January Financial Check-In: What You Should Know About Your Money This Month

January Financial Check-In: What You Should Know About Your Money This Month

Coming back from the holidays is always a little rough.

Your body may be back in the office, but your brain may still be in holiday mode as you reminisce about the decadent meals, gifts galore and family gatherings that were your reality mere weeks ago.

But it's time to get back into the swing of things!

And what better way to welcome yourself back into the real world than by catching up on your current events? Heck, while you're at it, why not also set a resolution to stay informed on the headlines that could affect your finances?

So box up the ornaments, sweep up those pine needles—and dive into our latest roundup of need-to-know money stories for this first month of 2015.

News Flash #1: Is the U.S. economy getting its groove back?

The country received an early Christmas present when the government released its latest figures on economic growth last month: According to the Commerce Department, GDP grew at a 5% annual rate in the third quarter, beating estimates of 3.9%—and signaling the biggest expansion since 2003.

The reason for the rally? Households ramped up spending on health care, recreation and financial services at a higher-than-predicted rate, perhaps aided by the fact that they were paying less at the pump due to falling oil prices.

The news helped drive up the stock market, and has economists believing the U.S. is bouncing back. And with the job market on the mend, people will likely have more money to spend—which, in turn, may help enable consumers to keep opening up their wallets. All this, analysts say, should bode well for the economy in 2015.

News Flash #2: But we're still behind China ... or are we?

Before we get too self-congratulatory, the International Monetary Fund (IMF) revealed some eye-opening information: China now has the largest economy in the world, marking the first time in over a century that America has been pushed out of the top slot.

According to the IMF, the U.S.'s 2014 output of goods and services was projected to add up to $17.4 trillion, compared with China’s $17.6 trillion. Another way to think about it, writes MarketWatch columnist Brett Arends, is that the U.S. now comprises 16.3% of the global economy, while China makes up 16.5%.

A sticking point with some analysts, however, is that the IMF calculations were based on a measure called purchasing power parity (PPP), which takes into account how far a consumer's money actually goes when buying things in their home country.

In other words, based purely on the currency exchange rate, Chinese workers make much less than American workers. However, since goods are cheaper in their country, their money actually has more purchasing power.

If the IMF were only basing their calculation on the exchange rate, however, the U.S. economy would probably be about 70% bigger than China’s, and its gross domestic product per head nearly four times larger—which, some market watchers argue, means the U.S. is still technically wealthier.

News Flash #3: Big IPO shows promise for the peer-to-peer lending industry

Wall Street was abuzz over the strong New York Stock Exchange debut of the Lending Club, an online credit marketplace that connects individual borrowers with lenders—leading economists to believe that peer-to-peer loans could grow in popularity. (Intrigued? Read more about the company in our recent story on buzzy finance trends.)

The IPO, priced at $15 a share, eventually hit $1 billion in mid-December. Some credit the company's success to a simple business model: connecting would-be borrowers with non-institutional investors who loan money in return for monthly principal and interest payments.

But peer-to-peer lending isn't without controversy—most notably, the risk of a borrower defaulting, and the potentially high interest rates these loans could carry. So you probably shouldn't expect these types of loans to replace traditional ones anytime soon.

News Flash #4: Could medical debt seriously ping your credit score?

Forget for a moment the credit card balances you racked up over the holidays. Recent research suggests there’s an entirely different kind of debt that’s taking a toll on Americans’ creditworthiness.

According to the Consumer Financial Protection Bureau, medical debt is affecting the credit scores of 43 million Americans—and now accounts for half of all overdue debt on credit reports.

Part of the problem, however, could lie in the sometimes confusing process of collecting and reporting medical debt, says the government agency. For example, consumers may be confused when they receive bills from multiple providers that stem from one treatment. Plus, the lack of standard debt-collection practices means that people may not realize how quickly they can have a strike recorded against them on their reports.

The good news? Going forward, the CFPB is requiring credit reporting agencies to provide regular reports on how they are handling medical disputes in order to create more accountability with the industry.

Last but not least, here are some stats to distract you from the winter doldrums:

• Here's a reason to make a money resolution: According to a Fidelity report, 51% of those who made one in 2014 said they felt like they made financial progress over the past year, compared with just 38% of those who didn’t.
• It turns out “diversity” isn’t just a buzzword—it can actually boost a business’s bottom line. A recent academic study found that offices with equal numbers of men and women tended to be 41% more productive than those predominantly composed of single-gender coworkers.
• Financial optimism looks to be on the rise: 49% of respondents to a National Foundation for Credit Counseling poll say they believe their financial situation will be better by this time next year.

LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Unless specifically identified as such, the people interviewed or quoted in this piece are neither clients, employees nor affiliates of LearnVest Planning Services, and the views expressed are their own. LearnVest Planning Services and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.


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