Hello friends!

This week, we’ll talk about what the Federal Open Market Committee (FOMC) actually is and how it affects you. Then, we’ll take a look at XYZ.

Okay, so before we can understand why the FOMC matters to you, we need to break down what it actually is. Here are some key terms (got that back-to-school feeling yet?):

• Monetary policy: The actions taken by the Federal Reserve to influence the availability and cost of money and credit in the best interests of national economic goals. This power was given to the Federal Reserve in the 1913 Federal Reserve Act. Monetary policy has three tools:
  • Open market operations: the purchase and sale of securities in the open market by a central bank
  • The discount rate: the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank’s lending facility (the discount window)
  • Reserve requirements: the amount of cash that banks must have, in their vaults or at the closest Federal Reserve bank, in line with deposits made by their customers. Learn more about reserve requirements here.
• Federal Reserve Board (FRB): The governing body of the Federal Reserve system. This body is responsible for the discount rate and reserve requirements. Jerome Powell is the current chair of the FRB.
• Federal Open Market Committee: The branch of the Federal Reserve system that directs open market operations, thus determining the direction of US monetary policy.

The FOMC has twelve members, including the seven members of the FRB, the president of the Federal Reserve Bank of New York, and four of the eleven remaining Reserve Bank presidents, who serve one-year terms on a rotating basis. The FOMC meets eight times per year to review economic and financial conditions, determine the stance of monetary policy, and look at the long-run goals of price stability and sustainable economic growth. Raising interest rates, for example, is something that can come out of an FOMC meeting. These meetings are not public, and thus are the cause of speculation from Wall Street, but they typically release transcripts after the meeting.

So how does all of this affect your money?

• The stock market: Usually, these rate hikes have more of a psychological effect than anything else. Some longer-term data shows that markets can rise under certain circumstances when the Fed tightens monetary policy.
• Credit cards: Raising interest rates means your credit card debt is more expensive, as banks pass on carrying costs to consumers.
• Mortgages and loans: Similar to credit card debt, these also become more expensive, as can tapping into your equity. Rising mortgage rates could effect the cooling of the housing market and making the price of a home more affordable; however higher interest rates can make the monthly cost of a mortgage higher.
• Savings accounts: Here’s some good news! Rates on savings accounts also go up, albeit very slowly. Where you bank will make a difference with the savings account rates.
• Bonds: Raising interest rates can have a big effect on your bond portfolio, because when interest rates go up, bond prices go down. If you have them in your portfolio, you might see them go down as well. That’s why it’s important to have mostly short term bonds, as longer-term bonds react in a more volatile fashion.

Speaking of back to school! Domestika, an online learning platform that we are not affiliated with, is having a big sale through the weekend. If there’s a craft or skill you’ve been dying to learn, now’s your chance to sign up for an asynchronous course for only $10. Here are some that caught our eye:

• Travel photography with a mobile phone: You love to travel and we love to see pictures from your adventures, so this one seems like a great way to hone your skills without investing in a big camera setup. (Bonus recommendation: you can also learn photoshop if you want to jazz your pictures up or make it look like Aunt Mable was standing on top of the Eiffel Tower).
• Writing a novel: Many of us dream of writing a novel, but without taking creative writing classes, it can be hard to know where to start. This course will walk you through it, step by step. Want to write something else, or just establish a daily practice? The writing category on Domestika is huge and has something for everyone.
• Embroidering pet portraits: Okay, here’s the truth. The craft section on Domestika is so varied and amazing that we were nearly in tears trying to choose a winner from this category. But because we are pretty pet-obsessed around here, we picked this one. That said, if you want to get into woodworking, needle felting, crocheting, making furniture out of cement, cake decorating, or almost anything else, you can find it.
• Using storytelling to pitch and sell ideas: If you’re a freelancer or working with clients, this class can help you perfect your pitch. The rest of the marketing and business category has advice for freelancers, social media influencers, and more.
• Designing green spaces for your home: It’s not even fall yet, but we’re already thinking of ways to combat seasonal depression. Having plants around the house can help with that, as you see green living things instead of just snow and ice and bare branches all winter long. This course can show you how to set up a beautiful green space at home. The entire architecture and spaces section is, like the others, fascinating.

That’s it for us this week. Have fun learning how to press flowers or build an app, and we’ll be back in your inboxes next Friday.

How We Help

Last week, we had a fun conversation with a client about a different aspect of estate planning: collectibles. (No, not Beanie Babies.) We shared some important information with her about how we take valuable collections into account in estate planning. When including these kinds of things in your estate, consider the ABCs: Appraisal, Basis, and Communication. Appraisal is about how much the collection is worth; Basis is about what you paid or your cost and the capital gains tax rate on the sale value of the items; and Communication is about being very clear and specific about who should inherit what. If you have a collection or artwork that is important to you and you want to include it in your estate plan, call us and we’ll come up with a custom plan for you.

Advisory Services offered through Obsidian Personal Planning Solutions, LLC. Securities are offered through Triad Advisors, member ​FINRA/SIPC.​ Obsidian Personal Planning Solutions, LLC, and Obsidian Personal Planning Solutions, Inc, are not affiliated with Triad Advisors.