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Quick Overview: As we reach the end of a year filled with questions about whether the economy would overcome the many challenges, it’s good to see things are still humming along. In the face of the most aggressive Fed in a generation, with yields soaring and mortgage rates exploding, the consumer situation in many cases improved. This is primarily due to the strength of consumers’ balance sheets, thanks partly to record net wealth growth due to higher stock prices and home prices. This chart from Carson’s VP, Global Macro Strategist Sonu Varghese, shows just this:

Overall liabilities are near where they’ve been the past few decades, yet assets and net worth have considerably improved. In other words, many household balance sheets are in very good shape.

The obvious question is why higher rates have yet to impact the consumer more. The simplest answer is that
consumers locked in debt at a much lower rate, so higher rates didn’t impact them nearly as much as expected. This chart shows that 90% of all household debt was locked in heading into ’22, implying the huge jump in yields didn’t impact consumers as much:

Use up the FSA: For those of you with a flexible spending account (FSA), this is a friendly reminder to use that up before the end of the year. With a typical FSA, if you don’t use the funds by December 31, you can lose some or all of them. If you’re looking for some creative ways to use up the money, check out this list for possibilities.

In the Spirit of Giving: Being frugal versus independent is an interesting thought. Frugal is when you can afford something and choose to deprive yourself of it. Not wanting something to begin with because you find happiness and independence from sources that can’t be purchased is something completely different. In late November, a single, childless, 82-year-old man who lived in a trailer park in rural New Hampshire died and left $3.8 million to his town. Holt lived an unremarkable life but is an example of right behavior—patience, control over greed and fear, long-term thinking, etc. Some might argue that he could have been happier if he had lived in a nicer house, traveled, etc. It’s possible. But perhaps not likely.

This can be a tough conversation. It is the crux of how we want to counsel you to consider your finances. What will make you most happy? What do you want your legacy to be? What does living freely mean to you? Here’s another quick story: Chuck Feeney, who founded Duty Free stores, died in October. The well-known part of Feeney’s story is that he gave away 99.99% of his $8 billion fortune years before he died. He and his wife kept $2 million, lived in a small apartment, flew coach, and gave the rest to charity.

The less well-known part of this story is that at one point in his life, Feeney tried the High Life. He had luxury apartments in New York, London and Paris. He hobnobbed with the rich. If he wanted it, he could afford it. He quickly learned this wasn’t for him. Society told him he should want those things, but that isn’t what actually made him happy.

Giving away money made him happy. “I’m happy when what I’m doing is helping people and unhappy when what I’m doing isn’t helping people,” said Feeney.

Financial commentator Morgan Housel said of Feeney, “He may have looked frugal, but he was actually the freest, most independent person you’ll ever hear of.”

Business Briefing

  • Key Inflation Gauge Falls: The Commerce Department reported Thursday that prices were flat in October after rising 0.4% the previous month. Consumer prices were up 3% in October compared to a year earlier, the lowest inflation rate in more than 2 1/2 years and down from a 3.4% annual rate in September. So-called core inflation, excluding volatile food and energy costs, increased 0.2% from September to October, down from a 0.3% rise the previous month. The cooling of the Federal Reserve’s preferred inflation measures increased expectations that the central bank’s policymakers would keep interest rates unchanged at their December meeting. (The Associated Press)
  • Amazon deliveries: Amazon has surpassed UPS and FedEx to become the nation’s biggest delivery business, and its lead is increasing. Amazon delivered more U.S. packages than UPS in 2022 after pulling ahead of FedEx in 2020. The online retail giant delivered more than 4.8 billion packages nationwide this year before Thanksgiving, followed by Black Friday, the unofficial kickoff of the busy holiday shopping season. The company projects it will hit 5.9 billion deliveries by the end of 2023, up from 5.2 billion last year. (The Wall Street Journal)

Christmas Shopping: If you fall in the majority of people who are still Christmas shopping, we came across this wise advice:

Happy shopping! We’re not in the business of giving marriage advice often, but if you need financial advice (which some might argue could help your marriage!), please don’t hesitate to reach out. The start of a new year is a great time to evaluate your shared goals and whether your current financial plan sets you and your family up to pursue those goals.