Gamestop Tips on Savings & Restarting Your Business: Cut Through The Noise

Gamestop Savings & Restarting Your Business: Cut Through The Noise

Gamestop mania, savings tips with low yield accounts, & restarting your business.

In this episode of Cut Through The Noise, Anthony Saffer, CFP®,CKA® and Alex Okugawa, CFP®, CEPA®, CKA® tackle the hottest topics in financial markets, financial planning, and life, including:

What is happening with Gamestop?  What happened and why speculation with no underlying value will always be reconciled…

Where Should I Save My Cash? With savings accounts paying so little interest, is there a better place for my money?

Restarting My Business  My business was hit hard but is starting to pick back up. I need all the revenue to pay bills, including re-staffing but I also want to be smart and build some reserves in case things are closed again, how should I be thinking about this?

Best way to save for college?  Is a 529 plan the best way to save for college? The decision comes down to tax benefits vs flexibility.

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Full Transcript:

Anthony: Hello and welcome to our segment cut through the noise where we answer your questions that we have heard throughout the month today we’re going to talk about Gamestop, low-interest savings accounts, restarting a business after COVID, and the best place for college savings. Stay tuned…

What is happening with Gamestop?

Gamestop mania, Tips on Savings, & Restarting Your Business: Cut Through The Noise

Anthony: okay Alex first question for you what do you make of this game stop mania?

Alex: Yeah so as many people know Gamestop was heavily in the news. The stock price jumped up rapidly and there really seemed to be no other reason behind it besides what was called a short squeeze. What does it mean for investors? For long-term investors that have a solid disciplined investment plan, this really means nothing. It’s a blip on the radar, it has no impact on your long-term financial plan and investment plan so don’t even worry about it it’s just noise.

For younger investors that possibly got caught up in this whirlwind, I do feel bad a little bit and it’s partially because you know a lot of people this is going to be their first major experience with investing and they come into this experience basically seeing investing as gambling, as legalized gambling.

What they’re doing is they’re either looking to Tik-Tok or their favorite influencer to see what stock is going to get pumped up next. They’re then saying I just got to find the next one, I got to find the next one. I got to find the next stock that’s gonna absolutely rip, and unfortunately for us, it’s a little sad because that history is not the way that investing is gonna work over the long term.

You need to just have diligent savings, and unfortunately, a good investment strategy can sometimes be boring. Investing in low-cost diversified ETFs and mutual funds that are well researched. A broad range of spectrums there but it impacts people differently.

Where Should I Save My Cash

Gamestop, Tips on Savings, & Restarting Your Business: Cut Through The Noise

Alex: All right so Anthony the second question we have here is with savings accounts paying so little interest is there a better place for my money?

Anthony: It’s a little bit demoralizing to get like you know 0.1% interest on your savings account, but understand first what the objective of that cash reserve is or those savings. I think it’s important to set a goal. For example, how much do I want in cash reserves and then be okay with it not earning a lot. It’s there for the stability and for the convenience of it.

Perhaps look to like an online bank like an Ally or a Marcus or something that’s paying a little bit more interest. Once you have that goal in place, if you have more than you really do want to set aside that’s still liquid consider creating a second layer of reserves where maybe you are taking a little bit of risk and it’s still accessible.

Alex: So what do you mean by that second layer like what are we talking about?

Anthony: Yeah I mean it could be like tax-free municipal bonds maybe you do get a little bit of risk going on in something like that, but you’re only going to get to it if you’ve used the bank money first. It becomes that next part of it.

Restarting My Business

Gamestop, Tips on Savings, & Restarting Your Business: Cut Through The Noise

Anthony: Okay so the next question for you Alex is “My business was hit hard by the pandemic but it’s starting to pick back up. I still need all the revenue to pay bills including re-staffing, but I also want to be smart and build some reserves in case things are closed again. How should I begin thinking about this?

Alex: That’s definitely a difficult question just to answer from a broad level of course as I’m thinking about it we would want to look specifically at the business, how cash flow looks, what they’ve been doing recently.

There’s really no easy answer to that, I would say the first thing though is that if you’ve made it this far and your business is continuing to chug along, you should be really proud of yourself for making it through this. Especially if you’ve been in a hard-hit industry like restaurants as an example.

I would say that the thing that you should be doing now at this point really is taking this experience, internalizing it, and using it in business practices going forward. So going forward, the businesses that got hit hard but made it through this we’re going to see them be a little bit more conservative. They should behave by having cash reserves, emergency plans, and backup plans in case they do get hit hard again. So I would say going forward the best thing you can do is always plan ahead, prepare for the unknown, and have that cash reserve there that you can fall back on should things get tough again.

Anthony: I think this situation should prepare business owners for contingencies more often we can’t plan for everything yep but it’s going to make us all more innovative and thoughtful.

Best way to save for college?

Gamestop, Tips on Savings, & Restarting Your Business: Cut Through The Noise

Alex: Anthony the last question we have here is about college planning. So is a 529 plan that is a college savings plan, the best way to save for college?

Anthony: Possibly. It sure can. I like to explain it this way is that when you’re saving for college think about it along a spectrum of tax benefits on one side or flexibility on the other and what your priority is.

A 529 plan, which is a specified college savings plan, is great because the tax benefits are good when you get growth over the years. As long as it’s used for college then it can come out tax-free which could be a huge benefit, but it needs to be used for education. So you get a little bit of additional flexibility with something like that if you have multiple kids because if one child decides not to go to school then you can pass it on.

Alex: Or if they don’t use all of it.

Anthony: Yes, If they don’t use all of it. So there is some built-in flexibility there but there’s still that restrictiveness. On the other side of things, some people prefer not to get it tied up in a college plan specifically, so they just save over here. It can be used for anything and yet I’m going to earmark it for college.

What I find is a lot of people like to do almost a hybrid of that. I’m going to build up a 529 plan especially when the kids are young. Build up to a certain amount and then once I feel semi-comfortable with it then I’ll move over and save more flexibly somewhere else.

Alex: Well and I’ve been asked this question recently too with all the administration changes, the sentiment around college education whether or not it should be free or things like that.

People are saying “should I still continue to save for college in that type of account knowing that there are ideas or talks that that college should be free?” I think the thing is we don’t know exactly what the future holds but like you said you can kind of hedge your bets and get flexible.

Saving in both types of accounts like a 529 college account and maybe just a normal taxable brokerage account gives you both benefits but it also gives you flexibility no matter what the future holds.

Well, this was our segment Cut Through the Noise! If you have questions that you would like to ask us we’d love to answer them give us a call or visit our website we’d love to talk with you.

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