Economy: Managing Your Money Ahead Of The Midterm Elections

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0:21Gas, groceries, housing, health care. Almost everywhere you look in the U.S. economy right now, prices are up and people are feeling the squeeze. You hear about it in the news and on social media. You want to know how bad it is right now? I've had to cash in my life insurance. I've had to cash in my 401k retirement. When I go to the grocery store now, I look at things I'd like to buy, but I can't. My utilities have doubled. My insurance has doubled. My co-pays have tripled. I have to drive 40 miles one direction to go to a dentist because no other dentist in my area will take my insurance. As of July, 6 in 10 Americans say President Trump's economic policies have worsened economic conditions in the country.

1:06That's according to a survey from Pew Research. That's up from roughly 53 percent who said the same last fall. And while the U.S. economy is strong on paper, with relatively low unemployment and a strong stock market, voter concerns about affordability are expected to factor heavily into the midterms. So how should you manage your money right now? And what financial decisions are you weighing that you'd like a second opinion on? I'm Jen White. You're listening to the 1A Podcast. We'll hear from many of you who chimed in about those questions and more right after this.

1:42This message comes from Bombas. Bombas compression socks help keep legs fresh on travel days, work days, leg days, and more. That's all-day relief with everyday style. Go to bombas.com slash NPR. This message comes from BetterHelp. Imagine carrying a backpack every day. It is easy not to notice how heavy it is until someone asks if there's a desire to put it down. Therapy can help lighten what has been carried. Visit BetterHelp.com slash NPR. This message comes from Jerry. Noticing your car insurance rate creep up even without tickets or claims? You're not alone. That's why there's Jerry. Jerry handles the legwork by comparing quotes side by side from over 50 top insurers so you can confidently hit buy.

2:30No spam calls, no hidden fees. Jerry even tracks rates and alerts you when it's best to shop. Drivers who save with Jerry could save over$1 ,300 a year. Don't overpay. Download the Jerry app or visit jerry.ai slash NPR today. Let's turn to our panel of experts. They're here to share some guidance about how to navigate the current economy. Cara Perez is the founder of the international financial education company Bravely Go. She's also the author of Money for Change, Reduce Waste, Build Wealth, and Build a Better Future for All. Kara, welcome back. Hello, happy to be here. Joining us from D.C. is Heather Long, Chief Economist at Navy Federal Credit Union.

3:11Heather, great to have you back. Good to be here. Wish we had better news to talk about. Yeah, same. And joining us from the Chicago area is Terry Savage. She's an expert on personal finance, the economy, and the markets. She's also the author of several books, including The Savage Number, How Much Money Do You Really Need to Retire? Terri, welcome to 1A. Thank you. Glad to be with you, Jen. And we should note that the advice of our panelists is not a substitute for a financial advisor who knows the fine details of your financial situation. Let's go to the phones. We have Mike on the line in Michigan.

3:47Mike, where are you feeling the crunch right now? Um, we're feeling the crunch mostly at the grocery store and the gas pump. Um, however, our health insurance costs have also increased pretty considerably over the last two years. Um, and, uh, I'm also a federal employee, so we are under a pay freeze. So we're getting no cost of living adjustments. So my take home is less than it was two years ago. Terry, when we talk about economic policies that are having the greatest impact on gas, for instance, what are we talking about? Well, Jen, you know, we talk about gas because we're consumers. I mean, you pull up to the pump and it doesn't matter really how much extra money you have.

4:28It's just a shock to see the prices. And different states have different taxes. So we're going to now see a few states starting to talk about a gas state gasoline tax holiday. But the real shock at the pump is at diesel, which none of us ever, most of us, I would say, 90 % of us never noticed. But when you think about diesel being over 100 % higher than it was a year ago, and every single thing in your grocery store comes in on a truck. I mean, that's it. That's for sure. And then everything that goes in an ingredient that goes into your food, the farmers harvesting the livestock, everything, they use tractors and harvesting machinery that pay using diesel.

5:08So So when you say we've had a shock at the pump, our shock is really relatively small compared to the shock that is going to come down the price line as we see these input costs go up. Basically, you haven't seen anything yet. And then, of course, this winter, you may very well see it if you're using heating oil. We have natural gas in great supply, but heating oil will also be impacted. So we're just this is the pump is the tip of the iceberg. Yeah, but that diesel shortage is expected to extend into 2027. So if we're talking about a prolonged shortage of diesel fuel, what kind of cost of living crisis should Americans expect in relationship to just that piece?

5:52That piece is going to stick with us a long while. We get diesel through the Straits of Hormuz. Russia has stopped exporting diesel. It evolved in that whole geopolitical issue. And now there's talk about banning exports in the U.S., which only further would distort the market. But the fact is that that critical input is going to impact all of us. Again, this is just the beginning of that impact that we're seeing now. And so, yes, you can plan for not only continued high levels of prices, but potentially higher levels of prices, which is what the Fed is worrying about, which is why they're going to try and raise interest rates for pretty much for sure again this year.

6:31Well, let's go back to the phones. We've got Charlie on the line from Vermont. Charlie, thanks for calling. You've got a question about housing. Go ahead. Hi there. Thanks for taking the call. Yeah, I mean, I'm a father of a young family. We're trying to move into a larger house because we've outgrown our current living situation. And the price, the cost of housing combined with interest rates and really the lack of supply, at least around where we are, is just staggering. And I'm wanting to hear about just the general outlook for folks in my situation in that regard. So, Heather, let's come to you first.

7:11What does the housing market look like, say, for the next five years? Do we have any projections? It looks frozen. It's a really tough situation with the mortgage rates back above 7%. And it's hard to see any relief on housing costs unless we go into a recession and the Federal Reserve really has to cut the interest rates again. You know, you're just obviously home prices have shot up more than 50 percent in the past several years. Wages have only gone up about 30 percent. So that's a key reason many people are struggling. And on top of that, we now have mortgage rates that are more than double what they were in 2022.

7:59So the cost pressures with housing continue. A lot of people are being forced to rent right now. And one of the big concerns is there was sort of a building boom after the pandemic of rental units, but that's also slowed down a lot. So rent prices are also likely to come under strain in the next year or two. Yeah. Kara, any advice for the best way to navigate the housing market right now for someone like Charlie who needs more space and has a growing family? Well, I can really relate to Charlie. I'm in Massachusetts just down the road and I paid $300 ,000 for a 690 square foot single family home.

8:41So to say that the New England housing market is atrocious is really underselling it. But what I would say is I really encourage people to think creatively when it comes to all rising costs they're experiencing. We often think the only way to meet a need is to spend money on it, but can we think more creatively? Are there family members we can live with? Is there another way we can get housing? I know several people who have gone in on a house together that are friends. So they're all on the mortgage. They're all in the Indeed, they're not married, they're not family members. So thinking more creatively around housing is one of the personal actions that people can take.

9:19But ultimately the housing market really comes down to zoning and supply. So I also encourage people to get down to City Hall and let them know we need to do away with single family zoning. We need to build more housing. And Charlie, I would just mention that a couple of weeks ago here on 1A, we spent an hour talking about these new co-housing situations that people are reaching for, in part because they want more companionship and more connection, but oftentimes it's a financial decision. So more intergenerational housing solutions, or as Kara said, families going in on housing together or friends buying a house together.

9:59You can find that conversation over at the 1A.org. It might be of interest to you. Patty says, I was laid off from my job in June due to trickle down from federal budget cuts. I have not had any success finding another job, but I think it will be difficult because I am in my 60s. The biggest effect of me losing my job is our health care costs. Our insurance plan through COBRA costs us over$1 ,900 a month. We're cutting back on travel and eating out and other discretionary spending. We'll be back with more from our guests and calls we got from you right after a quick break. Stay with us.

10:36This message comes from Bombas. Bombas compression socks help keep legs fresh on travel days, work days, leg days, and more. That's all-day relief with everyday style. Go to bombas.com slash NPR. This message comes from Jerry. Noticing your car insurance rate creep up even without tickets or claims? You're not alone. That's why there's Jerry. Jerry handles the legwork by comparing quotes side-by-side from over 50 top insurers so you can confidently hit buy. No spam calls, no hidden fees. Jerry even tracks rates and alerts you when it's best to shop. Drivers who save with Jerry could save over$1 ,300 a year.

11:17Don't overpay. Download the Jerry app or visit jerry.ai slash NPR today. Back now to our discussion about the affordability crisis. And if you're feeling squeezed by elevated inflation and high prices, you're not the only one. Almost all financial advice right now sounds out of touch. The best financial advice right now would be to cut down your expenses. But it's like, if your biggest expense is your housing, how do you tell someone to cut that down? Like, it's just some things just sound kind of unrealistic because the necessities are priced like luxuries. People are spending the most on things they have to spend on.

11:52You cannot budget your way out of a bad economy. Let's go to Melanie calling from Maryland. Melanie, you have a question about the housing market. Go ahead. I have two properties in my family. They're not the best of properties. They are. One is a post-fire property, and the other one is a vacant house that hasn't been cared for in decades. I have been trying to get my mother to sell these to get out from under the property taxes, which go up every single year. But at the same time, right now, we're doing without things I never considered luxuries like paper towels. I finally have her just about talking to starting to work with a realtor, but now I'm getting nervous I've given her the wrong advice based on the mortgage rates, the interest rates.

12:33Is it the right time to sell and come out from under these properties as people who are renting a third property? What should we do? Okay, so Melanie, I just want to make sure that they understand the question. There are two properties, neither is in great shape, but you're currently renting. So it's do we hold on to these properties we own while we're renting or do we wait? Is that right? Exactly. My mother's wanted to hold on to them as long as possible for the sentimentality and just to see, you know, what they increase to as time. But at the same time, we are drowning under the property taxes of paying those on top of trying to rent.

13:08And Melanie, just because it might be relevant, your mother, is she a retiree? Is she on a fixed income? She has fixed income. We are a multigenerational household of three generations. Okay. Terry, I'm going to come to you first. Okay. I'm going to bet that we're unanimous on this, Melanie, in giving you our support and encouraging you to get out from under this burden as soon as possible. So you can have her listen to this in replay because she's being sunk and buried in this cost of this property to the detriment of your living standards currently. It might be that with the money that she gets, there would be an opportunity to purchase something else or at least to deal with your own financial condition.

13:55the issues with the house you know if she passed away there would be no capital gains tax but i think if they're in such bad shape there's not a tax issue here i really think it's time to wake up and face the current reality which is not hoping that prices will go up but dealing with the reality that you need money today kara anything to add i'll echo that yeah i think an important thing to understand is when it comes to having assets we want assets to be income generating or to be growing in value. And it doesn't really sound like these two properties are. It doesn't sound like they're currently rentable.

14:30It just sounds like they're an expense that you have. So losing that expense is going to free up money. It may be a tough housing market, but I do think it's a good idea to put these on the market and try and sell them. All right, Melanie, thanks for that call. Let's go to Carly in Pennsylvania. Carly, you have a toddler. You're expecting another baby in February. What's on your mind? Yeah, so we feel so blessed. We were able to buy our forever home last year. My husband and I are in our early 30s. My husband is very handy, but this is a fixer-upper. He's done a lot so far, but we burned through almost 1 ,200 gallons of oil last winter.

15:16and with the price of oil this year, we're trying to figure out, do we spend$600 to$700 a month on a budget through the year, just burning money, or do we take out a home improvement loan, for example, to do some efficiency upgrades? We have natural gas in our neighborhood. We're looking at that. We're looking at windows. We're looking at a new roof. It's just really hard to weigh all the priorities and see how we're going to possibly come out ahead, especially with interest rates at where they are and with necessities at where they are. Yeah. So Heather, I want to come to you first. When we look at the energy market right now, what are the trends we need to keep an eye on?

16:05This is a really tough one for Carly. As a former Pennsylvanian, I sympathize. you're sitting in a state that has tons of natural gas, but it's not benefiting you right now. You know, I think the hard call is that we don't know how long the war in Iran is going to last. We don't know how long these oil and diesel and heating oil prices are going to stay high. But sitting here today, I think we can all agree that there's no end in sight. And it's probably going to be a really, really rough winter for costs of home heating oil. I would lean towards what she was suggesting. If it were my home and my situation, I would be taking a look at the upgrades that you can do.

16:49I can tell you at Navy Federal Credit Union, we have been flooded recently with home equity loans, people taking out home equity loans in order to make upgrades to their home. And I personally replaced my windows this summer and have been amazed at what a difference it's made to my electricity bills. So I know it's a hard call when you're also juggling child care expenses, but that would be my lean right now. Well, and Kira, for someone like Carly, and Carly didn't mention potentially taking out a home equity loan, but if you're looking at trying to make improvements to your home to make it more energy efficient or perhaps to change its heating source.

17:32What do you need to think about before you take on any form of debt to make those improvements? Yeah, I use heating oil at my house and I also had to replace my roof about two months after I moved in. So I'm having haunting memories hearing Carly's story. What I would say is it's important to understand that when interest rates rise, that means borrowing money is more expensive. So both taking money out against your asset, your house, right? And or credit card interest rates, getting a new mortgage loan, all of that means right now, borrowing that kind of money is expensive. So we have to weigh the borrowing costs against the benefits of what you will get from borrowing that money and then spending that money.

18:18So sit down and run your numbers, definitely. When it comes to heating your house, there's a lot of options and I encourage you to look at what your state offers. Here in Massachusetts, we have a program called Mass Saves, which will come out to your house and install insulation and do things like weatherstrip your doors and really help protect you from the elements. And it is low cost to free. I got attic insulation done this year for$0. So look into if there is a state program like that available before you borrow any money. All right. Thanks so much for that call. Let's go to Carolyn calling from Virginia.

18:57Carolyn, you're 68. You're planning on working until 70, but you've got some concerns about retirement. Go ahead. Thank you. I lost about a third of my portfolio in 2008 during the crash, and I am so fearful. I my broker talked me out of moving my money into something. I mean, I have to admit financial ignorance, something like a savings account, right, where it the interest rate is consistent, not, you know, everything going up and down and up and down. They're in it for the long haul. But I just want to have money in the next 18 months so I can actually retire. Yeah. Any advice, Terry? Oh, yeah.

19:46You're right up my alley, Carolyn. You know, I always say in the stock market, there are the bulls and the bears. The bulls think it's going off. The bears worry about it going down. And there's a third category, the bulls, the bears, and the chickens. And chicken money is my definition, money you cannot afford to lose. I want to say that your instincts are right on. We've got the stock market near all-time highs right now. But interestingly enough, 60 % of the S &P 500 stock index is down 20 % at least. That's like bear market territory. It's all revolving around artificial intelligence. And I don't want to get into the specifics of the stock market, but the fact is baby boomers have benefited from an incredible bull market since 401k plans first started 40 years ago.

20:35And now you're at the stage where you do not want to risk. Now I want to make a very clear point. This is your money. I'm sure your stockbroker means well, but probably has an experience losing 30 or 40%. I've lived through a couple of bear markets that have exceeded 40 % declines. So number one, I'll give you some, everybody out there in this stage. Number one, if it's a retirement account you had at work and you're not working there anymore, roll over the 401k to an IRA. right? You can go to Fidelity, Vanguard, Schwab, and put a third of it maybe in the money market fund, just what you're talking about, Carolyn.

21:12If you have to argue with your broker, ask your broker, which of course they can't, do you want to split my losses with me? It's very correct of you to have the instincts, not that America is going to end or the stock market will collapse forever, but that you don't want the panic of losing 30 % or more. So insist on moving. not see brokers by the way these days get paid how much money are you managing he doesn't want to see you or she take it out of your account at the firm and move it to a bank where it would be safe but you could buy a government securities money market fund in your ira or just in your brokerage account and that money is chicken money money you cannot afford to lose you won't make a lot but you won't lose any and you're getting you're getting big thumbs up there from from Heather Long as well.

21:59Heather, go ahead. Yeah, I'll just chime in and say the two-year U.S. government treasury bond is yielding almost 5%. You say you want to retire in 18 months. It's hard to beat almost a 5 % return on something that safe right now. They even talk about on Bloomberg Radio this morning. Let's go to Dennis in Dover, Delaware. Dennis, you came into a sum of money, what's your question about it? Yes. Hi. Good morning. I'm a senior. I'm a senior retired. I came into a sum of money and I'm just wondering what my best options might be. Right now it's parked in a market rate savings account at my bank, but I'm wondering if I should maybe move that sum or part of that sum to a certificate of deposit.

22:50certificate deposits are realizing nice yields. My market rate savings is not realizing such a good yield. Or maybe I should think about putting it all on brokerage since the stock market is doing so well. However, with this AI thing going where it's going, who knows if that's going to hold? So I'm just wondering. And I'd like to know if I can get an opinion from Heather Long. I'm a fan of Heather Long, and it's really great to be on the line with her. All right, Heather, will come to you first. Well, thank you. I would definitely move into a CD. I'll be interested in what Terry and Kara say, but right now, almost all CDs are 4 % or higher.

23:31It's a great time. I know at Navy Federal Credit Union, ours are like 4.25 or higher. So it's a great time to be shopping around. Banks are falling all over each other and credit unions to try to up these rates right now. So I definitely, if you're anything below 4%, you should shop around. It's a really good time. I would be really cautious. I can hear Terry's voice in my head of putting the money in the market right now. It sounds like if you've had it in a savings account that this is money you want to preserve, it's maybe a rainy day fund or something you've been saving for. And again, you don't want that volatility on the short term when you can earn over 4 % doing nothing.

24:17Yeah, Terry and Kara, I want you to weigh in here as well. Kara? I would say, yeah, I like what Heather is saying. I have to ask, though, if you have any outstanding housing costs. Is this money that we could use to finally pay off the mortgage or make the house kind of more secure? I think for seniors, really making sure that you have secure long-term housing is a very big priority. But I like a CD. I do worry about volatility for someone who is retired or is close to retirement. So I'm sure Terry will have more precise stock market feelings. Yeah, Terry, go ahead. Well, we're all on the same page here.

24:58So for starters, I don't know your age, Dennis, but the first thing is, do you have any credit card debt? Because for sure you want to pay that off immediately. Great to earn four and a quarter percent. That's exactly what I would suggest. Or in a government money market fund, but it should be at least four percent these days. And if you have any, not your mortgage necessarily, CARES advice is great, but if you have credit card debt, you want to pay that off right away. anything with a higher rate than what you could earn in the bank. And then be glad you have some peace of mind with that chicken money.

25:32All right, Dennis, hope that was helpful. We got this from Elizabeth in Vermont, who says, I'm a senior living on a fixed social security income in an old farmhouse in rural Vermont. Yesterday, I discovered I'd run out of heating oil, which means I no longer have hot water. I don't have the financial resources to even pay for 100 gallons, which is the minimum for delivery. I've applied for fuel assistance, but it won't be available until the end of November. And now with the high cost of fuel oil, it won't likely go very far. I'm trying not to panic, and I'm looking at ice-cold showers for the next few months.

26:04I just want to briefly talk about the specific vulnerability that seniors are facing in this moment, Terry, and whether there are any, I don't want to say creative solutions, but any resources that maybe people haven't considered that they could look to for support. Okay. Seniors are the baby boom generation, maybe even beyond that. And they have been resourceful all their lives and have worked hard. And to see it being ripped from them in their old age because Social Security doesn't keep up with inflation and medical costs and so forth is really painful. And this story was especially painful.

26:43So number one, you need to check with your community and state resources. Just start searching online that you've applied to one heating program. There may be other things that your churches or your community chest or your chamber of commerce can help you with. I want to circle back to an excellent point Kara made earlier about the fact that we have young families who cannot afford a home their size and we have seniors, many of whom who just simply don't want to leave their homes or who have low rate mortgages, three and a half percent, they don't want to move because, of course, the cost would be higher.