Voiceover Audio: Welcome to the Enjoy More 30s Family Finance podcast.

The only podcast dedicated to making life more enjoyable for young families by hitting on the financial topics that tend to weigh on us, stress us out, and distract our focus from simply enjoying life.

Joseph Okaly: Hello and welcome to the next series here on the Enjoy More 30s Family Finance podcast, REMIX for Rising Rates.

In 2022, there have been really significant declines across pretty much every major asset class through the end of October.

With rates rising, interest rates rising significantly for the first time in really a long time, it can be a very unnerving experience for people that are dealing with it, which is pretty much everyone out there.

This series is going to attempt though to help you with that.

Going back and re-mixing a number of past episodes that I've presented to help you emotionally navigate these more turbulent times.

Each week, I'll be re-mixing a different episode, bringing what I would say is probably a timeless concept into the focus of the present day situation.

So as always, before I begin, please share and like, please leave reviews.

I'd love to reach and help as many young families out there just like you.

Today's first episode is re-mixing all the way back to the very beginning.

Season one, episode one, Unknowns are Scary.

When my son Noah, if you remember was just a couple of days old, we brought him home from the hospital.

And we started to notice these little blistery bump type things around his diaper line.

And you know, at first we just thought it was an irritation from the diaper.

Babies have super, super sensitive skin.

They're red and blotchy all of her when they're born.

But after 2, 3, 4 started to pop up, we kind of started to realize that this is maybe something more than just diaper rash.

We came to this realization during the night so we left a message for the pediatrician, because we wanted to go in and see them the next day.

That night, though I could not sleep at all.

I was tossing and turning, my mind just wouldn't shut off.

It was wondering just what was wrong with him.

You know, you go on the phone, you start looking up everything on the internet, and there's just a whole box of scary that pours out at you.

And so it was a very, very difficult night.

Now the next day, we get the appointment with the pediatrician.

They have us come in and they diagnosed it as something called impetigo, which is a bacterial infection.

And it's not a good infection to have by any means.

But if you know you catch it early, you get a prescription Neosporin kind of a thing.

And now you handle it.

And this poor little boy who's just been born is great throughout the whole process, we have him laying on our laps, no shirt on, rubbing the ointment on him holding up his hand, so he can't touch it.

And he's just sleeping there with his arms straight up in the air.

So he was fantastic.

But you know, once that night happened, I wasn't scared anymore.

Not because the difficulty was over.

It was it was still difficult, we still had to go through and get him back to better.

However, I knew what I was dealing with, right?

I knew the name of it and I knew the treatment that was required to have him be better.

The same thing is true when it comes to personal finance.

What you need to know is that the unknowns from a finance standpoint or a personal finance standpoint, they work in a lot of the same ways.

So if you don't know where you are, and you don't know what you need to do to fix it, that's pretty scary, right?

And that's true for anything across the board.

And what makes it even worse.

A lot of times when it comes to finances is we don't even know what we don't know.

So Noah had a rash.

It was a visual element.

I could see that there was a problem.

Finances don't always work that way.

And if they do work that way, it's sometimes because it's got so late in dealing with the issue that now we're trying to play catch up.

So when we see our accounts in the context of this year, you might have your accounts dropping 20, 25% or more, perhaps, depending on how you're allocated.

It can be really scary.

Like, why is this happening?

I've heard words thrown around, like interest rates and inflation but that doesn't all of a sudden magically tells me what's going on and makes sense.

Like, oh, okay, interest rates right now I get it now.

I'm fine with my account dropping so significantly.

So why don't we start off today with an explanation on how interest rates and inflation could possibly tie to what you may have seen in your investments?

When inflation is too high, the government starts to get worried about that, you know, the economy could get a little out of control.

They want it to grow, for sure but they want it to grow it more of a controled, let's say steady rate.

They don't want the train, so to speak, to speed up too much and get going off the tracks.

So what do they do when they say hey, inflation is too high, the economy's running too fast.

What do we do?

They raise interest rates.

Why?

Because it makes it more expensive for companies and individuals to borrow money.

If it's more expensive to borrow money, they won't have as much money to spend.

Think like if you go to the store and they offer you a credit card.

If they give you 0% financing versus 10% financing, you're probably going to spend more if they offer you the 0% right?

So less spending overall slows down the economy.

So when interest rates go up, it's generally viewed as bad for the economy.

I mean, they are doing it to slow down the economy, right?

So that would make sense.

The stock market then sees this information and says, hey, it's probably going to be harder for companies to borrow money to grow their businesses with these higher rates.

That probably means profits won't be as high as we expected.

And stocks may sell down like they have this year.

When stocks sell down, though you have that other area of your portfolio, right?

Bonds, fixed income, they are more conservative, they will help us balance out those losses.

And that usually tends to be true; the bond part of your portfolio if you have one is not there to increase your returns.

It's there to provide stability in the years where the stock market decreases.

In the 2008 financial crisis and the 2020 pandemic, bonds did hold up considerably better than stocks.

However, this time around, the reason for the losses were rising interest rates.

They weren't a global pandemic, they weren't a financial crisis.

This year, it was inflation and those rising interest rates.

When rates go up, bonds go down.

So if you think about it, they have this reverse relationship.

If you personally owned a bond that had a 4% interest rate, and now interest rates go up and new bonds are offering 5%, Which one would you prefer; your 4% bond or the higher 5% bond?

The 5% one, right?

So when the rates go up, the 4% bond is now worth less.

In 2022, then thus far, both the stock and the bond portions of most portfolios have been in decline, as there has been that lack of balance.

So hopefully, you know, that helps a little bit in connecting the dots together for you, at least at a starting point in the series.

Maybe at least makes you know a little bit more sense why when you hear inflation and interest rates, how those connect together, and how that may be connected to your portfolio, depending on how you have it put together.

Does that make you feel better about seeing your accounts go down now?

Nope, you know probably not.

Just like me finding out that the name of Noah's infection was impetigo didn't instantly make me feel better.

But at the same time, it was a little less scary for me now than when it was completely unknown to me.

Maybe now instead of saying "why is this happening to my portfolio", you can say, "I kind of get why this is now happening to my portfolio." And next week's remix, Stocks Lead, Don't Follow, we are going to dive a little bit deeper into our perspective now and how to deal with it.

While I can really only give specific advice for people to take with clients that I know as you know, I can't give advice to somebody's situation I don't specifically know any more than a doctor can prescribe a drug to a patient they've never met.

What I can try to help with is the perspective element in the way that you're looking at this, across the broad spectrum of achieving your goals, right?

Investments are there to help us achieve our goals, not just to have a big number on a piece of paper.

So we want to remember that money is just that tool, these coins, these papers, these numbers that we see on our screen.

Feeling that security, feeling that we're on the way to achieving our goals and happy experiences we want to have with our families.

That is the real end game in all this and so that's where I'm going to try to help you.

As always, please remember to review and share for others and if you need any help, don't hesitate in reaching out.

I probably have helped someone just like you.

Until next week.

Thanks for joining me today and I look forward to connecting with you again soon.

Voiceover Audio: The conversations on this show are Joe's opinions and provided for general information purposes only.

They do not constitute accounting, legal, tax, or other professional advice for your specific situation.

You should always seek appropriate advice from a financial advisor, accountant, lawyer, or other professional before acting upon any content or information found here first.

Joe is affiliated with New Horizons Wealth Management LLC, a branch office of TFS Securities, Inc., and TFS Advisory Services an SEC Registered Investment Advisor, Member FINRA/SIPC.