In many resort markets, vacation rental rates are up again this year. However, interest rates are still low and real estate is once again appreciating. Is this the year to stop renting and buy a vacation home?
You’re not alone if you are thinking about shopping for a second home. Baby boomers at or near retirement continue to propel the demand for second homes, creating an expanding pool of buyers.
In recent years, vacation sales exploded, to the point where they accounted for 21 percent of all home sales in 2014. Last year a dwindling number of bargain-priced properties led to tighter supply and fewer sales, and caused the price of vacation homes to rise. Still, vacation home sales accounted for 16 percent of all home sales in 2015, according to the National Association of Realtors.
Second homes have their quirks
Buying a vacation home differs from buying a primary residence in a lot of ways. Inventories and prices vary more on a seasonal basis. Tax policies and lenders’ underwriting standards treat second homes differently, especially if you plan to rent out your property when you’re not using it. Owning and maintaining a vacation home in a resort areas can incur costs you might not anticipate.
Here’s a summary of important differences to keep in mind when buying a vacation home.
Vacation home mortgages
Second-home loans generally require more money down and a better credit score than owner-occupied home loans, which is the reason that about half of vacation-home buyers pay in cash. However, you can use equity in your primary home to take out a home equity line of credit and use it to make the down payment on a vacation home.
If you’re making monthly mortgage payments on a primary residence, lenders look carefully at your debt to income ratio to be sure that you are financially capable of paying two mortgages. Your total debt payments, including all mortgages, can’t exceed 36 percent of your gross income, but if you plan to rent the place, you can count some of that assumed rent as income when calculating the ratio. The lender will tell you what’s an acceptable assumption.
If you have an FHA loan on your primary residence, FHA will not finance a second home unless it is necessary for employment and is not a vacation home. Also, FHA loans are generally intended for owner occupants and the agency frowns on borrowers who use rent out FHA-financed homes. VA loans cannot be used to buy vacation homes.
Tax treatment
If you use the place as a second home—rather than renting it out as a business property—interest on the mortgage is deductible just as interest on the mortgage on your first home is. You can write off 100% of the interest you pay on up to $1.1 million of debt secured by your first and second homes that was used to acquire or improve the properties.
However, when you sell a second home you do not qualify for the exclusion from capital gains that allows home owners to take up to $500,000 of profit tax-free when they sell their principal residence.
If you plan to rent out your vacation home, very different tax rules apply depending on the breakdown between personal and rental use. If you rent the place out for 14 or fewer days during the year, or if you use it for more than 10% of the number of days the home is rented out, you can pocket the rental income tax-free. The house is considered a personal residence, so you deduct mortgage interest and property taxes just as you do for your principal home.
If you rent it out for more than 14 days, you must report all rental income on your tax return. You can deduct rental expenses, but you must allocate costs between the time the property is used for personal purposes and the time it is rented.
If you rent the house half the time, for instance, half of your mortgage interest, property taxes, utilities, insurance costs, and repair expenses are deductible against rental income. The other half of your interest and property taxes would still be deductible against your other income because it’s a second home.
Costs you may not anticipate
Renting your vacation home increases your maintenance costs considerably. Most vacation home buyers last year lived 200 miles away from their new purchases.
If you fit that pattern and live far from your vacation home, you’ll have to hire a property manager. Maintenance costs for repairs, upkeep, and yard work increase when tenants are involved. Marketing vacation rentals can also be costly. You are competing with other owners who can count on repeat business. To get established, you’ll need to spend time and money on listing sites.
Many vacation spots are prone to natural disasters like hurricanes, floods, forest fires and earthquakes. Don’t be surprised if your insurance premiums are higher than your primary residence. Electricity and other utilities may be higher in rural or semi-rural areas.
Tips on buying a vacation home
Take a few weekend trips to make sure it’s the right spot for you. Pay close attention to travel times and restaurant and recreation accessibility to properties you are considering. Make sure to choose a knowledgeable local real estate agent who will know the local comps and any area idiosyncrasies.
Keep emotions out of any decision-making. Don’t fall in love with a property until you have done your due diligence, even if that cute place on the beach looks perfect. Once you are burdened with property taxes, insurance, and other fixed and sometimes unrelenting costs, you can’t change your mind without the potential of considerable loss.
Before you decide to buy, know how much you’ll use it. Will you be able to visit your vacation home monthly? Quarterly? Annually? If you’re not confident that you’ll be able to make the time to take advantage of a vacation home, you need to evaluate whether it’s the right decision to buy one or not.
Think long term. While vacation homes can gain value over time, short-term speculation on residential real estate is risky business, and most buyers settle on a property they’ll enjoy for many years to come. Planning for long-term enjoyment can mean buying a place that’s big enough for a growing family, or choosing an area with a range of recreational opportunities to accommodate evolving interests.
Jobs week cleared up the skies for the Federal Reserve members, who are smiling — big time — after a series of data lines gave them what they wanted: a softer labor market!
While the labor market isn’t breaking, it has become more pliant in the data lines the Fed focuses on. After Friday’s jobs report, which had some one-time variables, we can say that the economy is heading into an area where the Fed will feel much more comfortable, and we should not have any more rate hikes.
We need to focus on this week’s data to better understand the labor market. First, let’s take a look at Friday’s jobs report.
From BLS: Total nonfarm payroll employment increased by 187,000 in August, and the unemployment rate rose to 3.8 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in health care, leisure and hospitality, social assistance, and construction. Employment in transportation and warehousing declined.
The headline number beat estimates but had negative revisions in the previous months; we had a big jump in the labor force, which was the biggest reason the unemployment rate ticked up higher. We also had some one-time variables as one trucking company filing for bankruptcy, and the actors’ strike, which hit the data this month. Here is the breakdown of the jobs gained and lost:
In this job report, the unemployment rate for education levels:
Less than a high school diploma: 5.4% from 5.2%
High school graduate and no college: 3.8% from 3.4%
Some college or associate degree: 3.0%
Bachelor’s degree or higher: 2.2% from 2.0%.
The key to the unemployment rate jumping was a big move in the labor force, especially from ages 55 plus in this report.
The Federal Reserve’s fear of wages spiraling out of control like we saw in the 1970s wasn’t a valid concern. As the growth rate of inflation fades, so should their fear on this topic. Wage growth has been slowing down since January of 2022. It might still be too hot for the Federal Reserve, but anyone who isn’t blind can see it’s not spiraling out of control. As the chart below shows, average hourly wage growth data is slowing down from a hot level.
Job openings
The job openings data is one of the Fed’s favorite labor market indicators: They use it to talk about how tight the labor market is. I believe the Fed members want to see the job openings data return toward 7 million so they have to be very pleased with the job openings falling below 9 million this week. As we can see in the chart below, the labor market isn’t as tight as it used to be.
Quits rate
Another great data line for the Fed this week is that the quits rate has returned to pre-COVID-19 levels. With fewer people quitting for better-paying jobs, this makes the Fed much happier, especially in the lower-wage service sector, because people making more money on the low end isn’t something the Fed will tolerate. As Fed members have said recently, they want to see labor softness in the service sector.
This was an epic jobs week because the Fed can say that they’re really making progress on attacking the labor market. Once you get a trend in labor data, it’s tough to reverse course quickly, especially as the Fed is in restrictive territory with their rates. Let’s not forget that the student loan debt payments are about to go online, which means less disposable income in the economy. The 10-year yield is slightly below my peak forecast for 2023 of 4.25%, sitting currently at 4.18%.
The things to focus on for the next 12 months are: the Fed is in restrictive territory with rates, student loan debt payments are about to start again and the labor market is getting less tight. When I say Fed members are happy about this week, it’s an understatement. They are very excited that the economy has a lot of variables that will attack the labor market.
Payrolls at nondepository mortgage bankers and brokers inched down as spring homebuying ended, according to the latest estimates from the Bureau of Labor Statistics.
The slight drop in representative payroll estimates to 340,000 from a downwardly revised 341,500 the previous month suggests some seasonality has returned to the market.
Spring homebuying this year boosted second-quarter volumes markedly above those seen in the previous fiscal period for the first time in two years, according to a report that Attom, a curator of land, property and real estate data, released Thursday.
The number of mortgages originated rose 21% on a consecutive-quarter basis to 1.56 million but was still 38% lower than a year ago.
“It looks like owners took advantage of the small rate drop to refinance existing loans, while a jump in mortgages for purchasers was likely fueled by a number of forces,” Attom CEO Rob Barber said in the report.
May appears to have been the strongest month for industry hiring this year, when job numbers peaked at an upwardly revised 343,900.
Meanwhile, in broader employment data that the BLS reports with less of a lag than industry estimates, the United States added 187,000 jobs in August as compared to a downwardly revised 157,000 the previous month.
“With the markdowns in the rate of job growth for June and July noted in this report, the cumulative effect is a noticeable slowdown in the job market,” said Mike Fratantoni, chief economist, Mortgage Bankers Association, in a report issued Friday.
Unemployment rose to 3.8% from 3.5%, as more people that left the job market returned to it but found it difficult to obtain work. The annualized rate of wage growth was a little slower at 4.3%.
The rate of wage growth is still likely above the level monetary policymakers would like to see given their 2% inflation target, but other employment numbers might deter further rate hikes, according to Fratantoni.
“This report should be enough for the Fed to keep the federal funds target rate on hold at its next meeting,” he said.
Some relief from rate pressure would be welcome in the mortgage market given a rise in financing costs since spring that’s likely contributed to the dip in industry hiring.
“With mortgage rates near 7%, consumers are feeling the pinch,” said Odeta Kushi, deputy chief economist at First American, in a report issued Friday.
However, there’s still enough household formation in the market to compel builders, who have shown a willingness to make selective price concessions, to provide additional supply.
“Demographic tailwinds from millennials aging into their prime homebuying years and a lack of existing-home inventory means new home construction is essential in meeting shelter demand,” Kushi said.
Residential construction jobs increased by 2,400 in August, Kushi noted.
“You need more hammers at work to build more homes. That’s why residential building jobs are still up more than 10% compared with prepandemic levels, despite the rate environment,” she said.
On a week fraught with important economic data, the results continue coming in on the weaker side of forecasts and bonds continue to like it. While yesterday’s JOLTS data was quite a bit lower than forecast, today’s relevant reports came in closer to home. As such, it’s no surprise to see smaller gains. But even if today’s tame data merely served to solidify the gains seen yesterday, it’s a win.
Of the two reports, it’s quite clearly GDP that’s helping bonds maintain the gains. There wasn’t much of a reaction to ADP employment data, and it was potentially weaker to boot. GDP, on the other hand, was unequivocally helpful (2.1% vs 2.4% f’cast, and a modest decline in the price index).
With Change Lending losing the special license, it is no longer included in an online roster from the Community Development Financial Institution (CDFI) Fund, the Treasury unit that administers the program. Also, Change Lending would now have to provide employment verification records, banking activity details, and other documentation that lenders typically require that the CDFI … [Read more…]
Inside: Looking for information on what a typical Christmas bonus in the US is? This guide will help you calculate how much you can expect and what to do with it.
Are you waiting eagerly for that year-end surprise called the Christmas bonus? Like Clark in National Lampoon’s Christmas Vacation?
Or maybe you’re an employer wondering about giving out festive bonuses?
This guide is a jingle bell away with everything you need to know about Christmas bonuses in the United States.
You’ll discover how these additional pays work, what the typical bonus amounts are, tax implications, the benefits of giving a bonus, and wisely spending your bonus. In other words, it decodes everything from the employer’s perspective, right to how it impacts an employee’s pocket and spending decisions.
So, buckle up – you’re about to become a little richer in knowledge. Stay tuned!
What is a typical Christmas bonus?
A Christmas bonus, often referred to as a “13-month-salary,” is a special gift you might receive from your employer at the end of the year.
It depends largely on your company’s resources and financial standing, meaning not everyone will get one.
However, if you’re lucky, you might expect a bonus ranging from 2% to 5% of that, discretionary to your employer.
Thus, the average Christmas bonus would be you could be looking at an additional payout of around $1144-2860, assuming an average income of $57,200.
Does everybody get a Christmas bonus?
Not all employees in the US typically receive a Christmas bonus.
The giving of bonuses varies between companies and roles within those companies.
Personally, I have only had one company that gave out Christmas bonuses. Most companies tend to give their annual year-end bonuses, which may be based on factors like performance or tenure, during the first quarter of the new year.
While a Christmas bonus would be nice as it often serves as an appreciation gesture for hard work throughout the year.
Understanding the concept of Christmas Bonus
A Christmas Bonus is essentially a little financial gift from your employer during the holiday season. Think of it as an extra dollop of icing on your annual salary cake.
It’s typically a percentage of your salary and serves to show appreciation for your hard work throughout the year.
For instance:
Let’s say you earn $80000 a year and your boss awards a Christmas bonus of 5% would then receive an extra $4000 just in time for the festivities.
Your company elects to give all employees a flat $1000 Christmas bonus regardless of seniority.
Note that a Christmas bonus isn’t legally required and varies greatly between businesses.
History of Christmas Bonuses
Woolworth’s birthed this tradition back in 1899, offering a cash bonus of $5 for each year of service with a limit of $25.
In Woolworth’s early years, they established a pattern of rewarding their employees with a generous Christmas bonus.
This practice was seen as an annual tradition and was appreciated by their staff, instilling a sense of loyalty within the workforce.
Over time, Christmas bonuses have evolved not just in amount but in form as well. Besides cash, you could also receive gifts or even lavish holiday parties.
Despite the more modern trend of diminishing Christmas bonuses, this part of Woolworth’s history highlights the positive potential of such incentives.
Factors influencing the amount of Christmas Bonus
Considering factors on the Christmas bonus is crucial because it ensures fair distribution, tailored to individual employees’ performance, length of service, or their specific needs.
We all know that bonuses adequately demonstrate appreciation and recognize the hard work of their employees, increasing their job satisfaction and driving productivity.
So, let’s look into whether or not a Christmas bonus is viable for you or your company.
1. Company policy on Christmas Bonus
A company’s policy about Christmas bonuses is typically laid out in the employee handbook and company policies.
Policies may stipulate that Christmas bonuses are issued under certain circumstances, like when the employee has met specified targets or when the company has performed exceptionally well during the year.
Also, the board of directors may elect to give out one-time Christmas bonuses.
However, if these bonuses are not incorporated into the employee’s employment contract, they are typically subject to the employer’s discretion. Employers must take extra caution to ensure that these bonuses are presented as discretionary and not part of a contractual agreement.
Remember, these factors may vary from one company to another. Always refer to your employer’s specific policies and handbooks for accurate information.
2. Amount of Salary
Your annual gross income might influence the amount of your Christmas bonus, as some employers factor in their employees’ base pay when determining bonus amounts.
However, not all organizations adopt this practice, with some opting for a fixed, equal distribution amongst all staff members regardless of their earnings.
Therefore, depending on your contractual agreement and your employer’s policies, your salary could influence your bonus, but this isn’t a universal rule.
3. Type of Bonus
The types of bonuses vary greatly as companies have the discretion to decide the nature of the bonus, with the decision often driven by the organization’s performance, the individual’s job role, and the overall economic conditions.
They can be incentive-based, linked to performance targets, holiday-exclusive like Christmas bonuses, or tagged to specific business milestones, leading to significant variability.
Here are different types of bonuses you should know about:
Discretionary bonuses: These are given at your employer’s will. They might consider factors like company performance or your personal performance reviews. However, there’s no guarantee you’ll receive one.
Non-discretionary bonuses: These are part of your employment contract. As long as you meet certain criteria, you’ll receive this bonus on top of your salary during the Christmas season.
Non-holiday bonuses: Given outside of the holiday season, these can be extra pay or an item like a company car.
Remember, your bonus type dictates how much you could get for Christmas. Be sure to check your contract!
4. Company Culture
Company culture significantly affects bonuses as it underpins how employees perceive their value and recognition within the organization.
If the culture fosters transparency, fairness, and goal-oriented behaviors, bonuses can effectively serve as an incentive and boost morale. Statistics show that employee loyalty increases when they feel appreciated, which can often be demonstrated through financial bonuses.
Moreover, a culture encouraging open communication assures employees of fair dealing when it comes to awarding bonuses.
Hence, bonuses, when tied to clear goals, become more than just monetary rewards, ensuring employees understand their role in the company’s success.
5. Recipients of the Bonus
In the US, Christmas bonuses are usually gifted to all employees, irrespective of their role or position.
Some of the roles that may receive a Christmas bonus include:
Full-time employees: Usually part of the main workforce, these individuals are often at the receiving end of holiday bonuses.
Part-time employees: Even though they may work fewer hours, many companies consider them for bonuses.
Temporary workers: Though their roles are for a limited time, they are generally excluded as part of the company’s bonus scheme.
Contracted employees: If their contract includes a clause for a holiday bonus, they are quite likely to receive a Christmas bonus. If it does not, they will not receive one.
Remember, the goal is inclusivity, a policy aimed at making every employee feel rewarded and appreciated during the festive season.
6. Holiday Season
Christmas bonuses are commonly offered by employers during the holiday season in the United States. This bonus is seen as a way to show appreciation and respect to employees, which can help to mitigate feelings of burnout.
Companies may elect to give bonuses at other times of the year to motivate their employees and boost their job performance. These bonuses can incentivize individuals to achieve specific company goals, with the promise of additional monetary compensation driving their hard work.
Aside from motivation, off-season bonuses also serve as a token of appreciation, illustrating a company’s recognition and value of their employees’ efforts.
It’s worth noting that a bonus doesn’t necessarily have to be monetary. Examples can also include extra vacation days or other perks.
7. Amount Given to Employees
A Christmas bonus is an extra payment given to employees during the holiday season as a gesture of gratitude for their commitment and hard work.
Factors influencing the Christmas bonus amount include:
Length of service: Employees who’ve been with the company longer might receive a higher bonus. For instance, an employee with a decade of service might receive $1,000 at a rate of $100 per annum.
Based on Salary: Many companies may opt to give a flat percentage related to the salary of their employees.
Flat Amount: Others may give the same amount to all employees across the company.
8. Company’s Financial Resources & Performance
A stronger performing company is more likely to give more bonuses as it typically correlates with higher profits, enabling them to be more generous with employee rewards.
On a company level, if overall performance benchmarks are hit, Christmas bonuses may increase across the board.
In fact, the incentive of bonuses can create a highly driven workforce that pushes towards achieving and even exceeding business goals. Furthermore, companies that distribute bonuses, particularly holiday bonuses, can significantly boost employee morale, fostering both loyalty and a positive company culture.
How to Calculate Your Potential Christmas Bonus
Calculating your Christmas bonus can often seem nebulous, leaving many uncertain about the amount they should expect.
The elusive nature of the Christmas bonus can largely be attributed to the fact that unlike salary, it isn’t typically fixed and may vary based on several factors such as an employee’s performance, the length of their service, or the financial health of the organization.
Despite this, there are a few pointers that can shed light on how to calculate this anticipated festive season reward.
Step 1: Check if you are Eligible for a Christmas bonus
Figuring out your potential Christmas bonus firstly entails a careful examination of the terms of your employment contract, alongside other supporting documentation such as your employee handbook or job offer letters.
These documents accurately establish the contractual relationship between you and your employer and often contain crucial clues about bonus calculations.
For instance, if your contract states that you are entitled to an equivalent of one week’s salary as a Christmas bonus, then you can confidently expect that amount.
Keep in mind the discretion of the employer in case of confusion. Some bonuses might not be contractual but discretionary. Consult your HR department for clarification if needed.
Step 2: Calculate your percentage of the total bonus amount
To calculate your bonus based on your salary, you need to know the exact percentage your employer uses, which usually ranges from 2-5% of your annual earnings.
Multiply your annual salary by the bonus percentage to determine your possible holiday bonus.
For instance, if you earn a yearly salary of $100,000 and your employer gives a 2% bonus, you’ll receive a $2,000 bonus.
Step 3: Is my Christmas Bonus Taxable?
So, if you’re anticipating a hefty holiday bonus, remember, it might be subject to taxes.
Bonuses are often considered supplemental income.
As such, the Internal Revenue Service (IRS) requires a 22% federal income tax on this income, which can reduce your bonus significantly.
State laws also have a part to play. Your holiday bonus is taxed according to your state tax rate, which is another cut from your bonus.
For example, your bonus amount is $5000 after federal taxes of $1100 and state 4% taxes of $200 are deducted, your take-home bonus is $3700.
How to Spend Your Holiday Bonus
The anticipation of receiving that extra lump sum has many employees daydreaming about that eye-catching new car, an extravagantly relaxing vacation, or perhaps the latest tech gadget.
Although it’s tempting to indulge in the pleasure of immediate gratification, there are more finance-savvy alternatives to consider for the effective utilization of your annual bonus.
1. Invest your Christmas Bonus
Getting that skip in your heartbeat when you receive your Christmas bonus is a feeling like no other.
However, the real magic happens when you decide to invest this bonus, making it grow over time instead of spending it all at once.
Here are the top four ways to invest your Christmas bonus:
Wealth Creation: When you invest your bonus, you’re setting yourself up for future wealth. Learn how to invest 10k.
Earn Additional Income: Use your bonus as a kick-start to a side hustle. Many Americans already secure supplemental income this way. In fact, many people are interested in how to make money online for beginners.
Professional Growth: Investing your bonus into professional development is another smart move. Enrolling in online courses that build your technical skills or lead to certifications can enhance your earning potential. Learn to invest 100 to make 1000 a day.
Financial Security: Finally, investing your bonus helps to secure your financial future. Whether it’s putting money into retirement funds or investing in a high-yield savings account, every bit helps set you up for stability and freedom. This sets you up to become financially independent.
Your Christmas bonus could be the first step towards a future of financial growth and security.
2. Consider your financial needs for the coming year
Before you rush to spend your holiday bonus, consider your financial needs for the coming year.
Start by:
Assessing your monthly expenses. How much do you need for essentials like housing, utilities, and food? Compare with the ideal household budget percentages.
Evaluating your emergency fund. Remember, experts recommend at least $1000 in an emergency fund. Plus having three to six months’ worth of expenses stored away in a rainy day fund.
Big expenses coming your way: Do you have any costly expenses like home repairs or car replacement in your future?
You may want to set aside money for those future needs, so you will be financially stable when they happen.
3. Pay Off Bills
Don’t run to the stores before analyzing your debt.
If you have high-interest loans or credit card debt, prioritize paying these down. Our expert tip at Money Bliss is to tackle the highest interest debt first.
Use your bonus to pay off debts: Since a bonus is usually an unexpected sum of money not factored into your annual budget or salary, you can make significant headway in paying off your debts, particularly those with high-interest rates.
Save on interest charges by reducing debt: The bonus can help reduce your debt balance, leading to less interest accruing over time. This move could save you hundreds, even thousands, over the long term.
Consider debt management apps: Apps like UndebtIt help you find a debt free date. Platforms like Tally† can simplify your debt payoff journey with automated payments using a lower-interest line of credit.
Reconsider splurging your holiday bonus: Rather than spending it all on that coveted item or trip, you might want to consider other financially beneficial options.
4. Buy Christmas Gifts
Utilizing your holiday bonus wisely to purchase Christmas gifts can be a smart and rewarding way to use your end-of-year windfall.
Instead of splurging on high-cost items, consider thinking through your holiday gift list and budgeting accordingly.
Bear in mind that enjoying the holiday season doesn’t have to break the bank; as Christmas on a budget is possible.
Don’t forget to spoil yourself with a gift every now and then. You’ve worked hard for this bonus and deserve a treat too.
5. Splurge on Fun Things
It’s absolutely okay to treat yourself with a holiday bonus – after all, you’ve earned it! Using it wisely can add a dash of fun and pure enjoyment to your life.
Now, what do I want for Christmas?
Here are a few fun ways to splurge your holiday bonus:
Dream vacation: The bonus could be your ticket to the vacation you’ve been fantasizing about. Plan carefully to make the most out of it.
Invest in hobby: Whether it’s photography, painting, or gardening, investing in a hobby can prove to be quite rewarding.
Spoil yourself: Get that TV you’ve been eyeing or make a down payment for that new car you fancy.
Remember, pleasure is a great aspect of well-being. So, it’s great to treat yourself once in a while. Just balance it with other financial responsibilities.
6. Invest in Long-Term Goals
Ditch the instant gratification of spending your holiday bonus all at once. Instead, consider investing it towards long-term goals for an even greater payoff.
Here are some easy steps to set you on the right path:
Identify your long-term financial goals. Be it a dream home, kids’ education, or retirement, a clear goal will help you stay motivated.
Assess your current financial situation to gauge how much of the bonus you can invest.
Choose the right investment vehicle. Stocks, bonds, or real estate can be profitable, depending on your risk appetite and time horizon.
Remember, spending wisely today makes for a secure tomorrow.
7. Give Back to the Community
Giving back to your community during the holiday season is a fantastic way to share your fortunes. Not only does it bring joy to those in need, it fosters appreciation, empathy, and understanding.
Here are some thoughtful ways to use your holiday bonus:
Donate to a Local Charity: Identify a local charity that resonates with your values. Every donation counts and your contribution could make a substantial impact.
Sponsor a Family’s Holiday: Many organizations connect sponsors with families in need. Your bonus could help provide them with essential groceries, clothes, toys, and a memorable holiday experience.
Contribute to a Fundraiser: Participate in your community or workplace fundraisers. Your financial support could contribute towards a noble cause, be it medical aid, education, or relief work.
Volunteer Your Time and Skills: Although not a direct use of your bonus, volunteering can be another way to give back. Maybe your bonus might allow you some additional free time to offer.
Remember, volunteering often reflects individual happiness and improves overall well-being.
Do You Expect the Average Christmas Bonus?
Remember, Christmas bonuses can be diversified: from additional checks or sums of money to extra vacation days or tangible gifts.
Everyone always wants a Christmas bonus! So now, you can determine if yours is above or below the average Christmas Bonus!
Based on research, less than a quarter of employers offer a performance-based holiday bonus, so if you’re fortunate enough to receive one, consider investing it to reap greater returns in the future.
The best decision depends on your unique financial situation, so use the above tips to make a smart choice with your bonus money.
Know someone else that needs this, too? Then, please share!!
The role of economic data in determining mortgage rate momentum is hard to overstate these days and today provided another solid example. This morning, the average mortgage lender was offering rates that were modestly HIGHER compared to yesterday afternoon. After the data hit, most lenders ended up offering mid-day improvements that brought the average easily below yesterday’s.
The data in question was the Job Openings and Labor Turnover Survey (aka “JOLTS”). While it’s not quite on par with reports like The Employment Situation (the official name for the big jobs report most frequently referred to simply as “the jobs report”), it’s been an increasingly reliable source of inspiration for rates.
Today’s installment was the weakest since March 2021. Mortgage rates tend to improve when data comes in weaker. This is both a general truth and a specific consequence of the Fed’s current stance on rates. The Fed wants to see more evidence that high rates are having a negative impact on the economy. Yes, it does seem odd to be rooting for economic pain, but as far as the Fed’s concerned, a softer labor market is a good price to pay in exchange for lower inflation.
30yr fixed rates are still in the 7% range, but if the week’s remaining economic data were to be as downbeat as JOLTS, that could change. Just be aware that surprises can occur in either direction when it comes to the data.
At the height of the COVID-19 pandemic in 2020, Penn froze hiring, furloughed workers, and cut program budgets. It also issued then-President Amy Gutmann a $3.7 million home loan.
The University’s loan to Gutmann – which was disclosed in the University’s tax filings and Gutmann’s ethics disclosures to become the United States ambassador to Germany – appears to rival the largest-ever loan issued to a college administrator in the Ivy League, according to an analysis by The Daily Pennsylvanian. The DP previously reported that the same tax filings showed that Gutmann received $23 million in compensation during the final year of her presidency, likely a record single-year payout to a university president.
Penn’s loan to Amy Gutmann was the largest issued to an Ivy League administrator in fiscal year 2021
According to Gutmann’s ethics disclosures, the loan was issued in October 2020 at the federal mid-term rate of 0.38% and has a term of nine years or the termination of Gutmann’s tenured professorship at Penn.
In the same month that the loan was issued, Gutmann said that she would take a pay freeze rather than a pay cut in light of the COVID-19 pandemic, when four other Ivy League presidents took pay cuts of 20% or more.
“In 2020, the Trustee Compensation Committee approved an employee loan for President Gutmann consistent with University policy and applicable laws and regulations to assist in her post President transition,” Board of Trustees Chair Scott Bok wrote in a statement to the DP. “The University, like many peer institutions, has from time to time made loans to senior leaders in order to attract and retain the best available talent in key positions.”
A spokesperson for the University declined to share the written loan agreement or minutes of the meeting where the loan was approved by the Compensation Committee.
Gutmann resigned the Penn presidency in February 2022 after she was confirmed as United States ambassador to Germany and since then has been on a leave of absence from her tenured professorship at Penn. In response to a request for comment directed to Gutmann, the U.S. Department of State referred the DP to Penn.
“Pursuant to written policy, the University grants leaves of absence for employment elsewhere for up to two years,” Gutmann wrote in her ethics disclosures to the U.S. Office of Government Ethics in 2021. “If the University extends my leave of absence past two years so that I may continue to serve as Ambassador to Germany, I will refinance the loan with a different lender, pay market rate for the remaining period of my government service, or pay off the loan.”
Multiple experts that spoke with the DP said that universities commonly issue home loans to top administrators for retention purposes, often in the earlier stages of the hire. They said that more public information was necessary to determine whether the loan issued to Gutmann was fully appropriate, though it is not illegal.
“[$3.7 million] is a large amount, even for the wealthiest charities,” Notre Dame School of Law professor Lloyd Hitoshi Mayer said. “And often university presidents are provided with housing by the university, particularly the more elite universities.”
As president, Gutmann was contractually obligated to live in the President’s House, known as Eisenlohr, located at 3812 Walnut St. Mayer added that the size of university loans issued for home purchases is typically associated with the cost of the home but could also cover furnishings and related expenses.
According to Philadelphia property records and Zillow, a 5,000-square-foot home in the Fitler Square neighborhood of Center City was purchased under the name of Michael Doyle, Gutmann’s husband, for $3.6 million in December 2020. The address is the same as the address listed in Gutmann’s voter registration records.
Mayer said that universities typically issue home loans to deans and other senior officers as part of their compensation package, to help them purchase houses when they begin their tenure — especially at universities in expensive real estate markets. In addition to Gutmann, Penn currently has two $150,000 loans issued to Penn Nursing Dean Antonia M. Villaruel and Graduate School of Education dean Pam Grossman before she left office in July.
The purpose of Gutmann’s loan was initially listed as “retention” in the University’s tax filings for fiscal year 2021 and as a “special employee loan” in the same filings for fiscal year 2022. It was issued during the 16th year of her presidency and had increased to a balance of $3,714,060 as of Penn’s most recent tax filings.
“It’s less common, in my experience, that this happens that there’s a general loan as this one appears to be to the officer without ties, for example, to buy the house when they first take the job,” Mayer said. “But it does happen.”
Glenn Colby, the senior research officer in the department of research and public policy at the American Association of University Professors, said a home loan “can be viewed as an investment” of the University’s money.
“A university the size of Penn has an endowment, and they have to decide, what are our investments?” he said. “In this case, it appears that they said, for one investment, would we give a large loan to [Gutmann]?”
Colby added that the nine-year term of the loan matches what limited research has typically observed for loans issued by universities to professors.
Separately from issuing home loans to University officers, the Office of Penn Home Ownership Services offers an application for financing for home purchases and renovations in West Philadelphia. According to the office’s website, over 1,400 employees and families have participated in the program.
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“It’s definitely not a good look,” Colby said. “It’s like why, why are they giving her a loan that massive? And then she left two years after she got the loan.”
While Colby said it was positive that Penn reported the loan in its tax filings he said he would expect minutes of the meeting where the loan was approved to be available to the public.
“The public information raises a lot of fair and legitimate questions that need to be answered about the specifics of the actual loan agreement with the University,” Dean Zerbe, a former senior tax counsel on the United States Senate Committee on Finance who has conducted oversight of loans to charitable officers, said.
Ozment as well as other former employees — loan officer Ron Hankins, underwriter Natalie Boyd and loan processor Kristin Mastrorilli — followed improper mortgage lending practices and lied to Lower about doing so in order to further line their pockets, according to the suit.
The former employees agreed to fraudulently cause Lower to issue high risk loans while knowingly disregarding that at least 13 of the customers receiving these loans did not meet Lower’s loan eligibility criteria, Lower alleged.
The suit said the former employees engaged in “the gross misconduct” to earn more money from Lower than they would have otherwise been owed had they not caused Lower to issue the high-risk loans.
“As a direct and proximate result of Mr. Ozment’s, Mr. Hankins’, Ms. Boyd’s, and/or Ms. Mastrorilli’s fraud and conspiracy to commit fraud, Lower has suffered financial loss and other damages that exceed $4,000,000.00,” the suit said.
Ozment operates Oz Lending as a DBA of AmCap and the suit alleges that he has posted selected portions of customer reviews to misleadingly portray prior customer successes as a result of Ozment’s relationship with AmCap, “when in reality, those successes were a result of Mr. Ozment and Oz Lending were associated with Lower.”
To date, Ozment and AmCap have not returned Lower’s confidential information and trade secrets, Lower alleged.
“Rather, Mr. Ozment has improperly retained and used Lower’s confidential information and trade secrets to solicit Lower’s customers for his, and AmCap’s, benefit thereby breaching the agreement.”
Ozment’s employment agreement — which contained non-solicit provisions — would require Ozment not to compete with Lower and to refrain from soliciting any employees or business from any of Lower’s customers for 16 months after his termination.
Lower claimed that AmCap knew of Ozment’s employment agreement.
The suit claimed that by mid-to-late 2022, Ozment secretly entered into agreements with AmCap to leave Lower and to take Lower’s information, customers and the Plano office employees with him to AmCap.
According to the suit, AmCap and Ozment agreed that AmCap would offer jobs to Lower’s Plano office employees working with Ozment if they agreed to terminate their employment with Lower.
Lower’s employment-related claims will be resolved through arbitration while the lender will ask a court order for permanent injunctive relief from Oz Lending using Lower’s customer information, property and client testimonials, according to the suit.
Summons were issued to AmCap Mortgage and its former employees earlier this month.
Lower, attorneys for the lender, Ozment, Hankin and Mastrorilli didn’t respond to requests for comment.
AmCap declined to comment on active litigation.
Lower originated a total of $4.24 billion in production volume across 14,563 loans in 2022, according to mortgage data platform Modex. A total of 433 sponsored loan originators work in 77 active branches across the country, according to the Nationwide Multistate Licensing System (NMLS).
AmCap Mortgage posted a production volume of $3.35 billion across 11,289 last year, according to Modex. AmCap has 540 sponsored MLOs across 128 active branch locations, NMLS showed.
AA stimulus package is a set of financial measures put together by central bankers or government lawmakers with the aim of improving, or “stimulating,” an economy that’s struggling.
Individuals in the U.S. during the past two decades have witnessed two major periods when government stimulus packages were used to boost the economy: first, after the 2008 financial crisis, and second, following the 2020 outbreak of the Covid-19 pandemic.
While viewed by some as key to reviving growth, economic stimulus packages are not without controversy. Here’s a closer look at how they work, the different types of stimulus packages, and their pros and cons.
Government Stimulus Packages, Explained
What is a stimulus package? The foundational theory behind these economic stimulus packages is one developed by a man named John Maynard Keynes in the 1930s.
Keynes was a British economist who created his theory in response to the global depression of the era. His conclusion was that, when a government lowers taxes and increases its spending, this would stimulate demand and help to get the economy out of its depressed state.
More specifically, when taxes are lowered, this helps to free up more income for people; because more is at their disposal, this is referred to as “disposable income.” People are more likely to spend some of this extra money, which helps to boost a sluggish economy.
When the government boosts its spending, this also puts more money into the economy. The hoped-for results are a decreased unemployment rate that will help to improve the overall economy.
Economic theory, of course, is much more complex than that, and so are government stimulus packages. 💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.
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Different Types of Stimulus
Monetary Stimulus
To get a bit more nuanced, monetary stimulus is something that occurs when monetary policy is changed to boost the economy.
Monetary policy is how the supply of money is influenced and interest rates managed through actions taken by a central agency. In the U.S., that agency is the Federal Reserve Bank.
Ways in which the Federal Reserve can use monetary policy to stimulate the economy include cutting policy rates, which in turn allows banks to loan money to consumers at lower rates; reducing the reserve requirement ratio, and buying government securities.
When the reserve requirement ratio is lowered, banks don’t need to keep as much in reserve. That means they have more to lend, at lower interest rates, which makes it more appealing for people to borrow money and get it circulating in the economy.
Fiscal Stimulus
Fiscal stimulus strategies focus on lowering taxes and/or boosting government spending. When taxes are lowered, this increases the amount of money that people have left over from a paycheck, and that money could be spent or invested.
When money is spent on a greater amount of products, this increases demand for those products — which in turn helps to reduce unemployment because companies need more employees to make and sell them.
If this process continues, then employees themselves become more in demand, which makes it more likely that they can get higher wages — which gives them even more funds to spend or invest.
When the government spends more money, this can increase employment, giving workers more money to spend, which can increase demand — and so, it is hoped, the upward cycle continues.
In the U.S., a federal fiscal package needs to be passed by the Senate and the House of Representatives — and then the president can sign it into law.
Quantitative Easing
Quantitative easing (QE) is a strategy used by the Federal Reserve when there is a need for a rapid increase in the money supply in the United States and to boost the economy.
For example, on March 15, 2020, the Federal Reserve announced a $700+ billion program in response to COVID-19. In general, QE involves the Federal Reserve buying longer-term government bonds, among other assets. 💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.
Pros and Cons of Stimulus Packages
There are advantages and disadvantages to economic stimulus packages, including the following:
Benefits
The goal of a stimulus package, based on Keynesian theory, is to revive a lagging economy and to prevent or reverse a recession, where the economy is retracting rather than expanding. This is a more immediate form of relief as the government also uses monetary, fiscal, and QE strategies to boost the overall economy.
This might include the Fed cutting interest rates, which lowers the rate at which banks loan money to consumers. That can encourage individuals to borrow money, which gets it circulating in the economy.
Taxes may also be lowered, which means workers have more money from each paycheck to spend. That spending may, in turn, increase the supply and demand for products, which can help both employees and businesses.
Risks
However, there are also risks to implementing stimulus packages. An economic theory that runs counter to Keynesian theory is the crowding out critique. According to this thinking, when the government participates in a deficit form of spending, labor demands will rise, which leads to higher wages, which leads to lower bottom lines for businesses.
Plus, these deficits are initially funded by debt, which causes an incremental increase in interest rates. This means it would cost more for businesses to obtain financing.
Other criticisms of stimulus spending focus on the timing of when funds are allocated and that central governments can be less efficient at capital allocation, which ultimately leads to waste and a low return on spending.
Another risk is that the central bank or government over-stimulates the economy or prints too much fiat currency, leading to inflation, or rise in prices. While a degree of inflation is normal and healthy for a growing inflation, price increases that are rapid and out of control can be painful for consumers.
Previous Economic Stimulus Legislation
Perhaps the most sweeping stimulus bill ever created in the United States was signed into law by President Franklin Delano Roosevelt on April 8, 1935.
Called the Emergency Relief Appropriation Act and designed to help people struggling under the Great Depression, Roosevelt simply called it the “Big Bill”; it is now often referred to as the “New Deal.” Five billion dollars was provided to create jobs for Americans, who in turn built roads, bridges, parks, and more.
The Works Progress Administration (WPA) came out of the New Deal, ultimately employing 11 million workers to build San Francisco’s Golden Gate Bridge, LaGuardia Airport in New York, Chicago’s Lake Shore Drive, about 100,000 other bridges, 8,000 parks, and half a million miles of roads, including highways.
Another agency, the Tennessee Valley Authority, collaborated with other agencies to build more than 20 dams, which generated electricity for millions of families in the South and West.
More Recent Stimulus Packages
Additionally, there was the American Recovery and Reinvestment Act (ARRA) in 2009. This was passed into law in response to the Great Recession of 2008 and is sometimes called the “Obama stimulus” or the “stimulus package of 2009.” Its goal was to address job losses.
This Act included $787 billion in tax cuts and credits, as well as unemployment benefits for families. Dollars were also provided for infrastructure, health care, and education, and the total funding was later increased to $831 billion.
More recently, the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, was passed by the United States Senate on March 25, 2020. On March 27, 2020, the House of Representatives passed the legislation and the President signed it into law the same day.
And in March 2021, the American Rescue Plan was passed by the House and the Senate and signed into law by President Biden. This emergency relief plan included payments for individuals, tax credits, and grants to small businesses, among other things.
The Takeaway
Stimulus packages are used to prop up economies when they are struggling or on the brink of a major recession, or even depression. While in recent decades, such stimulus packages have been credited by some for helping the U.S. economy out of the 2008 financial crisis and 2020 Covid-19 pandemic, others worry that the increase in government deficit is unhealthy, and all that spending could lead to inflation.
For individuals, devising a strategy to help save and invest during times when the economy is struggling — and in general — can be important to achieving their financial goals. Chatting with a financial planner about those goals may be helpful for some when it comes to putting together a plan to save for the future.
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FAQ
Are there stimulus packages for small businesses?
Yes. For example, as part of the American Rescue Plan, small businesses that closed temporarily or had declining revenues due to COVID were extended a number of tax benefits to help with things like payroll taxes. There were also funds put toward grants for small businesses as part of this economic stimulus package.
How do stimulus packages fight recessions?
Economic stimulus packages are thought to help fight recessions by lowering taxes and increasing spending. The idea is that these measures would boost demand and improve the economy, and thus help avoid or fight recession.
What disqualifies you from getting a stimulus package?
Some reasons that could disqualify you from getting a stimulus package include having an income that’s deemed too high, not having a Social Security number, or not being a U.S. citizen or U.S. national.
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