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Interest rates have a significant impact on your finances whenever you purchase an expensive item, such as a house or car. Interest rates have fluctuated a great deal over the past four decades as the ebb and flow of the economy has a direct impact on the prime interest rate.

History of the Prime Interest Rate

Individuals who have a perfect credit history qualify for what is known as the prime interest rate. Lenders calculate the prime interest rate by taking the federal funds rate and adding 3% to it. Most types of loans use the prime interest rate as their base. The prime interest rate hit an all-time high in 1980 when it was calculated at 21.5%. The all-time low was in 2008 when it was 3.25%.

Historic Interest Rates for Auto Loans

The most popular type of auto loans are 48-month and 60-month loans. The interest rate for 48-month auto loans peaked in 1981 when car buyers had to pay a 17.6% interest rate on their vehicle loan. The lowest interest rate was 4% in 2015. The highest amount of interest car buyers paid on their 60-month car loans was in 2007 when they were charged a whopping 7.82%. The lowest interest rate took place in 2014 and 2017. At the time the prime interest rate for 60-month car loans was 4%.

Why Historical Interest Rates Were Sky High in 1980

The overall economy is why the prime interest rate has fluctuated so much over the past four decades. When the economy is booming, the prime interest rate increases, however, when the economy slips towards a recession, interest rates decrease. This is because the Federal Reserve is trying to encourage people to spend money, which in turn is supposed to stimulate the economy out of a recession.

Investors couldn’t have asked for a better start to the 2019 calendar year. It was only a mere five months ago that the stock market was experiencing a nearly 20% correction from all-time highs and everything seemed doom and gloom. Fast forward to the present, and there seems to be an entirely different sentiment in the capital markets.

2018 was an unusual year in that the bond market was flat and stock markets across the globe were negative. Typically, bonds and stocks move in opposite directions of each other, which is why investors own both in a diversified portfolio. Stocks took a nosedive at the end of last year due to fear that the global economy was heading into a recession. Jerome Powell, Chairman of the Federal Reserve, came out at the end of last year and indicated that the Fed was going to be more patient in raising interest rates. Ever since these comments, risk assets such as stocks and high-yield bonds have taken off.

Market crashes are inevitable. They may not be predictable, but the fact is that the market will most likely crash at some point while you own stocks. The temptation to sell as soon as the market starts to trend downwards is huge. Many people will rid themselves of stocks at a loss, in the hope of avoiding a worse loss later.

Seeing any kind of a loss in the value of your investment can induce panic. This is called an “unrealized” loss and is a normal part of investing and there are many reasons not to sell during a downturn. Even when you have a large unrealized loss. The biggest one is that people who hold their stocks through a crash often experience a profit in the long term. Unless you are trying to make money quickly (and sometimes even then), selling during a downturn is a guaranteed loss.

Instead, you should keep your time horizon in mind. Many investors are saving for retirement. The reality these days is that retirement can last a few decades and chances are you will make money by holding. Financial writer Ben Carlson invented an imaginary awful investor, Bob, who made his first investment right before a huge crash in 1973, then again before the crashes in 1987, 2000, and 2007. After a lifetime of bad luck, Bob still decided to hold on to his investments without ever selling until he retired when he ended up with a 9% annualized return.

Returning home from an international vacation can leave us feeling saddened and missing the sunny skies, white beaches, or cultural city centers. It’s easy for our minds to start wondering “what if”…? What if I were to retire abroad? Would I be able to retire earlier? Would I be able to afford the healthcare? Will my Social Security benefit be enough to cover all my monthly expenses?

As the retirement savings crisis continues to increase, the number of Americans choosing to retire abroad also increases. According to the Social Security Administration, the number of Americans collecting their benefit while living outside of the U.S. is now almost at 700,000 people. This figure has continued to grow since the Great Recession. If all of the stars align, this could be an attractive and viable option for retiring Baby Boomers.

International Living has assembled a list of the “Best Countries to Retire”, which includes Mexico, Panama, Ecuador, Costa Rica, Colombia, Malaysia, Spain, Nicaragua, Portugal, and Malta. The list dives into the pros and cons of living (rather than simply vacationing) in each country. However, in reality, Americans who are retiring abroad are more likely to live in Canada, Japan, Germany, Mexico, and the U.K. The reasons for choosing a country vary widely amongst retiree.

As financial planners, one of the most common questions we receive is regarding the future of Social Security. A lot of this uncertainty is driven by headlines in the media. Oftentimes, the media calls to question whether Americans can rely on the Social Security program to still be viable when current workers reach retirement. Much of the doubt is derived from changing demographics in the United States.

The baby boomer generation is reaching retirement and healthcare advances are allowing us to live longer lives. Combine this with reduced birth rates resulting in less future workers, and some of the skepticism surrounding the Social Security program becomes valid. With that being said, many Americans are afraid that the Social Security program will become obsolete, which most likely will not be the case. What we do know is that over the next 75 years or so, Social Security will have to evolve in order to support future generations of retiring workers.

The Social Security program was signed into existence by Franklin D. Roosevelt in 1935 and has been through a few major changes over the last 84 years. As it currently stands, Social Security is a “pay-as-you-go” program, which means that the current working generations are paying for the current retirees. The system is subsidized by the Social Security Trust Fund, a reserve of funds to cover any deficit between income from taxes and output of benefits. While the demographics continue to change, the program will take on more costs with less workers to fund it. But there are several solutions to this issue, many of which we have seen before throughout the history of Social Security.

So you’ve planned night and day, hired incredible vendors, tied the knot, and danced the evening away with friends and family. Or maybe your wedding was a simple, quiet romantic elopement with just a few loved ones present. Either way, as you forge ahead into your new life together, you might be wondering what is next, especially in the realm of finances.

Many couples already live together before they get married, so they probably share finances to some extent. They are already used to setting financial goals together, making budgets, and deciding who pays for what. If you are a newlywed and haven’t done these things, this is a great place to start. But besides these tasks, there are other things to consider to make sure your finances are in order.

Now that you are married, you have to prepare for the unexpected and make sure that everyone is taken care of in the case of the unthinkable, not to mention you’ll need to think about your future together and plan for retirement. Below is our financial checklist for newly married couples, and we hope it helps you out!

Combine or Update Insurance Policies

1. Life insurance: Not everyone thinks about life insurance before they are married, but now that you are, it is time to make sure you both have a life insurance policy to make sure your loved ones will be taken care of if one of you passes.
2. Auto: Often there is no reason to carry two different policies once you are married when you can save by bundling. If your spouse is going to be driving your car, you also want to make sure both names are attached to the insurance so there are no issues in case of an accident.
3. Home: You may find that your partner can get a cheaper home insurance rate by bundling with another policy like their auto insurance. Be sure to shop around and ask about discounts for bundling.
4. Health insurance: If you want to combine health insurance, marriage is one of the few qualifying life events that allows you to change your plan. However, you generally only have 60 days to add a spouse after the wedding, so make sure you get on this right away.

A home mortgage is something that the majority of Americans need to obtain in order to purchase a primary residence. A mortgage is considered “good debt” because it is tied to an asset that has the opportunity to appreciate in value over time. It is usually issued at a lower interest rate compared to consumer loans and the interest can be tax deductible.

A common question people have is whether or not they should pay down their mortgage early. The first thing to look at when trying to answer this question is the interest rate on the loan. Since the Financial Crisis in 2008, we have seen historically low interest rates. According to FreddieMac, the average 30-Year Fixed-rate mortgage has been between 3.5% and 5.5% since 2010. It is important to take into consideration the opportunity cost of paying down your mortgage. If you have a low rate (in the 3.5%-4.5% range), it may make sense to invest that money rather than using it to aggressively pay down the mortgage. Going back to 1926, the average annual return on a 60% stock and 40% bond portfolio is about 8%. If you’re a long-term investor, it would make more financial sense to invest that money in a diversified portfolio instead.

Spring is a glorious time to travel. Tourists are fewer and prices are often cheaper. Flights have fewer delays and cancellations, and the weather is starting to warm up. We have selected three budget-friendly trips from Denver that may appeal to you whether you’re traveling alone, with a partner, or with your family.

Get Your Groove on in Memphis

United Airlines has non-stop flights from Denver to Memphis that can usually be found for under $250. The Memphis Music Hall of Fame and the Rock and Soul Museum are just two of the many Memphis museums that feature music. Live music can be found all over town, and Beale Street is the epicenter with three blocks of nightclubs, restaurants, and stores. It is best known for delta blues, jazz, rock ‘n’ roll, R&B and gospel music. The Beale Street Music Festival, held May 3rd to 5th, draws thousands of music fans from around the world for live performances.

Another claim to fame is the city’s barbecue. Barbecue tours offer tastes of a variety of barbecue styles — up to seven for $65. Or, just pop into a nearby BBQ restaurant and make your own discoveries.

Fly to the Windy City

United Airlines offers round trip fares to Chicago for around $170. Getting from the airport to the city is just $5 on the L train that has a station in the airport. Or, you can purchase a $28 Ventra pass that is good for a week of unlimited rides on Chicago’s L trains and busses, including to and from the airport. Check into a small charming hotel, such as the historic Old Chicago Inn ($135 a night) with its Prohibition-era inspired speakeasy. The weather is usually balmy in late spring, so walking through the city parks, along the lakefront, and down the Magnificent Mile (a shopping mecca) can be delightful.

Fly to Iceland and Beyond

Round trip tickets from Denver to Iceland are around $552 on Icelandair. The airline allows multi-day stopovers before boarding a plane for your onward journey to Europe. A sample price from Denver to Dublin with a stopover in Iceland is about $1,110. This is about what you can expect to pay on a major airline without a stopover. While in Iceland, enjoy some of nature’s most dramatic displays in The Land of Midnight Sun. By May 21st, there is no night in Reykjavík. Glacier hiking, lava caving, and horseback riding are some favorite activities. Many choose to rent a car and drive the ring road that circles the island, or just explore part of it for extravagant views of the wild and rugged land and seascape.