Do you sometimes lie awake at night thinking about bills that need to be paid? Does it feel as though you’re drowning in debt? If this describes you, you might take solace in the fact that you’re not alone. A recent report released by the American Psychological Association (APA) showed that 72% of adults feel stressed about money at least some of the time, and 22% said the amount of stress they experienced was extreme.1
The bad news is that stress can be responsible for multiple health problems, including fatigue, headaches, and depression. And, over time, stress can contribute to more significant health issues, including high blood pressure and heart disease.2 The good news is that there are some simple steps you can take to reduce or eliminate some of the financial stress in your life.
1. Stop and assess
The first step in reducing financial stress is to look at your situation objectively, creating a snapshot of your current financial condition. Sit down and list all of your financial obligations. Start with the items that are causing you the most stress. For debts, include the principal due, the applicable interest rate, and the minimum payment amount. If you’re not already doing so, review your bank account and credit-card statements to track where your money is going. The goal here is not to solve the problem; it’s to determine and document the scope of the problem. You might find that this step alone significantly helps alleviate your stress level (think of it as facing your fears).
Home buyers and sellers finally have reason to celebrate in 2015. After almost a decade of limping along toward recovery, it seems as though the housing market has finally hit a more comfortable stride. According to the S&P/Case-Shiller Home Price Indices, well-known gauges of the U.S. housing market, real estate is finally showing healthy signs of improvement.
Data released by Case-Shiller at the end of April indicates that home prices have continued to rise across the United States. (Source: S&P/Case-Shiller Home Price Indices, April 2015) And as it turns out, no one factor is responsible for the trend. Rather, a variety of factors are being credited for the recovery.
Low mortgage interest rates
This year, mortgage rates have remained at all-time lows. (Source: Freddie Mac U.S. Economic & Housing Market Outlook, April 2015) A slower-than-expected economic recovery may be partly responsible, with the Federal Reserve holding off on raising interest rates until the economy is on more solid ground. And while interest rates are expected to go up at some point (possibly later this year), home buyers are taking advantage of the historically low rates while they can.
Dividends can be an important source of income. However, there are several factors you should take into consideration if you’ll be relying on them to help pay the bills.
An increasing dividend is generally regarded as a sign of a company’s health and stability, and most corporate boards are reluctant to cut them. However, dividends on common stock are by no means guaranteed; the board can decide to reduce or eliminate dividend payments. Investing in dividend-paying stocks isn’t as simple as just picking the highest yield; consider whether the company’s cash flow can sustain its dividend, and whether a high yield is simply a function of a drop in a stock’s share price. (Because a stock’s dividend yield is calculated by dividing the annual dividend by the current market price per share, a lower share value typically means a higher yield, assuming the dividend itself remains the same.)
In a word, very. Dividend income has represented roughly one-third of the total return on the Standard & Poor’s 500 index since 1926.*
According to S&P, the portion of total return attributable to dividends has ranged from a high of 53% during the 1940s–in other words, more than half that decade’s return resulted from dividends–to a low of 14% during the 1990s, when the development and rapid expansion of the Internet meant that investors tended to focus on growth.*
And in individual years, the contribution of dividends can be even more dramatic. In 2011, the index’s 2.11% average dividend component represented 100% of its total return, since the index’s value actually fell by three-hundredths of a point.** And according to S&P, the dividend component of the total return on the S&P 500 has been far more stable than price changes, which can be affected by speculation and fickle market sentiment.
Texting versus email (or even snail mail). Angry Birds versus Monopoly. “The Theory of Everything” versus “The Sound of Music.” “Dancing with the Stars” versus “American Bandstand.”
It’s no secret that there are a lot of differences between baby boomers, born between 1946-1964, and millennials, who were generally born after 1980 (though there is disagreement over the precise time frame for millennials). But when it comes to finances, there may not be as much difference in some areas as you might expect. See if you can guess which generation is more likely to have made the following statements.
Boomer or millennial?
- I have enough money to lead the life I want, or believe I will in the future.
- My high school degree has increased my potential earning power.
- I rely on my checking account to pay for my day-to-day purchases.
- I consider myself a conservative investor.
- Generally speaking, most people can be trusted.
- I’m worried that I won’t be able to pay off the debts that I owe.