.

You weren't a big fan of it. In my case, I'm turning 65 next month. I live from a pension, so it's not money that I'm necessarily planning to use any time in the near future. I was planning to pretty much put it up and pass it down to my son, so I was advised to do an index fund. When you sign, you get a 35% bonus.

Was it the death benefit? And so I'm watching. I have the money in a 403b right now, and I'm just watching it go down and down and down.

So I was just wondering, are there any other alternatives besides the index fund? Okay, I guess I'm a little confused. Let me just clarify. So you said it's all in a 403b, but it sounds like you're describing an insurance product because you talked about a death benefit.

That's where I'm losing you. Okay, yeah. If I move it to an annuity, an index fund, then it's to protect it from losing any grounds, any monies, gains, you don't lose.

Right. So you're considering pulling it out of the 403b and rolling it over into a variable indexed annuity, it sounds like, where you'd get a portion of the upside of the annuity, but you would have the floor on the downside. Are you no longer with the company? Are you retired? Yes, I'm retired. I'm living from a pension, and the pension is, you know, adequate. So I'm good.

Very good. You know, I wouldn't, if it were me, I wouldn't do anything right now until the market recovered. Could it go down further from here?

Sure. His market's down 400 today, it was up 800 yesterday. But that doesn't mean that it's not going to recover.

In fact, I fully expected to and it will happen before the economy does probably sometime next year. And the moment you sell all of those investments, you're going to lock in those losses. Now, if you immediately redeployed into a variable indexed annuity, yeah, whatever those investments are that make up that annuity that you get a portion of the upside that has the ability to grow without the downside.

But I think you've probably already taken most of the downside. And the challenge with the annuity is they're complicated. You're going to give up access to your money, whereas right now you have full access to even though I understand your bills are covered.

If you needed it for something unexpected, major medical expense, you needed something unforeseen, you have full access to your money. That would not be the case without penalties or extra cost if you go into the annuity. Now, it could be that you really value the peace of mind of knowing that you've got that floor on the downside.

And I totally get that. So if you at the end of the day just feel like you need to transfer the risk away from the market to the insurance company, and you're willing to give up some of the upside in exchange for having that floor, well, then that's what an annuity is for. It's just not my preferred option. You know, even though the market's been volatile, we've obviously seen some significant downsides, I think this is probably still the place for you to be or rolled into an IRA where somebody's managing it. But I'd prefer to do that outside of an insurance product. But at the end of the day, if you've decided that really is what's going to give you the greatest peace of mind, you certainly could do that.

My opinion would be to let it recover before you make that decision. And then at that point, you probably would consider rolling that to an IRA and hiring an advisor to make those decisions or if you're really just going to get the greatest peace of mind through the protection of the insurance company, then you could do the variable annuity at that point. Okay, and I'm not real familiar with IRAs.

I'm going to look into that after talking with you. Okay, yeah, the IRA is just the account structure. It has nothing to do with the investments themselves. So just like the 403b is a tax-deferred retirement account, the IRA is a tax-deferred retirement account. And then inside the 403b and the IRA, you have the investment options. So the IRA would just be the structure that you'd roll the money into so that it doesn't create a taxable event.

And then you could hire an advisor to begin to choose the investments inside the IRA, whether that's mutual funds, individual stocks, index funds, bonds, whatever it might be. And all of that would be based on your risk tolerance and your goals and objectives. Okay. All right.

Well, thank you. Yeah. How much is in that 403b? I have a couple of accounts. It's just over, it's around $100,000 in that. But I have something with Betrock and another with the company I used to work for. And they're all going down.

Yeah, no, I understand. But the good news is your bills are covered so you can wait this out. The last thing you'd want to do right now is sell out and lock in those losses because the market will recover. I realize there's a little concern on your part in the near term, but just stay the course and know that it will.

But here's where I think you could have some peace of mind. I really feel like you need to sit down with an advisor who can really help you understand what you have and make the investment decisions for you in the future so you don't feel like you're going it alone. And you have somebody who's not reacting emotionally but can really manage this money in a way that makes sense for your age and your goals. So what I would encourage you to do, Sharon, is reach out to a Certified Kingdom Advisor there in Chicago. Just go to our website, MoneyWise.org, click Find a CKA, put in your zip code, and I'd interview two or three. And then that individual could actually manage this money for you and make the buying and selling decisions in light of any market or economy, whether we're in one like we're in now that's really volatile or a market that's going straight up like we saw in the markets the last 12 years before this year. So that would be what I would do as a next step rather than trying to figure this all out on your own.

Just head to MoneyWise.org and click Find a CKA. I hope that helps you. We appreciate you checking in with us today very much. Listen, folks, we're going to take a quick break when we come back. More questions that we'll be addressing, plus Jerry Boyer joins us, our resident economist. He'll give us his thoughts on the economy and the market when we were just talking about a lot of new information out this week.

He'll assimilate it all and tell us what he thinks. This is MoneyWise Live, biblical wisdom for your financial decisions. Stay with us.

We'll be right back. Great to have you with us today on MoneyWise Live, biblical wisdom for your financial decisions. All right, before we head back to the phones, it's our final segment, which means our good friend Jerry Boyer is with us today. Jerry is president of Boyer Research. He is the columnist at Christian Post, or a columnist at Christian Post, where you can read his insightful articles. And he joins us each week with his market commentary.

Jerry, great to have you back. I'll tell you, the market can't make up its mind. Up, what, 800 yesterday, down 400 today. It's all about each day's news, I guess, huh? It is. It's all about each day's news. By the way, I like the columnist better. I want you to stick with that. The official.

The one that counts, right? That's right. Oh, yeah, the markets. What's happening is the markets are having trouble sifting through the data in the sense that they're having trouble figuring out what the Fed's going to do. And we've talked about this a lot, but I can't emphasize it enough that over the past 10 or 15 years, the Fed has gone from being the entity which determines our monetary policy to in addition being the greatest hedge fund in the history of the world. It is huge compared to any other investment vehicle.

There is no investor, no matter how wealthy, who has a fraction, a meaningful fraction of the amount of assets that the Fed has and invests in. So not only are they out there determining our monetary policy and being the lender of last resort, they are also the biggest investor. And so every day, what regular investors like the rest of us have to do is we look at the news and we used to have to ask, what is the news? Tell me about the economy or what does the news tell me about business? But now we have to ask, what does the news tell me about what the Fed will do?

It's all filtered through how they're going to respond to it. And the news this week, the big news was Thursday, we got a couple of inflation reports and they were generally bad. Inflation is not under control, not close to it. It's a little better than it used to be. I think I mentioned to you that it had peaked earlier. So the worst was in June. So we're down from like nine and a half percent inflation, but we're down to eight percent inflation.

That's still really bad. And so markets looked at that and they said, oh, well, the Fed's got to fight that. And the way the Fed fights that is they run the giant pumps in reverse, tuck money out of the markets in order to fight inflation.

They know they're going to hurt markets and maybe hurt the economy, but they have to do something. But then the Fed minutes came out and the Fed minutes are the notes on their last meeting. So they have a meeting and they announce a policy, but they write down notes of the meeting.

But for some reason, they I don't know if they have to be proofread or something or someone's printer isn't working. But you have to wait two weeks until the notes come out. And the notes shows that there's a faction of Fed members who are saying maybe enough pain already. And so markets said, oh, well, maybe they will lighten up a little bit. And then this morning, the consumer sentiment came out and consumers, you know, people actually go to the grocery stores, you know, as opposed to economists like me. People go to the grocery stores are saying, no, inflation is really bad. I mean, I really think like someone who does their own shopping ought to be the head of the Fed. I think that ought to be a rule.

You know, a shopper should because they're the ones who actually see it. So they're seeing that inflation is high. They don't expect it to go away. And so markets said, OK, doesn't matter if there's a couple of people on the Fed who are losing their nerve. Inflation is so high and it's publicly perceived. The Fed has just got to tighten.

They got to suck money out of the system. They're going to be sellers, not buyers, which means that's money coming out of investments. The biggest investor in the world is selling when the biggest investor in the world sells. Well, markets have to go down.

Yeah, that's really helpful, Jerry. Not to digress here, but I know you're a student of history, so I'm just curious. I mean, all this conversation about the Fed and its power causes me to think about the original intent here. It was Wilson, right, that signed the Federal Reserve Act that actually established the Fed was was this part of the intent, what we're seeing today? No, in fact, they promised the opposite, that it would be a gold standard Fed.

Wilson signed it. Theodore Roosevelt fought it up. And that is because in the panic of 1903, there was a big panic like we had in the Great Recession. And what happened is JP Morgan and another, you know, the other of the monopoly guys with monocles got together and said, listen, we've got to bail out the economy, so let's pony up. Roosevelt looked at that and said, well, there shouldn't be that much power in the hands of private individuals.

We need to have a bank that's a national bank that'll do the bailing out. So the Fed was created as to do bailouts because they didn't want the private sector to do the bailouts. They thought that was too much concentration and power. I don't really know that that's right, because still concentration and power when the Fed does it. But they weren't supposed to be micromanaging the economy. They weren't supposed to be varying the value of the dollar. They weren't supposed to be managing exchange rates, deciding to cause more unemployment, to fight inflation. They were just there in the case of emergency.

Remember the Maytag guy? You know, they're supposed to kind of be sleeping there all the time. And then once every 10 years, there's a panic and they come out and lend money until it passes. And they have expanded their role over the almost 100 years, the 100 years they've been in existence. But most of the expanding has been in the past 10 years since the Great Recession, when they were just the lender of last resort. And then they were in charge of monetary policy. And then they became the bailout center. And now in addition to that, they're the world's largest mutual fund. So they're getting bigger and bigger.

And the bigger they get, the more powerful they are. And then investors, the only rational thing to do is to stop asking what's the economy doing and simply say, what's the Fed going to do? Whatever the Fed is going to do, that's going to determine the motion of markets.

And that's what we saw happen this week. No question about it. And it sounds like the Federal Open Market Committee notes on their meeting is probably the best indication unless Chairman Powell happens to be speaking that week.

All right. Well, has any of this changed your outlook, Jerry? The fact that what we've talked about is we may have already had a recession earlier this year. We could have a recession, perhaps a mild one later this year, next year. But we will, at least at this pass, pull out of that and move through it.

Yes. By the technical definition of a recession, two quarters in a row of negative growth, we had one the first half of this year. I'm pretty sure that this quarter we won't have negative growth. So that would be a short recession, like a mild recession that we already went through.

But we could be going back into one. And when markets are selling off, one of the things they're saying is, well, if the Fed is sucking this much money out of the system, that's going to cause a credit crunch. There won't be enough lending money. When banks can't get access to credit or excuse me, when banks don't give credit, when small businesses can't get access to credit, that tends to contract the economy. So right now, people with skin in the game, investors are essentially acting as though the Fed's going to fight inflation so hard that it's probably going to trigger another slowdown, another recession. I don't know whether it'll be a technical recession or not.

That doesn't really matter to me. If you have like two quarters of negative growth and then things are normal or whether you have two years of near zero growth, it's pain either way. So I think, you know, following markets in terms of growth, we've got pain ahead. And markets are betting that even though the Fed's going to really try to fight inflation, it won't win. That inflation will remain elevated, not 10%, like we saw before, but remain elevated. That's called stagflation. People who didn't live through the 70s have forgotten this weird word, stagflation. We're going to have to relearn that word, I think. Yeah. Well, that would be unfortunate if we did, but you're probably right.

Last question, Jerry. Obviously, we saw a pretty big, well, a crash in the UK government bonds last month. Hundreds of that country's pension funds collapsed. Is that a cause of concern to see something like that here in the US? Yeah, it is because to some degree we're kind of trapped by that too, because there's only so much we can let the pound fall against the dollar. They're a trading partner. And if they fall against the dollar too much, it really messes with the trade relations. I'm not saying that it's our job to guard the pound.

It's our job. It's our Fed's job to guard our monetary policy. But when the dollar gets way too strong against other currencies, it actually hurts trade.

But there's something else I think that's really big about this. For 300 years, they were the financial center of the world, London. Now, it became more New York, but they're still a major financial center. They are first world power, and they are teetering on the edge of a credit crisis. That could be a sign of what's ahead for us. We're not that much better off than the United Kingdom.

We're very similar economies, very similar political systems. And if they're not immune, then maybe we're not immune. Well, certainly something we'll keep an eye on. Jerry, always appreciate your comments, my friend. God bless you. Have a great weekend.

God bless you, too. All right. Jerry Boyer, chief, well, I was going to say chief economist. Yeah, we'll call him the chief economist here in MoneyWise. He's a columnist at Christian Post and is president of Boyer Research. We have him each week to provide his analysis on the economy, which we always look forward to. All right.

Quickly to Marysville, Ohio. Connie, you've been incredibly patient. Go right ahead.

I am interested in the IBONTS. I've heard you talk about it a lot. So I went ahead and registered for an account. And when I went on to log into the account, there's an important message that says, warning, warning, warning.

And it's talking about how by using the system that I understand and can sense that there is no reasonable expectation of privacy regarding any communication or information transiting, transisting stored on or traveling to and from the system that the government routinely monitors and make for any lawful government purpose, intercept search and season and communication, la la la. And it made me kind of nervous. So then I didn't proceed. So I want to know what do I need to be concerned about that or not?

You know, I mean, obviously, at the end of the day, you need to make that decision. I wouldn't be concerned about it. I opened an account. I read that privacy policy. And that's basically what it is. It's a privacy policy statement that they have to put on there to protect themselves. Any information you transmit as a part of your account, you know, can be accessed. It could be used by other government agencies. But, you know, they're going to issue a 1099 INT to the IRS anyway when you cash in your bond. So they're already communicating your information. I think at the end of the day, if we read the privacy policies on anything we sign up for, we just have to recognize there's risk with transacting business online.

And doing that with the U.S. government through the Treasury Direct's website, I think is probably about as safe as anything else you might do online. So it doesn't cause me any particular concern, Connie. I would proceed. But at the end of the day, read it.

And if you have some concerns, you certainly could pass. But I appreciate you checking in with us. God bless you. That's going to do it for us today, folks. I want to say thank you to my team today, Dan, Amy, Clara and Jim. Couldn't do it without them.

MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Hope you have a great weekend. Come back and join us on Monday. We'll see you then. Bye bye.