Financial Terms with Letter 'B'

Our today’s edition is about B’s of Finance. How important is budgeting for you all? Do you know any tools or apps that help you save money efficiently?

Well, budgeting is a very broad topic and we are focusing on the basics.

B- Budgeting 101

As we all know, the majority of North Americans live paycheck to paycheck. Let’s break this population into two categories: high-income and low-income households.

During the pandemic, household savings grew in both categories but the interesting part is how these households utilized their incomes.?Statistics show that high-income households hold more than 30% of pandemic savings, compared to just 10% for low-income households.

Due to higher disposable incomes of low-income households, non-mortgage debt is being paid off, depleting savings, whereas high-income households continued to add to their stockpile.?

Budgeting behavior hasn't changed much between the two income segments, except that the pandemic situation gave low-income households the ability to carry small balances on credit cards and make payments on existing debt.

What impact do budgeting behaviors have on external variables such as demand growth or inflation??

Inflation occurs when people have a lot of surplus cash and there is a rising demand for goods and services. For high-income groups, hospitality was their top purchase pre-pandemic.?

With accumulated cash in hand, hospitality industry has witnessed a surge in demand, pushing prices of products to an all-time high, indicating a sign of inflation.? Additionally, a significant portion of earnings is directed to investments in assets such as housing and the financial markets.?

So, how can you balance your income to be prepared for the future?

It requires a great deal of caution to make a good fortune. Being prepared for unplanned events requires keeping a check on one's personal finances.

There are many budgeting apps that help set financial goals and provide a holistic view of your finances.?

The right way to choose your budgeting app is to consider:

• Budget design feature
• Security
• Free version or low monthly fee
• Multiple accounts integration?

Some of the budgeting apps are: Mint for monitoring daily activity, Pocket Guard to track spending, YNAB (You need a budget) for achieving financial goals.?

Successful budgeting is also correlated with the Stock Market! How?? It’s a long - term strategic decision that highlights the health of the economy.?

For instance, Increase in exemption limit for taxpayers.

Taxpayers can benefit from a reduction in their tax burden and direct that money into investment rather than paying taxes. It boosts the stock market.?

Upward and downward trends on the stock market have specific terms, which we will explore in the next B’s of finance.?

B - Bear and Bull Market

?In plain language, if it’s a bull market, the shares are rising, while in a bear market, the shares are declining. It has a lot to do with investors’ psychology as well. The stock market performance either builds or shakes investor’s confidence.?

Stock market and economy are mutually dependent. Investor’s strategy is reliant on the market they want to focus on.?

A bear market is linked with a weak economy. It is a stock market with a decline of 20% or more. Investors in the bear market make sure to diversify their portfolios so as to deal with price fluctuations in the market and tamp down the volatility.?

Consequently, panic selling occurs in bear markets, and investors carry a lot of risk while trying to sustain in these markets and prioritize their stocks.?

Speaking of the bull market, it builds investor confidence. It’s a sign of a thriving economy and low employment. The investors are eager to buy or hold securities, which creates a buyer's market. So overall, one’s investing decision is highly dependent on the nature of the market and their risk taking capacity.?

When it comes to financial planning and budgeting, knowing how markets will behave and diversifying your portfolio are key takeaways.

Thank you readers!? Comment below of any B’s in finance that comes to your mind.

Stay tuned. See you next Wednesday :)