• Manufacturers in Texas Saw Growth in Factory Activity Slow in January

    Every month, the Federal Reserve Bank of Dallas asks Texas business executives questions on labor market conditions and the results are compiled into the Texas Manufacturing Outlook Survey, the Texas Service Sector Outlook Survey and the Texas Retail Outlook Survey.

    On January 30th, the Federal Reserve Bank of Dallas reported that: “Growth in Texas factory activity slowed in January, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 9.1 to 0.2, with the near-zero reading suggestive of flat output.

    Other measures generally indicated weakened manufacturing activity this month. The new orders index was negative for an eighth month in a row – suggesting a continued decrease in demand – though it moved up from -11.0 to -4.0. The growth rate of orders index inched down to -12.3. The capacity utilization index was positive but dipped from 7.9 to 6.0, while the shipments index returned to negative territory at a reading of -6.3.

    Perceptions of broader business conditions continued to worsen in January, though pessimism waned. The general business activity index remained negative but shot up 12 points to -8.4. Similarly, the company outlook index posted its 11th straight negative reading but moved up 11 points to -2.5. The outlook uncertainty index was largely unchanged at 16.8.

    Labor Market & Price Pressures

    Labor market measures pointed to stronger employment growth and longer workweeks.

    • The employment index climbed four points to 17.6, a reading significantly above its series average of 7.9.
    • Thirty-one percent of firms noted net hiring, while 13 percent noted net layoffs.
    • The hours worked index held fairly steady at 3.8.

    Further, price pressures were generally steady and wage growth eased slightly in January.

    • The raw materials prices index was largely stable at 20.5, remaining below its series average of 28.0 for the third month in a row.
    • The finished goods prices index was little changed at 9.9, roughly in line with its series average of 9.0.
    • The wages and benefits index ticked down from 34.2 to 30.5.

    Expectations regarding future manufacturing activity were mixed in January. The future production index pushed further positive to 16.1, signaling that respondents expect output growth over the next six months. The future general business activity index remained negative, coming in at -9.1. Most other measures of future manufacturing activity were positive this month.”

    Sources: dallasfed.org

  • 5 investment ideas for small-business owners struggling to keep their finances liquid

    Three local financial experts share their advice.

    Andrew Hipple has advice on how small business owners (and individuals) can take advantage of the rise in interest rates.
    Andrew Hipple has advice on how small business owners (and individuals) can take advantage of the rish in interest rates. (photo credit: Steven M. Falk / Inquirer Staff Photographer)

    Written by Gene Marks

    Even as commercial lending rates have more than doubled in the last year, interest rates earned on checking, money market and savings accounts remain stubbornly low as banks seek to maintain their profitability.

    That’s not helpful for business owners, who need to earn money on their cash reserves while keeping enough liquidity to meet faily working capital needs. Options remain limited, but the environment is slowly changing, and a number of investment choices with minimal risks are emerging.

    Click here to read full article from the Philadelphia Inquirer, featuring Andrew Hipple CFP®, Partner at Lane Hipple Wealth Management Group.

  • Conference Board Leading & Coincident Economic Indicators Pointing to a Recession

    The Conference Board was founded in 1916 by a group of CEOs “concerned about the impact of workplace issues on business, and with a desire for greater cooperation and knowledge sharing among businesses.”

    Every month, the Conference Board compiles a composite of economic indexes designed to signal peaks and troughs in the business cycle. The leading, coincident, and lagging economic indexes are essentially composite averages of 10 individual indicators and help smooth out some of the volatility of individual components.

    The ten components include:

    • Average weekly hours, manufacturing
    • Average weekly initial claims for unemployment insurance
    • Manufacturers’ new orders, consumer goods and materials
    • ISM Index of New Orders
    • Manufacturers’ new orders, nondefense capital goods excluding aircraft orders
    • Building permits, new private housing units
    • Stock prices, 500 common stocks
    • Leading Credit Index
    • Interest rate spread, 10-year Treasury bonds less federal funds
    • Average consumer expectations for business conditions

    Leading Indicators Signaling a Recession

    On January 23rd, the Conference Board announced that its Leading Economic Index for the U.S. decreased by 1.0% in December 2022 to 110.5 (2016=100), following a decline of 1.1% in November.

    The LEI is now down 4.2% over the six-month period between June and December 2022 – a much steeper rate of decline than its 1.9% contraction over the previous six-month period (December 2021–June 2022).

    “The US LEI fell sharply again in December – continuing to signal recession for the US economy in the near term. There was widespread weakness among leading indicators in December, indicating deteriorating conditions for labor markets, manufacturing, housing construction, and financial markets in the months ahead.

    Meanwhile, the coincident economic index (CEI) has not weakened in the same fashion as the LEI because labor market related indicators (employment and personal income) remain robust. Nonetheless, industrial production – also a component of the CEI – fell for the third straight month.

    Overall economic activity is likely to turn negative in the coming quarters before picking up again in the final quarter of 2023.”

    The trajectory of the US LEI continues to signal a recession 

    Sources: conference-board.org

  • Financial Tips for Doctors with Student Loan Debt

    How to Get Strategic About Tackling Your Medical School Costs

    Medical school can certainly be viewed as an investment – but it’s a costly one. Statistics show that the average student loan debt for college students is $28,950, while the average medical school debt is around $200,000. Even for doctors who are earning high salaries, it can be challenging to pay down such a hefty amount of educational debt.

    Feeling burdened by debt can seriously impact your finances, but it can wreak havoc on your emotional and physical well-being, too. If you’re a medical student or doctor looking to protect your net worth and quality of life, it’s imperative that you establish a savvy plan for paying off your student loans. Below are five tips to help you get started.

    First: A Word on Federal Student Loan Forgiveness for Doctors

    At this article’s writing, President Biden’s student loan forgiveness program is tied up in the courts and it remains unclear when borrowers may get final answers on whether they qualify for any form of federal loan forgiveness. However, it should be noted that some doctors could eventually qualify for medical school loan forgiveness. Get updates here as they come.

    Now, onto helpful tips that doctors can use to pay off student loan debt.

    Tip #1: Don’t Throw All Your Money at Your Loans

    It’s tempting to want to discharge your debt as quickly as possible, but it’s important to budget out your paycheck to fund other priorities, too. This means putting some money into a savings account to establish an emergency fund so that you’re protected from the unexpected, and thinking about other financial goals you’re working towards, too.

    Should you amass huge savings? No, not while you have significant debt. However, you should save at least three to six months’ worth of expenses so that you have a solid amount to fall back on should life throw you a curveball – which it’s bound to do at some point. The last thing you want to do is increase your overall debt because you didn’t have the funds to cover an unforeseen expense.

    Tip #2: Investigate Income-Driven Repayment Options

    You may be able to ease your student loan debt through the federal income-driven repayment program. They set your monthly student loan payment to an amount that is deemed to be affordable based on your income and family size. Often, your payments can be adjusted to around 10% of your discretionary income amount. Discretionary income is determined by taking the difference between your Adjusted Gross Income and 150% of the federal poverty guideline.

    Income-based repayment plans can be quite advantageous from a cash-flow point of view. However, when taking on any new payment plan, be sure to also consider any anticipated medical school loan debt forgiveness, any risk of capitalizing interest, and potential tax consequences.

    Tip #3: Refinance Cautiously

    Oftentimes, you’ll come across options to refinance your loans at a lower rate through private lenders. This can be a smart move if the loans are equal, though that isn’t always the case. You may end up taking on more risk through a refinance than originally intended, so proceed with care.

    Though it might not be obvious at first glance, federal student loans come with several benefits that refinanced loans don’t have. For example, with federal student loans, you can qualify for income-driven repayment programs, public service loan forgiveness opportunities, and more forgiving ways of dealing with financial setbacks such as long-term disability. So, before refinancing medical school debt, doctors should consider all factors and carefully weigh the pros and cons of a refi.

    Tip #4: Avoid ‘Lifestyle Creep’

    This is a concept that can be detrimental in any profession, but high earners such as doctors can be particularly susceptible. As you get more established in your medical career and begin to see your hard work reflected in your paycheck, it can be tempting to begin introducing more luxury into your lifestyle or to increase your spending. While you don’t have to deny yourself material rewards like a big house or fancy car, be sure that you’re budgeting appropriately and not getting carried away. For example, a pay increase should never always go to new lifestyle expenses. Be sure to increase your savings and investments, too.

    Prioritize building an emergency fund, think about your mid-term savings goals, always work to max out your retirement accounts, and pay extra on your student loan debt, too. After your financial responsibilities are satisfied, then you can indulge in more lifestyle spending with the knowledge that you’re on firm financial footing.

    Tip #5: Tackle High-Interest Loans with Gusto

    Some people tackle large amounts of debt by paying off smaller loans first, which is called the snowball method. However, note that the benefit of paying off your debts this way is purely psychological. The idea is that each small debt you pay off will motivate you to continue on to larger ones. Financially speaking, there’s no real benefit to paying off smaller loans before others. For doctors with significant student loan debt, paying off your loans with the highest interest rates first allows you to pay less in interest over time and more towards the loan principal – a savvier strategy for your financial outlook.

    Are You a Doctor Chipping Away at Student Loan Debt?

    To achieve your dream of entering the medical profession, you’ve likely invested time and money and made countless personal sacrifices, too. And while your career may be rewarding, it’s also normal to feel the heavy burden of medical school loan debt. If you think you would benefit from a conversation about your debt repayment strategy or your overall financial plan, contact Lane Hipple Wealth Management Group at our Moorestown, NJ office by calling 856-638-1855, emailing info@lanehipple.com, or to schedule a complimentary discovery call, use this link to find a convenient time.

    Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents on social media platforms. I have no right to distribute the articles, or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.

  • Quarterly Tax Ideas

    Market Exit

    GETTING OUT OF THE MARKET BECAUSE OF TAXES?

    Are you thinking about bailing out of stocks because you are worried that the capital gains tax structure might change? Before you hit the sell button, think it over carefully and make sure you truly understand the tax implications – especially the differences between short- and long-term capital gains.

    Capital gains taxes are essentially separated into one of two categories: short-term and long-term. And as you might surmise, the category that applies to you depends on how long you’ve held the assets.

    • Short-term capital gains taxes are applied to profits from selling an asset you’ve held for less than a year. Short-term capital gains taxes are aligned with where your income places you in federal tax brackets – in other words, you pay the same rate as you would on ordinary income taxes.
    • Long-term capital gains taxes are applied to assets held for more than a year. The long-term capital gains tax rates are 0%, 15% and 20%, depending on your income. Generally speaking, these rates are lower than the ordinary income tax rates.

    Long-Term Capital Gains Tax Rates

    The tax rate on most net capital gain is no higher than 15% for most individuals, but if you are a high-earner, you might fall into the 20% long-term cap gain bracket.

    FILING STATUS0% RATE15% RATE20% RATE
    SingleUp to $41,675$41,676 $459,750Over $459,750
    Married filing jointlyUp to $83,350$83,351 $517,200Over $517,200
    Married filing separatelyUp to $41,675$41,676 $459,750Over $459,750
    Head of householdUp to $55,800$55,801 $488,500Over $488,500
    SOURCE: IRS

    There are a few other exceptions where capital gains may be taxed at rates greater than 20%:

    1. The taxable part of a gain from selling section 1202 qualified small business stock is taxed at a maximum 28% rate.
    2. Net capital gains from selling collectibles (such as coins or art) are taxed at a maximum 28% rate.
    3. The portion of any unrecaptured section 1250 gain from selling section 1250 real property is taxed at a maximum 25% rate.

    2023 Mileage Rates Announced

    The Internal Revenue Service issued the 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

    Beginning on January 1, 2023, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

    • 65.5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022.
    • 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
    • 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.

    In addition, the IRS announced that:

    • These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.
    • The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
    • It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station.
    • Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
    • Taxpayers can use the standard mileage rate but generally must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.

    Remember, the IRS Will Never…

    Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail you a bill if you owe any taxes.

    • Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
    • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
    • Ask for credit or debit card numbers over the phone.

    Your Financial Advisor

    Although Congress continues to pass large economic bills (the CARES Act and the Inflation Reduction Act were each about 800 pages long), no single bill can account for every unique situation. Worse, the federal tax code is crazily long. At over 2,500 pages, it is 5x the length of the Grapes of Wrath, written by John Steinbeck.

    So, before you go down a path that might not be in your best interest long-term, make sure you consult with your financial advisor to determine how any new tax changes and any proposed tax changes might impact you and your family.

    Nothing contained herein shall constitute an offer to sell or solicitation of an offer to buy any security. Material in this publication is original or from published sources and is believed to be accurate. However, we do not guarantee the accuracy or timeliness of such information and assume no liability for any resulting damages. Readers are cautioned to consult their own tax and investment professionals with regard to their specific situations.