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What To Expect From The January Fed Meeting

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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It’s officially 2019, which means a whole new year of Federal Reserve meetings. The Fed was busy last year, raising the federal funds rate four times and adjusting to the leadership of new chairman Jerome H. Powell.

The Fed’s Federal Open Market Committee (FOMC) holds its first 2019 meeting on Jan. 29-30. After watching the Fed close out the year with a December rate hike, those worried about further increases will have a lot to look out for as the committee gives its first thoughts on what consumers should expect in the coming year.

Even though a rate increase seems unlikely, new economic forecasts and a reaction to the government shutdown are just a few things worth monitoring. Here’s what to expect from the January Fed meeting.

Read more: How Fed Rate Hikes Change Borrowing and Savings Rates

Why you shouldn’t expect a rate hike

The FOMC ended the year with yet another rate hike, raising the federal funds rate from 2.25 to 2.5%. It was the committee’s fourth increase of 2018, which began with a rate of just 1.5%.

But the January Fed meeting will likely be an increase-free one. Tendayi Kapfidze, chief economist at LendingTree, the parent company of MagnifyMoney, said the probability of a rate hike is “basically zero.”

Kapfidze’s assessment is twofold. First, he noted that the Fed typically announces rate increases during the third month of each quarter, not the first. This means a hike announcement would be much more likely during the FOMC’s March 19-20 meeting, rather than in January.

Perhaps more importantly, Kapfidze said there’s been too much market flux for the FOMC to make a new decision on the federal funds rate. He predicts the Fed will likely wait for more evidence before it considers another rate hike.

“I think a lot of it is a reaction to market volatility, and therefore that’s lowered the expectations for federal fund hikes,” Kapfidze said.

3 things we may learn from the January Fed meeting

But if a rate hike is so unlikely, what should consumers expect from the January Fed meeting? Here are three things to keep an eye on.

#1 The frequency of rate hikes moving forward

It’s unclear when the next increase will occur, but the FOMC’s post-meeting statement could give a clearer picture of how often rate hikes might occur in the future.

The Fed released its latest economic projections last month, which predicted the federal funds rate would likely reach 2.9% by the end of 2019. This figure was a decline from its September 2018 projections, which placed that figure at 3.1%.

As a result, many analysts — Kapfidze included — are forecasting a slower year for rate hikes than in 2018. Kapfdize said some analysts are predicting zero increases, or even a rate decrease, but he believes that may be too conservative.

“I still think the underlying economic data supports at least two rate hikes, maybe even three,” Kapfidze said.

Kapfidze’s outlook falls more in line with the Fed’s current projections, as it would mean two rate hikes of 0.25% at some point this year. There could be more clarity after the January meeting, as the FOMC’s accompanying statement will help indicate whether the Fed’s monetary policy has changed since December.

#2 An economic forecast for 2019

The FOMC’s post-meeting statement always includes a brief assessment of the economy, and this month’s comments will provide a helpful first look at the outlook for 2019.

Consumers will have to wait until March for the Fed’s full projections — those are only updated after every other meeting — but the FOMC will follow its January gathering with its usual press release. This statement normally provides insight into the state of household spending, inflation, the unemployment rate and GDP growth, as well as a prediction of how quickly the economy will grow in the coming months.

At last month’s Fed meeting, the committee found that household spending was continuing to increase, unemployment was remaining low and overall inflation remained near 2%. Kapfidze expects January’s forecast to be fairly similar, as recent market fluctuations might make it difficult for the FOMC to predict any major changes.

Read more: What the Fed Rate Hike Means for Your Investments

“I wouldn’t expect any significant change in the tone compared to December,” Kapfidze said. “I think they’ll want to see a little more data come in, and a little more time pass.”

At the very least, the statement will let consumers know if the Fed is taking a patient approach to its analysis, a decision that may help indicate just how volatile the FOMC considers the economy to be.

#3 A response to the government shutdown

The big mystery entering January’s Fed meeting is the partial government shutdown. While Kapfidze said the FOMC’s outlook should be similar to December, he also warned that things could change quickly if Congress and President Trump can’t agree on a spending bill soon.

“The longer it goes on, and the more contentious it gets, the less confidence consumers have — the less confidence business have. And a lot of that could translate to increased financial market volatility,” Kapfidze said.

Kapfidze added that the longer the government stays closed, the more likely the FOMC is to react with a change in monetary policy. During the October 2013 shutdown, for example, the Fed’s Board of Governors released a statement encouraging banks and credit unions to allow consumers a chance at renegotiating debt payments, such as mortgages, student loans and credit cards.

“The agencies encourage financial institutions to consider prudent workout arrangements that increase the potential for creditworthy borrowers to meet their obligations,” the 2013 statement said.

Learn more: What is the Federal Open Market Committee?

The FOMC is one of two monetary policy-controlling bodies within the Federal Reserve. While the Fed’s Board of Governors oversees the discount rate and reserve requirements, the FOMC is responsible for open market operations, which are defined as the purchase and sale of securities by a central bank.

Most importantly, the committee controls the federal funds rate, which is the interest rate at which banks and credit unions can lend reserve balances to other banks and credit unions.

The committee has eight scheduled meetings each year, during which its members assess the current economic environment and make decisions about national monetary policy — including whether it will institute new rate hikes.

A look back at 2018

Before the FOMC gathers this January, it’s worth understanding what the Fed did in 2018, and how those decisions might affect future policy.

The year 2018 was the Fed’s most aggressive rate-raising year in a decade. The FOMC’s four rate hikes were the most since the 2008 Financial Crisis, after the funds rate stayed at nearly zero for seven years. This approach was largely based on the the FOMC’s economic projections, which found that from 2017 to 2018 GDP grew, unemployment declined and inflation its Fed-preferred rate of 2%.

In addition to the rate hikes, the FOMC also continued to implement its balance sheet normalization program, through which the Fed is aiming to reduce its securities holdings.

When the Fed meets in 2019

Here is the schedule for the next three FOMC meetings. Note that each meeting date is tentative until confirmed at the meeting before it:

  • March 19-20
  • April 30-May 1
  • June 18-19

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dillon Thompson
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Dillon Thompson is a writer at MagnifyMoney. You can email Dillon here

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How These Newlyweds Tackled Six-Figure Debt in Their First Year of Marriage

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Newlyweds Faith, 27, and Leo, 30, eliminated over $100,000 of debt in their first year of marriage.

When Faith and Leo Jean-Louis tied the knot in June 2017, they carried a joint debt load of over $200,000 down the aisle along with them.

Even before their nuptials, the Atlanta couple decided to make paying off the balance a priority in their first few years of marriage, no matter what. Now, about a year into their debt payoff mission, the couple has already knocked out more than $100,000 of their debt.

It was no easy feat, and required a commitment to working longer hours and seeing less of their family, friends and each other. The couple recently spoke with MagnifyMoney about the lessons they learned in their first year paying down their debt, and their plan for how they’ll approach things differently in the years to come.

‘The biggest thing standing in our way was debt’

The Jean-Louises met back in 2014, when they were both newcomers to Atlanta. Leo, 30, who had moved to the city to begin his career as an occupational therapist, met Faith, 27, a nursing student at Emory University, at church.

They started dating a few months later, and in 2016, they got engaged. In premarital counseling sessions with their pastor, the couple was encouraged to think about the purpose of their marriage. They both agreed that giving to others — not just their money, but also their time — was a major desire.

“One of the questions we had to ask ourselves was: ‘What do we want life to look like in three years, five years, 10 years from now?’” Leo said. “The biggest thing standing in our way was debt.”

Choosing a strategy

Faith and Leo both earned undergraduate and master’s degrees, and together they owed around $194,000 in student loans. The rest of the $211,000 obstacle came from credit card debt, which included wedding expenses and their honeymoon to Greece.

The couple hired a certified financial planner to help start the process. At first, they tried to prioritize debts by highest interest rate, but it became too overwhelming, as some of their biggest debts had the highest rates. They switched gears and opted to use the debt snowball method instead, which involves paying off debts with the smallest balances first as a way to gain easy wins early and build momentum. This meant tackling the credit card debt before worrying about the mountain of student loans.

Their adviser recommended they use some of their savings to make a lump payment on their loans. They paid $10,000 toward that in August 2017, and things took off from there.

“That’s when we knew that this was really serious,” Leo said. “That really got us kick-started.”

Putting in extra hours

Working extra shifts and a part-time job were a huge part of the couple’s strategy to whittle away their debt.

Leo took on additional therapy shifts on weeknights and Saturday afternoons. Faith, meanwhile, kept her side job from graduate school, where she worked as an overnight nurse for new mothers. Pulling these night shifts five or six times a week was exhausting, she said.

“I’d go to my full-time job, leave around 5 or 5:30 p.m., come back home, take a quick nap and then wake up to go to my overnight job, and then leave for my full-time job again that morning,” Faith said.

Their second paychecks — other than the 10 percent they tithed to their church — went entirely toward the debt. Thanks to careful budgeting and self-control with entertainment and spending, the Jean-Louises managed to live entirely off the money from their primary jobs as a nurse and occupational therapist.

Spending little time with each other was a sacrifice for the newlyweds, but seeing their debt decline helped them keep focused.

“We just kept reminding ourselves: ‘Hey, life is not always going to be this way,’” Leo said. “We knew we’d have the next 20, 30, 40 years to live how we want to if we could just sacrifice for this short period of time.”

One side benefit was that they bonded more as a couple.

“We had to constantly be in communication: asking each other how we were doing, encouraging one another when we were tired,” Leo said.

Small savings add up

Faith and Leo track their progress and share updates for friends and family on social media. (Photo credit: Leo Jean-Louis)

When they first started tackling their debt, the couple put together a budget by tallying all the money they were spending each month and looking for places where they could cut back. Leo said it was “trial and error” at first, but once they realized where they could save the most, they began to make major lifestyle changes.

They started carpooling to work, which saved around $100 per month. They saved about $240 every month by packing their lunches for work. They even saved between $50 and $60 each month by forgoing a cable plan, instead using an Amazon Fire Stick, which retails for $40, to watch TV shows online.

Instead of going out to restaurants and movie theaters on weekends, they hung out at their friends’ homes. Rotating houses each time, these potluck-style dinners helped them stay social without expensive nights on the town.

A long journey ahead

With half of their debt behind them, Faith said in June that she and Leo would be taking a month or so to relax. They’re planning a vacation to Costa Rica, exploring Atlanta and dialing back on their second jobs.

“I still think we want to be aggressive with it, because we don’t want this to last much longer, however, right now we are taking some time to have a break,” Faith said. “We still have our part-time jobs, but we’ve calmed down with the amount of shifts we’re taking.”

Still, the Jean-Louises are confident that they’ll stay committed to their money-conserving lifestyle, a big part of which involves the small, day-to-day decisions that have saved them so much over the past year.

The couple’s goal is to be debt-free by December 2019 — a task they think is easily attainable if they keep living this way. They also might receive help from Faith’s employer, which will allow her to enter a repayment plan that could help pay off as much as $50,000 of the remaining total. Faith will become eligible for the plan in fall 2019, and they’ll make their decision then.

“I think it’s just about remembering that this is temporary,” Faith said. “It’s not going to last — it’s just a season we have to go through.”

Faith and Leo’s tips for overcoming debt

The Jean-Louises don’t see their story as an anomaly. The couple uses Leo’s Instagram page to inspire others trying to conquer debt and offer advice.

“We want people to know that they can get out of debt, too,” Leo said.

Here are Faith and Leo’s four tips for tackling debt:

  • Think about “the why”: Leo admits that the total can be overwhelming, which is why he suggests people first consider their reasons for wanting to be debt-free. “If you can dream a little bit about where you want to be, that should give you enough motivation to take the first step,” he said.
  • Write down your debts: Actually look at the numbers, consider what you owe and what you could end up paying over a lifetime if you took a more conservative approach to paying off debt, such as if you were only making the minimum payment each month.
  • Track your expenses: Life changes, whether small or large, are needed. Look at every aspect of your monthly spending and find ways to save, no matter how miniscule they may seem. “Let’s say you decide to go to Starbucks every morning. Is Starbucks that necessary? Or can you make your own coffee at home?” Faith said. “It’s just seeing what’s important to you and what you can decrease or cut back on.”
  • Remember to enjoy yourself: Always make time to have fun, even if you have a rigid plan. “You can make a budget for the things you like to do, which will help you stay focused and not get so overwhelmed,” Faith said.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dillon Thompson
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Dillon Thompson is a writer at MagnifyMoney. You can email Dillon here

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Survey: Nearly 40 Percent of Students with Loans Consider Dropping Out of College

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

What To Do if a Student Loan Refinancer Rejects You

Today’s college student bears the weight of trying to succeed academically as well as his growing debt from student loans.

According to a new MagnifyMoney.com survey, nearly 40% of current students with loans have considered dropping out to avoid racking up more student loan debt. And of the students who thought about leaving before earning their degree, over half were more than $20,000 in debt.

It’s no secret that student debt is causing many individuals to consider whether their degree is even worth the financial stress. An analysis by The Hechinger Report revealed that 3.9 million people with student loan debt dropped out of college during the 2015 and 2016 fiscal years alone.

For fall 2017, total undergraduate enrollment dropped by nearly 224,000 students from a year ago, according to the National Student Clearinghouse Research Center. The center said it’s the sixth consecutive year of total enrollment declines and does not cite reasons, but our survey found financial concerns seem to play a role in student enrollments and dropouts.

The survey was conducted via Google Consumer Surveys’ online student panel from April 23-May 7, 2018. It included responses from 3,069 college students. Approximately 2,000 of respondents had at least some student loan debt.

Key findings: Work, kids add to financial strain

In our survey, 39% of our respondents with student debt said they have considered stopping college before graduating so their financial situation wouldn’t get worse. For those students, balancing school with part-time work was also a major worry, with more than half citing the juggling act as a main reason they considered quitting.

Nearly 45% of those who contemplated dropping out said they worked 20 hours or more per week, with 20% saying they worked more than 40.

Still, 35% of the students in our study who had thought about leaving weren’t working at all, signifying that loan debt is still a major stress for those who don’t earn extra money while in college.

Concerns such as children and expected income seemed to play a large role in these anxieties as well: 30% of students listed balancing work and family as a main reason they had thought about quitting, while 26% said they considered quitting because they were worried about not making enough in their chosen career field.

Debt amounts hit $50,000 and up

In addition to the 52% of our in-debt respondents who owed $20,000 or more, nearly 25% were facing at least $50,000 in total loans. Additionally, almost 10% owed $100,000 or more.

Loan structure varies widely among these students. Based on our survey, 48% of our respondents said they had at least some private loans, while 52% were exclusively using federal aid.

No one-size-fits-all plan for paying off debt

There was no clear favorite strategy for paying off debt. While 39% of people said they would use an income-based plan to manage their loans, 25% said they would use a standard repayment plan. Still, another 26% weren’t yet sure how they would deal with the debt.

Despite the stress caused by student loans, most of our respondents were generally positive about their job prospects after school.

Nearly half said they thought they would make at least $20,000 extra per year as a result of their degree, with 34% of them saying they expected to earn at least $30,000 extra.

Tips for dealing with student debt

Student loans don’t have to be such a headache, though. With the proper planning and preparation, students can work around the overwhelming costs of loan debt and keep the stress of repayment at bay from their daily lives.

Jeremy Wine, supervisor of student loan counseling services for Take Charge America, a Phoenix-based nonprofit credit consulting agency, shared tips for approaching the repayment process.

    • Think ahead. As our survey shows, worrying about loans during college can be a major source of anxiety among students. Still, Wine said it’s best to set up a plan of action long before you put on your cap and gown. “Realize that it’s there and that it’s something you have to pay back,” he said. He added that a nonprofit loan counselor can help you lay out a set of repayment goals and a budget that fits your financial situation.
    • Look at repayment options. If you have federal student loans, there are a number of flexible repayment options available to you. Contact your loan servicer to enroll.
    • Don’t waste money. It may be tempting to use the loan funds on items such as a new computer or a car payment. Wine said it’s best to only use the money for tuition and fees, even if that means getting a part-time job to pay for the rest.
    • Consider consolidation carefully. Student loan consolidation or refinance involves paying off each of your loans with a new loan. Refinancing your debt can help lower your interest payments and make your loans easier to manage. Typically, you’d take out the new loan with a private lender. Just know that if you refinance federal student debt with a private loan, you’ll lose access to flexible repayment programs offered to federal borrowers. There is a consolidation program available for federal loans specifically, however, which is another option.

 

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dillon Thompson
Dillon Thompson |

Dillon Thompson is a writer at MagnifyMoney. You can email Dillon here

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